Spend Less Money on the Buying
July 22, 2009
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.
Effective Buying Strategies for Enterprise Applications
July 19, 2009
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.
Innovation in Enterprise Applications?
July 10, 2009
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?
Lower the Cost of Sales!
July 3, 2009
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?
Don’t Buy Unless You Try
July 2, 2009
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?
Don’t Pay Maintenance–and Use the Money For?
June 29, 2009
Top 10 things to use the money for, once you stop paying maintenance.
10. Reducing the backlog at internal support. This doesn’t take much money, of course, since you’re already saving the hours your people had been on hold waiting for the software company to answer.
9. First-Aid. You know all those open, raw spots in your current installation, the ones you hoped would be fixed by the latest version, if you could ever get it installed? Take charge and fix them, ’cause now your former supplier ain’t gonna do it. You’d be surprised what rudimentary first-aid tools can do: a few user exits, a virtual machine for low-profile Java apps that the exits talk to, a little user training, a few reports. You’ll get people back to the front in no time.
8. Raises. You know life just got easier. But that doesn’t mean that you shouldn’t use some of the money to reward your staff for all the effort they put out over the years dealing deal with your former supplier.
7. Shutting down the patch testing environment. Of course, once you do that, you have even more money, so…
6. Buy something you couldn’t afford. Go on, live a little. Here are some suggestions…
5. Invest in mobile. Every one of your executives wants cool stuff on their iPhone (or an iPhone if they don’t have it). Make yourself a star. Give it to them. They’ll go to their graves believing that IT support improved on the day you stopped paying maintenance.
4. Invest in the cloud. Face it. With the end of enterprise support, you don’t have an excuse not to do development that you can’t afford to do. So start by reducing the cost of development. With EC2 or Force.com or Rackspace, you can suddenly start doing it right, that is light and cheap.
3. Don’t invest in social networking. But do take the shackles off. Spend a little, tiny bit of money encouraging people to figure out what they ought to be doing with these new tools (if anything). And maybe use some of the tools to help everybody keep track of the efforts.
2. Return some of the money to the CFO. He or she has been walking around the halls looking for some spare change. Now you can reach in your pocket, pull something out, and feel good for the rest of the afternoon.
1. Hold a check-burning party. Write out 10 of those big checks made out to whoever it is, go out to the parking lot, and reduce them to their constituent elements. Hint: bring some beer.
Got your own suggestions about what to do with the money? Add some comments here.
Preparing for Next-Gen Apps: Clean up Your Data
June 25, 2009
A new generation of apps is coming, a generation that will make today’s middle-aged apps look as dated and primitive as the old Dun & Bradstreet software.
I remember the last time this happened; it was 1990. The big deals in enterprise applications were ASK and the aforementioned D&B and SSA. I worked at one of the next-gen apps, QAD; nobody at our company back then had even heard of SAP or PeopleSoft.
At that time, how could a company sensibly prepare for the fact that they would soon replace their systems? It was pretty simple. Don’t buy the old-fashioned guys, because the useful life is too limited. (Basically, it’s the same reason you might not want to buy a new car in the last year of the model.)
But what else can you do? Well, as I said in the previous post, buy appropriate technologies: keep any new technology small and simple and don’t worry too much about your platform (which is dying, anyway).
Here’s another thing to do. Fix your data. When you look at any modern app, one thing strikes you immediately. They just won’t work on bad data. It isn’t just garbage-in, garbage-out. It’s really more like the catalytic converters, which would turn into sludge the second exhaust from lead-based gasoline hit their poor little crystals.
But can’t you wait until you get a next-gen app, when all your data will be nice and new and clean, just like the app? Well, no. Because one of the things you’re going to want to do (and can do, because next-gen apps worry about conversion) is use your old data in the new app. And if your old data is, well, what most people’s old data looks like, you will muck up that old app.
In a way, what will happen to data when modern apps come in is what happened to the pioneer’s farmhouses after they got modern plumbing. Before, real cleanliness was something only rich people could achieve and then only at fabulous expense. After, real cleanliness was simply expected of anybody who called themselves middle-class.
So, if you believe my analogy, how do you clean up your data if you don’t have running water? Well, a whole lot of it is attitude. If you want it clean, even if you’re poor, you can do a lot about making it clean and keeping it clean. [Please comment if you have a good suggestion.] And if you don’t really care–it’s not that you’re against cleanliness, mind you, it’s just that it’s a lot of work, and you’ve got other things to worry about, and besides, it’s pretty dark over in that corner, so who would notice–well, you’re in for a surprise when attitudes and technologies change.
