It’s been quite a while ago when I read Chris Anderson’s book The Long Tail. It is so obvious how to cover niche requirements for books or CDs, for example, with an online shop instead of a real shop. Obivously, the real shop has only limited shelf space and, therefore, needs to focus on selling blockbusters. The online shop has almost unlimited shelf space and almost zero distribution costs (i.e., provided that shipping is being paid for by the consumer) and can, thus, sell also those items – with a profit – that are rarely being asked for.
But how does this work in the software industry? Well, technically it should be even easier since software is a non-tangible good and, thus, the distribution costs are actually gone. From the software provider’s perspective, all you need to do is to offer an electronic catalog that for each software product has a download button.
However, I immediately see two main differences between the software industry and, for example, the entertainment industries.
The first one is the cost of production. I am not claiming that developing software is more expensive than, for example producing books or CDs (there isn’t a really good comparison anyway). But I think that the cost of production for books or CDs is more or less staying at the same level. This is not so for software, particularly in the area of business applications. The more software being produced, the more expensive the cost of production. Why? Because business processes need to be supported seamlessly accross different software components. The more software components being developed, the more integration scenarios need to be supported between all these components – and with all the legacy components that are still in use (think about that software is often much longer in use than hardware). There are simply dependencies between software components that one does not observe for books or CDs.
And the second one is that for an independent software vendor (ISV) – like SAP – there is a need to keep away from the long tail’s end to some extent. This is because the fewer customers there are that require a certain business process functionality, the higher the risk for the ISV to loose money due to the cost of development, maintenance and support.
Hmm, and now? How can customers then ever get a solution that supports all their requirements, of which many may be more common but some may be very specific to their business?
Obviously, there is a need to address this long tail differently from an ISV perspective. And an obvious solution is open innovation as introduced – o.k., I know, this was also already a couple of years ago – by Henry Chesbrough with his books on open innovation and open business models. This is about the observation that more and more innovation is actually happening outside a company’s boundaries. And it is – as a consequence – about managing the permeability of the comany’s boundary when it comes to the (product) innovation lifecycle.
So, how can open innovation concepts address the long tail in an SAP environment? Or in other words, how can SAP users identify and prioritize business requirements that they would like SAP to cover in future releases? And how can this be carried out most effectively and efficiently? How can SAP identify commonalities in such requirements? And what do we do when we have actually identified the long tail? What is the role of SAP partners? What the role of SAP customers? What the role of the SAP community network?
Take it for granted that I don’t have answers to all these questions, but I would really like to learn from your experience and perspective. Share your feedback here. Or come to the expert networking sessions at SAP TechEd Phoenix on Thursday afternoon (Oct 15, 1:00 pm or 1:30 pm).
Looking forward to your input!http://www.sapteched.com/usa/activities/session.htm?id=422