The first post in this thread is a true story of my initial warning many years ago that Microsoft was morphing into something inauspiciously different. The second post in this thread documents the tragic conversion of Intuit to the “dark side”.
A few months ago, I heard a friend and colleague, Dr. Espen Anderson, speak on the changing landscape of end-user computing. He raised an interesting hypothetical question: When will Google turn to the “dark side”? Espen’s question hit a nerve with me because I really like Google. And then I realized I once really liked Intuit. And before that, I once really liked Microsoft. After recovering from a subsequent bout of depression that felt strangely similar to memories of being dumped by old girlfriends, I was inspired to write this thread to see if there are any predictable patterns and what the implications are that we can prepare for when technology vendors, particularly software vendors, turn to the “dark side”.
By the way, there is no statistical validity to this post. I gave two stories in the preceding posts to have a couple examples to refer to, but I could have documented another couple dozen similar stories about different technology vendors that I have personally come across in my 30 years in the business that would work as well. Even then, there is no statistical validity to this post except in my own mind – it is just my own musings intended to spark additional thinking and conversation.
Okay, let’s deal with the obvious: small entrepreneurial companies get bigger as they are successful. Bigger companies are different from smaller companies. They have more people, more bureaucracy, and more levels of management; the opportunity for personal politics to cloud out shared objectives increases; the mission to please the customer moves from being in the hearts of a few people to being written on vision statements and placed in frames and hung in halls; in the meantime, the unwritten mission to a growing number of employees becomes to survive and move up the organization by competing internally for scarce resources. As a result, large companies often become very inside-out oriented: customers are supposed to use their products. When they use them wrong, they are stupid. When they don’t buy them, they are ignorant. These are problems every large company faces and thousands of great books deal with it. So I won’t in this post. Instead, I will focus on the additional problems faced by software vendors over time above and beyond the complications inherent with becoming large.
Interestingly enough, Microsoft competes with Intuit for home finance software. Or do they? In 2008, Microsoft announced they would not continue their practice of annual releases of their MS Money Plus product stating:
…the feedback we are hearing is that the incremental updates to the software don’t merit a new product every year.
Hmmm… let me see if I got this straight… Microsoft has acknowledged that there is such a thing as a piece of software getting so mature and so good that it doesn’t need to be replaced year after year? Wow! It’s a good thing they don’t think that about word processors, or spreadsheets, or presentation managers, or operating systems, because these things obviously are still in the early stages in their evolution. I eagerly look forward to to Windows and Office upgrades because I firmly believe it is never to late to try to get it wrong if one just tries hard enough.
All the sarcasm aside, I really can think of only two reasons I ever needed to upgrade my financial software: To download transactions from financial institutions and to track my portfolio of investments. The first became possible with the advent of the Internet becoming a common platform for B-to-C commerce. The second only became necessary when I reached a point in my life that I actually saved more than I spent. Other than that, I can honestly say that I could have continued living with the first version of Quicken for Windows until this very moment in time if I was given the chance.
Now let me think of all the reasons I needed to upgrade my word processor, my spreadsheet, or my presentation manager in the past decade: Uh… there was that one thing… give me a minute… what was it?… it’s coming to me now… oh yes, it was SmartArt! That’s it! I really needed some additional canned ways to mislead people with pretty images!
Sorry, I guess all sarcasm wasn’t set aside after all. Let’s see if I got it out of my system.
There is a pattern here: A really good idea for software is conceived and implemented –> the software system rapidly expands to fill most if not all the essential features it will ever need, even though on a rare occasion something big comes along that makes a new feature really attractive (like the Internet) –> the initial flood of revenue drops off as new customer numbers decrease and existing customers are happy with what they got –> executives don’t get bonuses, investors don’t get returns, and neither are happy and they begin applying internal pressure –> clever and not so clever ideas on how to persuade existing customers to continue to provide revenue are dreamed up –> customer satisfaction drops and cost-to-serve goes up.
This destructive pattern is predicated on the belief that software is inherently a product. As such, software is perceived as something that should be packaged, put on the market, and sold for a specific use. Like a TV set, you buy it up front with the intention of getting a prolonged use of it over time.
This is the essential point where the Open Source community takes exception. In Chapter 3 of his 1999 landmark paper, “The Magic Cauldron”, the sometimes controversial Eric S. Raymond wrote about “The Manufacturing Delusion” stating:
“…software is largely a service industry operating under the persistent but unfounded delusion that it is a manufacturing industry.”
I think this rings true in my experiences. For example: I need the capability of managing my personal finances in order to accumulate wealth. Hell, if I were rich enough I’d just hire Jim Cramer or Dave Ramsey to manage my finances for me and then I couldn’t care less how it was done as long as I accumulated wealth. But I’m not that rich and so I have to rely more on myself than I’d like, and I need tools like Quicken that promote self-service. But, the Quicken software by itself does not meet my need. To meet my need takes:
- My correct application of the software…
- loaded with accurate data…
- along with a heavy dose of personal responsibility and financial discipline.
Therefore, an unneeded software upgrade actually is a barrier to meeting my need, at least for the period of time that the new software is installed, data is converted, problems are overcome, and the new UI is learned. In this sense, the more Intuit thinks they are in the manufacturing business, the further away they get from actually meeting my needs.
So what is the answer? Open Source? Maybe. It is interesting to note how many people angry at Intuit are willing to look at GnuCash, an open source Quicken alternative. Equally interesting are the numbers of OpenOffice users tired of the painful and costly Office upgrades. Over 100 million users have downloaded it – they aren’t all hippies and Linux programmers.
So what is the answer? Software-as-a-Service (SaaS)? Maybe. Intuit recently acquired a SaaS company called Mint that had a completely different model for making money (their revenue comes from member banks rather than software users). The founder of Mint and now an Intuit executive, Aaron Patzer, recently said:
“The average user of Mint is 30. The average Quicken user is 47. You will have desktop products for at least another five years simply due to comfort level more than anything else.”
So basically Aaron seems to be saying that young people are already comfortable with Web-based, SaaS applications and us old farts will need a little more time, but either way the end is inevitable. I wonder if the legacy Intuit executives squirmed when they heard about Aaron’s remarks? They should. Not because Aaron is wrong (he’s not wrong in my opinion), but rather because if Aaron is right, they have to fundamentally rethink their business model, get over their legacy “manufacturing delusion”, and learn from the youthful spirit of Mint. If they step back a little less than a Gigasecond (20 years or so), they might see Mint looks a lot like the good ”Anakin Skywalker” Intuit once was.