Think Small: Appropriate Technology for the Enterprise
June 24, 2009
Vinnie Mirchandani frequently rails against maintenance fees in his Deal Architect blog, quite correctly in my view. As apps get older, the ecosystem becomes more robust, the number of people available to make the things work increases, and the underlying technology gets better, prices should go down. That they don’t is a testimony to the chutzpah of the application vendors and the, er, timidity of the customers, nothing more.
But let’s say, Vinnie, that you know this and you’re not particularly craven, but you need these guys. What do you do? Or let’s say that you’re just buying something they’re offering, because it makes sense. What do you do? Or let’s say that you believe those silly pundits and you’ve decided to go off maintenance. What do you do?
As I said in an earlier post, you still need an application strategy. The question is really, “What should that strategy look like?”
In that earlier post, I suggested that you should favor cloud applications, because they reduce the invisible, but very real long-term infrastructure costs. You should think Google Apps and Salesforce and developing on Amazon (but not on Intuit’s QuickBase, no matter what you do).
But this isn’t in itself a strategy, it’s just a guideline. So let me add another such guideline.
Think small.
Do you remember back when Jerry Brown was governor of California and was talking about something he called, “Appropriate Technology.” Appropriate technology was small stuff, which worked, which didn’t cost too much, and which was suited to a small, local problem at hand.
Let me give you an example that I remember from the time. Our local, San Diego power company wanted to build a plant in the desert, basically to deal with peak power demand. This was a big technology solution. Perhaps emboldened by Governor Moonbeam, the appropriate technology people proposed a combination of cogeneration and peak usage pricing. Miracle of miracles, they one. Why? Well, I can assure you it wasn’t because San Diego County had gone blue. It was because everybody could see the point of not having to pay for concrete and transmission lines, when they didn’t have to.
Oh, gosh, am I talking about best-in-breed apps, heterogeneous computing environments, multiple vendors, nightmarish integration costs, etc., etc., all the things we were trying to get out from underneath when we jumped onto the big app bandwagon?
Yup, yup, yup. That’s what I’m saying. In this day and age, you’re better off figuring out small, local solutions to specific problems–and accepting the costs associated with that–than you are buying a large, global solution, that supposedly offers economies of scale, but never delivers them.
If you adopt this strategy, you think (or at least you entertain the possibility) that a small, light call center/knowledge management app that deflects 10% of the time-wasting calls and can go in tomorrow, SaaS, might do more for you than the global call-center app that is designed to automate your interaction with most of your customers, costs jillions, and will take so long to install that none of us will ever be there to see what happened–even though the large app is supplied by your primary IT supplier and will become part of your global application footprint (the one you pay all that maintenance for).
I know it’s a radical notion. But that’s the idea. Think small. Look for small improvements. Buy small apps to make the small improvements. Don’t buy more than you need; assume that light apps that do less are the way to go.
Given the cost structure in place today, you’ll not only do more, faster; you’ll save money.
Why? Well, when you cut through all the nonsense, it’s the same reason I pick up a wrench rather than call the plumber. It doesn’t require that much. The job gets done. And there’s no reason to pay any more than I have to.
Designed for Stability
June 22, 2009
I was just talking recently to a specialty chemical company whose specialty product is used primary by an industry that is now under water. They have a lot of middle-aged systems, and they’re looking for something, anything that they can do in the systems area that can help them out.
We’re talking about a company that needs to contract by, say, 50% until their market comes back.
So what can they do? Well, nothing. But the reason they can do nothing is well worth paying attention to and pondering.
You see, the systems they have–I won’t tell you which one is preponderant, but it’s one of the $AP family, that is, SAP, Oracle, PeopleSoft, JD Edwards, etc.–are all designed for stability. They work well only when things change very little. Change a manufacturing line, get a new big customer, add a new product or two, and these systems can deal; it only takes a few man years of work.
But change the business in some fundamental way and everything breaks. Move a line from one factory to another, and it might actually be easier to move the physical line than it would be to move the data in the old ERP system into the new one.
Chrysler faced this a while back, when Cerberus bought it; now, both GM and Chrysler are having to deal with it. I ran into the problem at an electronics company that was deciding to outsource and at a company that was trying to shift a lot of its business onto the web. Their systems wouldn’t let them change.
Well, it’s a good thing if the company that’s setting up the system is stable, has a product that doesn’t change too much, has reliable customers and a business model that will work for the next twenty years.
