Column oriented databases are not the same as in-memory databases

In recent years, thanks not least to aggressive marketing by QlikTech (or Qlik Technologies as the are now often called) Tableau and Tibco Spotfire, columnar databases and in-memory databases have become very fashionable. Microsoft's VertiPaq engine, which is behind the PowerPivot product, is a good example of a tool that came in on the wave of this trend.

One of the results of these is that there seems to be some confusion about what the terms "in-memory" and "column oriented" mean, and attributes of one are often attributed to the other.

Just to be perfectly clear: A columnar database is not necessarily in-memory, and an in-memory database is not necessarily columnar.

In-memory is a somewhat vague term, since, as Nigel Pendse likes to point out, all databases have to hold data in memory to process it -- the CPU cannot directly access the hard drive. However, I would say that unlike some other tools, IBM Cognos TM1 and QlikView are in-memory. These products load everything into memory before they do anything. If there is not enough memory to fit the entire data set, the load fails and that's that. The same applies to SAP HANA. But unlike QlikView and HANA, TM1 is a multi-dimensional database.

The loading behavior of an in-memory database is much different to the MOLAP engine in Analysis Services, which is fundamentally disk-based but has sophisticated paging abilities to keep as much as the data as possible in memory, or the column oriented Spotfire, which attempts to load everything but uses paging if there is not enough memory.

Columnar is a much clearer and simpler term. It simply means that the data is stored by column instead of by row. There are a large number of analytic databases with this architecture, such as Exadata, SAND, Greenplum, Aster, or Sybase IQ, just to name a few. Some, like Vertica and VertiPaq, even refer to their columnar architecture in their names. Some columnar databases are in-memory, but many are designed to deal with huge amounts of data, up to the petabyte range, and cannot possibly hold it all in memory.

By the way, what got me off on this rant is actually this blog about Endeca Latitude 2 which actually equates the two technologies, and a Linked-In discussion the author started (which is private, so I can't link it here) with the title "Is Data Modeling Dead?"

The idea in memory databases kill data modelling comes from the fact that columnar databases are often used to discover hierarchies, and a whole generation of so-called "agile" in-memory database tools use this method. But in-memory multi-dimensional databases are still around and still very useful for analyzing data on well defined structures such as financial data.

The end of Essbase Visual Explorer

I talked to Tableau and Oracle on the same day recently so I managed to get both sides of this story.

Essbase Visual Explorer is an OEM version of Tableau Desktop. In other words, it is the Tableau product rebranded as an Oracle Hyperion product.

The OEM agreement was originally made between Tableau and Hyperion. It made sense for Hyperion, because they did not want to invest in in-house development on any new front-ends, but they needed something to liven up their Essbase offering. It made sense for Tableau because they were a tiny unknown company at the time, and hooking up with Hyperion, then one of the largest BI companies, was a great way to push sales and raise visibility.

But Tableau has moved on since then. Hyperion’s unwillingness to market Essbase aggressively meant that Tableau could not depend on Hyperion forever, and Tableau now supports a wide variety of data sources. They said to me that they were “sunsetting” the relationship. My impression was that only a small proportion of their customers are Visual Explorer customers and they are ready to move on.

Oracle inherited the relationship from Hyperion, but its strategy has been quite different to (and in my opinion more sensible than) Hyperion’s. Reading between the lines of what Paul Rodwick said to me, my guess is that Oracle thinks that Tableau got more out of the deal than Hyperion did. Be that as it may, as a stand-alone tool Visual Explorer does not fit well into Oracle’s ambitious plans to integrate Essbase with its reporting and analysis suite, OBIEE. Visual Explorer is still on Oracle’s price list but the recently released BI Foundation Suite combining Essbase and OBIEE does not include Visual Explorer.

So Oracle will continue to support Visual Explorer, but both Oracle and Tableau have indicated to us that they have little interest in continuing the relationship, and I do not expect Oracle to continue actively positioning Essbase Visual Explorer in the coming years.

SAP raises the stakes with EPM 10

SAP is now adding new features to its (relatively) new integrated planning tool, BusinessObjects Planning and Consolidation, often still called BPC. It needs to show customers that it is up to more than just integrating its portfolio and it also needs to face up to scrappy new competitors like Tagetik and De facto, planning tools with a very similar architecture.

