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The End of Expense Software In this two part article, we look at the changing dynamics of software in the social sector. Part One below focuses on changes in pricing. Part Two discusses a shift from a technology-centric approach to IT towards a productivity-centric approach. Part One The Commoditization of Software The era of expensive software is over. Depending on your perspective, that is a new revelation or old news. Either way, software is being commoditized and its good for consumers, its good for social sector organizations which have traditionally paid too much for too little, and I would argue that its good for the software industry itself. Whereas software has traditionally been the domain of a small class of experts, in recent years software has been liberated and democratized so that it can be created and used by a much wider range of people. The phenomenon of lower cost, high quality software is widespread across many software categories (e.g. consumer, enterprise, desktop, web based, etc.). However, I will focus specifically on software that helps social sector organizations such as non-profits and associations run their organizations with tools that manage content, contacts, members, email newsletters, events, reports, web sites, and so forth. The Evidence Some people, especially those who still pay a lot of money for their organizational software, may question whether lower cost software is a full blown trend or just reflects a few isolated examples. Although its harder to see a trend at the beginning, this one is well under way. Already, in the social sector, there are dozens of software packages that support organizational tasks from web site marketing to event registration to donation management to sending email newsletters. And increasingly, these software systems provide multiple, integrated modules rather than merely silos of isolated data and functionality. Why is it happening? There are several reasons that the era of expensive software is over and Ill just highlight a few here. 1. The Web Software has been slowly migrating from the desktop and client-server environments to the web for a number of years. But, increasingly, this trickle is becoming a stream as both business applications migrate to web-based software and desktop software migrates to webtop software such as web-based email and productivity applications. For one thing, web-based software is easier to build. For another thing, its easier to distribute and set up because people only have to log on. With increasingly widespread access to the Internet, sophisticated software is just a click away. 2. Open Source Software Open source software (OSS) collaborative and shared programming code and software products with low or no cost is another major factor. First, because OSS is widely shared and widely available, the cost of creating software is falling. This is because a lot of open source code makes up components of other software products. These products no longer have to create all their code from scratch because they can use open source components. And, a lot of this savings gets passed along to consumers. Second, with all that code being created and shared, there is more competition. Programmers and companies can replicate each others innovations and feature version easily and very quickly. So, the barriers to entry in a specific software category are falling and with it prices. 3. It is Easier to Write Software Traditionally, software was created by a small group of experts who knew complicated programming languages and could largely control their inventions through compiling and copywriting their code. In recent years, programming tools and languages have become much easier to use. For example, much of todays web-based software is not compiled which means that it is much easier to create, maintain, share, and improve. Moreover, web-friend scripting languages like ColdFusion, PHP, .Net, and Ruby are both powerful and relatively easy to use. When compared to the old warhorses of C++ and Java, more people can create more software more quickly than ever before. What does it mean for social sector practitioners? As software prices drop drastically in the social sector and elsewhere, executives and managers in non-profits and associations will be faced with: Better and More Affordable Software The good news for social sector managers and practitioners is that software is quickly becoming better and cheaper. If you are running a non-profit, association, or other social sector organization and you are paying a lot for software, you are paying too much. More Choices Already a dizzying array of low cost software options exists for social sector organizations. These options range from commercial and free open source software to web-based ASP or hosted software to traditional installed client-server options. And, new options for the social sector are being introduced all the time. While this proliferation of offerings contributes to lower prices, it also creates new challenges for social sector decision makers who can easily spend all their time evaluating software rather than doing the work of their organizations. More Consultants As the price of software becomes lower and software products continue to proliferate, it is inevitable that there will be more consultants who work with social sector organizations to help them evaluate, choose, implement, and support their technology. We'll focus more on some of these consulting services in Part Two of this article. Winners and Losers Winners As software matures and becomes commoditized, consumers will be winners. In the social sector, these consumers will be the organizations that purchase software to manage web sites, contacts, members, events, emails, and related functionality. In addition, many consultants will be winners. Consultants who help organizations select software will be one area that will win. And, consultants who provide professional services and best practices consulting to organizations trying to effectively use software will be winners. Finally, many software companies themselves will be winners. Although the trend towards low cost software will clearly threaten some traditional software companies and ASPs, others who embrace the change and innovate will thrive and grow. Losers The main losers will be the makers of expensive or proprietary software. Increasingly, it will be difficult to charge premium prices for software and software-based solutions. This is particularly true in the social sector where price sensitivity is more of a factor than in the private or corporate sector and price sensitive consumers will choose lower cost solutions. As consumers become more educated about their options, they will refuse to pay six figure price tags for technology that can easily be obtained at a fraction of the cost. Most of the companies that attempt to stay in the old proprietary, expensive model will suffer financially as the marketplace changes beneath their feet. However, this trend does not have to mean the end for large, traditional software companies. There are great examples of companies that have successfully navigated the changing terrain. One of the best examples is IBM. Once IBM was practically synonymous with traditional IT. Now it has embraced the open source movement and successfully changed their business module to incorporate these changes so that it continues to thrive.
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