When Is a Software Company Not a Software Company?

From the newswire: Atos shareholder calls for chairman to resign.

On paper and from a certain perspective, Atos’ business focus sounds great—among many other things, they’re a Platinum SAP partner, with lots of products and services to sell, and a ton of big-name customers. But peel back a layer or two…

Years ago, when DBS (Dun & Bradstreet Software, and, yes, I go back that far) started their own consulting arm, a very wise man observed to me that you can’t sell both software and services—your focus and your bottom line have to be one or the other. Sure, you can dabble across the fence for fun and profit in support of your primary business. However, get lost in what looks like all that green clover on the other side and you’ll likely find that in the end you’ll be lucky if it’s all just not quite as sweet. Usually, the grass isn’t as green, and the re-reorganization pill you must swallow is bitter. Perhaps Atos remains more of a services company at heart, and this doesn’t quite directly apply. But they certainly tread the margins from time to time.

When is a services company not a services company?

Not knowing what you’re selling creates problems. The most common accommodation I’ve seen is to set up two sets of salespeople—one for the services, excelling at implementations and other project management stuff, and the other for the software, excelling at architecture and applications. It’s actually the perfect-sounding paper tiger in the boardroom presentations. “We are great at everything you need!” However, as you might imagine, the two teams will very (most?) often consider each other competitors—consultants want big projects with lengthy timelines with lots of billable hours. Software sales jockeys want big projects with tiny timelines with instantaneous recognizable revenue. And you just can’t have it both ways. This goes for infrastructure outfits touting industry templates, and all sorts of other sins for which Atos might need to atone.

And let’s not just kick this one paper tiger while it’s down. Buyers don’t have to go beyond a software-only price list to find plenty of holes in which to misstep. One large vendor with whom we’ve all dealt once assigned as many as 70 different salespeople to individual accounts as a way to preferentially promote each one of its myriad offerings. This company is by no means unique and alone in divvying up sales quotas into separate sales fiefdoms. The biggest competitor pays salespeople different rates depending on which portion of the product line looks best to the industry analysts to be growing most quickly. Want to buy that? It’ll get grossed up and you’ll have an impossible time squeezing much (if any) of a discount. Want to buy something else? You may find it hard to get the sales team’s attention for anything less than writing them a check for the software application sight- or demo- or reference-unseen.

In all of these cases, your sales pitch from all sides will undoubtedly tout the power of “single sourcing” from one powerful vendor, but if that were really true, why wouldn’t they respect their own strength enough to send you one single salesperson who understands and can convey that unified value? You know behind the scenes there will be warring sales factions all bent on extracting your money to pay for *their* portion of “the deal” at the eager expense of all the others. Put plainly: if you get a call from a financials salesperson separately from an HCM salesperson, keep your wits about you. Same goes for database vs apps, or software vs services or anything vs anything else.

All’s well that ends well

The wise man who pointed this all out to me years ago instantly quit DBS to start his own consulting firm, laughing at the naysayers suggesting he could never compete with DBS’ own experts. He knew DBS was a software company, and which inner wolf would win. (It’s the one you feed, natch). And he’s one of the most successful guys I have ever known—at one point he was CEO of both his services company and an additional highly respected and high-performing software company, and both were extremely successful precisely because they had zero overlap in markets and objectives and were free to be who and what they were good at without equivocation or cross purposes—all on purpose.

A partner is not always a partner

Ah, if only Atos’ problems were so simple… If it were just a question of achieving a unified focus, a smart incoming chairperson could set an agenda to laser in on one thing or another and tighten up the ship. But behind this story in particular there are even more chickens compelled to come home to roost. Over the years, as Atos was being both services- and software-oriented, the company confused several as to which side of the project its bread was best buttered. When I worked for SAP, these guys were quite often touting themselves as a partner. They were also whispering behind their hand to the potential clients that their tools and add-ons were so much better than SAP’s. (“Maximize the deal size” is one of those ubiquitous sales management koans). This, of course, was more than a little frustrating to the SAP salespeople who were all—services or software—focused on winning the applications business for all the pieces and not just the core. The cumulative effect of decades of this sort of “co-opetition” is that SAP’s institutional preference—despite whatever you may read on their partner portal—is never going to be Atos. The whispers from behind *their* hands will be that other infrastructure, implementation, and add-on companies are all better options. After all, it’s SAP’s ecosystem. And that means that Atos will continually have to swim upstream against a persistent undercurrent.

The bottom line

Some lessons can be inferred from all this. First of all, beware any vendor coming to you purporting to be aces at both software and services. They are not, because they cannot be both. It’s one business or the other for every long-term successful firm in this industry, and it’s been that way since forever. Second of all, pay very careful attention to the behavior of certain “partners” that you may be considering for your big project. If they aren’t 100 percent behind the vendor at the heart of your selection and all that vendor’s components, they might sooner or later become (or already be) on the outs with that vendor as a de facto competitor, and you could be left holding a very expensive bag.

Partner programs, truth be told, are profit centers for the big vendors. They charge big money for such privileges, and the “partner” team will cozy up with all sorts of cash that the rest of the company will want to have nothing to do with. Lip service will be paid, of course, but the proof is in the backhanded whispers, and salespeople are never hesitant to share if you know the right questions to ask. It may never become as public and as ugly as Atos’ current situation, but it’s absolutely not in your best interest to be the middle that both sides are playing against.

The good news is that this is all moot when it comes to Atos, because you’re already forewarned against bad economic performance in your vendor evaluations via our recent blog post itemizing the factors to consider when evaluating technology. The software or services can be new, different, valuable, and easy to migrate—compelling, even. And who doesn’t love a sexy ROI story? But if the vendor financial wheels are foreseeable to come off in the time frame you expect to be using the software or services, hold out your ten-foot pole while you look for the alternatives. Every corporate deterioration rewards those who pick a better side—both those better vendors, as well as those better vendors’ customers. There’s no better feeling than to watch the new features and functions accrue to your favorite solution simply from the combined resources of all the other customers jumping on board after you. It’s better for your solution, and it’s also better for your recruiting—everybody wants to work with hot AND successful tech.

Here’s to being first in line for benefits by paying attention from the drop.

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