Selling Software is Blood Sport
The lawsuit between talent management vendors SuccessFactors and Softscape is just the latest example of the cutthroat competition raging in the independent packaged software business since it started in 1969.
By Bill Kutik
It all started in 1969 with what became known as "the consent decree."
Under considerable anti-trust pressure, IBM agreed to unbundle its software and services from its hardware, which had previously been sold at one combined price. Since IBM's application software was suddenly no longer "free," the decree gave birth to the independent packaged software industry.
It spawned such early mainframe software vendors as McCormick & Dodge, MSA and closer to home in HR, InSci (Information Sciences) and Tesseract. Plus, it began the blood sport of software sales.
Few recall that the term FUD (Fear, Uncertainty and Doubt) -- most recently applied to Microsoft -- was first used to describe IBM's whispers about its new competitors in order to steer clients and prospects away from them. But the concept remains: Undermining the competition to a prospect has been every bit as important to a vendor as selling the merits of its own product since the software industry began.
Occasionally, it spills into the courts, which, to paraphrase Clausewitz ("War is merely a continuation of politics"), can be merely a continuation of competition.
In 1991, Integral Systems sued its founder, Dave Duffield, four years after he left to start PeopleSoft and just as the new company was starting to pick up real sales momentum. Integral claimed Duffield could not have gotten to market so quickly without copying Integral's code and functionality in his new HRMS. That suit was settled out of court.
Now we are faced with the spectacle of SuccessFactors suing Softscape over the creation and e-mail distribution of a competitive document. I won't rehash the allegations in the case. Knowledge Infusion VP Jason Corsello has already done a fine job on his
blog
as has TechVentive CEO Brian Sommer on his
blog
.
Instead, without favoring either side, let me simply say that at one level, this is common as dirt. Nearly all enterprise software selections are conducted in a formal process; the buyer, sometimes aided by an experienced consultant. Lengthy and separate meetings are held with each vendor, including many demonstrations.
Sometimes vendors know their competition; often they can guess. Every software vendor I know arms itself for this ordeal with competitive intelligence. Sometimes that function is centralized in an individual or department; sometimes the information is stored on an internal knowledgebase or even left to individual salespeople.
However they are created, every vendor has an internal "kill sheet" or "playbook" for every one of its competitors crammed with negative facts (which may or may not be completely accurate), lists of lost customers, implementations gone horribly wrong, rumors, speculation, terrible screenshots ... whatever.
In short, it's exactly what is in the competitive document Softscape now admits creating. Though it must be said such documents are not usually written as though they came from the competitor's customer or feature the competitor's logo -- like the Softscape document does.
The methods employed to research competitive documents run the gamut from honorable to slimy. Perhaps some are even illegal, but I'm not a lawyer.
At the highest level, outside researchers are engaged to call lost prospects, honestly identify their employer, and simply ask why the sale went to the other guy. You'd be amazed how willing many buyers are to talk.
In the old days, competitors would obscure their badges at trade shows and swipe collateral or peek at demonstrations. Now they constantly check out each other's Web sites, which are public.
After Taleo posted a five-minute demo of its new performance management product online, I heard comments about its user interface and functionality from four or five competitors within a week or two. Attending competitors' webinars under a false name and company begins to get a little gray, but goes on all the time.
Then, we start slipping down the black hole. Salespeople are hired precisely because they are hungry, aggressive and willing to do just about anything to close a sale. "Anything" obviously varies with the individual.
Would they pose as a prospect in order to see a competitor's complete sales process? Would they hide behind the name of another company, even one connected to their own CEO? SuccessFactors alleges Softscape did both.
Want to hear an astonishingly similar but more clever story? The one-time head of sales for a defunct recruiting vendor told me two of his salespeople once created a dummy consulting company, got new cell phones and numbers for it, and contacted four or five competitors saying they were assisting in vendor selection for a variety of unnamed clients.
All of the competitors contacted gave them full product demonstrations and even high-level pricing, always the hardest thing for competitors to find out. The information gleaned was spread throughout the company's sales force and "helped us win a good number of deals," the former sales head says. "Moreover, we made sure no one in our company ever responded to blind calls."
Shall I be a parent and say, "Just 'cause Johnny does it, doesn't mean you can"? None of this is meant to judge the merits of either company's case. Merely to add some historical perspective on the software industry.
Of course, the huge difference here is that this competitive document -- however researched and created by whomever -- got out! Thus, the internal standard operating procedure for every software company somehow became external. I think exactly how that happened is the key fact in this case and that has yet to be properly addressed. Would SuccessFactors have suffered the damages it alleges if the document had not been e-mailed all over and instead stayed inside Softscape where it belonged?
After reading many of the court documents, it appears that somehow the burden has shifted to Softscape to prove that it did not e-mail it. Now, everyone knows it is impossible to prove a negative. So I await a showing from SuccessFactors that "John Anonymous," the name on the Google e-mail account involved in the distribution, is somehow connected to Softscape. I understand Google has been issued a subpoena in an attempt to discover that.
However this lawsuit turns out (and many get settled out of court after the discovery process, which has just started), I'm sure it will not change the way the software industry has been selling for nearly 40 years.
HR Technology Columnist Bill Kutik is also co-chairman of the 11th Annual HR Technology Conference & Exposition® in Chicago, Oct. 15-17. The full agenda will be available in early May at
http://www.HRTechnologyConference.com
. He can be reached at
bkutik@earthlink.net
.
April 7, 2008 Copyright 2008© LRP Publications
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