November 18th, 2009

A Tale of Two Software Worlds: Old ERP vs. SaaS

Posted by Brian Sommer @ 11:20 am

Categories: Current Affairs, ERP, Financial Software, Future of Application Software, HR, Implementing Technology, Selling & Marketing Software, Software Development, Software Marketing, Software Vendors, The Application Software Buyer, The Applications Market, Think About IT, software

Tags: Software, Software-as-a-service, Solution, Customer, ERP, Survivors, Software As A Service (SaaS), Managed Hosting, Cloud Computing, Emerging Technologies

Watching the train wreck as SaaS continues its assault on the on-premise software world

Charles Dickens began his famous book “A Tale of Two Cities” with this opening statement:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going to direct to heaven, we were all going direct the other way, “

This week, I’m in Silicon Valley. Yesterday, a colleague, Dr. Katherine Jones, and I visited with executives from WorkDay, Taleo, Ariba and Financial Force (the Salesforce.com and Unit4/Agresso joint venture). Today, I’m at Salesforce.com’s Dreamforce event. These visits have confirmed for me what CIOs have already indicated to me: SaaS (software as a service) has really moved mainstream. Big ERP (enterprise resource planning) vendors that cannot, will not or are unable to offer these solutions are in trouble. Yet, to hear it from the old school crowd, these firms are:

- still vetting the SaaS space as they aren’t sure it’s for real
- saying that their customers aren’t asking for SaaS
- having trouble retro-fitting their old-premise solution to a SaaS environment
- do not know how to make a solution multi-tenant despite spending hundreds of millions of dollars in research and development
- etc.

LET THEM EAT CAKE

Or in this case “let them pay 25% maintenance that generates 90+% margin for us”. The arrogance, indifference or lack of empathy old school vendors have for their customers is appalling. They behave with the imperious attitude of the royalists of yore. But, like the old royalists, they did not recognize that the world around them was changing. Instead, the royalists found themselves increasingly on the other end of a pitchfork, ax or guillotine. The end of an era is coming and vendors can choose to embrace or fight it. But will the fighters win?

In the executive meetings yesterday, Katherine and I heard, consistently, these sentiments:

- Interest in SaaS products is growing rapidly. Vendors find they are challenged by internal concerns (e.g., how to accommodate their sales professionals’ commission problems as these companies are shifting from on-premise to SaaS sales) not market acceptance. Nonetheless, the smart firms don’t let their internal issues impede what their customers want. These vendors are sorting out the issues and moving forward.

- Marketing SaaS products is not a problem for SaaS vendors but successfully implementing the customers they are winning is. SaaS vendors are almost universally focused on building solid customer references as they know that reputation really matters in a space where a few minutes of service disruption could kill one’s brand.
- Market interest in SaaS products is expanding. Once, where customers would entertain some HR or CRM apps running on the cloud, Finance applications are now being seen as very viable solutions to use.

Katherine and I asked these vendors about the software products they are replacing. No surprise here: they are uninstalling old school products – many of the products being replaced were implemented to alleviate Y2K (year 2000) issues. Those aging products, many of which were implemented in the mid-to-late 1990s, are the ones being booted to the curb. More on this in a subsequent post.

Why are the old products falling away? Vendors told us that their customers and prospects are looking to SaaS as:

- The TCO of existing solutions is out of whack. Ever higher maintenance costs were frequently identified as major customer pain point and a driver of SaaS sales.

- Customers don’t like being stuck on older releases because they can’t justify the commitment of funds, time, third parties, etc. to implement upgrades.

- They have run out of time waiting for their old ERP, HR, or Finance software vendor to get on the SaaS bandwagon or deliver long-promised SaaS products.

One SaaS vendor executive described the ‘transition points’ that trigger the initial contact with their firm. These include, but are not limited to:

- The prior old school vendor requires a re-implementation of the product to utilize a new release.
- The old school vendor requires its customers to re-license an application as it is being re-platformed or re-badged.
- The customer is experiencing declining fortunes yet the old school vendor’s license fees and maintenance amounts will not change to reflect the new economic reality.
- The customer is outgrowing the old solution. The number of customers that are now global is huge and growing yet some solutions do not scale in size, functionality or global reach.
- Etc.

