Strategic and Free

I worked for nine years at a major software company specializing in computer aided design software.  During my tenure there, I worked on three major software products which were sold to end users.  The first one, a diagramming products was priced at $199 (or was it $299) and was competitive, both in functionality and price with our competitors.  Sales were ramping up slowly when our competitor was bought by another huge and pervasive company.  This made our product’s future very bleak and it was dropped soon after.

Our next product was an architectural product.  Our competitors charged $500 for a very cool and fairly functional application.  When we finally came out with our first release, it went to the company’s pricing committee, which decided that we should charge $900 (our marketing guy had recommended $500).  It was a cool product and some functionality was better, some not as good, as our competitor’s.  However, the pricing was totally out of whack.  At $900, the decision to buy needed more levels of approval and couldn’t just be purchased on a whim by most architects.  Conversely, a $500 product was much easier to justify and purchase.  After a couple of years of good reviews and slow sales this product was dropped.

The third product was a view and markup product, priced at $199.  It was just what the market needed and wanted and sales were setting records at the company.  Eventually, however, it was decided that it was an important strategic product and should be used to help the company’s general bottom line.  It was given away for free as part of this corporate strategy.  While this was fine for the company, it wasn’t so great for the group that developed it.  When your group produces a toolkit, utility, or other free product, someone is eventually going to notice a red column on the corporate budget.  This is your group, employing many developers, but not providing any direct income.  It’s difficult to quantify “strategic product” on a balance sheet and the memory of why your product was so important in the first place is soon forgotten.  When lean times roll around, what do you think is the first group that’s going to be cut?

It’s sad and unfortunate, but being attached to strategic and free products/projects in your company may eventually put you at risk for being first on the chopping block.  If you’re on such a team, you must continually remind upper management why you were created in the first place and why you continue to justify your existence.  Failure to do so while only likely result in the decision to strategically eliminate a negative on the balance sheet, making your executive look good in the short term, regardless of the long term.  But, when did the future ever influence an executive’s bonus?