Thursday 27 February 2014

Opinion and Insights: Revenues Trump Innovation at Large Tech Companies

Let’s face it. Large B2B tech companies don’t come up with groundbreaking innovations. They are too big and are too busy with action items, corporate politics and intense pressure from the street to develop new innovations and bring those ideas to market in a reasonable timeframe. They also have a big reason not to monkey with the status quo, billions of reasons actually. Faster, cheaper, better typically means less revenue.
Turns out Wall Street isn’t a big fan of cool innovations that decrease revenue, which shouldn’t come as a surprise. Perched high on the list of career limiting moves in Silicon Valley is driving a plan to develop innovative products and services that will decrease revenue.
The truth is, most great ideas from the major hardware and software vendors leave with their creators, stop on Sand Hill road for funding and end up in a little office in the Valley. Big ideas can mean big money. Visionary engineers aren’t turning their moment of genius over to a big political machine to get kicked around meeting rooms for three years only to resurface neutered and too late to matter anyway.
Big tech companies, especially hardware vendors, will continue to fight to the death to keep their antiquated products moving off the shelves. Sluggish economics made 2013 a great year to buy dated technology; 70, 80, even 90 percent discounts on six-figure hardware deals. What’s happening here? While these products are selling for next to nothing, vendors are now charging 20 percent of the list price for support and updates.
This is a plan that certainly works for Wall Street and it is hard for customers to resist. What would you do if you bought a new car two years ago for $50,000 and your dealer called you at the end of the year saying they’d give you a new care for $5,000? Anyone would take that deal!
VMware had this same problem getting their groundbreaking technology off the ground. Customers could install their technology and use 90 percent less server hardware. While this was great for the customers, HP, Dell and IBM certainly weren’t happy with VMware. The same thing could be said for resellers, as they certainly weren’t interested in selling 90 percent less hardware.
The resellers are just as weary about messing with their nest egg. However large or small, the few VARs that actually survive their first two years in business did so for a reason — they realized that running a tech resale business is about making money. The rash of leads, rebates and SPIFs coming from their big vendors are too lucrative for the resellers with influence to take a chance on anything new.
The hardest part of getting new innovations to market is cutting through the big tech companies marketing machines and their incredibly talented (and well paid) sales people to get prospective customers to consider new technologies. There really isn’t a villain to blame, but there is a hero.
Ultimately, the buyers of technology are the heroes of our industry. They are our saving grace. Despite pressure from their upper management, the people in the trenches that do this because they love it are the ones that keep us moving in the right direction.
To those visionary technologists, don’t believe all the marketing hype from big tech. Keep innovating. By doing so, you will help shape the future of the industry.
Paul Murphy is VP of Worldwide Marketing at DataCore.

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