The presentation I saw yesterday was nominally about EPM, but SAP concentrated on Planning and Consulting (BPC). It has many new features including a new workspace and Web-based data input. This is something new since the original OutlookSoft product only allowed planning in Excel. Neither Tagetik nor De Facto offer this. The product also allows reporting on non-BPC BW data and a slicker looking Excel interface with some nice new features. Unfortunately, they couldn’t get the template function working in Excel for the demo.

SAP says they will gradually move the whole thing to HANA but did not provide details. Having the database in memory is the best way to provide the performance planners demand. However, in my opinion HANA’s architecture is not very well suited for planning. Column database architecture is available in other business intelligence tools such as QlikView and Microsoft PowerPivot, but they are not suited for planning.

Planning involves adding new data to the database (as opposed to overwriting data) and the automatic data driven modelling features of this kind of database makes it impractical to offer a simple way to add data. You cannot "discover" new periods, scenarios or products in an ETL process. Multi-dimensional databases, with their predefined dimensions, are better for this kind of feature, because the idea of an “empty cell” for adding new plan data comes so naturally.

How Information Builders gets around the Flash / HTML 5 controversy

As I mentioned in a previous post, the iPad is still a hot topic for business intelligence vendors, and both Oracle and Information Builders have just come out with new iPad support. At its Summit 2011, Information Builders has been demoing the InfoAssist tool with the built-in ability to switch between rendering in Flash and HTML5 on the fly.

Information Builders is not exactly a newcomer to the world of using HTML to render rich content. In fact the Information Builders Active reports were originally rendered in HTML 4 and offered an amazingly rich  user experience completely off line. But what was amazing back in the day is becoming more commonplace, with HTML5 making it much easier to build rich interactive content. This development shows that users and developers no longer have to takes sides in the Flash vs HTML 5 argument.

To me, the moral of the story is that Microsoft, Abode and Apple may well be wasting their time fighting over the rich web development platform. It was always pretty artificial. And it isn't just large vendors like Information Builders who have this kind of multi-platform capability any more. HTML 5 is not just for MP3 bloggers any more, and as cross-platform development specialists such as Appcelerator  and the many Flash / HTML 5 converters (including Adobe Wallaby) gain traction in the market, it is becoming less and less important to worry about the development tool used to get the content delivered.

The trouble with mobile user interfaces

Mobile user interfaces are a major trend in business intelligence. We read a constant stream of announcements by vendors about their support for mobile BI, even if the actual success stories are less common. I commented on business intelligence and the iPad here.

Timo Elliot made some interesting remarks about how mobile BI could have an affect beyond mobile, and this is my reply:

It should be pretty obvious to most people by this time that mobile user interfaces are going to play a major role in the future of computing. That is because the mobile user experience can never be reproduced. The question is how big a role.

But however big the role, this doesn't necessarily mean that graphic user interface design will be completely changed by mobile devices. Mobile interfaces aren't just new, they are also subject to completely different constraints than desktop systems are.

• Pointing with your finger can be seen as a much more natural user interface that using a mouse, but it is also less accurate.
• Simple interfaces fit small screens well, but the give users fewer clues as to what they can do next.

And so on. The user interface guidelines that have been developed for desktop systems still make sense, and as a result my guess is that mobile devices will not change desktop interface designs all that much.

SQL Crescent: A new step for Microsoft SQL

Crescent is the code name the new business intelligence user interface Microsoft intends to release with the Denali release of SQL Server. You may have heard about it, because Microsoft has been releasing excited videos about it, featuring huge crowds of developers going wild over the technology. I have not seen much of the technology itself, but what I have seen seems to borrow heavily on the user interfaces of Tableau and the Google Data Explorer.

The technology is closely related to PowerPivot. It is based on a new hybrid semantic layer that either directly access a data source or uses PowerPivot's Vertipaq column-oriented storage engine. It is part of Microsoft's not yet fully realized plan to provide seamless conversion of Excel-based data marts to a server environment.

To me, the most intriguing thing about SQL Crescent is that Microsoft's SQL development team is dipping its toe into the area of business intelligence front ends. (I don't really include Reporting Services because it is simply a reporting tool, not a specialized BI tool, and it works better with relational data than with multidimensional data.) In the past real analysis has been the domain of the Office group. PerformancePoint was a bit of a halfway house between the groups, but in the end it was folded into SharePoint, where the dashboard component still resides. Currently PowerPivot only has an Excel (or SharePoint Excel Services) user interface. So this seems like a big step.

