Feeds

Are founder-driven SW vendors good for enterprise buyers?

A safe bet?

Build a business case: developing custom apps

Comment I met with Gerry Cohen last week, the founder CEO of BI vendor Information Builders (IB). After 30 years in the business he still has an infectious enthusiasm for software. As has Jim Goodnight, the founder CEO of SAS, and Michael Saylor, the founder CEO of MicroStrategy, who founded his company in 1989. Between them, this triumvirate of founder CEOs account for $2.3bn of worldwide annual BI industry sales: about one-third of the whole BI market.

Venture capitalists are conspicuously absent from the ownership of their companies. These founder CEOs represent a previous generation of entrepreneur. They used their own hard-earned cash to set up their businesses and they borrowed nothing. They are all highly intelligent, driven, and intent on continuing to do it "their way".

They are all technologists first and foremost. They have all engineered break-through products based on technical innovation (MicroStrategy pioneered Relational OLAP, SAS pioneered scientific/technical analytics, and IB pioneered mass reporting). They believe in the superiority of their technology with almost religious fervour. They are dismissive of the technology of their competitors. Acquisitions are for others; these founder-driven companies believe in organic growth (although SAS did acquire data quality vendor, Dataflux).

If you have little knowledge of these companies, you are not alone. A look at Google Trends confirms they are hardly on the radar. Founder-driven technology companies are often little-known outside their customers. They treat marketing with mistrust. This is based on bitter experience. MicroStrategy reputedly once spent $1m on a television advert during the SuperBowl. Information Builders similarly once spent heavily on corporate marketing. Advertisements from either are rare indeed these days.

In recent years SAS has been more aggressive, but as Hyperion CEO Godfrey Sullivan said in December 2006: "We never see them." The triumvirate are the antithesis of Business Objects and Cognos in this respect. However, this may not be all bad. If you can set a premium price, and spend very little on marketing, margins can be good. MicroStrategy posts an extremely healthy 32 per cent operating margin, around three times the industry average. If profit, rather than market share, is your goal this is a good strategy.

The triumvirate looks after their customers. As Jim Goodnight says: "When we get a customer, we virtually never lose them." SAS, in particular, is famed for its excellent customer services. As part of its SAS Poll initiative customers are encouraged to put forward their requests for software enhancements. Eighty-five per cent of these suggestions are incorporated into SAS products. Pretty impressive.

The take-away for customers: on the upside, founder-driven companies deliver robust and proven technology, and excellent customer service and user group communities. They are immune from hostile take-over so their technology strategies can be played out. To some extent they are "a safe bet".

However, they are now more risk-averse than in earlier days, and are less likely to deliver ground-breaking innovation. Without substantial new investment in marketing they may be relegated to niche players over time...you can't acquire new customers if they don't know you are there. Also, none have articulated a clear succession plan, so there may be continuity risk (remember what happened to Digital Equipment after Founder CEO Ken Olsen left).

Jim Goodnight delivered the joke of 2006: "PowerPoint is used by people who have no power, and have no point." He doesn't much like PowerPoint, nor do Michael and Gerry. Like Jonny Wilkinson of the English rugby team, it is certainly too early to write them off - their companies may yet stage an amazing finale.

Copyright © 2007, IT-Analysis.com

Maximizing your infrastructure through virtualization

More from The Register

next story
HIDDEN packet sniffer spy tech in MILLIONS of iPhones, iPads – expert
Don't panic though – Apple's backdoor is not wide open to all, guru tells us
Do YOU work at Microsoft? Um. Are you SURE about that?
Nokia and marketing types first to get the bullet, says report
Microsoft takes on Chromebook with low-cost Windows laptops
Redmond's chief salesman: We're taking 'hard' decisions
Cheer up, Nokia fans. It can start making mobes again in 18 months
The real winner of the Nokia sale is *drumroll* ... Nokia
EU dons gloves, pokes Google's deals with Android mobe makers
El Reg cops a squint at investigatory letters
Chrome browser has been DRAINING PC batteries for YEARS
Google is only now fixing ancient, energy-sapping bug
Big Blue Apple: IBM to sell iPads, iPhones to enterprises
iOS/2 gear loaded with apps for big biz ... uh oh BlackBerry
prev story

Whitepapers

Seven Steps to Software Security
Seven practical steps you can begin to take today to secure your applications and prevent the damages a successful cyber-attack can cause.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.