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SaaS and the Commoditization of the Software Market

Office 2007 Reaches a New Low – reports Joe Wilcox @eWeek.  He means low prices:  while Office Standard is still above $300, the Home and Student Edition can be purchased for as little as $89.99.

He then speculates on the reasons for this “Crazy Eddie”  pricing, with percentage of likelihood:

  • It’s end of the back-to-school buying season, when Microsoft and retailers often discount consumer Office (50 percent).
  • Microsoft is seeding the consumer market with the Home and Student Trojan horse for supporting Web services such as Office Live Workspace (25 percent).
  • The low pricing is way of psychologically preparing the consumer market for $69.95 Office Equipt, which packs 12-month subscription versions of Office 2007 Home and Student Edition, Windows Live OneCare, Mail, Messenger and Photo Gallery. (20 percent).
  • Microsoft is shoring up marketshare as proactive response to freebees like Google Docs. (5 percent).”

I strongly believe in the last one, which is way underrated at 5%.  With freely available OpenOffice, Google Docs and the Zoho Suite, people have little reason left to purchasing Microsoft Office.  I’ve said this before, while discussing the perfectly rightful clampdown on piracy:

The danger for Microsoft is not the direct financial impact of these users turning away from their product, since the never paid in the first place. It’s losing their grip; the behavioral, cultural change, the very fact that millions of people – students, freelancers, moonlighters, small business workers,  unemployed – realize that they no longer need a Microsoft product to work with MS file formats.  Microsoft shows these non-customer users the door, and they won’t come back – not even tomorrow when they are IT consultants, corporate managers, executives.  That’s Microsoft’s real loss.

But this post is about commoditization, and there’s more to it than putting price-pressure on Microsoft. Yes, SaaS disrupts the traditional software market, but there’s another equally important trend happening: some of the early pioneers who evangelized SaaS but retained a 1.0 business model are being squeezed by more nimble competitors. 

Days after my post on SaaS and the Shifting Software Business Model I received an email from Salesforce.com, announcing new, promotional pricing for Salesforce Group Edition.  The promo was supposed to end July 31st, but I suspected this would become a permanent price cut.  Why?  Group Edition is where Salesforce.com feels intense price pressure – see the comparative matrix here.  Today I checked again, and what a surprise (not really) –  the promo deadline is now gone, Salesforce.com silently turned the promotion into a permanent price-cut

No wonder there wasn’t much fanfare: price cuts are a red flag for the Street.  Commoditization can be a death-spiral to businesses – except for the few that drive it. But it is beneficial to customers, and in the end, that’s what matters.

(Disclaimer: I am an advisor to Zoho, the company with a mission of Deflating IT).

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Everything on this Vista PC is an Afterthought

OK, so I bit the bullet: after being so critical of Vista, I ended up buying a PC blessed cursed with this Operating System. Not that I changed my mind: I simply wanted an ergonomic desktop, for the times I’m stuck at the desk anyway. Costco had a fairly good promotional offer on a loaded super-duper-multimedia HP with this beauty of a display.

Well, beauty is in the eyes of the beholder, but this 22″ baby has beautiful colors, is fast and the most versatile I’ve seen – it can even pivot to portrait position – except I don’t know why I would want to do that, considering the software does not work, not even after the update.

But first things first: unpacking. This thing has a wireless keyboard and mouse, which is nice – but why on earth do I need to plug in a USB transmitter for them to work? This isn’t an after-market add-on, this configuration only comes with wireless. Talk about wireless, this being a desktop, my primary desktop connection will be via the LAN cable, but why does HP bundle another plug-in, a wireless antenna with this unit? (which, incidentally was missing from my package). Why not just build it in. OK, let’s move on: this whole multimedia center thingie (TV, DVR, remote) does not excite me a lot, but since it there, I will eventually figure out how to work it. But wait: for the remote to work, I have to … yes, you guessed it right, I have to plug-in yet another component, a wireless receiver.

I am not trying to expand the system: out-of-the-box, just to use the basic capabilities I have to plug-in three “extensions” that could very well have been built in. Are these features all afterthoughts? (And I haven’t even mentioned the jungle of cables into the monitor, including a USB connector to enable the two other USB ports on the side of the display).

