If you’re a software publisher today, you’re operating in a swamp that’s teeming with alligators. Some are large and dangerous, determined to rule the entire swamp by providing swamp-dwellers with all the software they need – often for free.
Other alligators are small and annoying. They are the fast-moving, nimble purveyors of Web-based on-demand software, also known as rental software or software as a service (SaaS). SaaS is rapidly transforming the software industry. If you’re big in this swamp, you’re probably safe. If you’re small, you’re probably safer because you don’t have enough of a market share to seriously threaten anybody bigger. But if you’re in the middle, look out. PROBLEM Business Objects is in just that position. The France-based provider of business-intelligence, or data-analysis, software doubled in size when it bought Vancouver-based Crystal Decisions Inc. in 2003, and in the process acquired the popular Crystal Reports business software. It built a global business around Crystal Reports and its own enterprise software, with Vancouver serving as an operational centre employing half its global workforce of 3,000-plus people. Even though Business Objects, with annual revenue of US$1.5 billion, is a behemoth in Vancouver tech terms, it’s merely mid-level in the global software universe. Business Objects’ first worry came from the monsters of the software world: Microsoft Corp., Oracle Corp. and SAP AG. Determined to take over all software-based business operations, these hungry predators are increasingly offering applications within their software suites that allow companies to conduct their own data analysis without the need for Business Objects software. At the other end of the scale, on-demand purveyors are biting off pieces of the company’s market by offering low-cost or free business-process software that wanders into the business-intelligence world. While on-demand is still a small player in the overall software game, its influence is growing. A U.S. report from Saugatuck Technology Inc. in early April indicated that the share of business and IT executives who use at least one on-demand technology rose from 11 per cent to 26 per cent in 2006. Growth is expected to surge this year as larger enterprises begin to flow with the on-demand software current. It’s a classic squeeze play that threatens to crush specialty software suppliers such as Business Objects. SOLUTION According to Vancouver-based executive VP of operations Greg Wolfe, Business Objects saw this squeeze coming in 2005 and began taking steps to push back. Executives realized the company needed a new and innovative strategy to continue disseminating its software to large and small business customers. So last year, Business Objects shifted to a radical new business model that was miles away from the original boxed software familiar to its customers. First, company strategists recognized they needed a new perspective. Instead of simply providing business-intelligence software, Business Objects would also supply advice on how to use and apply that analysis, in effect becoming a consultant and an integral part of the client’s business. Then, Business Objects bought a bunch of little companies that had developed the software needed to retool its offering for the Web-based, lower end of the software world. This software provided visual tools, allowed on-demand delivery, helped build data warehouses and provided data cleansing. Business Objects rolled them all into Crystal Reports and began to deliver it via the Web. Crystalreports.com is now an online community site that allows report sharing among subscribers (currently more than 40,000 of them). At the other end of the scale, Business Objects used the new software to create tools – some of which haven’t been launched yet – to help its partners (companies with large data-analysis needs) better understand their own businesses. In a sense, it is no longer a simple software supplier but a content-management operation. “We used to be feature-based,” Wolfe explains. “But today the features are near free, and you have to think of how you can monetize the eyeballs that use them. Now, we’re a content business and the business model is in how you package that content.” LESSONS • Recognize change is happening. When your industry is disrupted, rethink everything and disrupt along with it. • Look for the partnership/distribution points. These days, being a lone wolf doesn’t work very well. Big or small, acquisitions or partnerships can extend your reach and help you distribute. • Find the value. Today, more than ever, you really have to understand exactly what value a customer can achieve from your product or service. Click here to read Tony's blog.