Amid Software Shift, User Groups Give Customers A Voice



Posted 1/31/2007

The business software industry has never been known for being customer-friendly. In many cases, buyers spend millions of dollars on systems that take months to install but don't work right. Then they can spend millions more on consultants to fix the problems.

This dynamic has started to shift in recent years. Users are shying away from large software installations in favor of smaller, bite-size projects.

That's forcing software makers to focus more attention on customer satisfaction, says Jim Shepherd, an industry analyst with AMR Research.

One sign of this shift involves software user groups, clubby networks of customers who meet, exchange ideas and serve as an informal liaison between a tech firm and its customers.

Such groups have been around since the dawn of the computer industry. But lately they've gained more stature and clout with their respective vendors.

Virtually all the big software makers work closely with independent groups of their software users.

"Vendors have woken up to the fact that this is a relationship business," he said. "Now the goal is to build a long-term relationship with the customer, as that's where the opportunity is."

In general, group organizers volunteer their time. They conduct online surveys or hold focus groups to gather user opinions.

Most groups are self-funded to maintain autonomy. Yet users and vendors often partner on marketing efforts or hold their conventions in the same place.

Members can network at such events to share insights about the best ways to use tech products. By joining together, they can also sway vendor decisions about future prices, features and upgrade plans, says Robert Rosen. He stepped down last summer as the president of Share, an IBM (IBM) user group.

"This is a very synergistic relationship in which both sides benefit," Rosen said. "IBM had a past reputation of saying take it or leave it, but now they've come a long way in giving customers what they need."

Rosen should know, having been a member of Share since 1970. He's also the chief information officer for the National Institute of Arthritis and Musculoskeletal and Skin Diseases at the National Institutes of Health.

Rosen remembers one instance when IBM retooled its approach to grid computing based on user input. Grids pool computer resources to share computing power.

"IBM was not giving sufficient consideration to grid security," Rosen recalled. "That made it hard for customers to run their payroll or corporate data on big grids."

In another case, Share suggested that IBM employees could benefit by attending their regular user event. About 100 IBM staffers regularly attend the event each year.

Share, the granddaddy of all tech user groups, was founded in 1955. That's just two years after IBM released its first computer.

"IBM has been doing this work for a long time with user groups," said Al Zollar, general manager of IBM's Tivoli software unit. "These groups have become a part of the fabric of how we do business."

Higher Expectations

User groups help vendors spread their message about plans among the user base, says Julie Silverstein, president of SmithBucklin, an association management firm. SmithBucklin runs events, marketing campaigns and financial services for about 200 groups, including 18 tech user groups such as Share.

"Vendors have a much higher expectation of user groups than in the past," Silverstein noted. "Relations between the two were a lot more adversarial in the early years."

Case in point: the 14-year-old Independent Oracle User Group [IOUG]. It has grown to include more than 20,000 members worldwide. Yet only in recent years has Oracle (ORCL) become more responsive to the group's concerns, says Ari Kaplan, the president of IOUG, who also heads the database practice at Datalink. (DTLK)

"The biggest change since 1993 has been in how Oracle views its customer-driven focus," Kaplan said. "Oracle had a former standoffish attitude toward user groups. Now they are more cooperative."

This change of heart makes business sense. Software makers such as Oracle can glean valuable feedback from user groups. Such input helps vendors to pinpoint technical concerns or business-related problems. The findings can then be used to improve future product designs.

In short, user groups serve as "the collective voice" of customers, said Rod Masney, president of Americas' SAP Users' Group [ASUG] and a technology director at Owens-Illinois. (OI)

Another Point Of View

ASUG has about 2,000 member firms and 50,000 individual participants. That broad reach lets SAP (SAP) understand the "pinch points" shared by many users, Masney said.

"We help them see where there is real pain in our business, and how they can eliminate it," he said.

ASUG convenes what it calls influence councils to discuss hot topics with SAP software developers, such as data security or risk management. Higher-level executive exchanges connect C-level executives with SAP product managers to work on long-range strategic issues.

SAP commits four full-time executives to support ASUG, says Stefan Kneis, SAP's executive liaison to ASUG. The internal team matches concerned users with the right SAP product experts, Kneis says.

"It is important to get an unbiased view from the customer so that we can tweak our own investment decisions." he said.

SAP cited the group's role in helping it develop a new sales and operations planning product launched Wednesday.

At times, tensions flare between vendors and users. Masney recalls one heated meeting at which he suggested ways for SAP to improve the root design of NetWeaver, its middleware product.

"From my perspective, I offered my opinion," he recalled. "But I was politely coached to not tell them how to architect the solution, and I think that's appropriate."

Such discussions aren't always comfortable, Masney admits. But it often takes healthy debate to identify "those golden nuggets of value" that will benefit users and vendors, he added.

"Ultimately, it is not for ASUG to tell SAP how to do software development," he said. "It's more about us describing our business plan, and finding ways that they can save us money, drive more revenue or reduce our inventory."

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