Enough is enough: It's time to change the way software companies sell their products, says Laurie Orlov, an analyst at IT market research company Forrester Research. Questionable deals and murky accounting practices at a number of enterprise software companies have spurred a flurry of censure in recent months, says Orlov, and resulted in:
Audits and US Securities and Exchange Commission (SEC) investigations
Asset management software supplier Peregrine Systems is under fire from the SEC for recognising licence sales to resellers – licences that were never purchased by customers. Peregrine executives have to date fired two auditors – Andersen and KPMG – and in May 2002, CEO Steve Gardner and chief financial officer Matt Gless were forced to stand down. Peregrine's management team has acknowledged that their accounts may have been overstated by as much as $100 million.
"The most flagrant examples of sales bravado", according to Orlov, have been provided by former executives of storage management software company Legato Systems, now-bankrupt customer interaction software company Quintus, and application development specialist Unify. Charges were filed against the executives in May 2002, and include : loaning customers the money to purchase software with no chance of being repaid (Unify); forging million-dollar contracts (Quintus); and fraudulently booking sales that had not been finalised (Legato).
According to Orlov, several major Oracle wins in North America have run into trouble as a result of alleged overselling by the company's sales force. "The state of California back-pedaled on its recent $95 million agreement with Oracle when an audit revealed that it had purchased more database licences than it had employees," she says. The city of Toronto is also trying to terminate a majo