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The 1992 Soft*Letter leadership scorecard.

"If a company can win the hearts and minds of the most important ten percent [of the people in an industry], its market position is assured."

So who's winning the hearts and minds of the software world's inner circle these days? If industry reputations do contribute to leadership in the marketplace (as publicist Regis McKenna claims), that's a question worth examining--and also a tough one to answer objectively.

To get a better sense of who the real industry leaders are, we recently invited Soft*letter subscribers--who are arguably the software world's most knowledgeable company-watchers--to rate the reputation and leadership qualities of the ten largest independent personal computer software companies (based on 1992 Soft*letter 100 rankings). By the end of November, we'd received more than 200 ballots ranking these ten firms on four criteria-- senior management, technology and products, customer service, and marketing strategy.

When we tallied the scores (giving equal weight to each category), we ended up with the following ranking of the industry's "most respected" companies:
#1 Microsoft 4.16 (out of 5.0)
#2 Borland 4.10
#3 Novell 4.02
#4 WordPerfect 3.87
#5 Adobe 3.78
#6 Autodesk 3.67
#7 Symantec 3.55
#8 Aldus 3.46
#9 Lotus 3.30
#10 Software Publishing 2.94


The three companies that our subscribers picked as most influential--Microsoft, Borland, and Novell--are hardly dark horse candidates; all three are among the industry's largest and most successful enterprises. Yet it's worth noting that these firms scored highly despite some significant negatives. Microsoft is currently under investigation by the FTC for predatory competitive tactics, Borland has suffered embarrassing delays this year in product development, and Novell is far less visible in industry circles than many of the other companies in our list.

Part of the reason these companies are so respected, we suspect, is that they are seen as solid performers in all of our scoring categories (except for Microsoft, whose customer service quality was rated the worst of all ten). If there's a message here, it's that the software industry respects successful companies, not just great products or charismatic chief executives.

In fact, when we look at the companies that excel in each of our four categories--senior management, technology and products, customer service, and marketing strategy--it's interesting to see how often the same names show up in the top rankings:

* Senior management: The three leaders in the management category share some obvious similarities. Most importantly, each is led by an articulate, entrepreneurial chief executive--Bill Gates at Microsoft, Ray Noorda at Novell, and Philippe Kahn at Borland.
#1 Microsoft 4.56
#2 Novell 4.31
#3 Borland 3.97
Category Average 3.67


* Technology and products: Here, the winners are companies that have explicitly positioned themselves as technology-driven, or that develop products in leading-edge markets:
#1 Borland 4.44
#2 Adobe 4.39
#3 Microsoft/Novell (tie) 4.18
Category Average 3.89


* Customer service: With the exception of WordPerfect, this isn't a category where companies are widely differentiated; in fact, nine companies earned scores that fell within [+ or -]10% of the category average:
#1 WordPerfect 4.53
#2 Borland 3.86
#3 Aldus 3.60
Category average 3.58


* Marketing strategy: Again, Microsoft--which has one of the industry's clearest, most unambiguous marketing messages--topped the rankings by a wide margin:
#1 Microsoft 4.63
#2 Novell 4.14
#3 Borland 4.11
Category average 3.59


One point that our rankings underscore is how difficult it can be to alter a corporate reputation. Several companies that received poor marks in our scorecard rankings have significantly cleaned up their act during the last year or two. But even our subscribers--who tend to read the trade press, attend conferences, and work directly with these Scorecard companies--aren't yet aware that turnarounds have taken place. (To see how much change occurs in these rankings over time, incidentally, we plan to make the Soft*letter Leadership Scorecard an annual event.)

