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?
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.
The Oracle Quarter
June 23, 2009
I was following some Oracle deals, as their quarter closed last month, and what struck me most about some of these deals is that Oracle competitors are trying to out-Oracle Oracle–and failing.
Let me give you an example. One of the most common, best-known plays in the ERP salesperson’s playbook–the equivalent of post-right in football–is called elevating the deal.
When you elevate the deal, you try to take it out of the hands of the “team” that has been assembled to evaluate your product and put it in the hands of busy executives, preferably several levels up, who are in a position to override the team. When you’re put in front of these executives, you pitch business benefits, instead of functional capabilities, and fill their soft little heads with visions of flexibility and agility, competitive differentiators, and money dropping like rain to the bottom line. At this level, of course, you just assume that your software actually has the functionality that will allow you to gain those benefits, which is of course what that low-level team was taking all this time trying to assess.
Both Oracle and SAP are past masters of this particular play; when they run it, it’s Tom Brady to Randy Moss, man.
So this quarter, I heard about two situations where one ERP vendor tried to elevate the deal, at the express instructions of the coach, er, head of sales. In either case, was it Oracle? No, it was the other guy. And did it work? Not a bit. The only thing the competitor succeeded in doing was ticking off the selection team.
It’s a pretty small sample size, of course. But it made me wonder. I know that the applications themselves showing their age. Is it possible that the tactics that go along with those apps are beginning to fray, too? I have been saying for some time, now, that they’ve outlived their usefulness to the customer (if there ever was any). See my blog post, “Lawson’s New Office,” for instance. But now, I’m wondering, have the old sales tactics stopped working for the vendors, too?
I’d be curious to get comments on this; as I said, my sample size is too small. But assuming I’m right, there’s one other question to ask. Why has Oracle figured this out and other companies haven’t?
If so,
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.
Chiseling On-Demand
June 15, 2009
You know the old joke, “How can you tell whether a software salesperson is lying?”
What about when it’s a “No-software salesperson?”
The question came up the other day when one of the people in the office went off to Intuit’s road show for its on-demand database. (Intuit is putting Quickbase on line, promoting it as the cloud’s answer to Access, and the road show was for people who might develop on it, using a Flex-based front end.)
This person came back less than wowed, of course; what do you expect, it’s Intuit. But the quality of the product seemed to me to be beside the point. No matter how good or bad it is, I argued, you would have to be absolutely cracked to have anything to do with it.
Why? Because the way Intuit behaves itself in the on-premise world makes them a non-starter in the on-demand world.
Believe me, I know whereof I speak. I am a heavy user of Intuit products: TurboTax for 10 years or so, QuickBooks for four, Quicken, now, for two. I have thus had more exposure than I would ever, ever like to have to Intuit’s chiseling ways: the design that plumps unerringly for the cheap and stupid way of doing things, the support that has at times left me screaming at the telephone, the innumerable ways they have made my life harder because they only want to deliver the absolute minimum, the endlessly inventive efforts to extract an extra $5.00 or $20.00 from me.
I use the products, despite all this. But only because, over the years, I have figured out how to keep the chiseling costs down to what I think is an acceptable minimum.
Mind you, sometimes they nail me, even so. This year, it happened twice. This year, for instance, they decided de-support QuickBooks 2006 Professional Edition. “Desupport, I thought? I don’t get any support from them anyway.” Turns out, of course, it was a way to get me to plunk down another $300 for the latest edition. Didn’t work; I finally figured out that there was no reason to pay another $300 for software that I already owned. But it did cost me more than a few hours to figure that out. And it burned me when I figured out that what they were doing, in order to make me want to upgrade, was taking away their QuickBooks e-mail invoicing service. $100/year to send out invoices? Give me a break.
But they weren’t through with me of course. This year, I saw the most inventive piece of chicanery I’ve seen in a long, long line. Instead of sending me a check for the TurboTax rebate, they sent me a debit card with a $10 credit. This turned out to be much more fiendish than you might think. First of all, even though it says debit card on the card, it’s actually a credit card, so if you say, “Debit,” to the cashier, it’s refused, something I find embarrassing. Second of all, even after you get on to that dodge, it’s a lot of work just to use it. Either you have to come up with an item that costs exactly $10, or you have to split the bill between two credit cards–also embarrassing. So what did I do? I finally bought a $7 item, and I guess I’m going to let them have the remaining $3.
So what does this have to do with cloud computing? Well, let’s put it simply. If you have enterprise application software, and you’ve bought a perpetual license, you have a defense against at least some of the chicanery and chiseling that seems to be built into relationships with software vendors. You can stop dealing with them and still use the software. But with a cloud computing vendor, you don’t have that defense. So you’re much, much more vulnerable.
My supplier of enterprise application software happens to be Intuit, and with Intuit, I simply don’t allow myself to become that vulnerable. I never use the Intuit Quickbase product or the On-Demand version of Quicken or QuickBooks; I don’t even use the on-demand TurboTax backups. Why? I have been victimized by Intuit’s sharp practices many times, and I don’t want to give them an even bigger and more vulnerable target.
Now I don’t blame Intuit. They invented a business model that really worked for them and apparently works for millions of customers–a kind of RyanAir for software, where you provide the maximum amount of irritation and inconvenience possible in return for a rock-bottom price. But this is not a business model, I think, that consumers should accept when it comes to cloud-based applications. There’s just too much risk that a Ryan Air-like application company will ask you in mid-flight to chip in a little bit more so they can get you back down on the ground.
