It is rare to find the word “ethical” and “software company” to appear in the same sentence. The industry has managed to become a byword for snake oil, aggressive pricing and sneaky contract terms. Years ago when working at Exxon I recall one vendor who sold Esso UK some software, rebadging the product as two separate products and then trying to charge Esso for the “other” product, which of course they had already bought. Needless to say I was having none of that, but the very notion that they would try to do this spoke volumes about their contempt for the customer.

The prize (so far) goes to one of my colleagues, who used to work for a software company that once sold a financial package to a customer on the basis that it had a particular module. The only problem was that it did not exist. He was asked to set up a “demo” of the software to the customer which sounds like something out of “The Office”. In one room sat the customer at a screen, who typed in various data to the system and requested a report from an (entirely fictiitious) pick list of reports that the vendor was supposed to have built but had not. In the next room was a programmer. When the customer pressed “enter” the data would appear in a table, and they quickly manually edited a report format using the customer data, which was “off to the printer”. A couple of minutes later the report was brought in to the customer, who could they see the new reporting module in action. The slow response time was explained by an “old server”. Lest you think this was some fly by night operation, this major provider of financial software had over USD 100 million revenue back in the early 1990s, which was when this particular scam was perpetrated. And yes, they closed the deal.

As if to prove that enterprise software companies are still amateurs when its comes to dubious behavior, Sony has just made all the wrong headlines by placing what is essentially a clever virus on its CDs, purportedly to avoid digital copyright violations. The software installs itself into the root directory of your PC and, quite apart from preventing unathorised copying of music, also broadcasts back to Sony what music you have been listening to. Apparently million of PCs may have been infected, and only after several refusals have Sony now agreed to stop producing the spyware. Just what corporate manager at Sony thought this was a really bright idea that no-one would figure out is yet to emerge. However it is safe to say that Sony’s PR agency are not having a quiet run-up to Christmas right now.

I’d be interested to hear about any reader’s experiences of outrageous software company behavior.

A survey by the Economist Intelligence Unit (sponsored by PWC) just released today has a very interesting finding that backs up something I have written about before: when it comes to innovation, don’t look for it in large companies.

In answer to the question:

“Small or start up competitors are more likely than large, established companies to create breakthrough products or business models” no less than 70% of senior executives “agreed” or “strongly agreed”, with only 10% disagreeing. Given the vastly greater resources and R&D budgets available to large companies, why the dearth of innovation there?

It is easy to argue that bureaucracy is the cause but I think there is another reason that I have not seen written about. I had some dealings with Oracle in the 1990s when they were concerned about the emergence of object databases, and they wanted customer input as to whether this was a real threat to them. What struck me in several meetings in Redwood City as I met with a range of senior Oracle technologists, was how that the most impressive people were the ones working on the database kernel, the core of the Oracle product. Less impressive were ones working on the applications, and least of all were some working on the tools layer above. This makes sense: if you are a top developer and join Oracle then you probably want to work on the crown jewels. Similarly in my dealings with my favorite Walldorf-based ERP vendor I have found the best people to have worked on the basis, the next best the modules, and the least impressive ones on the peripheral tools. Again, the key to SAP’s success has been its integrated ERP system, so it is hardly surprising that the top people gravitate there. Moreover the area which made the company initially successful is probably the one where the greatest understanding of the customer issues resides. The farther you move away from this the less likely it is that the best people will be working, and also the less likely it is that the senior executives (who built the company n the first place around a core technology) will grasp the opportunity and back innovation. Hence the ideas leak out of the company as those passionate about them leave to set up start-ups.