It's also interesting to contrast our rankings with more volatile indicators--in particular, Wall Street stock prices, which reflect daily shifts in opinion about a company's performance. Thus, in the following Scorecard summaries, we've included each company's price/earnings ratio as of November 30.
#1 MICROSOFT Composite average 4.16
Senior management 4.56 Technology & products 4.18
Customer service 3.27 Marketing strategy 4.63
Price/earnings ratio 36


By virtue of its enormous revenues, Microsoft wields tremendous economic influence in the software world. But the surprise here is that Microsoft--despite persistent and well-publicized complaints from its rivals and business partners--still commands tremendous respect as an industry role model (except in customer service). That industry respect, we believe, probably gives Microsoft even greater leverage to define technology directions and set marketplace expectations than its economic power alone would suggest.

In a sense, Microsoft suffers from a kind of Jekyll & Hyde syndrome. Most of the time, it's a company that acts brilliantly, delivers innovative products, and sets an example of great management. But Microsoft is also a company whose behavior can be petty and abusive. Judging from our Scorecard rankings, the "good" Microsoft is what impresses industry insiders the most; the ill-behaved side is largely ignored.
#2 BORLAND INTERNATIONAL Composite average 4.10
Senior management 3.97 Technology & products 4.44
Customer service 3.86 Marketing strategy 4.11
Price/earnings ratio n/a


Borland is currently about a sixth of Microsoft's size, yet its Scorecard ranking--and presumably Borland's industry leadership role--falls just short of Microsoft's #1 position. Moreover, Borland's technology & products rank is the industry's highest, which gives the company an important edge as the market moves toward new generations of database, spreadsheet, and language products.

What's behind Borland's strong showing here? Part of the answer is the company's across-the-board strengths: Borland was a pioneer in installed base marketing, it operates an award-winning tech support organization, and it pulled off the industry's single largest acquisition with surprisingly little disruption. But the real answer, we suspect, is that Philippe Kahn himself is widely perceived as "a product guy"--a role that most industry insiders have always respected.
#3 NOVELL Composite average 4.02
Senior management 4.31 Technology & products 4.18
Customer service 3.44 Marketing strategy 4.14
Price/earnings ratio 41


Novell's high Scorecard ranking is a bit unexpected, because the company has always paid more attention to end users than to the mainstream PC software industry. Moreover, the company's second-tier management is notoriously thin, and its marketing efforts tend to focus on VARs rather than high-visibility retail channels. Where the company does earn a good deal of respect, probably, is in its well-managed relationships with other software and hardware companies. In an industry where grumbling over contracts is almost universal, Novell's partnerships are a model of civilized behavior.
#4 WORDPERFECT Composite average 3.87
Senior management 3.70 Technology & products 3.63
Customer service 4.53 Marketing strategy 3.62
Price/earnings ratio n/a


The abrupt departure of executive vice president Pete Peterson in [DATE] left WordPerfect without a high-level spokesperson; founders Alan Ashton and Bruce Bastian have rarely played much of public role in the industry. That lack of visibility seems to be reflected in WordPerfect's overall average scores--except in the customer service category, the company's traditional strength.
#5 ADOBE Composite average 3.78
Senior management 3.83 Technology & products 4.39
Customer service 3.44 Marketing strategy 3.45
Price/earnings ratio 16


Adobe scores highly in two areas--senior management (the company's chief executive, John Warnock, is a feisty and often passionate Adobe advocate) and technology (Adobe is recognized as the standard-bearer in printing and font technology).
#6 AUTODESK Composite average 3.67
Senior management 3.63 Technology & products 4.10
Customer service 3.53 Marketing strategy 3.42
Price/earnings ratio 28


Even though Autodesk is one of the two or three biggest software companies in the Bay Area (which should provide some visibility), the company has always paid more attention to its engineering and architectural customers than to the PC industry. Perhaps as a result, the company's Scorecard standings fall below average in all categories except technology & products, where Autodesk gets high marks for its leadership in the CAD market.
#7 SYMANTEC Composite average 3.55
Senior management 3.42 Technology & products 3.70
Customer service 3.56 Marketing strategy 3.52
Price/earnings ratio 44


