The Very Real Risks of Legacy Software Providers
There are a number of ways that businesses traditionally decide on software solutions. Functionality and price play a big role, of course. Familiarity comes into play. Some purchasers feel more comfortable with larger vendors; “No one ever got fired for choosing IBM” is an adage for a reason. For my money, however, the most important criteria for a technology partner is the health of the company – and nowhere is that more true than in the oil and gas industry.
Oil and gas is evolving quickly, driven by rapidly changing micro- and macro-economic forces. To drive profits and differentiate your business, it’s imperative to choose software partners that are financially, technologically, and philosophically healthy.
Alarmingly, some major players in the oil and gas software space (and beyond) find themselves overleveraged and dealing with serious liquidity concerns.
As interest rates have increased, debt service costs have risen significantly, putting pressure on OpEx. This in turn shifts focus away from the customer and toward cost takeout. Cost centers like Support get cut, innovation hubs like Engineering are gutted, and the growth engines that power future investments evaporate. Maximizing EBITDA and margin becomes the only priority – not customers or products – as servicing the debt drives decision making. Eventually cash flow dries up, and that’s when things get really bad: 82% of businesses fail because of cash flow problems.
This financial ill health comes at tremendous expense to the customer. When things go wrong, there’s no one to call. I’ve heard anecdotes lately about other oil and gas software providers not just delivering a poor support response, but literally never responding at all. When organizations find themselves financially unhealthy, they must devote all of their time and energy to solving their problems. That results in losing sight of why they exist in the first place: to deliver value to their customers.
In our market, the risks of trusting a financially unhealthy company don’t stop at losing support and being stuck with a stalled-out product. We make mission-critical software. If it doesn’t work, people don’t get paid, financial statements can’t be published, and the business cannot continue to function. That risk is simply unacceptable.
Technological health is inextricably linked to financial health. One informs the other. When engineering resources get cut, innovation grinds to a halt. Products can no longer evolve to meet the needs of the organization or the industry as a whole. With the pace of innovation today, solutions become outdated and ineffective very fast.
Companies can be technologically unhealthy before they’re in financial straits, too. Many legacy offerings remain on the 20- or 30-year-old technology they were built on, even if they have a web page thrown on top to present the illusion of a SaaS solution. These products continue to be a cobbled-together collection of disparate (sometimes even overlapping) products, and with all the recent acquisitions, they’ve become even more disjointed. This creates a clunky experience for customers and it’s bad for the bottom line. Without a standard tech stack and faced with ever-growing complexity, legacy providers eventually end up with a far larger cost burden than if they had invested in modernization and integration in the first place.
In addition, without modern architecture, it becomes more and more difficult and expensive to find the resources necessary to support back-end infrastructure. On-premises software today automatically comes with an expiration date. At some point, vendors have no choice but to end-of-life it, which adds a whole new layer of headache for their customers and financial pressure to their business.
Technological ill health restricts business growth as well. If you double your business through an acquisition tomorrow, your legacy system will not be able to keep up, let alone enable new synergies. It will require months of onboarding new products, adding new user licenses, and making the various pieces talk to each other… just to have the same inflexible, table-stakes functionality. Conversely, with a cloud-based solution, you can scale up, scale down, add users, add modules – it’s all part of the same unified platform. Legacy solutions can’t even come close.
While philosophical health may sound a bit fuzzier than its counterparts, it actually underpins them both. To operate successfully in today’s business climate, oil and gas companies need a partner who is invested in the future. A philosophically healthy company makes decisions that result in financial and technological health today and in years to come.
What does that look like in practice? A focus on growth, innovation, and customer success. It means approaching investments from a perspective of making every customer’s business more efficient, more profitable, and more future-proof. It requires never resting on the laurels of a product that was best-in-class ten years ago and instead relentlessly pursuing and funding R&D. Philosophical health is a mindset of differentiation, disruption, and proactivity that results in tangible, exceptional business outcomes – a mindset that I’m proud to say we embrace at W Energy.
To bring it back to where we started: there are many software solutions that can offer baseline capabilities at a reasonable price. There are very few that are financially, technologically, and philosophically healthy. When it’s time to invest in software that will take your business into the next decade and beyond, make sure it’s a partner you can trust.