This is one of a series of posts on the high cost of buying enterprise applications and the high cost of selling the products. This high cost, I’ve been arguing, is just plain bad for both sides and almost certainly unsustainable. So the question for the analyst is, “What can be done about it?”

In the background, I’ve had a lot of discussion with industry pundits and the Twitterati: Vinnie Mirchandani, of course, and Jason Busch and @dahowlett and Brian Sommer and Dennis Moore and many others who don’t regularly comment over the airwaves. What accounts for the high cost, I’ve been asking? Two answers seem to emerge.

1. Too many cooks.

2. Too little trust.

If you’ve ever been involved in buying applications, you’ve seen the first one happen over and over again. Too many people get involved with the decision, each with their own agendas, each more or less connected to one of the contenders, and getting all these parties to agree requires too much head-banging. It’s Congress trying to pass health care, writ small, and it’s just as pathetic.

The lack of trust. Well, I get why people don’t trust, and I get why they erect structures that are supposed to control the vendor. But in my experience, it’s always been a losing game. Buyers are nowhere near as devious, oops, I mean sophisticated, as sellers–how could they be, the sellers do it for a living? So if you go into a deal, it’s natural to feel skittish, but giving in to the feeling doesn’t really protect you and does slow you down.

So what’s to be done? In the long run, you can’t do much about either problem without cooperation from the other side. If you’re going to have lots of cooks, the cost of sales for the vendor is just plain going to be astronomical, and the cost of buying will rise accordingly. If the vendor behaves in what has become the normal fashion, alas, defensive (and expensive) buying will be only too appropriate.

Granting that, you have to start somewhere, and here are some suggestions for the buyer, suggestions that should save money. All of these will really help, even though the second sounds completely ridiculous.

1. Limit the scope of what you’re buying as much as possible. Look only at what you clearly need; prefer things that you’ll use immediately; go for immediate results; and don’t buy anything else. You can always buy the rest later. (This reduces the number of cooks.)

2. Use a tape recorder and a camcorder. Keep track of what the vendor says, in full, precisely. Look the transcripts over. If you have questions or don’t understand, follow up. In the long run, it saves a lot of time. (This can help you to get more trust–kind of trust, but verify.)

3. Prototype, prototype, prototype. Get a small team to set it up and try it out, rather than assembling a large team to review demos that were set up by the vendor. If you have to pay the vendor to help you with the prototype, do it. You’ll save in the long run. (This, too, reduces the number of cooks.)

Enough from me. Suggestions from the readership are welcome.

It stands to reason, doesn’t it. The more thorough and rational the buying process for enterprise applications, the better the outcome. For sure. Right?

Well, the other day, Dennis Moore, aka @dbmoore, a well-known figure in the industry, posted a query on Twitter asking for data that would show this is true. The more thorough the buying process, the more effective the implementation has to be true, doesn’t it. But no, the guy wants data. “Not anecdotes,” he said later, “but data.”

He isn’t going to get any. There are three reasons for this. First, there isn’t any reliable data of any kind on whether implementations were successful, at least none that I’ve seen in a career of nearly two decades. Second, most effort expended on pre-purchase analysis of software is misdirected, adding little to the quality or accuracy of the decision. And third, if you work backwards from failed implementations and identify the causes of the failures, it is very rare that the cause is the kind of thing that could have or should have been caught by a more thorough analysis.

The fact that there is little reliable data on whether an enterprise application product works is, of course, a scandal, but the fact remains and will continue to remain just so long as enterprise application companies want everybody to believe that the odds of success ar high and customers are embarrassed to admit failure.

I have been involved in at least two attempts by large, reputable companies to get a good analysis of what value, if any, has been gained after an enterprise app was implemented. The first interviewed only project managers and determined that the project managers found many, many soft benefits from the implementation. The second, a far larger effort, was eventually abandoned.

But let’s say that we had some rudimentary measure, like number of seats being actively used versus seats planned to be used two years after the initial projected go-live date. Would it show that thorough investigation really helps?

I don’t think so, and here’s why. The question of which software application to buy and/or whether one should buy one at all is usually a very simple question, one with a relatively clear right answer, at least to an objective observer. But it is rarely, if ever, treated as a simple question. People wrongly worry about a lot of irrelevant things; they are (usually) distracted by the salespeople, who naturally want the purchasing decision to be based on criteria most favorable to them, and because there’s a lot of risk (A LOT), people tend to create lengthy, rigorous, formal processes for getting to a decision, which do very, very little to improve the accuracy of the final decision.

