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Business Management

Steve Goodman (US) - Giving It Away: Why Offering NMS for Free is a Viable - and Profitable - Long-Term Strategy - Part I

For the US enterprise software market, long sales cycles and high price tags are going the way of the dinosaur. Today, IT managers want "download-and-go" solutions they can implement themselves and that don't break the bank. This fundamental change is requiring enterprise software vendors to make serious changes - including giving away some of their products, such as commoditized network management systems (NMS) - in order to stay competitive and build a foundation for selling their premium services.

The Sales Evolution
The enterprise software sales process has changed dramatically over the last decade, particularly as software-as-a-service (SaaS) has become the norm. No longer do sales organizations target the CEO or CIO in a six- to nine-month process that requires competing for RFPs and participating in bake-offs to compare features that would most likely never be used.

Today IT managers and directors - not the CEO - are the targets of sales organizations, who are promoting software that can solve specific problems and help them do their jobs better. Gone are the days when software must be all things to all users. Vendors now must be nimble enough to address their customers' prevailing problems and get those products to market quickly. In essence, it's become a hacker-centric culture in which an agile development approach results in iterative development cycles and enables quick release of betas for customer feedback.

To be successful in this new environment, product management should focus on customers first, which entails seeking out ones who are willing to be beta testers and provide continuous feedback to ensure the software meets market needs. This "customer first" focus is a fundamental principal outlined by author and technology company founder Steven Gary Blank in his book "The Four Steps to the Epiphany," and has been a philosophy followed by virtually every successful B2B technology company.

During the development process, software vendors should focus on usability first, features second. Accustomed to software from Apple and other companies that rely on simple graphical user interfaces, users of SaaS and enterprise software simply expect that any new solutions should look and feel like other consumer products. By making new software simple and intuitive to use, vendors are able to more easily engage potential customers. And by not investing in extensive, unneeded feature development at the start, overall support costs are reduced.

Vendors also should consider leading with a "freemium" strategy, which allows users to try the software and make their own decision to buy. This eliminates vendors from having to do a hard sell of the product, and builds stronger relationships with advocates inside the enterprise who can influence future purchasing decisions. While offering a free solution may commoditize the market, it also provides an opportunity for vendors to deliver premium upgrades that will ultimately monetize the product.

Part two will look at how you can make a profit from Free NMS

By Steve Goodman, VP and GM of the Network Nanagement Business Unit, Quest Software

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