It's a bad time to buy software

On a recent client call, I found myself in an awkward situation. This company is looking to acquire a large suite of software and I really couldn't recommend they do it. The software market is in some real flux now and today's products and market leaders might not be tomorrow's. Right now, this isn't a software selection, it's gambling.

Software buyers might be taking big technical and economic risks when they buy new application software today. The question is how to avoid obsolescence risk and a bunch of duplicate costs?

There's a really good chance your firm will fall into one of the following scenarios in the next year or two. Please note the background information and scenario particulars below.

The changes underfoot in the application software space include:

The big problem with all of the above is that vendors don't have any firm ideas yet on what they will develop, when it will ship, what privacy issues they’ll expose your firm (and its data) to, how they’ll sell and price it, etc. You may have better luck consulting a crystal ball than relying on vendor statements right now.

In a conversation with another industry analyst, we can't see any real clarity on the above for at least six more months. Personally, I suspect customers and prospects won't really see firmer product roadmaps and pricing information for a year.

Firms, like my client above, are always replacing, upgrading and supplementing their software portfolio. Their businesses can't sit still but they may have to park some software decisions. For example:

Software purchases are almost always expensive capital efforts. The software is pricey and so, too, is the implementation. If you’re buying and implementing something today, the newer more advanced version that becomes available in the next year or so, may cost you more money to acquire and implement. It's like that quote attributed to General George Patton: "I don't like paying for the same real estate twice." And don't forget that any software project comes with risk. Is this application worth twice the costs and risks in a short period of time?

Patience is a virtue – Right now, software sales teams are crafting their sales plans for the rest of 2023. What are they forecasting? My hunch is that they all think that they’ll bag a bunch of new deals with many whopper sales in the mix. They’re also planning to snow you with loads of whiz-bang stories about how advanced technologies will power value with their customers if only you sign up now! Hey, everyone can dream, can't they?

A rosy 2H2023 software sales forecast may not be fully achievable if vendors can't deal with a whole new crop of advanced technology triggered sales objections.

These sales teams aren't going to be in a real discounting mood (and customers won't buy) until a couple of things happen:

Reconsider how much you really need to buy now – Chances are that your firm might not need all of that suite now. You might instead want to focus more on securing favorable pricing terms for future purchases but only commit to buying just one or two point/best-of-breed applications for now.

Bolster your resources – You might want to line up a great software negotiator and contracts attorney. Better still, have your own ‘paper’ that you want the vendor to sign. Trust me, their ‘paper’ is massively slanted in their favor. Why not level-set things?

Go open source or find a lower cost partner solution to plug into your pre-existing apps or application platform. It might be cheaper short and long-term. And, it even be functionally superior to what a large vendor might offer now. If you want to replace it later, your sunk cost in this solution will be less.

Put the existing vendor on notice – Let them know that:

Don't be afraid to seek true love elsewhere – In this environment, don't tolerate bad actors, pushy sales people and onerous contracts. Kick’em to the curb! They can't abuse you unless you let them. Go with a vendor that appreciates you (not your bank account).

Be careful! With great change comes both great opportunity and risk.

Image credit - Pixabay