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The Dangers of a Disorderly Market

OSS Suffers its Adolescence

By Edward J. Finegold

The OSS market reveals its immaturity in ghastly ways. Having only emerged in 1996 - at least in its current form - OSS is a young market and lacks many of the forces necessary to bring it to order. More often than not, outsiders coming into OSS from more established industries are surprised at how inconsistent pricing is, at the difficulties even in simple customer-vendor interactions, and at how unnecessarily slow, lengthy and political OSS sales cycles can be. Further, from customers' perspectives the majority of OSS vendors still carry a reputation for over-promising and under-delivering, and OSS is still viewed largely as a cost center. All of these factors - and more - result in a market that is suffering its adolescence while reaping that which it has sown.

Bubble Memories
Many folks in the OSS business have a faraway look in their eyes as they recall the glory days of the Internet bubble. OSS sales were easy - customers were actually calling to get on vendors' schedules - and up-front payments were being handed out like signing bonuses on NFL draft day. Money was flowing and a host of venture-backed start-ups, and more established vendors, found rapid success. Many OSS vendors remember this period of the late nineties as the good old days. Unfortunately, the same cannot be said for customers or investors.

OSS vendors' customers - both start up and established service providers - in an overwhelming number of cases paid too much for OSS and received too little. They saw millions of dollars take them into dead-end projects, products and architectures. Right or wrong, they blame much of it on vendors for overstating their capabilities and failing to deliver capable solutions. Remember that reputations - even when embellished - are rooted in truth. Now that the leverage has changed and OSS is a buyer's market, all vendors are paying for their colleagues' past, and continuing, misdeeds with grinding sales cycles that often result in unfavorable contracts and declining pricing. And in the meantime, many vendors continue to offer capabilities they can sell, but have not built and cannot reliably deliver.

From an investment perspective, there is relatively little interest among venture firms to invest new money in OSS. Some vendors have gained investments recently, but many of the firms that were once active in OSS have lost their appetite for the market. Many venture investors are hoping for their investments to pay off modestly, or to execute an exit strategy that is not entirely unfavorable. When venture investors become disinterested, and customers lend little credibility to vendor's promises, it becomes very difficult for innovative young companies to introduce new technology into a market that needs it desperately. It also means that publicly held OSS firms are likely to continue suffering poor valuations from disinterested investors.

Discovery: Today's Great Over-Promise
There are many examples of over-promises that have hurt OSS vendors, but the one that is perhaps most prevalent today - involving discovery - is particularly dangerous. For more than a year, a number of OSS vendors have pitched the benefits of discovery, inventory reconciliation, and data integrity.

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