by Eugene Volokh, VESOFT
                Published by The HP CHRONICLE, Dec 1983.
               Published by INTERACT Magazine, Jan 1984.
   Published in "Thoughts & Discourses on HP3000 Software", 1st ed.

It  is a fact of life that, for a variety of reasons, computer vendors
cannot  completely  satisfy  the  software or hardware  needs of their
users,  and a niche for third-party vendors will thus develop.  The HP
3000  market  is no different, with  many system software, application
software, and hardware products provided by independent vendors, often
in  direct  competition with HP itself.   This article will present my
vision   of   the  future  of  third-party  vendors  and  vendors  and
third-party products in the HP3000 user market.


HP  seems  to  have  everything  going  for  it.   It  dwarfs  all the
independent vendors selling in the HP3000 market put together; it has
more   money,   more   R&D   people,  more  salesmen,  more  technical
information, a larger distribution and support network, and more loyal
users than even the most successful of third-party vendors; by rights,
it  looks  like  it should have crowded all  the small guys out of the
market long ago.

However,  this  just  isn't  true.   Not  only  are there  hundreds of
third-party  vendors  providing  hardware and software  in the HP3000
market,  but  many  are  competing  (quite successfully!)  against HP.
Examples  of  this  abound; QEDIT, ROBELLE's text  editor, has a loyal
following that rivals that of HP's own TDP; Quasar (QUIZ, QUICK, QTP),
Infocentre  (GENASYS),  Gentry  (REX,  PAL),  and  Cole  &  Van Sickle
(PROTOS)  are  all thriving, even though  they are competing with HP's
own  RAPID/3000; I have seen more sites using ASK Information Systems'
MANMAN  than  HP's  own  MM/3000,  and  Qualex tape  drives and United
Peripherals  disc drives sell well even  in direct competition with HP
7976's and 7933's.

What  is  it  that  the third-party vendors have  that permits them to
compete  successfully  with  a  company  much  larger than  they?  The
reasons are several:

  *  "Reverse  economy  of  scale" - independent  vendors have quicker
    reaction  times than HP.  Fourth-generation languages, application
    packages,  reasonable (i.e. not EDITOR) text editors, and 6250 bpi
    tape drives were all introduced by independents before (often long
    before)  they were sold by HP.  Thus many of the companies were so
    firmly  entrenched  in  their  particular  market  by the  time HP
    entered it that they could not be easily dislodged.

  *  "You  can't  please  everybody" - HP  sells one fourth-generation
    language, one manufacturing package, one text editor, and one word
    processor; it can't afford to sell more than one of each. However,
    this  one  product won't be what the  user dreams about; each user
    will  have  some  features,  often  very important  features, that
    aren't  included  in  the  HP  product,  but may be  included in a
    product provided by an independent vendor.

  * "HP stands for High Prices" - HP has always sought to compete with
    other  vendors on the basis of reliability and quality, not price.
    Often  this works because a $50,000 product that does the job is a
    better  buy  than  a  $10,000 product that  doesn't; however, when
    equally  powerful  and reliable products  are available, low price
    sometimes wins against loyalty to a single vendor.


The  life of a third-party vendor is no bed of roses, needless to say,
and  has  not  gotten  much better recently.   There are several major
threats to the very livelihood of independent vendors:

  *  HP - every vendor must have spent many a sleepless night worrying
    that if his product was so wonderful and sold so well, wouldn't it
    just  be a matter of time before HP stepped in and tried to sell a
    similar product?  In fact, this has come to pass for many vendors,
    especially  since  HP's  recent  push  into  office-automation and
    application  software; all the vendors that I mentioned above, who
    successfully  compete with HP, have  not been completely unscathed
    by the entry of HP into the market.  Although they still have many
    customers  and are growing at an acceptable rate, life for them is
    nowhere  near as easy as it was  before HP stepped in, and some of
    the  less profitable and less successful  vendors were and will be
    pushed out of the market sooner or later.

  *  The  single-vendor shop - many HP  customers have an almost blind
    loyalty  to  HP.  In my years as  an independent vendor, too often
    have  I  heard  "sorry, we don't  buy third-party products."  This
    attitude,  although  sometimes  justified by the  desire to have a
    more easily supportable system, is usually quite incorrect because
    it  deprives  the user of the many  advantages that can be derived
    from  independent  vendor products.  However,  condemning it won't
    make  it go away, and every  third-party vendor must live with the
    fact  that  a  substantial  part of the HP3000  market  is forever
    barred  from him.  Furthermore, all sites have some degree of bias
    in  favor  of HP; therefore the  independent vendor must always be
    demonstrably better than, not just as good as, HP.

  *  Removal of problems solved by  the products - many products solve
    certain  problems  that,  with  time, may become  less pressing or
    disappear  entirely.  For instance, application packages have sold
    well  because  you  could,  for  $50,000, get what  would cost you
    $100,000  to  create  yourself.   However, if  a fourth-generation
    language  (HP or third-party) is available that will let you build
    the  package  for  $40,000,  the vendor application  package is no
    longer  a good buy.  Similarly, systems software that was designed
    for  speed may no longer be as useful when you can buy a 44 or 64,
    on which even un-optimized programs can run fast enough.


In  the  above  two  sections, I have  outlined the opportunities that
third-party vendors can exploit, and the threats that they must battle
with.   The  various ways that the  opportunities may be exploited and
the  threats fought will create  several characters that a third-party
vendor can become:

  *  The  Superman  -  this  is the vendor who  will make a product so
    overwhelmingly  superior  to  everything  that  HP  or  any  other
    competitor has or can hope to have, that he has would-be customers
    begging  him to sell them his  product.  This guy has no problems,
    and  is  sure to make millions  of dollars.  However, although you
    will  see  some  truly  superior  products that  receive universal
    acclaim, Supermen will be rather scarce.

  *  The Undercutter - Undercutters use  reverse economics of scale to
    build products cheaper than HP does.  Present-day undercutters are
    companies  like  DIRECT,  which  builds  an  inexpensive  HP 2622-
    compatible  terminal,  and  Qualex  and United  Peripherals, which
    started  out as Innovators (see below); but  now that HP is in the
    market,  compete  with them on the basis  of price.  I do not envy
    the  lot of the undercutter; the fact  of the matter is that price
    is  not as much an issue as he might like it to be, and many users
    are  willing to pay more to get  something from HP, a company they
    know and trust.

  *  The  Improver  - this fellow creates  a product that improves the
    functioning  of an existing HP product, thus exploiting the market
    already  built  by  the  HP product.  Examples  of this are Adager
    Software  Pty,  whose ADAGER improves IMAGE,  and VESOFT Inc., who
    makes MPEX, which improves MPE.  Since HP is not perfect, there is
    always  a  market  --  often  a  very  lucrative  one --  for such
    products, and as new HP products come out, I am sure that there'll
    be many third-party products that fix problems and add features to
    the new HP products.

  *  The Innovator - Innovators make  their living by staying one step
    ahead of the competition and introducing their products and making
    their  pile before the competition moves in.  Quasar made millions
    this way on QUIZ, QUICK, and QTP, and other vendors, like ROBELLE,
    Qualex,  United  Peripherals,  Cole & Van  Sickle, and Gentry have
    prospered through innovation, too.

The  future  of  HP  system  software  holds  a niche for  each of the
aforementioned kinds of independent vendors, and it seems certain that
as  the  HP3000  market  will grow, they  will grow with it, providing
more and more useful packages for HP3000 users.

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