5 recession-era strategies for software vendors (and their customers)

New reports include recommendations for software vendors to crack down on piracy, hold off on the rush to cloud computing, and outsource back-office processes

Clamping down on pirates, simplifying licenses, and boosting layoffs and outsourcing are among the recommendations that Accenture has for software vendors struggling in this economy.

The global consulting firm today released two reports that, while aimed at executives at software vendors, can offer insight to their customers, such as enterprise CIOs.

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One is a high-level study of key global software industry trends, the other a more focused report on priorities for software vendors during this economic environment.

Pekka Huttunen, an Accenture senior executive in charge of its global software business, listed five strategies for software vendors:

1. Crack down on piracy

One of Accenture's clients found it was losing $1 billion a year in licensing fees from customers who were out of compliance. "The opportunity is large," Huttunen said.

Of course, the piracy, he concedes, is often unintentional. "In general, licenses are considered too complex from a customer perspective," he said. Vendors, meanwhile, rarely step up by providing customers with tools to help them better track their software usage. "They are partly to blame," he said.

The fix: "Make it a win-win" for vendor and customer, he said. Distribute free software tracking and auditing tools to customers. Simplify licenses and reward end-users, potentially with discounts, for using those tools and sharing usage information with the vendors.

"It's in the best interest of vendors to have CIOs like that," he said, pointing out that it shortens the negotiation time for customers to renew.

2. Trim expenses by cutting headcount

According to Huttunen, "software firms are less aggressive on operational efficiency than other companies, historically. But in the new economy, there are opportunities for outsourcing your back-office or non-core processes."

This especially makes sense for the select group of companies that have in the last several years accelerated their pace of acquisitions: Oracle, Microsoft, IBM, and others.

"They need to look again at the integration of their acquisitions and ask, 'have we integrated them well enough to be efficient?'" he said.

3. Don't go overboard in rushing to cloud computing or software-as-a-service

While the downturn has "put more focus on more economic ways of computing," Huttunen said, at the same time, the move from on-premise software to cloud or service-based software will be a "long transition."

"Some of these legacy systems support huge business streams. It's still a big risk to move to a new model, especially for a larger enterprise," he said. "The leap is still scary. And there are still concerns about data ownership, data privacy, not having control of key assets."

Most SaaS vendors remain "fairly small," offering just single, point solutions that may be more trouble than it is worth to integrate for, he said.

4. Formalize your product launch process

Huttunen said most software vendors are poor at "retaining the institutional knowledge" and the personnel responsible for a software launch.

Vendors can improve by using tools to help capture that knowledge and by taking steps to retain the key launch-associated personnel -- product, marketing, and channel managers -- by moving them over to other products.

Huttunen conceded that industrializing the process is difficult, especially in smaller firms but also in bigger firms steeped in the no-holds-barred startup culture glorified in Silicon Valley. "The idea is to let people be creative in areas that matter, but take the necessary steps, anyway," he said.

5. Tap into new ways of developing software

Huttunen called open source "one of the most interesting ways to economize software development. All vendors should take a hard look at it."

Open source is a subset of something Huttunen punningly calls "crowd computing," which is to tap into the expertise of a community or outside experts who essentially provide development and support resources on the cheap.

This story, "5 recession-era strategies for software vendors (and their customers)" was originally published by Computerworld.