We know that a lot of claims regarding key success indicators -- customer satisfaction, revenues for specific product lines, the real number of users in the software eco-system -- are suspicious, or worse. We also know that it's easy to fudge the numbers without actually breaking the law: if the last year's revelations have taught us anything, the current regulations regarding the information available from public companies can be used as a smokescreen to hide the most nefarious operations imaginable.
All that makes life scary for investors and partners. So it's no wonder that the current malaise in the stock market has as much to do with this crisis of confidence as it has to do with the fundamentals of the current business environment. In fact, I believe the stock market will never recover until investor confidence is restored, recession or no.
But does any of this mean anything for software users? Should you care about the financial disclosure problems of Wall Street? Or more succinctly, do the current problems plaguing the larger financial markets have any relevance for enterprise software users?
Absolutely. Imagine if Enron had been your software provider? Or Andersen, for that matter. Right now the future of your software investment would be under fire. At best, you'd have a hard time getting your strategic partner to pay attention to a bug that is killing your system performance. At worst, receivership would doom you to maintaining a software system without the help of an active, viable company that would support your success and ensure your ability to innovate going forward.
Is there an alternative to this scenario? I think there is. Instead of waiting for Congress to legislate a change in the disclosure laws -- a move that many doubt will happen -- I think it's time for the software industry to voluntarily open up its books and show the markets, and its customers, what's really going on.
A Little Daylight
This means full disclosure for all the funny stuff -- warrants given to customers as a "kickback" for buying software, side-deals that forces strategic partners to buy a vendors' products in exchange for certification, off-book joint ventures that hide costs, the real numbers on the breakdown of software suite sales, and on and on.
This information will serve two purposes. It will allow all of us to really see the market for what it is, and judge whether we're in a business that truly believes in a partnership with its customers. Many of us think that most companies could pass the test, but there are many for whom a little daylight would show the kind of market manipulation, lying and cheating that I believe lies behind the current crisis of confidence.
One of the reasons I have always been a firm believer in shareholder lawsuits is that it sharpens the mind of executives who might otherwise be tempted to fudge their numbers and mislead their shareholders. Unfortunately, the spate of disclosures about rampant market manipulation makes it obvious that the threat of shareholder suits, and their limited liability, are not enough. Maybe we need something more forceful, maybe we need the threat of prison.
Over in Europe, where "greed is good" never caught on like it did in the U.S., a number of software execs have been sent to jail or are facing the threat of jail for market manipulation. There are few such cases in the U.S., and possibly more on the way. Not enough, I'm afraid, to make a real difference.
I see two alternatives for the current malaise. Wait for legislation or more lawsuits to force industry's hand. Or volunteer to lead the charge towards more honesty, transparency, and truth in software. One software exec I've talked to likes the idea, but he's not sure how well his company would pass the test. Which may be the real problem with full disclosure in the software industry: Is anyone out there up to the task?