Drags to Innovation

Savio’s not the first person to tell me I’m wrong and I’m sure he won’t be the last. Somehow, though, this makes me think of that line, “I’ve been thrown out of better places than this.”

My comments had to do with the inefficiencies introduced over the years from closed-source vendors. Savio compares cost of spending in categories such as marketing, sales, etc. to help point out how I’m incorrect in my claim that the closed-source vendors have institutionalized overt and covert costs in such a way that they provide drag to innovation.

Allow me to clarify/correct/elucidate my point. This clarification is especially important given that Savio uses Red Hat as the open-source benchmark against which to measure the issues I raised.

I should have probably used the phrase incumbent rather than closed-source vendors. It’s just that most of the incumbent players are closed-source and it’s easy to link the two phrases together. I often say, “…the closed-source, legacy vendors…”

My main issue isn’t how a company does business or accounts for their spending. The fact that Red Hat spends a larger percentage of revenue on marketing vis-a-vis IBM, Oracle or Microsoft isn’t the issue. The issue is that companies like Oracle and Microsoft have put practices in place that create unfair and unnecessary burdens on their customers.

The example I used had to do with the extra layers put in place to protect the technical decision makers from themselves. In particular, I find it appalling that a large company would need a procurement official to interrogate a software vendor to determine how to count CPUs. But that company intending to license software has to do that because of the business practices the incumbent players have established.

What I want to expose for discussion is the inefficiencies imposed by the incumbent players. Every time that potential customer has to ask how to count a CPU or what happens to unused licenses they are, in effect, increasing their cost of purchasing software. These extra dollars spent in the procurement process are dollars that are unavailable for innovation.

Think about how this unfolds when a company like Oracle decides to change how they want to count CPUs. Oracle writes a new policy that they publish, is then reported on by news organizations, analyzed by analysts who then sell the analysis to their subscribers, read by their subscribers who need to figure out how to count the cores in their CPUs so that when the Oracle sales rep shows up they can figure out how much they owe in license charges, which then serves as the basis for their support charges.

I can’t be the only one who thinks it insane that there is a market for consultants to help companies buy and license software.

Such a market exists because the incumbent players invent increasingly complex business practices designed to maximize the dollars they can collect from a captive customer base. Those complex business practices increase costs and increased costs reduce dollars available for innovation. Now, that’s a drag.