Know any companies like that?
It’s a bad thing, though, if your company wants to or needs to change fast. Then your systems will get in the way.
Do people ever think about this simple fact when they’re buying the systems in the first place? I’ve never seen any company that did. Do they think about it when they’re buying a company? I’ve only seen a few. When they’re figuring out whether to consolidate systems, that is, do they consider the tradeoff between the money they’ll save by consolidating systems and the money they’ll lose if they have to disentangle the newly consolidated entities? I’ve never run into anybody who did.
It makes sense, of course. Everybody thinks that things will stay more or less the same. Companies, their employees, the people who sell them systems, the people who design the systems. So that’s what they plan for, build for, and buy for.
The only problem is that much of the time, it isn’t true.
Not only the systems, my dear, but the entire mode of doing business with the vendor.
They come to the conversation talking to me about consolidation; they want to use fewer systems, servers, support personnel, etc.
I don’t think this is going to work; in fact, I think they’re going in exactly the wrong direction.
Clarity at SAP
May 31, 2009
How will SAP develop? Where will it lead its customers?
We expect a CEO keynote at a software conference to answer questions like this; in what was his first full-CEO keynote, Leo did not disappoint. The answer? Clarity. Clarity is exactly what is needed to combat a global downturn and, guess what, clarity is exactly what you get from SAP.
I was there: the heads were nodding around the room and the Twitterati were passing the approval on as fast as their thumbs could go. “Good message,” one reputable analyst told me, and given the general dearth of good messages from SAP in recent years, you could see why he was pleased.
Good message? No. Illogical message. It makes no more sense than saying, “Language enables clarity,” and for roughly the same reason. Language doesn’t in do anything about clarity one way or the other. Used well and in the proper way by people who are intending to communicate, language can bring clarity. Used for other purposes, it can equally well confuse or deceive.
Now, in the history of the world, there have been many people who have claimed that a new language or a better language would indeed improve clarity and bring new intelligence and insight to people. But they’ve all been mistaken. They’ve seen a desirable effect (clarity), and they’ve known that you don’t achieve this effect unless a certain tool (language) is used correctly. So they think that the effect can be achieved by constructing the tool in a way that makes it impossible to misuse. But that’s just a mistake (what philosophers call a category mistake). The effect is not in fact caused by the tool, but by the way it’s used, and the tool itself has only a limited amount of ability to dictate what the final effect will be.
Similarly, SAP is merely a tool for storing business data. Good data, right problem, excellent analysis: voila, insight! Bad data, wrong problem, silly analysis, voila, confusion.
Now, there is an actual arguments that could be made in favor of what Leo is so blithely promising. You could say that the structure of SAP, the way it’s put together, is designed, through the use of best practices, to provide clarity, much as those mythical clear languages were going to be incapable of stating things that weren’t true.
I’m sure that Leo believes this, but since I don’t work there, I find it a bit of a stretch. It certainly can’t be something one would want to take on faith. It’s at best an empirical question. Whether it’s true or not would depend enormously on the quality of the implementations, the quality of the data actually being stored, the ability of the data to be used in multiple different circumstances, so that the data could be helpful in addressing real problems. If best practices genuinely produced good and useful data, flexibility and agility, etc., etc., that would be good to know, but I, for one, would find it surprising and at odds with what I know.
I might be more inclined to believe that SAP really does produce clarity in this way if I hadn’t asked Henning years ago what were his biggest problems in running SAP, and he pretty much said that it was hard for him to get insight into what was going on. I would also be more willing to believe it if SAP spent a lot of time analyzing whether the customers are using the software effectively. If they had lots of evidence that showed that people aren’t having problems with data quality, with fitting best practices to their own, or with flexibility and adaptability–that is, if they spent a lot of time figuring out whether their software was working in this way and could persuasive show that it is–one might feel that they really have happened on that magical clear language.
I actually had a long talk with Leo on a subject closely related to this. He’s a very smart guy, and it was a very enjoyable talk. In the talk, he insisted over and over again that it’s not his company’s job to see to it that the software is used effectively. I believe him, and I believe that’s a sensible statement of the company’s mission.
Unfortunately, though, if he doesn’t want to start reaching into companies and making sure that they’re using the software well, he can’t know one way or the other whether the best practices, etc., of SAP are producing the clarity that he’s claiming for it.
It may be enough for him to proclaim as an article of faith that SAP is enabling clarity. But it is not enough for me.
