I have decided I need to explain more clearly why I am so skeptical of the confident claims made for the “health” of Delphi based on the sales performance announced in the press release by Embarcadero earlier this year. Not that I don’t wish it were true, only that I fear that misplaced satisfaction can lead to complacency that I think could be costly.
Rest assured, I shall respond to David I’s invitation to contribute to the list of things that the new Product Manager for Delphi might focus on soon. In the meantime I shall elevate his invitation to the status of a “New Post”, so as to elicit responses from others.
But first, that press release.
The Embarcadero press release of Feb 2012 states that worldwide sales “grew 54% over sales of the previous version” and that this followed 3 years of 15% year-over-year growth, but crucially – if we are to draw any meaningful conclusions from these numbers – it doesn’t say how or on what those percentages are calculated.
What “growth” do these percentage sales increases represent ?
Is it based on comparing sales of new user licenses (predominantly Starter? Pro? Enterprise?) ? Or was it Upgrades sales ? Sales including a purchase of SA ? What ?
At an even more fundamental level, it isn’t even stated whether it is a percentage increase in sales volumes (numbers of customers/licenses) or sales value (raw $’s). Given that there was a big push to move people on to SA and that SA agreements themselves provide a built-in annual increase of up to 5%, if the increase was based on sales value and SA renewals were included then how much is real growth and how much was built-in, mandated “growth” under the terms of SA agreements ?
To add to the muddle, the 54% cited is for the “RAD family .. including RAD Studio, Delphi and C++ Builder”, whilst the 15% figures relate only to “RAD Studio and Delphi”.
As the saying goes (and the title of this post): “Lies damned lies and statistics”.
I do not mean to imply that Embarcadero are lying with these numbers. I don’t doubt for a minute that Embarcadero would have been sure to be entirely accurate with the 54% and 15% figures, but without the underlying numbers or at least a concrete explanation for the derivation of the percentages quoted, it is simply impossible to say what those numbers actually mean.
The one absolute number that does get quoted time and time again, that of “3 million Delphi/C++ Builder users“.
I seem to recall “3 million” being a figure that was widely cited at the time that Embarcadero purchased CodeGear, over 4 years ago. It stuck in my memory because a joke that went around the Delphi users here was that at the bargain price of $30 million, each user could have chipped in just $10 and the ‘community’ could have bought it ourselves!
And I wasn’t the only one. Bret Graffin had heard the same figure at around that time also, as he mentioned in the comments to the blog of a one Marco Cantu (you’ll need to scroll down to the post addressed to “King of All Access”).
Currently Embarcadero do cite 3 million, on their AppWave store marketing/PR landing page. But in this case the 3 millions account not just for Delphi, C++ Builder or any other combination of “RAD Family” products, but ALL Embarcadero Technologies customers, including – one must presume – those customers of their wide variety of database tools.
In any event, taking 3 million at face value, 4 years after the acquisition, after a year of 54% growth on top of 2 years (3 years in total, only 2 under Embarcadero as of Feb 2012) of 15% year-over-year growth and still the number of Delphi users is the same “3 million” ?
Something isn’t adding up if everything really is as rosy as some people have concluded, based on the “official numbers”.
And have people already forgotten that 2008 was also the year that saw CodeGear close a deal with the Russian universities for 1 million licenses ?
This 1 million license deal would account for the 3 million total in 2008, since when added to the 1.75 million would yield a total user number of 2.75 million. Add a slightly more generous estimate for unlicensed users and you can easily round this up to 3 million – what’s 250,000 users among friends, eh ? 😉 Though how much allowance was made for the fact that some of those unlicensed users might now be licensed as a result of the Russian deal ?
Maybe we can make sense of things if we work the numbers backwards, from the information in the press release ?
We are told that in 2011, sales grew 54% and that this followed 3 previous years (2010, 2009, 2008) of 15% growth. We also know that in 2008 1 million licenses were added as the result of the deal in Russia. This is an immediate problem for the numbers because 1 million is neither 15% of 1.75 million nor can it possibly represent 15% of the sales in 2007. We’ll just have to ignore this for the time being, yet we do also know that in 2007 the number of Delphi licenses claimed was 1.75 million. So let’s plug those numbers in to a rudimentary calculator:
2008 = + 15% + 1 million
2009 = + 15%
2010 = + 15%
2011 = + 54%
If you do the math, the total you get is 6.1 million. Clearly this is out of whack with the assertion that there are currently 3 million users.
So let’s take the 1 million license boost in 2008 out completely. But we still get 4.1 million.
Ok, so let’s now assume that the “1” in the “1.75” in 2007 already accounted for/anticipated the 1 million license deal in 2008. This means we start with just 0.75 million, but we still end up with 3.8 million.
If we hack and slash at the numbers, we still cannot get the claimed “growth” to tally with the asserted number of users.
I am being facetious, but this appears to be the interpretation of “growth” that some people are using, despite the fact that the numbers don’t actually fit, however hard you try (so presumably, they simply haven’t tried).
Because of course the percentages in the press release are increases in sales, not increases in total licenses. This makes things a sight more complicated because now you really do need to be able to know whether it is sales volumes or sales values that are the basis for the quoted increases.
Furthermore, without a breakdown of new user licenses vs SA renewals or upgrades, the percentages are quite simply meaningless. More people may be upgrading and renewing SA when compared to previous years, yet the number of overall users might still be in decline.
I don’t mean to say that this is the case, only that the numbers as presented in this press release – as accurate as they may be – do not support any meaningful conclusions, and certainly not the ones that some people are so determined to draw.
Let’s Take This Debate Down the Pub
My response to David I’s assurance that the numbers in the press release were indeed accurate was to say that “percentages can’t be taken to the bank” – a saying that I first became familiar with when I ran a pub for almost two years in the UK (a great way to spend money, incidentally).
In the UK, spirits have to be sold – by law – in measures of either 25ml or 35ml (so a “double” can be either 50ml or 70ml, depending on where you buy it, for example).
As a retailer you have to choose – one or the other. This affects your prices obviously, but more relevantly here, also affects your margin.
If you increase your serving from 25ml to 35ml, then you increase the volume per serve by 40%, but you cannot increase the price by the same amount – nobody would stand those prices. So you have to take a lower margin.
But that doesn’t matter – you are still selling “1 drink” and although the margin is lower as a percentage cost of sale, the actual bankable money in the till is higher. And you still sell the same number of drinks, because people don’t buy alcohol by volume (“No more for me thanks, I’ve had my 70 ml of whisky for the night”) but by the serving (“Yeah, go on, I’ll have another one”).
The point being, that percentages rarely tell the whole story.
The real question is, what are the absolute numbers ? What was the baseline figure for Delphi 2010 sales over which 2011 represented a 54% increase ? Or, getting straight to the point, how many active (in use) licenses are there ? Really ?
As I said before, with the need to activate licenses these days, this should be an easy number to determine.
Whether you would choose to talk about those numbers of course – that’s a different matter.