Blog: SaaS and Open Source are Good for Customers ... Unfortunately

Blog: SaaS and Open Source are Good for Customers ... Unfortunately

Turning to an unexplored, but extremely critical part of Lacy's piece, let's look at the issue she barely mentions: the level of customer hand-holding. During the heyday of packaged software, customers (at least those customers promising very large software purchases) could expect unlimited attention from sales personnel, including educational seminars, vendor CTO visits, free proof of concept implementations, etc.

Some of that still goes on with SaaS companies, because they can amortize the cost across several years of subscription fees. However, they ration the effort, given the realities of customer acquisition cost amortization. That's why it's hard for SaaS to grow as quickly as packaged software companies could.

Turning to open source companies, however, it's completely different. They typically sell support contracts, so it's something akin to a subscription. But customers usually only buy *after* the system goes into production, long after any selling/customer hand-holding effort is performed. And only a small percentage of users who go into production end up purchasing support.

Therefore, open source companies do very little traditional software sales activities. There is no free hand-holding. I heard the Chairman of one open source company state that their sales people are told to discard any sales lead if it takes more than 30 seconds to move it along to the next step. The implications of this are quite clear. If you're a potential user, you need to be able to self-sell, i.e., choose, evaluate, and pilot your own software decisions. When it comes to open source, the customer faces the slog, not the vendor. If you're a self-starter, so to speak, this world is great -- high quality software, low prices. If you're a user that likes a lot of vendor attention, you'll just pay in a different way. Instead of funding a sales rep's BMW via the license fee, you'll pay the vendor's consulting group or a system integrator to help you in the decision process.

While many in the Valley may lament this change, and pine for the good old days, I think I prefer the new way. It maps value received to costs more directly, and gives the vendor and service providers more incentive for customer satisfaction.

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