As many vendors put significant R&D money into new-generation cloud software to replace their legacy systems with the anticipation of returns, will shareholders, clients & users get value for money at the end of it? 

If Vendor X has 1,000 customers using a server-based solution and then promise to replace that system with a cloud-based one, two things happen:

1.  They still have to support the 'old' system for at least 5+ years - which requires resources and money (NB: it is a brave soul in a company who names the End of Life date and does not expect repercussions)
2.  They have to create a new, separate team to develop, build support and service the 'new' system

Let's assume that 500 clients remain on the old system, 50 move to a competitor product and 450 move across to the new product.  Even with a minimal increase in support fees (the new product is not a new sale - it is why clients pay monthly maintenance so there is no sudden cash injection), their revenues are already less as 50 clients have left, but costs are potentially double as now they have 2 separate teams maintaining 2 separate code bases, not 1.  They must also to fund the infrastructure upon which everything operates, staffing, premises etc and carry those for 5+ years.  

Regardless if another 300 clients move to the 'new and improved' version, they cannot switch off the old system as this has the potential for flight-risk for the remaining 100 customers.  This puts them further into a precarious situation with costs escalating on reducing revenues, which reduces the ability to fund R&D which in-turn lowers the appeal of the product, etc to customers, it is less enticing to attract new clients and the shareholders are left wondering where their money has gone; a vicious circle is born.

Something has to give and it is showing signs of happening right now.

Book a meeting with me via email if you’d like to learn more.

Alan