If it were just Intuit, of course, I wouldn’t burden you with my ranting. But it seems to me that Intuit is not the only company that came of age in an era when you delivered software to the premises and discovered that you can make a fair amount of money in that context by overpromising, underdelivering, and making sure that you have your customer’s wallet firmly in your gunsights at every moment. I hate to say it, but there are much bigger companies that deliver much bigger accounting software that have the same mind-set. So if it’s unwise for consumers to trust Intuit’s approach to business when it comes to cloud applications, isn’t it unwise for consumers to trust the other guys?
Now wait a minute, Leo or Larry might say, aren’t you tarring perfectly reputable, upright, leading companies with a brush that should be reserved for Intuit? Well, I dunno. I don’t own your software. You tell me, L&L. I know that Intuit has provided me with support that was completely inadequate and left me genuinely vulnerable as a result; has your enterprise software company done that? I know that Intuit has misled me about what’s in upgrades or in more expensive editions and cost me a lot of time and money as a result; has your enterprise software company done that? I know that Intuit has tried to charge me for things that I thought were included in the original deal and has raised rates on me without providing anything to me in return; has your enterprise application done that? And I know that Intuit designs software in a way that shifts a lot of costs onto me, even though it would often be very simple for them to avoid doing this. Does your enterprise application company do that?
If the answer is, “Yes,” to any of those questions, what’s going to stop you from doing this to your customer again, when your customer buys your cloud-based apps?
Maybe there’s an answer. But until there is one, my recommendation for customers of companies that do this would be to avoid their cloud-based applications for the same reason I would run, not walk away from Intuit’s.
So how do you know if your No-software salesman is lying? Well, I guess you don’t. But if he used to work as a software salesman, shouldn’t you at least check what he says?
Why Pay Maintenance on Enterprise Applications?
May 28, 2009
A client asked me the title question recently, and my answer was just a shrug of the shoulders. The answer is, “They probably shouldn’t.”
Yes, it’s a little more complicated than that. Maintenance on enterprise applications may be worth it to some customers, just as an extended warranty plan might well be worth it to some buyers of appliances, automobiles, or electronic, because they they get some comfort in knowing that they can do something if it breaks. It’s also worth it–absolutely 100% worth it–if your installation is in its early stages or incomplete, that is, you’re planning on buying more software from the company or you’re certain that you will need to maintain an aggressive updating policy.
But for most customers of most enterprise applications, it seems to me that paying a maintenance bill is in some ways akin to putting down your money in a three-card monte game. The money is gone. And it is more than a little unlikely that you’ll get any return from it.
Have I ever done this? Well, I’ve avoided three-card monte. But there was a period in my life when I paid for a health club membership that I wasn’t using. I kept on thinking, “Oh, I’ll go there next week,” or “I don’t want to have to pay the initiation fee,” or “My doctor told me to get more exercise,” and so I paid.
But really, it was just that I couldn’t face the facts. I hated that health club; I hated the pool and the locker room and the crowding. I hated the way they were gouging me. And I hated having to admit all this to myself. So I paid.
I didn’t use my membership, but I paid.
So is that why most people pay maintenance. I think so. At the moment of payment, it’s easier to write a check than it is to face facts, so they write a check.
Now there is an obvious counterargument to this. It goes like this. Paying maintenance isn’t like paying for a health club membership; it’s like paying for insurance. True, with insurance, you pay and you pay and there’s little visible benefit. But that’s the idea. Frankly, you ought to be happier to pay and not get much visible benefit than to pick up the phone and call the insurance agent.
This is certainly the argument that the CFO hears when he calls up a CIO and says, “Can’t we do something about the 2 million a year we pay to $AP (that is, any of the middle-aged apps vendors)?” The CIO says, “There’s nothing we can do. It’s an insurance policy. We have to pay. What happens if our system goes down?”
Most CFOs seem to find this compelling. But they shouldn’t. Come on. They’ve been to business school. There is a point, obviously, when it’s not worthwhile to pay insurance. To see what that point is, imagine that you lived in a normal, middle-class neighborhood where there hadn’t been a serious house fire in twenty years. Would you carry insurance if the insurance cost was 1/5 the cost of rebuilding the house? You shouldn’t. What about 1/10? Nah. What about 1/50? Well, maybe, but probably not. 1/100? Nope. Normal insurance for this kind of situation shouldn’t be much more than 1/200, and that should cover a lot of other things besides fire replacement.
So the CIO is right only if the odds of failure are high or the cost of maintenance is low. As for the odds of failure being high, I don’t think any CIO should be basing the argument on this. If the odds of catastrophic failure are high, even after operating the system for years, maybe you need a new CIO. As for the cost of maintenance being low? Well, they’re not. They’re a a little more than 1/5 (of the software costs). So you could just stop paying maintenance and after five years, you’d have enough money to buy a brand new package, with money left over to pay the integrators. Yes, the integration and hardware costs would add on a fair amount. But to pay those, you could just coast for a few more years. And remember, when you’re finished, you’re getting a new system, one that is now ten years more advanced than the system you bought.
So which should you do? Don’t pay and save for a new system that will work better. Or pay for insurance that you don’t or shouldn’t need.
So what’s the answer? Don’t pay. It’s really very simple.
The Applicator 