The Ethics of Selling the Old vs. the New

It hit me last week while attending Oracle’s Analyst World briefing. We met in a conference center on the Oracle campus in Redwood Shores to learn about the company’s latest developments in hardware and software, and to be briefed on its future road map.

How extensive was it? Let’s just say that my brain hurt when it was over, and I had to sign a five-year NDA agreement to get out of the building.

So what hit me? What ethical dilemma bedevils Oracle and other enterprise companies?

The very idea of ethics and the software industry may make for strange bedfellows for some people, and I do not believe that we’ve ever seen an ethical dilemma like this before, though others might have existed as well.

Oracle’s Ethical Dilemma

Clay Christensen wrote elegantly about the Innovator’s Dilemma — that point in time when an innovator must decide to supersede a product or a whole line with something with greater performance characteristics and a lower cost profile, or risk having a competitor do it, thus disrupting its established business.

As Christensen showed, many if not most companies are terrible at doing this. The mini computer makers completely missed the microcomputer wave, Kodak missed digital photography, and the list goes on.

However, this dilemma also breeds an ethical problem of the same order.

Suppose an innovator is successful at transitioning from the old product line to the new. Suppose further that the vendor continues to offer both the old and new product lines. Which one does the vendor lead with, or push through the sales force?

Typically, the sales force is comfortable with the old line. Having made a good living from selling it, the team is not very interested in selling the new stuff, which is why compensation plans get adjusted to incent the right behavior.

This is not far-fetched. It is, in fact, what happens all the time. More often than not, there are also financial incentives for the customer that make the new solution so appealing that the decision about which product to buy never rises to the level of a dilemma, ethical or otherwise.This time, however, is different. Typically, the new solution offers better price performance characteristics, and that’s enough to get the new product adopted by the market.

Here’s the rub: The new generation of hardware and software that Oracle and others are introducing might run well in a private data center, but their full benefits come through in cloud configurations. In fact, some customers will find the cost considerations work out best when they use the new devices in cloud configurations.

Selling the Cloud

In the cloud, as we all know, it’s not necessary to own the stack. Cloud vendors typically own the stack and sell it incrementally to customers on a periodic basis. I think this is one of Oracle’s long-term plays.

Oracle, SAP, Microsoft and others — except Salesforce, which set up camp in the cloud a long time ago — are now in a straddle position offering new technologies to old markets, or hybrid configurations for companies that might be changing over slowly.

The question is what do you lead with? Is there a duty for a vendor selling to a traditional on-premise data center to point out the obvious? This is what I consider the ethical dilemma.

I think there’s an obligation to inform customers that the choice between on-premise and cloud computing is no longer at best a toss-up. There are significant benefits and consequences to be considered. The market’s direction is clear. Data centers are consolidating into the cloud and delivering major benefits, including lower costs, greater reliability and better security.

If, after informed consent is obtained, the customer still wants to invest in the data center, that’s fine. I also recognize that these decisions are not as simple as my example. That’s why it’s a dilemma.

At some point in the not too distant future, though, it will be impossible to justify on-premise computing for routine business application work. Therefore, when customers are considering new purchases, sales people today have the responsibility to inform them — and to capture informed consent — that the direction of the market along with cost benefit considerations now favor cloud computing.

A purchase of a solution that uses cloud-oriented “hybrid” architectures might be a palliative approach to dealing with the conflict between premise-based and cloud solutions, but the subject has to be broached:

“Oh, you want to refit your in-house data center with a new generation of technology? Ok, are you aware of the significant advantages of cloud computing? Are you aware of the market’s movement in that direction?”

These and other questions now need to precede the standard, “Sign here. Press hard. The third copy is yours.”

Denis Pombriant is the managing principal of the Beagle Research Group, a CRM market research firm and consultancy. Pombriant's research concentrates on evolving product ideas and emerging companies in the sales, marketing and call center disciplines. His research is freely distributed through a blog and Web site. He is the author of Hello, Ladies! Dispatches from the Social CRM Frontier and can be reached at [email protected].

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