CIOs are adding to the market interest as they are choosing to use SaaS applications whenever some of their servers are due for retirement/replacement. CIOs realize that they would like to avoid new capital expenditures, want to have software that always remains current, use software that doesn’t cost them anything to upgrade, use software that frees up their IT staff to work on more strategic matters, etc.

Vendor after vendor reaffirmed for Katherine and me that customers are realizing 50% TCO savings over older on-premise products. (Salesforce did so this morning, too).

Now look at what’s going on at Salesforce.com’s Dreamforce event. 19,000 people registered for this event. The main auditorium of 10,000 was filled and an overflow room of 3,000 people was filled, too. In this economy, such a large number of people don’t go to a show, miss work and incur travel costs unless they’re serious about the subject.

A crowd of 19,000 people is a lot. Maybe only two or three application software vendors could deliver that kind of crowd. And some of those are struggling to do so as the lack of innovation, the lack of timely delivery of product, the high cost of these passé solutions, etc. makes market interest in these products fade.

Will SaaS displace on-premise solutions? Not entirely. But significant market share losses could start showing up in the next 24 months. Latecomers to SaaS will find their existing customers and new prospects to be especially leery of their solutions. Why? It’s taken Salesforce.com a decade to perfect their platform, their reliability, their sandboxes, etc. Untested SaaS environments will be viewed as risky propositions. CFOs, Controllers, CEOs, etc. will prefer to go with solutions from vendors with a solid track record and credentials in SaaS and the cloud. Newbies will have a really tough time.

Dickens opened his book with the best/worst dichotomies not just to get a reader’s attention but to point out that everyone in France at that time, royalists and peasant, had starkly different opinions of the current situation. Some royalists thought good times were still ahead while others correctly saw the sea change coming. Ditto for the peasants.

Survivors are the ones who correctly assess the market situation. Casualties are the ones who live in denial or in some unrealistic but idealized view of the world. Old school, on-premise vendors are in trouble. Of that I have no doubt. What amazes me is the level of denial still present in some of those firms. Pain is coming to those firms soon.

November 15th, 2009

Before you do that BPO, Audit, Consulting or other services deal, check out these costs

Posted by Brian Sommer @ 8:25 pm

Categories: Contracting, ERP, GRC - Governance Risk Compliance, Implementing Technology, Notable Research, Outsourcing, PSA - Professional Services Automation, Professional Services, Selling Professional Services, Service Providers, Sourcing, The Application Software Buyer, expense management, expense reporting

Tags: Rental Car, Hotel, Audit, BPO, Consulting, Business Services, Business Process Outsourcing (BPO), CAD, It Operations, Software

Is your services partner wisely spending its/your money????

I’ve spent a lot of money on travel. Over one 10-year period, I went through $2.5 million just on airline travel alone. I think I understand travel well.

I always look through the annual Business Travel News top 100 travel spending report. Companies are ranked by the amount of air travel spend they incur annually in the U.S.

In reviewing the latest issue, I was pleased to see several systems integrators, software companies, hardware vendors and other technology related firms have instituted some great practices in recent years. I even compared this year’s report with data in a prior year (see graphic).

Where the Money Goes

Now, some firms are spending more on air travel and total T&E (travel and entertainment). Why? Well, last year’s fuel costs drove air fares up demonstrably and that got reflected in higher travel costs. Some firms grew organically and some took on substantial acquisitions (e.g., SAP buying Business Objects, HP buying EDS, etc.). Growth should trigger higher travel costs as more headcount usually translates to more travel cost.

But, buyers of services need to look a bit deeper and question potential service providers as to the measures they are taking to ensure that the money they spend on travel and T&E is worthwhile and cost-effective.

Here are some areas to probe:
- Are training trips booked with 21-day advance purchase fares?
- Do employees use the lesser of the integrator or the client’s negotiated rates with carriers, hotels, rental car companies, etc.?
- Do employees car pool/share rental cars on long-term out of town engagements?
- Do employees stay in apartments or extended stay facilities in lieu of hotels for long-term engagements?
- Do employees use 7-day advance (or longer) fares for internal meetings?
- Are internal meetings scheduled for days when employees would normally be in their home office location (e.g., Friday)?
- Does the integrator/software firm aggregate travel spend globally to maximize its pricing power?
- Do the integrators/software firms utilize closer-in personnel so as to avoid air travel altogether?
- What percentage of trips are booked for travel that will not be chargeable/billable? How can this number be reduced further?
- What class of travel is being booked for short-haul, long-haul and international travel?
- Are service workers allowed to choose the carrier? How can a client be assured that the lowest fares are being selected?
- Does the service firm discipline employees who violate travel policies? Does the client have to pay for these excesses?

