If you’ve read or paid attention to anything that I’ve written over time, you’ll know that I hate clichés.
OK, I’m lying through my teeth! I love them, but not for the reason which might seem apparent. You see, I think there’s a lot of truth and a lot of mischief in clichés. In each one, there is a nugget of truth which is often obscured or masked by a thick layer of common sense. Not the common sense that is like “you shouldn’t let your kids play in traffic.” No, I mean the common sense that is more like sleight of hand — if you say it quickly enough, (most) people will accept the statement at face value, nod their head approvingly and then move on as if what was said is (actually) true — even if it’s not or a gross oversimplification of reality.
I enjoy them, because I enjoy identifying them, stomping them into the ground and having people come to recognize them for what they truly are. In the expression “you only get what you pay for,” we have another viable candidate to do damage to.
Why am I railing against this one now? Why is this relevant to ITSM? I’m glad that you asked!
ManageEngine recently announced that its Standard Edition product would be made freely available to all current and future customers.
What does this mean? Why is it important? Is the cliché really true?!
Let’s have a look, shall we?
[Editors Note: When on camera, make sure you smile more. You look too serious! Ugh]
Late in the interview, when asked about the future of the ITSM space over the next few years, I said:
“I think that the technology vendors are in for an interesting ride. They’re going to come to a point where, they’re standing on the edge of the cliff and wonder whether to jump or not. It’ll be interesting to see how it plays out.
I don’t think the jump is as bad as what vendors might consider it is, but the key thing is that it’s going to impact the way that they sell. Because it’s not just a matter of putting technology in people’s hands. Rather, it’s giving them a different orientation to work from and showing how the technology they’re offering is relevant in that context.
For the vendors that learn that bit of judo, to learn how to position it properly, I think they’ll be wildly successful.”
OK, so as with any bit of forward looking estimates (from those of us who engage in this risky activity), I don’t think I was 100% on, but I also wasn’t that far off the mark. I guess that I can be thankful that Barclay specified “next few years” in the interview! 😀
The reason that I was reminded of the interview was this ManageEngine press release from a little over a week ago.
You Only Get What You Pay For — Or Do You?!
The common thinking is that “if it’s free, it can’t be very good” or there must be some defect which has the product in question. While in some cases this may be true, it’s certainly not universal. After all, we have been consuming software on this basis for a long, long time! The concept behind the “Freemium” may seem as though it’s relatively new, but it’s not. It’s just about as old as the technology industry itself.
The Original Freemium: Shareware!
Let’s think back to the days of “shareware.” Remember that? Hundreds of programs for your DOS PC on a CD-ROM that you could install and play with and then buy for some steal of a price, if you liked it and found it valuable. Most of the programs didn’t have the sophisticated programming in it to disable it after a trial period, so authors/publishers largely relied on the “honor system” to get their revenue. Was it perfect? Not even close.
Some of the titles were really awful! You installed, tested and then quickly deleted it. Lesson learned. If it worked well, you paid your then you kept it around. Simple.
Freeware and Open Source
Beyond the shareware, we also saw the introduction of discussions around innovative licensing/sourcing options that addressed different ownership models and respect for intellectual property rights that challenged the MESS that the USPTO helped create/enable through the introduction of “software patents.” At some point, I am likely going to blog on that as well. As you might guess, I am not a fan. I think we are early into discovering the true cost (as in penalty) on innovation and entrepreneurship that this has introduced. Needless to say, I won’t digress any further.
Based upon the legal work of the Free Software Foundation (and the GNU Project), Creative Commons, we have seen a lot of new products introduced which has fundamentally altered the software industry. The success of Linux and the Apache development community are a testament to what is possible in alternate business, distribution and licensing models which don’t require “high licensing and implementation costs” up front. Is it a “software Nirvana”? No, it isn’t — but it’s been successful and a key driver of how the everyday technologies you and I use on the internet has evolved.
There’s no reason to consider that any software which is made freely available to customers is any less capable, robust or of questionable quality, until its been tested and proven to be so. These days, such products have a very short lifespan, given the pervasiveness of social media and the short-fuse of many users who quickly grow frustrated with failures or shortcomings.
A Bold Move
For a smaller vendor to take this action, it can likely be thought of as being overly risky or even dumb. I don’t think that this is the case. I happen to think that this is a pretty bold move and it makes sense for ManageEngine. Why? As we noted earlier, such moves are not unprecedented.
Haven’t We Seen This Before?
It wasn’t all that long ago when Service Now was the “young whipper-snapper” that was trying to prove itself in the marketplace that was filled (almost exclusively) with locally-hosted solutions. There were a lot of concerns (real or imagined) that the company had to address:
- Was it secure?
