Commentary: Business Software Needs a Revolution

It's too complicated. It's too expensive. That's why it's change-or-die time

Marc Benioff, the chief executive of startup Inc., has a knack for getting under the skins of his far bigger business software rivals. He has hired actors to stage protest rallies calling for the "end of software" outside his competitors' customer conferences. Borrowing from the '80s comedy Ghostbusters, he has handed out "software busters" pins. And he has told anyone who would listen that today's business software is too expensive and too dang complicated. "We have created an industry of complexity and we need to do something about it," he says.

Is Benioff a showman or a sage? Probably both. Sure, his antics are a way to promote his company, which dishes out sales force software as a service over the Internet. But there's also a lot of truth behind his shtick. Talk to a typical software buyer, and you hear the same complaints: It's too complex, with installation projects that can take years to finish. It's too expensive, with starting prices in the six figures and reaching into the millions. And it doesn't do what they thought it would do. "You know, the buyers of these things are starting to say, 'Wait a minute, maybe this stuff should work,"' says James Morris, dean of the School of Computer Science at Carnegie Mellon University.

It's amazing it took Corporate America so long to do this reality check. After years of buying the latest and greatest software, the computer rooms in many companies are "pure chaos," says Aneel Bhusri, a venture capitalist and a director at eight software companies, including PeopleSoft Inc. The cost of that chaos? Last year, the National Institute of Standards & Technology estimated that the annual cost of difficult-to-use or flat-out buggy software on the U.S. economy was $59.5 billion. Analysts estimate business-software customers spend $5 installing and fixing their software for every $1 they spend on software.

All that bad news is catching up with business-software makers. Sales of programs for things like companywide financial systems, procurement, and supply-chain management, combined, dropped 2.4% last year, to $35.8 billion, says AMR Research Inc. It's the first time in more than a decade that the market has slipped. This year, sales are expected to inch up 3%. For the software industry, which grew more than 20% per year in the late 1990s, such snail-paced growth is a jolt.

There's a troubling analogy to be made here to the fall of the American auto industry in the 1970s. As early as the 1950s, quality assurance experts like W. Edwards Deming were trying to win converts to rigid quality standards. Few in Detroit listened. But quality management was embraced in Japan, which helped to make the Japanese auto industry a powerhouse. Today, software quality gurus have been largely ignored in Silicon Valley. But in the new tech center of Bangalore, India, quality experts have been welcomed.

Could Bangalore do to Silicon Valley what Japan did to Detroit? Don't bet against it if current trends continue. "Software companies have to change," says Henning Kagermann, CEO of German software maker SAP. "We need to be more like the auto industry -- quicker and better at development, from innovation to customer support."

There's no reason the industry can't get there. After interviewing customers and experts, BusinessWeek has identified four ways to get software on track. They're not the only answers, but they're a good start.

ENOUGH WITH THE FEATURES. THE WORLD IS AWASH IN SOFTWARE BELLS AND WHISTLES. Today, software can do everything from automate a human resource department to manage a supply chain. To paraphrase futurist Clayton M. Christensen, once all the necessary functionalities -- or features -- are done, new additions just increase the chances of bugs. "I think the [industry] has filled up the functionality bucket," says Rick Berquist, chief technology officer at PeopleSoft Inc. "I think now we're in the reliability era."

How? For starters, give up the "not-built-here" dogma that has kept some software makers from working with new, easy-to-use programming building blocks made by Microsoft, Sun Microsystems, and IBM. That reluctance also has made some companies slow to adopt standardized programming technologies like the Extensible Markup Language, which makes it easier for different kinds of software to work together.

STOP. TAKE A DEEP BREATH. DON'T RUSH BAD SOFTWARE OUT THE DOOR. Database giant Oracle Corp.'s flubbing of its first all-Internet business software, Oracle 11i, is legendary. Consumed with being first to market, Oracle CEO Lawrence J. Ellison pushed to get his software out by the summer of 2000. Problem was, it had an estimated 10,000 bugs. Customers balked, and Oracle's application revenues fell 11% by the end of 2002. Is there a magic cure here? Heck, no. Just old-fashioned self-control.

Business-software companies can do more by doing less with individual releases. "They have to acknowledge they can't solve world hunger with one software release," says Art Eberhart, director of global information technology services at Dow Chemical (DOW ) Co. Eberhart says he would like software companies to think of innovative ways to clean up their programming so it's easier to use. If it takes a couple of releases to get it done, that's O.K.

EMBRACE AUTOMATED TESTING AND QUALITY MANAGEMENT. Give Ellison & Co. credit: They learned from their mistakes. Since the initial 11i release, they've started working closely with Mercury Interactive (MERQ ) Corp., which makes software that tests other software for performance and helps automate bug-testing procedures. That helped cut in half the customer complaints about updated versions of 11i.

Software companies also can turn to quality assurance standards such as the Capability Maturity Model championed by Carnegie Mellon. CMM, among many things, defines what are repeatable processes in software development -- much like an auto production line -- and ensures that those processes are done exactly the same way, every time. CMM also saves money for the software makers. By adopting rigorous quality standards like CMM, Web software maker Interwoven (IWOV ) Inc. was able to cut about $1.5 million in waste out of its $8 million annual R&D budget, says Alex Choy, vice-president for engineering at Interwoven.

LEARN TO LOVE SOFTWARE DELIVERED AS A SERVICE. Although few software execs may actually say it, many agree with Benioff: Software should be delivered as a service over the Internet instead of shipped to customers on a disk. If the people who designed the software are the ones actually running it, wouldn't they have an easier time fixing it when something goes wrong? Keith Raffel, chairman of Upshot Corp., which also delivers sales force software as a service over the Web, says that when Daylight Savings Time began in April, his engineers found a clock error in Upshot's software. They were able to fix it before any customers realized there was a glitch. "Can you imagine the problems if we had to go out to every customer in the morning and ask them to make this fix?" asks Raffel.

The lesson from Upshot and other software makers is that the industry can fix the problems that make customers so unhappy. Now, they just have to do it.

By Jim Kerstetter

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