The Dirty Little Secret Traditional Enterprise Software Companies Don't Want You Knowing

It's all about the money.

What if everything we've been led to believe about enterprise software was a well-constructed lie?

If you look closely at how the enterprise software market is set up, you will see that over the last 50 years a "syndicate" of the largest software companies in the world, names we all know well, have worked tirelessly to architect a business model where their customers pay billions of dollars but receive little in return except frustration and promises. This fabricated reality is so successful that customers of these firms rest easy believing two things to be true: the products and services they receive from these firms are actually helping their businesses; and that because they themselves are large businesses, they have no options but these legacy companies.

“The Matrix is the World that has been pulled over your eyes to blind you from the truth” -             Morpheus 

If you're a large company and you’ve never thought about this before, I understand. That’s what they want.

But take a step back and ask yourself a few questions about so-called "enterprise" software:

  • Why do legacy enterprise solutions cost so much to buy and operate?
  • Why are they so time consuming and costly to implement?
  • Why are they so hard to use?
  • Why does the cost of everything else in technology seem to be coming down, while the cost of these solutions continues to rise?
  • Isn’t technology supposed to be getting faster, more powerful, and more useful?

I've got good news and bad news. Let's start with the bad news.

If you’re a customer of one of these legacy software firms, the answer to these questions is simple:

You’re a big company, so you're led to believe that you need BIG technology.

You’re stuck in a well-designed, but vicious cycle:

  • You’re a big business, so you set big budgets for enterprise technology
  • You’ve been setting and spending those big budgets with the same companies for decades
  • Everyone you trust—your advisors, other large companies, and the technology firms you rely on—tell you that you need to do things this way… because your challenges are big
  • The legacy software companies oblige you and provide cost estimates that are equally big

Because this is the way it has always been, and there don't seem to be any alternatives, you shell out the money. The cycle is complete.

There is only one problem. This cycle is a lie.

Let's go deeper and look at what you really get for all that BIG-ness?

This might hurt a little:

  • First, you pay hundreds of thousands or even millions for the license to use the software
  • Your software vendor introduces you to their consulting partners
  • You pay those consultants to scope the project
  • An army of additional consultants starts to re-engineer your business to meet the requirements of your new software
  • You pay the consulting firms to implement the software you just purchased
  • Then you pay hundreds of thousands more to integrate your new software with your existing company software infrastructure
  • Then you pay the consultants to test the software to make sure it works
  • Then more consultants make sure everyone gets trained
  • Then finally you get to use your new "solution," but all you hear are people complaining about how slow, cumbersome, frustrating, and demoralizing it is
  • Then you get a invoice from your software vendor to maintain and support your new technology
  • And when your business changes or needs to do something new, you have to bring back the same consultants and pay them more money to make the required changes
  • Then, when the software company you just paid a ton of money to makes their software better for you, you have to pay them again to get those upgrades
  • And if you don’t pay them for those enhancements your software becomes unsupported and you are on your own

Sound familiar? You're not alone. This business model has been in play for decades in enterprise technology. Everyone has become so used to it that we don't see it as crazy. But it is.

The legacy software firms get away with this ruse because five of them represent 93% of the global software market. Better stated, they are the global software market, so they've been able to dictate how it works.

These companies and their friends, the big consulting firms, have convinced everyone that big equals complicated. That to satisfy the needs of large companies, large, complex technology is required. Simply put, enterprise customers just believe they need enterprise solutions to run their businesses, so they don't look at alternatives, or spend time thinking about how drastically technology has transformed over the last few years. Moreover, everyone involved in this syndicate is so dependent on this model, that nobody wants to tell the truth, or see it end. 

There is one more reason, and you really won’t like this part: whether by conscious choice or blissful ignorance, large companies allow the cycle to continue.

You’ve got the money and are willing to spend it to solve your challenges. Everyone from your board to your executive staff would laugh at the suggestion that you could run a billion-dollar business on thousand-dollar solutions. It’s safer, easier even, to keep doing what you’ve always done. What's the saying? "No one ever got fired for buying IBM."

This enterprise charade is so well-designed that even after you’ve spent millions of dollars and countless hours, when everything is outdated and nothing works, instead of stopping the madness, we've been conditioned to invest more into tweaking what’s already been built.

An interesting phenomenon exists in enterprise software. It seems the more money companies spend on these solutions, the more they are willing to tolerate poor performance.

“Everything will be fine, we’ll sort it out. Go back to sleep,” they whisper.  

But here is the good news: it doesn’t have to be this way anymore. You do have a choice.

“You take the blue pill, the story ends and you wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in wonderland and I show you how deep the rabbit hole goes”


The revolution has already started. 

Over the past couple of years, a sea-change has started to take place within large businesses. Employees have started asking why the software they use at work doesn’t look and function like the software they use at home. Questions like, why isn’t their accounting system as easy to use as Facebook? Why can’t their inventory management system be as friendly as Instagram? Why isn't their ecommerce software as easy as Pinterest?

In addition to questions like these, there are mega-trends reshaping the technology landscape in ways no one could have imagined even five years ago. The consumerization of the enterprise, the destruction of the CIO’s office, and the transition from on premise to SaaS are all colliding to offer large companies staggering capabilities without the ridiculous costs, timeframes, and PITA factors of legacy solutions.

The consumerization of the enterprise: In the last few years, enterprise-grade software has been “consumerized.” Large enterprises can now deploy powerful, friendly, user-driven solutions that actually help people do their jobs better. Unlike their legacy forefathers, today's enterprise software is made for the people, not for IT.

Shift away from the CIO's office: The past few years have seen a shift. Seems like the CIO’s office is going the way of the dinosaur. Harvard Business Review predicts that by 2017 marketing will be spending more on technology than the CIO. Technology has transformed to be a service to the business, not the other way around.

The rise of software as a service (SaaS): A new generation of enterprise-grade software platforms has emerged and is disrupting how large companies do business. Faster, more scalable, more reliable, and a fraction of the cost, these next-generation platforms are rewriting the decades-old enterprise playbook. 

Are you spending a ton of money on infrastructure, servers, and manpower just to keep your systems online? Worried about infrastructure failing and taking your business offline, or worse, being hacked and having to explain it to the world?

Things have changed.

Large companies are refocusing their resources on core competencies, instead of IT. Companies no longer need the expertise, budgets, and challenges associated with managing huge IT infrastructure. Software as a service has come of age and proven it can be more scalable, more reliable, and more secure than any of the legacy vendors we’ve been handcuffed to for decades.  

Gone are the days of maintenance contracts, upgrade cycles, and thousand-day implementation projects. Today’s enterprise-grade applications install in weeks, and are updated with the latest and greatest features in real time. And many are based on simple, month-to-month contracts.

Large customers are starting to experience what happens when technology gets out of the way. 

I recognize that it's hard to hear or even believe some of the things I've said. If you have been spending millions on your software for years, it's hard to think that it might not have been necessary to do so. And I'm 100% sure the syndicate will fight back against what I’ve said.

They will call in their supporters, those who need this flawed business model to continue. They will rage, but they will not succeed. These legacy software companies just can't explain the existence of all the innovative, enterprise companies who are thriving without them. They can't explain why they aren’t innovating themselves. And they can't keep their customers from finding out the truth any longer. It's been a great 50-year run, but their time is over. 

So, my question to those who run large companies, to those who are looking to innovate and lead, is this:

Would you like to go back to sleep? Or would you like to wake up?

About the author

Loren Padelford

Loren Padelford is the General Manager of Shopify Plus.