Deciding If Software Is Good

Michael Krigsman sticks it to Nick Carr and includes an interesting assertion: that how good software is can be decided by how much revenue it drives:

Nick, please let the market decide whether enterprise software is “good” or not. There’s a simple metric for measuring this: it’s called revenue. Just for kicks, compare the revenue of enterprise companies, such SAP or Oracle, to consumer-oriented firms such as Twitter (click to follow me).

Interesting point, but wrong. The amount of revenue software drives is determined by a number of factors (go ask an economist for the full list), some of the really key ones in the enterprise vs consumer questions include:

• The ability to pay of the target market. It doesn’t matter how good the software is, if the customer only has $10 that’s all they can pay for it.
• The size of the market it targets. Brilliant software for a niche market will generate less revenue that average software for a big market.
• The amount of and quality of competition. This is the really big point that Michael misses – if you are the only solution to a big problem for people who can afford to pay a lot, you will make money hand over fist almost regardless of how bad the software is.

A much better way of judging how good software is for a mature market, would be how much room there is for a new competitor. If someone can enter the market and solve the problem better than you they’ll take away your customers and make money instead. Unfortunately, this is a particularly complex metric because you also have to factor in how rapidly the entire market is growing etc.

This of course leads us to the question, is the enterprise software arena ripe for an upstart with a far more sexy, usable product to come in and take a lot of market share? To a degree yes, but only if they can also solve the existing problems that are well served by enterprise software – support, scalability etc. All the things that the enterprise sales process currently focuses on.