Beyond airfare, the size of the T&E numbers is what really gets my attention. Admittedly, I’m surprised when my rental car bill or my hotel bill exceeds my airfare. It happens more frequently these days as rental car rates have shot up in many markets. You’ll really see it when you stay more than a day in a given market (I rarely get that luxury).

I’ve seen service people charge in some whoppers on their time reports. Usually, they get nailed for it. You know what I’m talking about. Staffers taking clients out for mega-expensive dinners and charging it in. Lazy staff who don’t book travel until the last second. Staffers who insist on staying in resort hotels, use valet parking, etc. I have a name for those folks: ex-employees.

I once had a boss who insisted on only staying in the absolute finest hotels and dining in restaurants that only the most well-heeled gourmet could afford. And, of course, he only flew first class.This person was an empirious cad without empathy. This ultimate narcissist was hell to work for and a major expense control problem for his clients.

I spend a lot of time in software and service negotiations outlining the rules of the road, so to speak, on how service providers will operate when engaged with my clients. Trust me, if you don’t have these conversations, you will lose a lot of money.

So, what are the most egregious T&E sins of service providers you’ve seen?

October 14th, 2009

Customer Intimacy wins in SAP SI's and Channel Partners

Posted by Brian Sommer @ 10:25 am

Categories: Current Affairs, ERP, Implementing Technology, India & Services, Professional Services, Selling Professional Services, Service Providers, The Application Software Buyer, The Applications Market, sales

Tags: Customer, SAP AG, Firm, Channel Partner, Business Services, Strategy, Supply Chain, Product Development, Management, Business Operations

Yesterday, several bloggers at the SAP TechEd conference in Phoenix had an opportunity to speak with Zia Yusuf, EVP, Global Ecosystem & Partner Group of SAP.

I asked Zia what characteristics typify the best SAP partners. He rattled off five qualities that the best systems integrators and channel partners possess. These qualities and my comments on each include:

1) Have individuals that are deeply involved/connected with SAP’s product direction. We had a great conversation on this point. It’s obvious that implementers who know where the product roadmap is going are better able to serve customers. What too few implementers may do is the extra step to connect themselves to the product development side of a vendor like SAP. Software buyers need to review potential systems integrators on this point. They should see evidence of the implementer’s presence at venues like TechEd, their participation in forums like SDN, etc.

2) Ensure all their SAP implementation professionals are getting the training and product knowledge they need to be successful. Software buyers should insist that their implementers are certified on the products they install. Better still, see what the implementer’s overall level of certification is for their practice. Those firms who don’t invest in their people probably have a low-cost orientation and/or experience high turnover. Either way, firms with lightly trained individuals can’t possibly deliver the same level of value as one who invests in talent. Who do you want installing your software – people who know the product well or people who want to learn about the product on your dime?

3) Can adapt, quickly and easily, to ever-changing markets and market dynamics. When the marketplace demands a systems integrator possess a global delivery model, can the local, New Jersey firm you’re considering deliver a mixed mode solution? If it can’t, it better have some compelling other reason for your firm to use them (e.g., intimate industry knowledge). Markets move and move frequently. Integrators must move resources to different verticals (e.g., is anyone still selling new work in the Automotive sector?) and different labor markets (e.g., shifting more offshore work from India to China). Adaptability to changing markets is a proxy to illustrate how well a vendor can adapt to changing customer needs, too.

4) Are focused on customer service/value delivery – I’m still surprised at how many firms say words like ‘We deliver outstanding value to clients’ but can’t really prove it. Saying and doing are two different things. Smart services buyers get this difference and will ask for proof.

5) Tie their revenues to the delivery of value to customers – Better firms don’t front-load a lot of costs while value delivery is back-ended. Better implementers can craft plans, cost structures, etc. to align these two concepts. Customers will expect and demand this.

A few years ago, Michael Treacy and Fred Wiersema wrote the book The Discipline of Market Leaders. They posited that firms need competency in three key disciplines but they must excel at one of these if they are to be successful. Those disciplines include:

- customer intimacy
- product innovation
- process excellence

In their book, they highlighted companies like Nordstrom as an example of a customer intimate firm. Product innovators would be firms like Intel. Process excellent firms do something better than anyone else in their segment. Those firms could be like Dell and its supply chain or WalMart and its logistics (i.e., cross-dock, low inventory focus) or attention to cost reductions. Quality producers and low cost leaders in a market sector often are process excellence firms.

