As I have recently pointed out, the finances of your software vendor do matter. Unfortunately, as an existing customer or potential buyer it can be quite difficult to look behind the numbers and find the relevant information. When it comes to financial numbers, many vendors are far from as open and transparent as they claim to be.
In an attempt to assist customers, I propose a challenge to all software vendors:
Publish the following numbers clearly on your website/blog:
1) Revenue and earnings (profit) and their growth over the last 3 years by:
- Total
- Licenses and product lines (% or absolute)
- Professional services revenue (% or absolute)
- Support and Maintenance (% or absolute)
2) Ownership
- Who is the majority owner of the business (or is it public)?
- How long has the business been around and how long have the current owners owned it?
- How is the company’s capital structured? I.e. is the business sufficiently funded?
- What finance has the company raised over the last 3 years?
3) Precautions in case of bankruptcy
- Describe in narrative, e.g. use of escrow service or open sourcing old versions.
Some of this is already available in press releases and earnings announcements, but we hope vendors will help buyers by posting it in one place. We will then collect the links and create and maintain a free and publicly available spreadsheet with the financial information. We will do our best to convert currencies and take different methods and periods of accounting into account. This would enable buyers to use the data freely and engage in more informed conversations with their vendors.
In addition, we will rate the vendors giving them 1 point for each answer. With 9 questions, this means that even though the numbers might not all be satisfying, a truly open vendor will get 9 points.
The challenge is open to all software vendors, including open source and proprietary vendors. Here the ones we have written most extensively about, which I hope will participate: Day Software, Dynamicweb, Ektron, Episerver, eZ, FatWire, Google, IBM, Microsoft, SDL, Sitecore, Umbraco. I hope others will pitch in as well.
Thanks to Rory Bernard for suggesting this good idea and Kas Thomas for inspiration from his popular reality checklist for vendors.
Niels Hartvig February 1st, 2010 9:45
Despite the great initiative, Umbraco will not participate. We don’t find that the checklist above is as relevant to OSS projects as they might be to closed projects.
To monitor the health of the Umbraco project, we’re transparent on all details except financial details which we like to keep for ourselves for as long as possible – the reasons should be obvious to anyone who’ve been involved in a competitive market
To further validate the stats and info on the Umbraco project we’re hosting all source control, bug trackers and download stats at 3rd parties who doesn’t have any interests in the Umbraco project, just like we don’t delete historical data.
Hence, it’s possible to monitor who updates the Umbraco project, how frequest, how many open bug tickets there is, etc. All these are numbers that are more relevant to analyze the health of the Umbraco project than the financial numbers you request above.
Finally, I’d be worried that by mixing OSS and closed source projects in this review you’d be comparing apples and oranges as the ratio on income vs. product spread is likely to be very different.
Best,
Niels Hartvig / Umbraco
Janus Boye February 1st, 2010 9:45
Thank you Niels for letting me know about why umbraco don’t want to participate.
I’ll simply say that this exercise was not about who has the best ratio on income vs. product spread or the most product revenue.
This challenge is to help customers find out the information and then judge for themselves. umbraco could have received a perfect score by simply releasing the numbers. If you change your mind, you could at least tell the world about ownership and I also think you have good precautions in case of bankruptcy.
Janus
Niels Hartvig February 1st, 2010 9:45
> This challenge is to help customers find out the information and then judge for themselves.
And this is where I’m worried as the 1.1 (total revenue) will be low compared to vendors that we’re usually benchmarked against. This is because those benchmarks are about the *project* Umbraco and not the company. The project Umbraco doesn’t rely on the company Umbraco in the same way a closed project does. This is of course also reflected in our revenue (and number of staff). In the Umbraco project the revenue in the ecosystem is mostly found where the value in CMS projects are; the companies who integrates the solutions.
We’ll of course reply on 2.1, 2.2, 2.3, 2.4 and 3.1 – sorry for not making that clear!
Darren Ferguson February 1st, 2010 9:45
Why would one publish this information? It changes week to week, month to month, year to year.
Isn’t your objective better achieved if a company requests the vendors current version of this information at the time that they are considering engaging their services?
Benjamin Chodroff February 1st, 2010 9:45
Agree 100% with Darren. Also, software is specific to a need in a company which derives value. Just because a vendor has a high financial score does not mean all the vendor’s software is going to achieve value in your organization, or vice versa. I can see how it would be important to understand if a company is going to be around in 5,10, 15 years. Do you have any numbers that could show this is a proven success indicator for future purchases?
BiroTom February 1st, 2010 9:45
I would be happy to publish financial data of Sense/Net. The reason I tend to agree with Niels however, is that the companies and products are so different even within the CMS market. Umbraco is WCM, Sense/Net is ECM, just to give an example. Our customers are diffrent, our products are different, our development and licensing model is different. And than I am not talking about comparing to IMB and Microsoft…
PS: As far as I know, in most countires some or most of the finacial details are public anyway.
Bob Egner February 1st, 2010 9:45
The software selection process is full of risks, balancing vendor claims against specific company needs for a project. In most cases, the company making the selection will look at many dimensions of the vendors. In addition to the obvious feature claims that can be evaluated through hands-on testing of software, financial health is evaluated by looking at the numbers as suggested in this post. Further evaluation is made on other dimensions such as reference checks with other user companies to evaluate their results against vendor claims, and checking the health of the partner network.
EPiServer helps in these evaluations in many ways, such as making our software available through our community, EPiServer World. We also feature a portfolio of customer sites and case studies on http://www.episerver.com/customers, and a useful company fact sheet that provides a summary of the health of our finances and our partner network http://www.episerver.com/news/press-center.
We respond to information requests of this type all the time. I can revise the content and format of our fact sheet to align wtih your proposal when the next version is issued.
Janus Boye February 1st, 2010 9:45
Hello Biro
Thank you for your comment
This challenge here is not about who has the best numbers. The challenge is about true openness, which will earn you 9 points on the scale.
Even though some countries make the financial details publicly available, the problem is that when you operate in many countries the company structure can be quite complex and often you don’t see the full picture by just looking at one country’s accounts.
Look forward to seeing the information about Sense/Net
Thanks
Janus
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