- Was it stable?
- How do we contend with network outages?
- What about our data? Is it still ours?
- What about “vendor lock-in”?
The past years have shown that the bets against Service Now were premature and just plain bad. They are now the player to watch in the space. They have the funding, the buzz and the “logos” to show that they are not going anywhere anytime soon.
They had their shot, because they brought the right disruption to the marketplace they wanted to serve at the right time. The only thing that could have tripped them up was dropping the ball on execution somewhere.
Leading With Disruption
Just when we thought that the market was “stable,” ManageEngine comes along and throws a “curve ball.”
Many have talked about the commoditization of the ITSM tools/Service Desk space, but their making ServiceDesk Plus Standard Edition completely free for everyone is a pretty bold — and I believe, disruptive — move. Such an action has benefits, but it also has challenges. Everything has trade-offs, right?
In the end, I think this should be seen as less of a pricing play and more as a shrewd piece of Product Management.
It’s About Relationships
Given that this has the potential to significantly impact the company’s top and bottom line numbers, there has to be something in it for them. What? An enhanced customer relationship. Why do I say that? This is clearly a long-term play for the company.
If they wanted to increase short-term sales, dropping the price helps boost the subscriber base, even though it has them take a revenue hit. A good product manager might make that decision, because it’s helping her tackle a segment of the market that they really want to be in. But this is different — there’s no return to MSRP from free! Gaining clarity about your product strategy and a view of things which relies on the cross-sell and up-sell is just solid product management.
“Giving the software away” eliminates many of the common objections and customer barriers to adoption which are normally encountered in the sales process. Unrestricted use allows the company and its customers time to establish a working relationship over time, adding on other modules for a fee, when the time is right for the customer, not just for the vendor. The whole “try before you buy” is rooted in successful product marketing.
Managing Perceived Value AND Setting Expectations
As I’ve stated many times in different articles and presentations over the years, all successful service provider organizations (or those that are being managed like one) are ones that are effectively fulfilling both the value equation and the Expectation Equation (as described in the Universal Service Management Body of Knowledge [USMBOK]).
Value = Results / Cost
Expectations = (Customer) Requirements / (Service Provider) Capabilities
Often times, we see such service provider organizations (SPOs) focus on cost and mishandle the other parts. Why? Because they are not used to addressing how well their products/services meet a defined customer need resulting in value. Additionally, they often cannot describe their current level of capability in terms which are easily mapped against a customers explicit requirements. As such, many providers rely on pricing measures (discounting) to address that (often significant) gap, because they are more used to describing their products in terms of speeds/feeds — not capability!
I think that removing the base price and relying on the cross-sell/up-sell offers the potential to eliminate the initial barrier on cost, but it pushes the burden to post-sale support and solution design/envisioniong. This can serve as a foundation for better understanding the ways in which the product is being used by the customer, what results their customers rely on them for, how this translates in to an enhanced set of requirements that can be useful in engaging their customers and how best to position the set of products/services that will help the company grow.
Addressing The Obvious Challenges
Obviously, there is a revenue impact, as I described earlier. I cannot imagine a situation in which this wasn’t a carefully thought out attempt to alter the dynamics of the marketplace. That said, one can only hope that sufficient planning has been done to ensure the cost of operations is effectively managed (for current and future levels of service consumption/utilization) and there are sufficient assurances about the ongoing health of the service provider. If there is any area where I would expect customers to be a bit hesitant about the long term viability of or the risk of leveraging this platform, this would be it.
I don’t think this is the end of the road. I think that there are many more changes ahead in the ITSM Tools / Service Desk space and this is only one type of disruption we can expect to see. Regardless of the nature of the disruption, every one presents opportunities to customer and service provider alike.
Even though the focus of this piece is on ManageEngine, if you step back a few paces, you’ll see that this is more broadly applicable than it might initially appear. It’s why I’ve invested the time in building out the background for this and making the connections. It’s not just topical, right?
I think that if ManageEngine has done its homework, it’s likely to gain some significant benefits and grow its customer base.
I think that the customers who might not have had ManageEngine on their short list to consider will definitely have them there now. It’s too early (and I am not familiar enough with the product capabilities or their go-forward strategy) to know whether or not this will aid ManageEngine in penetrating the Large Enterprise arena. I suspect that the analysts will be watching this closely to see what the effects are.
I think that the single most valuable thing that ManageEngine can get from this move is: customer attention.
Now that they have it, what will they do with it?!
As with anything, I guess the answer is: we’ll see.
If you have questions, comments, or any feedback, please let me know.
I am a social being — you know how to find me, right?! 🙂