IT Customer Buying Patterns and Vendor Competition
Tail light chasing your competition means you will NEVER own a concept in your customers's minds. Matt Asay recently blogged about Novell's continuing practice of chasing Red Hat in the Linux market rather than defining itself on its own strengths, (in this case offering support for Red Hat servers cheaper than Red Hat). He rightly addresses the woolliness of their thinking and closes by saying:
Instead, Novell should be focusing on the things it does really well, like its powerful SUSE Studio technology, which makes it super easy to build Linux-based appliances. Novell is never going to be a better Red Hat than Red Hat. It should focus on being a better Novell. That positive message is what CIOs buy.
The post also includes a fragment of a leaked memo from a Red Hat country manager crying foul against Novell in a memo to a customer. Some consider this a sign that Red Hat is beginning to misbehave in its arrogance.
Here's what I think Novell is up against: Is the customer "happy" with Red Hat is the wrong question. This applies equally to both pricing and arrogance issues. There are few inflexion points to grab. Novell's opportunities aren't around offering cheaper support, but have to be looking forward to the next ground they can grab in customers's minds.
From my historical perspective as a customer, (and this was confirmed in recent discussions with CIOs I trust), customers never "trust" vendors, and in fact expect them to misbehave to maximize their own revenue. Customer organizations manage their IT budgets as a portfolio (especially large complex organizations with lots of "platforms" to support). Switching solutions means retraining, instability in something complex that isn't "broke", and the savings would need to be enormous to consider the conversation at all. And it's not enough to save a lot on the specific vendor competitive situation because the customer is actually judging the savings against their entire portfolio.
Let me borrow an example from discussions and a blog post from three years ago. Saving even 50% per year on a Red Hat support contract by switching to Novell is irrelevant. The risk of instability isn't balanced against a commensurate savings in the overall budget (against say the IBM or Oracle annual spend), or new value-add to the company. It's not worth the conversation. Matt rightly points out that the savings of moving from Red Hat to CentOS is 100% and the form factor exactly matches Red Hat. Is the customer "happy" with Red Hat is the wrong question. They're not unhappy enough with the value-to-conversion risk to make the conversation interesting compared to all the other more interesting value generation projects they're undertaking or savings in the ugly parts of the budget.
What this means is that once established, there are few opportunities for the 2nd place guys to break-in. The market leader already owns a concept (or concepts) in the customer's mind. It's not about differentiation. It's about owning the differentiation in the customer's mind. ("We're cheaper" is already owned by CentOS.) You need to catch the next technology wave and own a particular definition faster at a time when the customer technology office is already at an inflexion point so a "new" vendor is an obvious part of the discussion. For Novell, this might mean positioning all the great technology in SuSE Studio on cloud appliances for the intranet. Today the message seems to be focused on getting more ISVs to compete with Red Hat's perceived success with ISVs. Positioning this technology to solve the ISV problem backwards is irrelevant. (Near as I can tell Red Hat and Novell each have roughly the same number of ISVs and I'm betting there's substantial overlap. Red Hat has again created the perception that they have more ISVs in a customer's mind. They were likely first to grab the ISV market, and they have entrenched the concept in customers minds.)
Nobody knows what cloud computing will mean for the large organization IT shop. Positioning SuSE Studio as the perfect way to "build virtual internal application appliances for your internal cloud", with all the supporting materials, examples, tutorials and the like is a possible way to own "in-house application appliances" in the customer's mind before Red Hat or IBM or some clever start-up comes along and does so. Then Novell can talk about the value proposition of SuSE as a secondary complementary [larger] revenue stream. Following Red Hat means you'll always be second.