THE TABER REPORT    unsubscribeTaberConsultingsubscribepast issues   July 2002

Myths aren't necessarily false. In fact, a myth may be more powerful than an abstract truth. So in talking about the Myth of the Application Suites, we're talking about something very real.

This Taber Report is from summer 2002.  As always, we welcome your comments.

The Myth of the Application Suite

The question is, can creating a suite from a set of applications have a positive effect on your company's sales? It all depends on who you are, your value proposition, and your channel.  Microsoft Office, SAP, PeopleSoft, and JDEdwards OneWorld are a few examples of suite success.  Bundling apps together was very good for these vendors, as it created branding/promotional efficiencies and raised the average selling prices (ASPs). For platform companies (e.g., Oracle) or large vendors with dozens of related products (e.g., Siebel), creating an application suite drives the numbers and is expected of vendors for a "complete offering".

But the completeness of offering may be largely an illusion.  Almost never do Suites contain best-of-breed products for more than a few elements.  So customers have to buy third-party products or extensively customize to get their complete solution.  Further, recent (remember, this was written in 2002) analyses by Gartner Group and AMR show that while customers are seduced by suites, they don't succeed with them.  In the Supply Chain world, something over half of customers have installed only one module of i2 or Manugistics suites.  Even in the desktop productivity world, few users regularly run more than two tools from the suites.  Virtually everyone uses Microsoft Office applications every day, yet I'll bet YOU have never used all 7 of them in a single month. So the Suites do not deliver economic synergy for the customer.  They're a purchase- decision gimmick.

Suites do make for a simpler sales cycle and give more negotiating room for both the sales rep and the buyer.  For most customers, though, the Suite raises the ASP because the vendor is providing more software than the customer would otherwise buy.  And the resulting shelfware becomes an irritant in the long run for the buyer, who is paying excessive maintenance and upgrade fees for the software not being used.  Shelfware is a reality in the modern software market, irrespective of price point.  In some cases suites and shelfware are notorious (State of California vs Oracle), but they're almost always good only for the vendor.

Decision Time

Seems like the 800 LB gorillas can increase market share with suites.  But if you're a small vendor, does doing the Suite Thing work?  In my personal experience, not really. The Suite does give a single name for your products, so it's easier to get the message through.  But looking at before/after product sales of small vendors, customers have not bought more products when they were presented as a suite.  Partly, this is because small vendors don't have any market power, so each product is scrutinized individually.  And partly, it's because the suite doesn't contain that many tightly- integrated products.  And partly because the sales force isn't intuitively convinced about the Suite, and finds that it doesn't make the sales cycle any easier.  And partly because small companies don't have surplus technology that they're willing to give away (even as shelfware) for free.

I guess that's a lot of partlies.

Some rules of thumb about when marketing your products as a Suites, rather than piecemeal, really will make a difference: 

• You have a lot of small products that aren't practical to sell separately, such as Norton Systemworks,

• The product has to go through a channel (retail, VARs) that doesn't have the time to learn several value propositions (e.g., Microsoft Office),

• The products are almost always used together, without significant variations (e.g., Borland JDeveloper Enterprise),

• The products are part of a platform play, with centralized data models or highly leveraged elements such as SAP or Siebel,

• The products are part of a solution play, with a dedicated (and funded!) go-to- market strategy via a partner or SI,

• The underlying products have wide variations in price, and some products have higher uptake than others,

• There really is synergy across products, and customers would be better served to leverage the synergies,

• There is technology infrastructure shared across products, and it is best to avoid the customer having redundant copies of that infrastructure. 

Instead of a Suite

If your products don't fit in the Suite spot, creating some temporary promotional bundles may be less inexpensive and just as effective for building sales. The simple steps of:

• Creating a unifying umbrella name,

• Making a temporary promotional price,

• Writing a product-line brochure and sales pitch,

• Putting a press release on the wires to get you in search engines,

• Spinning a new higher-level product message for your web site, and

• Updating meta-tags and re-submitting your site for crawls, can in a few weeks increase the visibility of your products and generate new business opportunities.

For the small Enterprise Software vendor, this is usually much better bang for the buck than creating a Suite.  It avoids unnecessary product integration, and it avoids leaving money on the table that's inherent with shovel-ware suites.

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David Taber  
   www.taberconsulting.com