The power is in your hands

Can you feel it?  Maybe it’s more subtle than a Southern California earthquake, but there is a definite power shift going on – and it’s shifting in your favor.

It’s like every IT executive opened the window and shouted, “I’m mad as hell and I’m not going to take it anymore!”  “The Wall Street Journal” calls it the “new power of tech customers.”  It means that buyers of enterprise IT have more influence over their suppliers than ever before.

Good things are happening because of this new level of influence.  Sun and Microsoft buried the hatchet and agreed to work together to create more compatible solutions.  Companies like Microsoft and Computer Associates are rethinking their approach to software maintenance fees because enterprise customers are balking at paying high fees and not getting enough in return.  A new software cooperation initiative is helping member companies save significant dollars by allowing them to share homegrown applications.

More than ever, IT executives are challenging the status quo, forcing IT suppliers to sit up and take notice.  As Sun CEO Scott McNealy put it when he extended Sun’s hand of cooperation to Microsoft CEO Steve Ballmer, “The customer is in charge.”

Indeed.  Customers fed up with the lawsuits, verbal spats and intentional technical incompatibilities between Sun and Microsoft turned to competitors like IBM and to open source alternatives such as Linux.  After 15 years of intense rivalry, Sun and Microsoft finally realized they were hurting themselves as well as each other, and they called a truce.  The new 10-year deal gives the companies the right to share intellectual property that (hopefully) will make their products work better together.

As reported by “Network World” in early March, hundreds of thousands of customers are reconsidering the need for software maintenance contracts with Microsoft that are up for renewal this summer.  The customers report they haven’t gotten their money’s worth out of the contracts to date, and they question future value.  With the money from these contracts being a critical revenue stream for Microsoft, the contract negotiating power has just shifted to the customers’ hands.  “Network World” reports that Microsoft has the highest software maintenance costs in the industry, and a customer revolt over contract renewals could force those fees downward.

The slowdown in IT spending over the past three or so years has forced everyone to become more resourceful.  Tired of paying big bucks for non-strategic commercial software, a group of CIOs from some of America’s largest companies have formed a software co-op called Project Avalanche. 

Avalanche was started about three years ago by two IT executives at Minneapolis companies Josten and ePredix.  As they shared their gripes about paying top dollar for commercial software, while at the same time employing large staffs of programmers to write in-house code, they realized they could share code that doesn’t have strategic business value.  HR systems, for example, are “must have” applications for every company, but they aren’t usually considered a competitive advantage.  Why couldn’t the companies write one system and share the code, in a pseudo open source fashion?

“The Wall Street Journal” calls Project Avalanche “enormously disruptive” to the big software companies in the IT industry.  If traditional user companies band together to share their own code, who needs to buy the big, expensive enterprise applications from the likes of Siebel or PeopleSoft?  

Just as the name implies, Avalanche is gaining momentum as well as participants.  And who wouldn’t want to join? A total cost of ownership (TCO) study commissioned by the group shows that members can save between 20% and 40% on software developed and owned by the co-op vs. traditional commercial software.  That’s money that can be applied toward IT projects that provide real strategic business value.

As Carol King used to sing, “I feel the earth move under my feet.”  It must be the tectonic shift of power to the IT executive.

Linda Musthaler is vice president of Currid & Company.  You can write to her at mailto:Linda.Musthaler@currid.com