The BI Survey has started

The BI Survey 10 has started! The world’s oldest and largest survey of users of business intelligence software is now online. Last year’s survey garnered over three thousand responses and could build on a data set stretching back to 2001 to analyze the trends in the market for business intelligence tools.

The BI Survey has always had the goal of shedding light on the real world issues that matter to users. It avoids the latest hype and buzzwords and focuses on costs, goal achievements and business benefits. It helps potential buyers avoid typical pitfalls of buying and implementing business intelligence software. The Survey also provides vendors with no-nonsense information on what buyers really need, not what they say they want.

This year the Survey sharpens its focus on the project. Business intelligence has changed as it has become more accepted, and more, larger vendors have entered the market. The year we pinpoint new issues:

• The size and scope of projects, and how these influence business benefits
• Finding the right product for a given project
• Who implements the project and how much it costs
• Business participation in product selection and implementation

The survey compares the leading products on the market across a number of headline criteria such as performance, scalability and vendor support. Also it is based on actual data instead of just educated guesses, which makes it a great resource for any company evaluating business intelligence products.

If you want to take part in the Survey, click this link.

In-memory databases and mobile business intelligence

I was looking at some results of a benchmark test MicroStrategy did on its product. The benchmark was about supporting large numbers of users. MicroStrategy is pushing into the mobile business intelligence business and it has identified (correctly in my opinion) user scalability as one of the key challenges in this area.

Anyway, the benchmark tests to see how MicroStrategy would do with up to 100K users or so. Impressively, (if not surprisingly, considering they ran the tests themselves) the product did well. They ran the test both in Linux and Windows.

There were two things I found intriguing about the test: The hardware configuration of the application server, (144 GB of RAM), and the fact that they allowed the system four hours to load the data into cache, which is basically an in-memory cube.

In other words the Oracle database that was holding the data probably wasn't working very hard during the actual test. It worked during the four hours of loading, and was probably done for the day. Most of the heavy lifting was going on in MicroStrategy's in-memory database solution.

I think this is what we should expect more and more in the future: large scale database solutions of this type will make use of the falling RAM prices to squeeze better performance out of their solutions. Mobile applications with large numbers of users will need in-memory technology.

Flash and business intelligence

I have heard quite a bit recently about the demise of Adobe Flash. In fact I recently had a discussion with some programmer who were decidedly of the opinion that the future belongs to HTML5.

Apple does not like Flash, and has managed to keep it off the iPhone and iPad. Steve Jobs also claims that Flash is the most common cause for crashes on Macs.

Microsoft is not as strongly opposed to Flash as Apple is, but Silverlight is certainly intended to compete with it, and Microsoft has also thrown in support for HTML5, as as Google.

But I certainly don't see any move by business intelligence companies to move away from Flash in their reporting tools. In fact IBM Cognos released Cognos 10 fairly recently with more support for Flash than in previous versions. I also notice that Information Builders has actually more towards Flash in its Active Reports, away from the original DHTML version. And MicroStrategy doesn't seem likely to move away from its popular Flash dashboards, even if its current interest in mobile business intelligence will means more support for Apple platform.

I think people tend to underestimate the role that momentum plays in the IT business. I can understand the arguments that the markets are moving away from Flash, but I wouldn't expect it to disappear overnight.

Do companies really want transparency and collaboration?

Just finished our annual conference on planning tools. As usual, I talked to a lot of customers and vendors, and one theme came up several times: Some of the great features that vendors have on the roadmaps for their tools and that analyst list high in their discussions of trends for the new year may not be customer requirements at all.

I'm not talking about platform issues like mobile BI. This is about actual features of the tool. In particular, features that shed light on the thought processes that lead to the final planning numbers. Here are some specific remarks:

• Fine grained comments, for example comments on individual numbers, are rarely used.
• Detailed collaboration is often better done off line. Is this a tool issue or a cultural issue?
• Comments from large user groups tend to be too low in quality to be of much use.
• Middle management sometimes opposes processes that encourage transparency, even if they save time and effort.
• In some cases middle managers feel that storing data locally until it has been verified is better for them. So (to get back to a platform issue) Web-based data collection is not as popular as you might expect, a trend I have mentioned before.

Of course these are not universal truths. But it is interesting to hear how often they are mentioned.