Honestly, I can usually tell in an hour’s phone conversation what a company ought to do, and I often check back later — sorry Dennis, more anecdotal evidence — and I’d say I’m right at least 2/3 of the time, maybe more. And because of the way my business model works, I don’t even charge for these conversations.

What do you need to look at? Well, it’s a complex question, don’t get me wrong. But because the number of providers is limited, the capabilities are limited, and the likelihood of failure pretty high, there are usually only a few things that actually matter. And when there are only a few things, it shouldn’t take you that much time to figure them out.

Give a call, any time, if you want to test this out.

Those of us who have been in the business for a while feel it’s in the doldrums: there’s not much innovation, and every year, the apps get older.

Where will innovation come from? Well, the thing about innovation is that it has to change something that we think is fundamental and immutable: it has to be on a CD-ROM, it has to be typed from a phone keypad, etc. So you can’t look for innovation in the same old stuff.

That said, here are four areas that I think are wide open, wide open, wide, wide, wide open. An enterprise application (or an enterprise application company) can get an edge if they can do one of the following things:

Reduce the cost of sales by a factor of 10.

Reduce the risk of ownership by a factor of 2.

Increase the effectiveness of the application by a factor of 5. What’s a measure of effectiveness; well, let’s say it’s the number of users who use it seamlessly and easily.

Increase the speed of the application (usually by using a special-purpose database) by a factor of 50.

At least two of these aren’t impossible, because we’ve seen them happen.

Salesforce reduced the cost of sales for SMB customers by selling an enterprise-level application that you could test for free and buy with a credit card.

Workday and Qlikview both transformed applications in their area using special-purpose databases, and Hasso wants SAP to do the same.

And at least one large company, SAP, is trying for innovation in the third. Fumbling and clumsy as their effort to improve maintenance has been, the idea is to reduce the risk of owning SAP by making maintenance practices considerably more effective.

As for reduced risk of ownership or increased effectiveness (actually, maybe you’ve seen Qlikview do this), we’re still waiting.

Ideas on who’s done this or how it can be done?

In many previous posts, I have complained, bitterly, about the sales tactics that every enterprise application vendor uses, mostly to defend aging, poorly designed products. It’s one thing to put lipstick on the pig, I’ve essentially said, but it’s outrageous to charge admission, just to see the pig.

This is, of course, what happens in most sales situations. Companies big and small buy the software through a highly-paid salesperson, part psychologist and part snake-oil salesman, who listens to you, discusses your pain with you, and then arranges a long, long process that you and your team will go through: functionality requirements and demos and business cases and who knows what all.

Let me fill you in on a little secret. It’s mostly a waste of time. And money. Not just your time and your money. But also the software company’s. You are both driving up the cost of software, simply by accepting and perpetuating a system where rigmarole is the rule of the day.

In a time of economic growth, maybe both companies could afford it. So what if you use up a lot of IT hours compiling functionality lists and sleeping through demos. (Who could stay awake in them?) The IT guys like it well enough, and they like to be asked for input. So what if the software company wastes a lot of, er, resources flying in executives or taking the team out after all their hard work to a place where attractive women perform. (Happens, believe me.)

In a time of economic frailty and, not coincidentally, a time of doubt about the value and merits of enterprise software, no one can afford it any more. Not you, who has better things to do with your resources. Not the software companies, whose sales resources are being spread thin by companies that are insisting that the salesperson do more and more for them.

Wouldn’t it be better to use some of the resources squandered on these endless sales cycles for something else a little more worthwhile? LIke getting both parties to the right solution faster?

A product manager at an up-and-coming software company was talking about his experiences at Siebel, where he cut his teeth in that job.

“At Siebel, we would never, ever, ever let a customer take a look at the software. No way. Not ever.”

At his new company, by contrast, they give out free personal copies.

Now, which would you pay more for, software that you know works, because you tried it, or software that you can’t prise out of the company’s hands unless you fork over, big time?

Not sure what the answer is? Well, what if I told you that the success rate for the second kind of software was roughly 50%. So 50% of the time, forking over is just like sending money to that friendly Nigerian guy who seems to need some help.

Still not sure? Well, what if I told you that the software company made you sign a non-disclosure agreement about the software that you had just forked over for, which said, essentially, that no matter what you find after you forked over, you can’t tell anybody about it. Wouldn’t you think that maybe, just maybe, that was eau de rat that you were sniffing?

Well, if after all of those warning signals, you went ahead and bought, don’t think I’d call you a fool. You’d only be doing exactly what everybody who ever bought from Siebel did. And nobody would ever call those people fools.

Would they?

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