THE FUTURE OF THIRD-PARTY VENDORS IN THE HP3000 USER MARKET
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.
WHY THIRD-PARTY VENDORS?
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.
THREATS TO THIRD-PARTY VENDORS
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.
THE FUTURE
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.