The following is a real case study of how an Independent Software Vendor (ISV) failed in their attempt to launch a cloud product.
Building a consulting practice instead of a cloud product
I hold you responsible for not telling me earlier that this would cost so much, yelled the EVP of Product Development at the consultants that were helping him launch a cloud offering on Force.com. He was right about the cost spinning out of control. However, he and his team never really paid attention to the advice they were given. As far as the EVP was concerned, his team had been in IT product development for years and had the business knowledge as well as the technical caliber to pull it off. He wanted complete internal ownership of the project – the consultants were just there to help with a few tricky items on the fringes, so their advice was largely ignored.
Things started heading south after the first two potential customers continued to demand more features in the product before they paid a cent. Then came the expectations related to performance and more advanced features. The expectations kept mounting. Within the next few months, a significant number of the product team members got involved in figuring out how to meet the rapidly escalating demands from the first set of buyers.
Mired in product features and attributes, the product team didn’t realize that they were getting into a consulting role with their potential customers but, that was also something they weren’t trained to do. They didn’t know how to manage the scope of work or customer expectations. They had no idea how to push back so they continued accepting all demands and suggestions, turning the product scope into a constantly moving target.
The EVP went to the CFO for more funding and the executive team was appalled. They had already spent upwards of $2 million and it seemed like a bottomless pit with no revenue in sight anywhere. The executives pulled the plug on the entire initiative.
The example above is not fiction, it is painfully true. This is one of many organizations that thought that making money in the cloud model was easy – they spent all the money & effort but still ended up with less than they started with. The case study is from my recent book, Thinking of … Force.com as your Key to the Cloud Kingdom, co-authored by Ian Gotts. The book, featured in “CIO Magazine’s “What We’re Reading?” List for March 1st, 2011“, will help ISVs ask the right questions that are critical for commercial success in salesforce.com’s cloud.
It’s important to ask these questions before before you go and spend too much money. It’s quite possible that after considering all the questions you may come up with the answer No. That’s a No to Cloud Computing, or No to Force.com, or Not now but possibly later. Any of these answers is fine.
What is important is that the decision has been made with due consideration.