Business intelligence and the iPad

I have been observing the wave of BI vendors coming out with applications for the iPad with some interest. QlikTech and MicroStrategy, who are always quick to move with the latest market trends, were among the first. IBM Cognos waited for their new release but also have a client as well. And with SAP having just spent billions on Sybase for its mobile technology, it’s not surprising to see SAP has also jumped into the fray with a new iPad client for Crystal Reports and the BusinessObjects Explorer – though not, as far as I know, using Sybase technology.

But the point here is not to list all the iPad BI clients available – I am sure I have missed a few. What interest me more is the question of how these interfaces are designed. The key to making a mobile reporting interface work is to squeeze interface onto a very small screen. There are lots of tricks for doing this, most of them involving navigations tricks with simple gestures to make traversing the interface feel natural.

But the iPad really does not have that small a screen. In fact, with a 9.7 inch diagonal, it is about the same size as an Asus Eee screen. It does not weigh a lot less either. But despite Eee’s success, business intelligence companies were not falling all over themselves to create a new interface of the Eee.

Furthermore, in my opinion, the interface that Apple gave the iPad is not quite appropriate. The first time I saw it I just thought, “Oh cool, it’s like the biggest iPhone ever”, and so did many other people, I suspect. But frankly, the iPhone interface does not expand all that well. In short, the iPhone interface is a good interface because it is visually attractive and it handles the severe size constraint it is subject to quite well. To make this possible, the users’ choices are intentionally limited, but users do not mind since the device is so small. But the IPad does not really have this constraint, and so the restrictions are more of an inconvenience. Furthermore, the bigger screen gives the user way of interacting with the software, so looking simple becomes more and more cryptic.

So iPad interfaces tend to discard the typical desktop standards that have been accepted over the decades (for better or worse) and replace them with a concept that is finely tuned for a completely different format. But most users – especially users of business tools as opposed to toys – are more interested in the content of the application than in fancy interaction techniques. Business intelligence vendors may be better off just making sure their Web applications work well on Safari running on the IPad than spending time developing iPad specific applications.

Panopticon

I had another look at Panopticon today. I had seen it before, but they have a new version out. Panopticon is probably most noticeable at first glance because of its spectacular data displays. Their marketing material usually features very busy charts of two types – tree maps (heat maps with a drill down) and what Panopticon calls horizon graphs, which only they offer, as far as I know. Horizon graphs are too busy for most applications and only seem to me to be useful for trying to get an overview of a large quantity of data. It sees itself as a competitor of Tableau and Spotfire.

Similarly, Panopticon’s data layer is specialized in supporting large quantities of multivariate data, often in real time, or near real time. Typical applications include real time monitoring of telecom networks and financial trades. Product is notable for its ability to access disparate data sources including column-based data sources and enterprise buses. This makes a bit more like middleware than most BI. The company is particularly active in the financial services industry, where about 80% of its customers are found. Panopticon offers semantics in what it calls a Stream Cube, a multidimensional model with data access and caching functions.

Panopticon’s newest release includes an easier way for end users to design dashboard that are embedded in third party systems. This product, which the company refers to as the Rapid Development Kit(RDK), is a reminder that the product is often used in very technical applications, such as as an embedded dashboard in a custom solution. The RDK is intended to allow business users to deliver content to such technical environments.

Cognos 10

I had look at Cognos 10 today when IBM’s Andrew Popp and Andrew MacNeill dropped by in Würzburg on a whistle-stop tour of Europe. On the whole I was pretty positively impressed.

Cognos says it is moving back towards the business user. That was the main message I picked up from the meeting. I have been noticing this interesting trend with many vendors. About ten years ago there was a big swing away from the business user, and vendors started focusing more and more on the enterprise. The main reason for doing this was that they were chasing the bigger deals.

But vendors often forgot about the end user in their rush to establish themselves as enterprise standards. In fact, the BI Survey 9 found that buying choosing BI software for a project because it is the enterprise standard leads to the worst project results. It is refreshing to see vendors making a real effort to address this issue.

Cognos is focused on making the product easier to get started with. They have identified the issue of jumping between multiple studios as the key issue for end users. Removing the “studio hop” is a big part of the new product. Actually this never seemed to me to be such a big deal. However, I have often seen users confused about it in the field – at least during sales presentations. I wonder if it is also an issue for users with a day’s training.

