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Red Hat CEO Says Software Vendor Model Is Broken 223

Posted by samzenpus
from the for-some-definition-of-broken dept.
alphadogg writes "The current model of selling commercial enterprise software is broken, charged the CEO for Red Hat. It is too expensive, doesn't address user needs and, worst of all, it leaves chief information officers holding all the risk of implementing new systems. 'The business models between customer and vendors are fundamentally broken,' said Jim Whitehurst, speaking Wednesday at the Interop conference in New York. 'Vendors have to guess at what [customers] want, and there is a mismatch of what customers want and what they get. Creating feature wars is not what the customer is looking for.' Whitehurst estimated that the total global IT market, not including telecommunications, is about $1.4 trillion a year. Factor in the rough estimates that half of all IT projects fail or are significantly downgraded, and that only half of all features in software packages are actually used, then it would follow that 'easily $500 billion of that $1.4 trillion is fundamentally wasted every year,' he said."
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Red Hat CEO Says Software Vendor Model Is Broken

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  • No Shit (Score:2, Informative)

    by cyphercell (843398)

    Seriously, who the fuck didn't know?

  • by Mephistophocles (930357) on Wednesday October 20, 2010 @04:56PM (#33967002) Homepage
    Whitehurst touches on the emergence of cloud computing in the enterprise as well, and this is integral to an intelligent discussion of the imminent death of the traditional licensing system of enterprise software. From TFA:

    ""People say [they are interested in the] cloud but what they are really espousing are frustrations with existing IT business models," Whitehurst said in an interview with IDG News Service after the presentation. Whitehurst kicked off his talk by asking a seemingly simple question: "Why are costs of IT going up when the underlying costs to deliver those services halves every 18 months?" The cost of computing should come down, he reasoned, thanks to improving processing speeds and storage capacities. New, more powerful development tools and frameworks should also ease the cost of deployment. Yet IT expenditures continue to go up by about 3 percent to 5 percent a year.

    That ease in the cost of deployment, coupled with the flexible infrastructure the cloud supplies, will eventually mean the death of the traditional "per-proc" style of enterprise licensing. Happily, it likely means fantastic opportunities for open-source to take back a large share of the market. I've spent the last year migrating my medium-sized enterprise to the cloud AND a near-100% opensource infrastructure. In my particular sector (healthcare) that's becoming a trend - it's not a coincidence that the move within the medium to medium-large enterprise to the cloud often goes hand-in-hand with a serious investigation of open-source software within the mission-critical, production infrastructure.
    • Maybe. (Score:3, Insightful)

      by khasim (1285)

      But from his original statement:

      The cost of computing should come down, he reasoned, thanks to improving processing speeds and storage capacities. New, more powerful development tools and frameworks should also ease the cost of deployment. Yet IT expenditures continue to go up by about 3 percent to 5 percent a year.

      That's because as it because possible to do more in X hours ... more is demanded by management.

      As more space becomes available, more data is stored. Older data is not discarded.

    • Re: (Score:3, Interesting)

      by Surt (22457)

      This seems like a pretty fundamental misunderstanding of enterprise licensing costs. Costs are calculated per cpu or per seat because that's a convenient proxy for the size of the system, not because of any actual deployment expenses associated with the number of cpus or seats. If you think your licensing price is going to magically head downward because of cloud computing, you are in for a nasty shock. Instead prices will head up because the cloud providers now have more lock-in. In any case, the lice

  • by m94mni (541438) on Wednesday October 20, 2010 @04:57PM (#33967022)

    Just like war, commuting and other essentially completely worthless phenomena, waste of programmer time makes money exchange hands, and therefore increases GNP.

    In this case: who would want to be the first to go out on a limb publically and say "I want to decrease the IT sector by 50%"?

    Don't blame me, I didn't design that stupid measure.

  • So we had a major upgrade project. Our old authentication software on old hardware was going to be replaced with new software, new hardware, and a new architecture made possible by the features in the new software.

    Months of planning, rearchitecting, tripping over bugs ("oh, it's fixed in the next major version"), and testing, and it turns out that the software from vendor A does not work acceptably on the hardware from...vendor A.

    Throw the plan out, and start from scratch on new hardware. Halfway through, v

  • The business models between customer and vendors are fundamentally broken,' said Jim Whitehurst, speaking Wednesday at the Interop conference in New York. 'Vendors have to guess at what [customers] want, and there is a mismatch of what customers want and what they get. Creating feature wars is not what the customer is looking for.'