Clearly, Symantec no longer looks like the red-hot company it once was. Besides an awkward legal battle with Borland, Symantec now has a product line that is so broad that the company often seems unfocused (despite its success in the utilities segment). Our sense is that the industry has suspended judgment on Symantec, at least for the moment. If chairman Gordon Eubanks can recapture his role as a razzle-dazzle leader, Symantec could be next year's most dramatic turnaround story.
#8 ALDUS Composite average 3.46
Senior management 3.31 Technology & products 3.80
Customer service 3.60 Marketing strategy 3.11
Price/earnings ratio 26


Another high-flyer that now seems lost in the woods, Aldus has had a difficult time expanding its franchise from desktop publishing to a wider market. The company has also lost many of its key managers, laid off 11% of its workforce in August, and had the bottom drop out of its stock price.
#9 LOTUS DEVELOPMENT CORP. Composite average 3.30
Senior management 3.12 Technology & products 3.55
Customer service 3.30 Marketing strategy 3.21
Price/earnings ratio 12


More bad news for Lotus: The company ranks near the bottom in all of the "leadership" criteria we surveyed, and there's little doubt this lack of respect leaves Lotus unusually vulnerable to marketing and product challenges from its competitors. (To make matters worse, Wall Street also doesn't much like the company; the price/earnings ratio of Lotus's stock is the lowest of any on our chart.) We suspect that Lotus's dismal showing here reflects more than just the company's chronic indecisiveness about product development and marketing; there's also a long history of industry hostility that Lotus may have a lot of trouble overcoming.
#10 SOFTWARE PUBLISHING CORP. Composite average 2.94
Senior management 2.82 Technology & products 2.96
Customer service 3.28 Marketing strategy 2.70
Price/earnings ratio 863


Well, somebody had to hold down last place in our rankings, and Software Publishing Corp.--a company that's hasn't seen much good news in the last few years--was the most likely candidate. When we invited the chief executives of our ten Scorecard companies to comment on their rankings, SPC chairman Fred Gibbons responded by pointing out that his company has won a long list of technical excellence awards, as well as a recent citation for customer support. "We're defining the role of the desktop in a client/server world [and] inventing another category, just as we did with presentation graphics," Gibbons said. "Evangelizing visions takes time, but make no mistake, while we certainly have our work cut out for us, we are dedicated with all our resources to making our game plan victorious. We are stronger than this survey rates us. Watch us closely . . . and score us accordingly next year." "leadership" criteria we surveyed, and there's little doubt this lack of respect leaves Lotus unusually vulnerable to marketing and product challenges from its competitors. (To make matters worse, Wall Street also doesn't much like the company; the price/earnings ratio of Lotus's stock is the lowest of any on our chart.) We suspect that Lotus's dismal showing here reflects more than just the company's chronic indecisiveness about product development and marketing; there's also a long history of industry hostility that Lotus may have a lot of trouble overcoming.
#10 SOFTWARE PUBLISHING CORP. Composite Average 2.94
Senior management 2.82 Technology & products 2.96
Customer service 3.28 Marketing strategy 2.70
Price/earnings ratio 863


Well, somebody had to hold down last place in our rankings, and Software Publishing Corp.--a company that's hasn't seen much good news in the last few years--was the most likely candidate. When we invited the chief executives of our ten Scorecard companies to comment on their rankings, SPC chairman Fred Gibbons responded by pointing out that his company has won a long list of technical excellence awards, as well as a recent citation for customer support. "We're defining the role of the desktop in a client/server world [and] inventing another category, just as we did with presentation graphics," Gibbons said. "Evangelizing visions takes time, but make no mistake, while we certainly have our work cut out for us, we are dedicated with all our resources to making our game plan victorious. We are stronger than this survey rates us. Watch us closely... and score us accordingly next year."
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Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:ranking of top 10 software firms
Publication:Soft-Letter
Date:Dec 8, 1992
Words:2123
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