Be that as it may, the new version of Cognos provides a new way of accessing the system. Now the user starts in a Workspace that provides easy self service features and can add to that by clicking a button automatically attached to objects that brings the user to the appropriate authoring tool. Cognos is also moving away from the recursive grid concept that is the basis of Report Studio. This is probably a good idea as well, because you need quite a bit of practice to get a complicated layout right.

Cognos also introduced disconnected analytics with Report Studio’ ability to create prepackaged reporting applications. These single file packets include a slice of data and one or more interactive formatted reports. They are called Active Reports and are a lot like Information Builder’s Active Reports. They have also developed a set of query optimizations called the Dynamic Query Mode.

Another interesting side remark that IBM made was that they were considering using the name Dashboard for the Workspace. In the end they decided against it, and I think it was a good decision, although it is probably easier to get attention using the totally overhyped term dashboard which seems to be used to mean just about anything.

Visual Mining

I had a look at Visual Mining's Performance Dashboards a few days ago. Visual Mining has a product call NetCharts which comes in different editions for different customer groups. The core version is a set of developer tools that allow Java developers to create HTML 5 or Flash charts. NetCharts Server provides additional features for delivering the charts to end users. The NetCharts Performance Dashboards add an additional layer of user interfaces and data access tools to allow users with relatively few technical skills to create their own dashboards.

Strictly speaking dashboards do not include tabular data. Well anyway, that was the original idea, even if most vendors do not stick to it. and most of the presentation I got of the Performance Dashboards actually revolved around the features of the table object that is provided. The tables offer of sorting and filtering as well as conditional formatting.

Each table is made up of a single hierarchy and one or more columns, either taken directly from the database or calculated on the fly as a variances, including simple time intelligence features such as previous year. The hierarchy has good presentation features - it shows children as indented elements, the parent can be above or below the children, level based formatting is available and so on. Furthermore the end user can add or remove levels and change their order on the fly.

The product also has drill-down feature in the tables and the charts, so users can see the transactions the underlie the aggregate data. Navigating in the finished dashboard is relatively simple, and more emphasis is put on creating the dashboards. The end user can be given the rights to modify the charts freely, even changing chart types.

Chris Webb on the BI Survey

Chris Webb made a few comments on the results for SSAS in The BI Survey 9. I think the most interesting point he brings up is the poverty of front-end tool use, particularly third party tools, for a low-priced database with an open interface. You would think third party vendors would make up a larger market share, but that doesn't seem to be the case.

After all one would expect third party vendors to flock to the tool, especially since it is already available at so many sites. (The latter claim is my speculative inference based on the fact that SSAS appears so seldom in competitive evaluations.) Of course there are plenty of third party vendors on SSAS, but they seem to make a relatively small dent in the market. We do see quite a few third party planning tools using Microsoft as a platform though.

I don't think that this is limited to SSAS however. Use of third party front-ends for other multidimensional databases such as TM1 and Essbase also seems relatively seldom.

Web Business Intelligence is not a key issue

One of the questions we ask in the BI Survey is which criteria people use to choose BI products. Buyers in The BI Survey don't seem to find Web support very important. Specifically relatively few mention it as a reason for selecting the product they elected. In fact, less than one in ten do.

Of course that does not mean that Web based BI tools are no longer used. It just means that as a product differentiator, a Web platform really is not of any great interest to buyers.

This is interesting because Web architecture is a priority areas for business intelligence vendor R&D, and marketing departments often emphasize the Web capabilities of new releases.

John Schwarz was never going to be CEO of SAP

If you are interested in business intelligence or follow the doings of SAP, you probably already know that the former BOBJ CEO John Schwarz has left the company. The temptation is to delve into the details of all the post-takeover events at SAP and try to puzzle out the proximate cause of this move. Then you could do a little Kremlinology, trying to guess what is going on in the minds of various execs.

But I prefer to stick to a few general observations.

• When business intelligence companies get taken over, the senior management almost always leaves after a few years.
• There has been some discussion that Schwarz was shooting for the CEO job, but that hardly seems likely to me. Remember SAP had about ten times the revenues of BOBJ. Also, as SAP has learned the hard way, selling business intelligence software is a very different business than selling ERP.
• The main thing that keeps an executive of the acquired company on board is a clause in the contract. As soon as the clause expires, the executive jumps ship.

That's about it, really.

OK, like Oscar Wilde, I can resist anything but temptation. Look at the press release. Schwarz says "I strongly believe that SAP BusinessObjects will play a vital role in SAP's future success" and that he is "confident about the future direction of the company". It's hardly a ringing endorsement of SAP's ERP business, is it?