    Yes! There are so many features that end up being hindrances or that fall short of actual needs that it makes an investment not worth while. For example, here's what I want ou
    • by js3 (319268)

      it's nice to list what you want, but others want something else too. That's just the way the world works. It's just QQ to me

      • by eepok (545733)

        Ok, you're correct by tautology. I want something as do other people. Bravo! But you're not really commenting in the context of the article. You call it "QQ", but the Red Hat CEO calls it wasting hundreds of billions of dollars shotgunning bad features at users that don't want them.

        It's an insane idea, but even the auto manufacturing industry modulizes features better than the tech industry.

        Base Car = 15,000
        Automatic Transmission = 1200
        Built-in GPS = 500 + any subscription fee
        Bigger engine = 1000
        Alloy Wheel

        • by bws111 (1216812)

          That is how the auto companies list the prices on the sticker, but try to actually buy a car that has just the features you want (for example, bigger engine but no alloy wheels). Most of the time you will find the options are only sold in packages, pretty much like different 'editions' of software.

    • See but I want GPS. And if it costs the manufacturer $1.50 for the GPS chip then why do you care if I get GPS?

  • If all Software and IT needs were being funneled into new projects and new features and new ideas then the Red Hat guy might be write. This is not the case however. Most Software development done in the world is based on specific needs generated by specific customers on existing IT systems. It is a painfully slow, deliberate process that sometimes produces astonishingly public failures. Most of the time what is produced is quite successes that for the most part do what the customer wanted done.

    A couple

  • [evil]As a guy who puts together some of the software packages you buy I can tell you that bundling of commonly and rarely used functionality often happens by design. And it doesn't just happen in the software industry: car manufacturers do it when they bundle their options too. The advantages of bundling for the buyer are: fewer choices (shorter lead time if you know what you want) and better budgeting (fewer trips "back to the well" for more money); the advantages for the seller are: cost containment (

    • ...remember that another widely-used on-demand service called "cable TV" has already figured out the bundling concept and applied it viciously. (Ever wish you could just buy ESPN and SciFi?)

      This is a subject I know something about. Cable TV pricing for ESPN is complex, because ESPN has multiple revenue streams. ESPN advertising revenues depend not only on the number of actual viewers, but on the number of potential viewers as well. The price sheets are tightly-held secrets, but a cable company with 16

  • Companies developing software are still raking in billions of dollars. Maybe stop giving the shit away for free...

  • worst of all, it leaves chief information officers holding all the risk of implementing new systems.

    *begin ill-tempered, sleep-deprived rant*

    I can certainly understand why some suited weasels would want to buy their way out of any personal responsibility, but seriously, ISN'T THIS EXACTLY WHERE THE RISK BELONGS?! I thought that's why we paid them all that money, because they had the 'l33t business and organizational skills to handle the risk, like professional ball players. They're "superstar talent," remember?

    God forbid a CIO actually have the get off their fat ass and, you know, TEST an implementation b

  • were still used by somebody, and typically that's the biggest customer of that software. For instance, in the world of enterprise software, when you're a small upstart company, you first innovate to create the first release. They you add the project managers and the MBAs, and you need justification to add new features, and that's usually coming from demands from the biggest customers who threaten to kick you out and cancel the maintenance money.

    So why are there features in the product that 50% of the custom

  • It costs nearly $0 to deliver a unit of software, no matter the feature set included.

    So when someone buys a package to get one feature and is the only user of that feature, then he pays the full price of the software to get that feature.

    And everyone else pays the full price to get the features they want and can safely ignore that feature, or try it out and start using it if they wish.

    None of them, not one, came close to paying the full development cost for any feature they're using, but all, in aggregate, w

  • Basically my job revolves around operating and maintaining a database and front end that costs my employer no small amount of money. I came into my position between the last time the contract with this particular vendor was signed and now... when the renewal was due. Our account rep with this particular vendor sent their quote to my team to be forwarded on to our management, and as I read it I almost choked. They basically wanted to increase our rate by 1600%. Our IS department HATES software that we lease/
  • In the early 80s 2 groups existed. One was to only use prepackaged software and the other is to use your programmers to create your own solution. His rant backs the former group but unfortunately it is viewed as an expense commodity that does not add value to a ROI. The battle to use prepackaged software has won. Until investment is viewed as a profit center and not a cost center no business will bother to hire programmers to create software to do what it is they need to do rather than buy a prepackaged blo

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