Profits and Product

The software business eventually builds up a substantial maintenance base, but the profit is really in selling new products. The maintenance base is nice to have and keeps you running, but when you have a product that's selling like hotcakes, then you make money. This isn't a fashion business, but it has a certain element of that. Everyone wants a hot product that lots of other people want. The other aspect is that you want to get there first. The company that gets the hot product first usually gets most of the market and most of the profit from it.

Being on the cutting edge is a double-edged sword, however. Not every customer is a cutting-edge customer. Not every customer wants to buy the latest and greatest. In fact, today in particular, people are holding back, waiting to see what technology is really going to survive.

Software marketing is a bit different than consumer marketing. In consumer marketing, I want everyone to know that I'm making a camera because consumers buy them, and I'm going to advertise on television. In the industrial marketplace that we sell into, you're not going to see us on television. Occasionally software companies do advertise on television, but it's quite rare. We use technical marketing channels such as technical publications, for example, or technical trade shows and conferences. In these places, we get our name out. Also, we provide Web information, so people get on the Web and learn about the product remotely. Plus, we have salesmen knock on doors, and part of their challenge is to educate customers about what software we provide. We have a direct sales force that goes out and builds a relationship with the customer directly. We mostly sell to the business-level user. For a local application, a departmental application, it's the business user who needs a solution to meet his needs. Sometimes we sell to IT management for more of an enterprise solution or something they can use in many locations. So, we sell both to the CIO level and to the departmental level, depending on where the solution is used. Today, many people are educated about computers. Years ago, we only sold to IT management, but today everyone uses computers, so you'll find people who are running a trust accounting or a purchasing department who very often are capable of putting out a system, installing it, and getting it run themselves.

We only sell to a CIO if it is a strategic system that is very important to the company. Not every system is CIO level; many of them are pedestrian things. So, if it's a strategic system, you're selling higher up. There's more interest in picking the right thing because it's a more important decision for the company. If you're selling a departmental system, it's usually lower priced and gets a lower level of attention in the company. Obviously, if you're selling higher up, you're going to put more effort into it because those are bigger sales. The basic strategy is to show the buyer that you have a product that they can use easily, that is going to do the job that they want done, that will grow with their needs as time goes on, and that is going to be the best long-term solution for them. It's a very fundamental set of things that we sell in software.

A good software product should live up to the promise that it has made: do the job as advertised - economically - for the buyer. It must be easy to use, because otherwise the user has a lot of expense to keep it running. And we keep it up to date for him, so his investment is preserved.