These days, no-one wants to pay for anything: free email, free search, free storage, free social media, free everything.
But let’s face it, it’s costing someone, somewhere.
I got thinking more about this after a chance remark from someone who visited us at the AI Finance Summit this week in Zurich (https://theaisummit.com/finance/). He said that his large insurance company was “overrun” with offers of free proof-of-concept systems from (and what he said is important) “VC-backed software vendors”. He also pointed out that a lot of people had been “burned” by these “free trials”.
What it made me realise is that not only are the VCs paying, but so are the companies who are taking these “free” products on.
Getting a company off the ground is hard, whether you have $20 in the bank or $20 million. No-one ever wants to be the first person to buy your new product, especially in the software space. Even if you convince the business that what you are offering is genuinely the best thing since sliced bread, you then must convince the IT team, who are usually wedded to the current way of doing things, and will often throw every sort of FUD known to man in your path.
And the worst thing you can do is offer to do it for free.
That may sound counter-intuitive: Surely you want to make it as frictionless as possible for your prospective customer to take on your software? You don’t want them to have to go cap in hand to their boss asking for money for something that may be completely untried.
The problem you face, though, is that people do not ascribe any value to something they get for free. So that means you cannot get the buy-in from all the stakeholders, because there is nothing at stake. Stick some money in the pot, though, and suddenly you have everyone’s attention and motivation to make the project a success.
At this point, someone will no doubt give me an example of how they have offered a free proof of concept, and how the project was a success. And yes, I have on occasion gone down that route and yes, some interesting business has come from it. But it is the exception, not the rule. Apart from once (ironically our first ever paid engagement), all other paid-for trials or PoCs we have run have turned into ongoing business.
The worst culprits? Banks.
We have had some fantastic engagement with the occasional bank (who sadly I cannot name for confidentiality reasons), but we have had some horrors as well (who sadly I also cannot name for confidentiality reasons). At one bank, we had hardware installed (that we had paid for) for two years before it became obvious that there was no project, just a consultant who was justifying his large fee by getting vendors to run endless free trials. At another, we ran a mass of data (voice, email, IM, SMS, trades) through our system at very short notice to show what the art of the possible was (and we found some scary stuff). The bank didn’t buy anything from anyone: I still cannot mention the name in the office without someone swearing loudly after all the late nights that were wasted.
We are even turning some RFPs away now, as so often our weeks are consumed with endless site visits, WebEx’s and meetings which do not amount to anything. Sometimes you are a stalking horse for an incumbent vendor. Other times, it is used as an excuse to make no decision at all. The problem is that the procurement rules that are put in place to try to guarantee the best solution, often guarantee the very worst.
And that costs the customer money in terms of staff and lost opportunity.
There are some glimmers: Some companies are beginning to recognise that they need to foster new innovations, and that the best way to do that is to collaborate with vendors, and help fund the projects. This gets attention and engagement from all sides. I’m much more likely to give my absolute best for the person who provides jam today, rather than the promise of it tomorrow.
In my ideal world, we would all do a little bit of something for free: You should not just buy based on a few PowerPoint slides, and so opening the kimono just a little is a good idea. Ideally, you should have a structured engagement program, where you give all customers the same story. We, for example, offer to take customer data and run it through our system for free, and present the results back. This allows us to a) get the best out of the data, and b) set expectations.
Then we offer a partner program for resellers for an annual fee (with benefits!), or a paid engagement with the customer (in effect, a small initial installation) at a fixed cost. And if that all goes well, we go for the full roll-out.
It is so tempting to offer the world just to try to get business, but unless every engagement is properly scoped, and treated like a real project, and you don’t overstretch your own resources, it is almost always doomed to fail.