An Idea Whose Time Has Come:
Real Software Warranties
Carl D. Howe, Principal
June 2, 2003
What's wrong
The software industry faces one of the worst selling environments since its inception, yet vendors continue trying to sell their products the same old ways that they always have.
Our view
It's time for the software industry to recognize that it can't sell flakey software for millions of dollars as-is and charge the customer again to fix it.
The story
Would you buy the car described below?
FOR SALE: Brand new 2003 Mercedes Benz S600, Brilliant Silver, Charcoal Grey interior with COMAND navigation computer, ABS brakes, ESP. Seller disclaims all warranties and conditions, either express, implied or statutory, including, implied warranties or conditions of merchantability, or fitness for a particular purpose with regard to the car. The entire risk as to the quality of or arising out of use or performance of the car and its support services, if any, remains with you. Price: $125,000 firm.
Most buyers would ignore this offer. Who would pay over $100,000 for a car that the seller won't guarantee can at least drive off the lot?
Yet these are the exact software licensing words that enterprise software buyers have been agreeing to over the last 20 years or so. And corporations have been paying a lot more than $100,000; in many cases, they've bought software for millions of dollars with the same terms. Worse, most software companies also charge mandatory maintenance fees, often just to fix defects in the products they never should have shipped in the first place.
Vendors often claim that PC and server software is too complex to warranty. But that claim rings hollow when companies like Mercedes Benz produce cars like the S-Class advertised above that are literally multiple computers on wheels and carry five-year warrantees against defects, regardless of whether they are software problems or not.
What to do
Software vendors could offer warranties on their products, but the success of the software industry during the dot-com bubble convinced executives and investors they weren't necessary.
Those days are now over (see the April Blackfriars viewpoint, "Don't Blame The Economy For Poor Technology Marketing"). Every software vendor without a monopoly to prop them up is now reporting lower revenues and poorer profits. Buyers are starting to recognize that they have more market power than the vendors do. And the open source software movement is nipping at the heels of established vendors, capping prices and creating more competition in the marketplace.
This isn't a technology problem; it's a marketing problem. Blackfriars sees software warranties as a way for software vendors to build trust with their customers, differentiate their companies, and rekindle growth for their businesses. But for warranties to work, software vendors must take three difficult actions:
- Manage product quality. Today's software process of releasing beta software as final product and letting the users find the bugs won't work in an era of software warranties. While defects don't have to be nonexistent, vendors should test the software well before it gets released to avoid being swamped with warrantee claims.
- Accept warranty service cheerfully. Just as Japanese auto makers do, software vendors should use warranty repair as an opportunity to delight their customers with how well they fix bugs when they are brought to their attention. Corporate customers rank customer support as one of their top three criteria in purchasing technology, so if they take the time to report a problem, vendors should ensure that they have a good experience.
- Act first. Software warranties are a disruptive marketing tool: once one vendor offers them, everyone who competes with that vendor must offer them or appear uncompetitive. Vendors who can make the business case for software warrantees first will be the first to recover from today's sluggish software economy, and those that don't will feel like they're selling as-is used cars.
