Price Pressure on Search Vendors
December 23, 2008
The PC World story “Enterprise Software in 2009: Opportunities, Risks” is interesting. The thrust of the story is that the lousy economy means that organizations can wheel and deal for discounts. You can read the article here. If the Yahoo version of the story 404s, you can try the PC World Web site, but it too can be hit and miss. In general, I agree with this write up. The core of the argument pivots on SAP’s price flexibility. For me, the most important comment in the story was:
In addition, a company’s end users may not be as busy as usual, potentially making it easier to push through IT changes..
Now this remark suggested to me that in a downturn, employees have more free time. I thought that in a downturn, employees would have to work harder. Maslow and self interest kick in, not the desire to buy enterprise software and change business procedures. But if this statement is true, what will the company be doing to generate revenue while employees procure software? Buying cheap enterprise software generates revenue for vendors and increased costs for customers. In my opinion, enterprise software sales will slow, and I don’t think employees will be inclined to change. Employees will be inclined to look after their own interests which means that enterprise software vendors may face price inelasticity. Bad news will persist as customers and vendors create a feedback loop. What goes up is not sales. The higher frequency generated is the pain of imploding business models.
Stephen Arnold, December 23, 2008
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