Mixing Excel versions

The last partner presentation I saw at the the Microstrategy was given by Microsoft's Donald Farmer on the subject of PowerPivot. The presentation didn’t seem terribly relevant to Microstrategy, but it was a solid gee-whiz run-through of PowerPivot's features accompanied by a distracting post-modern slide deck featuring grainy black-and-white photos and classic ads. Donald also mentioned one intriguing tidbit that surprisingly no one really seemed to pick up on.

Afterwards I had dinner with Donald and Neil Raden in an unobjectionable casino restaurant. Neil is a devoted dad and regaled us the entire evening with amusing with anecdotes about his family. And as usual on such occasions we spent a lot of time gossiping and reminiscing. It was good fun.

The tidbit was that Excel 2010 will be able to run on the same machine as Excel 2007. Am I the only one who missed this? I’ve been discussing Microsoft’s new Office version and how it fits Microsoft’s BI strategy with just about anyone who will listen for months and I don’t think I’ve heard anyone talk about this.

Microsoft’s BI strategy has always been platform oriented. By this I mean that Microsoft is really interested in pushing its platform and the BI tools have always been an appendix to this goal. When it comes to Excel, Microsoft’s main challenge is to get users to upgrade and BI features are offered as a gambit to drive upgrades.

The problem here is that Microsoft’s argument doesn’t quite add up. Customers are supposed to use Microsoft’s BI tools because they have them anyway, but they are supposed to upgrade to the newest Office version because then they get the BI tools. I have heard this called synergy, but it isn’t – it is circular logic.

Most large companies will reluctant to take advantage of the BI features built into Office 2010 if it requires upgrading the Excel version. Microsoft often competes on price in the BI space, but there are simply too few BI users as a percentage of total Office users to justify a costly Office upgrade to get free BI features.

But all this assumes the company will only run one version of Excel. But if I understood Donald Farmer correctly, you can now run two versions of Excel on the same machine, meaning Excel 2010 can be positioned as a “normal” BI tool that runs alongside Excel 2007. If Microsoft follows this strategy in the field it could bring a lot of clarity into its BI strategy.

A better word for marketing is demarketization

The word market means different things to different people. Adam Smith's idea was that markets are about competition, and competition auomatically keeps tabs on vendors and consumers. So actually markets are about competition.

However, if you are in the marketing business, market is just another word for opportunity, and opportunities tend to arise in places where there is little or no competition.

Check out famed internet marketeer Seth Godin's blog entry on Groucho Marx.

Seth states "It's extremely difficult to repair the market." What is he actually saying?

He's saying get out of situations where you have to compete directly. So for him, a market is a place where there is no competition, and when competition comes, it's time to get out.

That is the point to vendor lock-in. When you lock in your customer, you lock out the competition. And that is why software vendors love it so much. It demarketizes the customer relationship.

Lock-in

Switching costs are the costs incurred from changing from one brand to another. Tangible switching costs are things like laying a new telephone line. Intangible costs are things like the cost of switching to a new telephone number.

Vendor lock-in is when a customer prefers a different product than the one he uses, but not enough to pay the switching costs. Many vendors of high tech products work to increase their own lock-in and decrease the lock-in of their competitors. In some cases, for example computer hardware, switching costs tend to decrease with time.

Brand specific training for users of computer software is a lock-in that tends to increase with time. Users do not like changing from software they are familiar with, and the longer they use the software, and more proficient they become, the less willing they are to change. With enterprise software, the cost and risk of switching from one product to another is a powerful force maintaining the status quo.

Lock-in is the key issue in software marketing. The usual marketing ideas that apply to selling high margin consumer goods like fresh fish simply do not apply. In fact the normal rules our supply and demand are so skewed in the IT market that they are almost impossible to recognize.

Competing commodity software packages immediately become freeware. The reason is that the high initial cost of creating software combined with the low marginal costs per customer encourages vendors to increase market share by price cutting. If there is no brake, the market ends up spiralling down to freeware. If a new standard is introduced into the market, and it succeeds in becoming a real standard, your package may become a commodity and you may find yourself having to give it away.

But by locking customers into a solution, software vendors can reap sizeable profits even if their products are more or less the same as the competition. The reason is that the switching cost, and not the license fees for the software itself –- which tend to be a small part of the total cost of ownership -– is what is keeping the customer paying.