Feeds

Are founder-driven SW vendors good for enterprise buyers?

A safe bet?

Internet Security Threat Report 2014

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

Secure remote control for conventional and virtual desktops

More from The Register

next story
Netscape Navigator - the browser that started it all - turns 20
It was 20 years ago today, Marc Andreeesen taught the band to play
Sway: Microsoft's new Office app doesn't have an Undo function
Content aggregation, meet the workplace ... oh
Sign off my IT project or I’ll PHONE your MUM
Honestly, it’s a piece of piss
Return of the Jedi – Apache reclaims web server crown
.london, .hamburg and .公司 - that's .com in Chinese - storm the web server charts
NetWare sales revive in China thanks to that man Snowden
If it ain't Microsoft, it's in fashion behind the Great Firewall
Chrome 38's new HTML tag support makes fatties FIT and SKINNIER
First browser to protect networks' bandwith using official spec
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Win a year’s supply of chocolate
There is no techie angle to this competition so we're not going to pretend there is, but everyone loves chocolate so who cares.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.