The next two days were spent with installation, which primarily consisted of removing some of the junk software loaded by HP (I still could not get rid of the Yahoo Search-bar at the bottom!) and setting up my own stuff. I killed the 60-day Norton trial, not that McAfee is better, but it’s free with my Comcast subscription. Too bad it wouldn’t install. This turned out to be a case study on the worth of Customer Support:

  • Costco Concierge on the phone: after 4-5 minutes she is still stuck trying to spell my name – who has time for this? No way she can help me.
  • HP Online Support: quickly says the disclaimer that it’s not a HP product, so I should really go to the other vendor, but he will try to help anyway. Well, 8-10 minutes later he concludes I should go to Windows Safe mode for this install. Oh, boy. If I have to start safe-moding on a vanilla, out-of-the box machine, what else am I in for during the lifetime of this thing? I tell him I won’t do this exercise, will likely return the machine next day
  • McAfee Online Support: he is quite clueless, too, but has an interesting prospective: perhaps, despite the aborted installation (which I repeated 4 times, Control Panel-uninstall-reboot-install included) McAfee might actually be working properly on my machine. Although he didn’t seem to get the concept of corrupted (or missing files) and had no way to verify his idea, he still planted the bug in me, so later, on my own I found a McAfee diagnostic tool that verified that I have the correct setup on my system. So, perhaps I am protected. I guess that’s the definition of hopeware.

I will spare you the details of my two-day struggle with Vista, the fight with the idiotic permission-scheme, (can’t delete my own stuff), the incompatibilities, the fact that there’s less and less information to be found, other than from users – hey, even the User Manuals link points to nowhere… enough said already. After two days, I can use the system (the screen is beautiful) but I’m far from done.

I’m starting to see how this supposedly good deal will turn out to be more expensive then a matching Mac. The funny sad thing is, I myself talked about this, describing the $1,500 iPhone: it’s the cost of my own time.smile_sad . This whole Vista-Microsoft-HP-Dell-you-name-it enchilada is anything but user friendly, a pain to work with. In fact, “work” is the operational word here: I don’t want to work setting up this thing, I just want to use it. Perhaps Steve Jobs and co. are turning a disadvantage into an advantage: they are not the darlings of the corporate market.. so they have to focus on individual users, who don’t have an IT department to support them. That means they are just turning out usable, friendly boxes.

Oh, talk about boxes, Joel Spolsky has a hilarious post today: Even the Office 2007 box has a learning curve, discussing Office 2007’s fancy box (which is the same design Vista comes in):

…I simply could not figure out how to open the bizarre new packaging.
…It represents a complete failure of industrial design; an utter F in the school of Donald Norman’s Design of Everyday Things.
…It seems like even rudimentary usability testing would have revealed the problem. A box that many people can’t figure out how to open without a Google search is an unusually pathetic failure of design.

Chris Pirillo responds: Windows Vista Isn’t for Developers?

Hm, now I really don’t know what to think. All this while I’ve been making the point that Vista is not for earthly users; now Chris makes the point it’s not for developers, either. So, who exactly is Vista meant to be for?

Update: How timely… read Raju, a Mac Convert’s testimony: Windows (Dell) to Mac: Thats a smooth ride. Damn. I have 90 days (Costco’s return policy) to make up my mind. But even if I take the smooth ride, no-one is paying for my wasted time….

Update #2: I’m speechless… but Vista has just given me another proof that’s it’s not meant for *users*. Here’s am error window:

Windows decided to mess with Firefox, without telling me, the owner of the computer what it did. OK, let’s click on the link, perhaps it tells us what happened:

What changes does it make?

It depends on the problem, but any changes made are related to how Windows runs the program.

blahblahblah … but it gets better:

How do I turn it off or turn it back on?

Adjustments to the Program Compatibility Wizard can be made by using Group Policy. For more information on how to use Group Policy, go to the Microsoft website for IT professionals.

So let’s get this straight: Vista makes changes to my system, to the most important program I use, Firefox, without asking me, without telling me what those changes were, how to undo them. And if I want to prevent such aggression in the future, I should go to the “IT Professionals” site.

Well, I won’t. A computer sold at Costco, BestBuy, Fry’s ..etc is a Consumer Device. I am a Consumer. This Operating System is NOT for consumers. Microsoft (via HP) sold me garbage.

I can’t wait for the Vista related Class Action cases.

Update: I think I’ll try this tweaky-thingy recommended at WebWorkerDaily.

Update (8/23): Dell must share my views of Vista, or in fact Windows in general, having shipped this laptop without any OS at all 😉

Update (8/23): Even a 6-year-old knows better… he is right, my next PC will be an Apple. And since I’m already doing most of my work on the Web, the transition won’t be a big deal.

OK, this is too much of a coincidence (or not?): when I described Microsoft Money as a showcase for what’s wrong with Microsoft’s Software + Service concept, Omar Shahine, a Microsoft employee responded – he experienced very similar problems. And what am I reading today on Omar’s blog? It’s been a bad month for Vista.