Ben Worthen of the WSJ uses IBM’s acquisition of Cognos to make the point that midsize tech companies are going extinct. The end result will definitely be a reduction in vendor choice.
While conventional wisdom says less choice is bad, this is not always the case. Last week at school we learned about a “famous” experiment where a major US grocery chain reduced 30% of products in a section of the store. When shoppers were questioned, 80% replied that there was no change, 16% replied that there was more choice and only 4% realized that there was less choice.
We also learned about a “famous” jam experiment. A taste-testing table was set up in a US retailer with two types of jam (trial A). Another table was set up at a later date with 5 different types of jam including the original two (trial B). The researchers found that 40% of shoppers sampled the jam in trial A versus 60% in trial B. However, 30% of shoppers purchased one of the jams in trial A versus 3% in trial B.
These experiments show the effect choice set size on people’s decisions. We like to say that we want choice. However, when the choices are narrowed, we feel that “only the best items are being offered to me”. Furthermore, because of loss aversion, too much choice leads us to wonder if we are making the right choice. This self questioning often leads to making no choice versus regretting a poor choice.
But consider the overchoice problem for a typical CIO today. His/her choices are 5-10x more than 5 years ago because of the range of OSS offerings. Yet, the usage of, and revenue from, OSS is lower than we’d like to see. Could OSS overchoice be directing CIOs to make the safe bet and buy from an enterprise software vendor? In a few years there will only be a handful of enterprise vendors around. Narrowing the enterprise vendor choice set could make it even harder for the large # of OSS choices in a product category to win against enterprise software vendors.
Grant it, jam is different than software. Jam is spreadable.