Carbonite Class Action Raises The Question – Do Customers or Shareholders Matter More?

Yesterday was the day that shareholders in Carbonite had to join in a class action against the company.

The issues are summarised in the action as follows:

“Carbonite's Server Backup VM Edition product suffered from deep quality flaws and poor technology. The Company received many negative reviews of the product from its customers. The product was so flawed that it acted as a "disruptive" factor amongst Carbonite's sales force, constraining salespeople from closing several large deals in fiscal year 2019. Based on these facts, the Company's public statements were false and materially misleading throughout the class period. When the market learned the truth about Carbonite, investors suffered damages.”

The action raises the question – Why does this happen?
In short, company execs are driven by numbers and revenue, the sales-driven culture means if a product comes to market and it’s not delivering – simply pressure sales to keep selling and pressure R&D to fix the issues quickly in the field.
If you ask people that work for a highly sales-driven tech company, many will tell you this is a common experience. Whether you like the approach or not, most times it works. Version releases come to market sometime with surprisingly gaping holes. These issues cause problems, but they get fixed over a couple of months and customers eventually calm down.

Where the sales voices on the executive committee is stronger than the the technical voice, the sales and marketing pressure to release on time and not slip on product delivery dates can often override a weaker R&D voice asking for more time. The big issues come when the R&D problems are bigger than either the R&D people realise for themselves, or that the commercial people refuse or do not understand the gravity of the technical issues.

We are NOT suggesting this happened at Carbonite, we have no insight to the specifics of that case whatsoever, instead we are suggesting this cycle of events is not uncommon across sales-driven tech companies.

The bigger question this raises is WHY do the execs feel so pressured to push out products that may have issues. Or if issues are found after launch, why do execs refuse to admit the problems?

Ironically, one reason is shareholder pressure. Shareholders don’t want excuses, they want results, revenue growth and eventually profits. So it’s a bit of a catch 22, and raises the questions whether shareholders need to understand the responsibility they themselves have in this conundrum.

Perhaps the biggest question of all should be – What about the customer?
The sad truth is that the customer can come somewhere down the stack of priorities for the executives when issues like this occur. Customers become part of a damage limitation exercise. Customer Satisfaction may get demoted on the priority list under things like executive job protection and shareholder reaction.

That’s not to say people in these companies don’t care about their customers. Many people in the field that have to deal with the fall out from product issues, care passionately about the customers they serve. Often time it is the case that the Executives care too, they are just juggling with a bunch of high pressure balls.

So best advice, if you are going to be an early adopter of any major version release, take considered steps, don’t jump both feet in straight away, take a phased implementation approach, if you hit problems, delay the upgrade or migration until you feel sure the product will do what it says on the tin.

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