5 recession-era strategies for software vendors (and their customers)

Clamping down on pirates, simplifying licenses, and boosting layoffs and outsourcing are among the recommendations that Accenture Ltd. has for software vendors struggling in this economy.

The global consulting firm today released two reports that, although aimed at executives at software vendors, can offer insight to their customers, such as enterprise CIOs.

One is a high-level study of key global software industry trends, the other a more focused report on priorities for software vendors in this economic environment.

Pekka Huttunen, a senior executive in charge of Accenture's global software business, listed five strategies for software vendors:

1. Crack down on piracy

One of Accenture's clients found it was losing $1 billion annually in licensing fees from customers that were out of compliance. "The opportunity is large," Huttunen said.

Of course, the piracy, he concedes, is often unintentional. "In general, licenses are considered too complex from a customer perspective," he said. Vendors, meanwhile, rarely step up by providing customers with tools to help them better track their software usage. "They are partly to blame," Huttunen added.

The fix: "Make it a win-win" for vendor and customer, Huttunen said. Distribute free software tracking and auditing tools to customers. Simplify licenses and reward end users, potentially with discounts, for using those tools and sharing usage information with the vendors.

"It's in the best interest of vendors to have CIOs like that," Huttunen said, pointing out that it shortens the negotiation time for renewing customers.

2. Trim expenses by cutting head count

According to Huttunen, "software firms are less aggressive on operational efficiency than other companies, historically. But in the new economy, there are opportunities for outsourcing your back-office or noncore processes."

This especially makes sense for the select group of companies that have in the past several years accelerated their pace of acquisitions: Oracle, Microsoft, IBM and others.

"They need to look again at the integration of their acquisitions and ask, 'Have we integrated them well enough to be efficient?' " Huttunen said.

3. Don't go overboard in rushing to cloud computing or software-as-a-service

While the downturn has "put more focus on more economic ways of computing," Huttunen said, at the same time, the move from on-premises software to cloud- or service-based software will be a "long transition."

"Some of these legacy systems support huge business streams. It's still a big risk to move to a new model, especially for a larger enterprise," he said. "The leap is still scary. And there are still concerns about data ownership, data privacy, not having control of key assets."

Most SaaS vendors remain "fairly small," offering just single, point solutions that may be more trouble than it's worth integrating for, Huttunen said.

4. Formalize your product launch process

Huttunen said most software vendors are poor at "retaining the institutional knowledge" and the personnel responsible for a software launch.

Vendors can improve by using tools to help capture that knowledge and by taking steps to retain the key launch-associated personnel -- product, marketing and channel managers -- by moving them over to other products.

Huttunen conceded that industrializing the process is difficult, especially in smaller firms but also in bigger firms steeped in the no-holds-barred start-up culture glorified in Silicon Valley. "The idea is to let people be creative in areas that matter but take the necessary steps anyway," he said.

5. Tap into new ways of developing software

Huttunen called open-source "one of the most interesting ways to economize software development. All vendors should take a hard look at it."

Open-source is a subset of something Huttunen calls "crowd computing," which is to tap into the expertise of a community or outside experts who essentially provide development and support resources on the cheap.

Copyright © 2009 IDG Communications, Inc.

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