I pushed Zia to then pick one of these three market disciplines. I wanted to know which one is key for systems integrators/channel partners. Without a moment’s hesitation, he said customer intimacy.

That’s really no surprise as most consultancies sell work and sell follow-on work due to the long-standing relationship they have with their clients. Some firms bend over backwards to place their ex-employees into key clients. If a service provider has ‘customers’ instead of ‘clients’, then they probably aren’t customer service focused.

The best integrators really try to understand their clients. They know what the value drivers will be for a given initiative and will construct an implementation plan that aligns with it. Integrators who take a one-size-fits-all approach to projects lose some deals and don’t delight some of the customers they have.

Customer intimate integrators know the client’s industry, know the personal/career/political/economic agenda and needs of each client executive. These integrators win because of their client knowledge.

Customer intimacy alone will not carry the day. If an integrator is customer intimate but not winning 60+% of their proposals, then they probably aren’t doing enough in the other two disciplines. For example, knowing a client’s needs well won’t be enough if your cost structure is way too high. It also doesn’t help if your firm has nothing new, original or proprietary to add to the standard SAP solution sets. Better integrators bring their own intellectual property into a deal. These added extras are the competitive differentiators implementers must possess.

My view is that implementers need to be something like 40% focused on customer intimacy, 30% focused on product innovation and 30% focused on process excellence. If an integrator is overly skewed in just one discipline, they may be unable to win the work they need to be a sustaining or growing service provider.

July 21st, 2009

Google, Microsoft and Zoho

Posted by Brian Sommer @ 1:17 pm

Categories: Current Affairs, Future of Application Software, Google, SaaS and Beyond, Selling & Marketing Software, Selling & Marketing Software, Software Marketing, Software Vendors, The Application Software Buyer, The Applications Market, Think About IT, Web/Tech, software, software. applications

Tags: Desktop, Google Inc., Zoho, Microsoft Corp., Software Purchase, Tools & Techniques, Microsoft Office, Management, Office Suites, Software

The Battle for the Desktop and Beyond

Microsoft is in the news lately with its Office 2010 announcements. It contains, no surprise, a number of tidbits to make more of the application suite more cloud friendly and less costly. Implicit in this strategy change are signs that more corporate and personal buyers of the suite are looking ever harder at Google’s offering, Zoho’s suite and other products.

For certain, competition is coming at Microsoft’s Office suite. It’s been building for some time and the near monopoly Microsoft’s had here may be at risk. Sun had a pretty good offering out there the last few years but this time the stakes may be different. (Full disclosure: the original version of this post was prepared in Microsoft Word.)

Software markets tend toward standardization. In almost every sector of software, customers eventually move to a few or one ‘industry standard’. The industry standard doesn’t have to be the best technically or the most loved or the cheapest. It can be hated, expensive and a pile of garbage but, at least, everyone else is using it. We’ve seen industry standard solutions appear even when standards bodies are urging the market to adopt something completely different.

Why does this occur? Well, too many people think that software buyers are logical, rational purchasers. News flash: They’re not! Software purchases are:
- emotional
- financial
- political
- technical
- business
- etc.
decisions.

It’s this soup of buying factors that helps create monolopies or duopolies.

Yet, in time, innovation, obsolescence, regulation and competition break down these ephemeral monuments to market share.

Google has been coming at Microsoft for some time. Like Microsoft, they have deep pockets and a couple of key products to fuel the cash generation machine. Microsoft also possesses a few nuggets of cash creation and big cash balances. Where one is strong (e.g., Google Search, Microsoft Windows), the other is weak.

These battles are about momentum and not about protecting market share. Google only wins by tackling the market share that Microsoft has in Office. Microsoft wins when its search tool (i.e., Bing) displaces Google.com as everyone’s default search. To win either of these markets is a coup in and of itself. To win both could be a staggering victory for the winner and a going out of business sale for the loser.

Google’s Apps have a couple of hurdles for corporations. Yes, they’re cheap to use but many companies still don’t want their internal information on someone else’s cloud. If Google can’t convince very large numbers of large companies to cutover to its suite, it won’t win. Check out this solid piece in BusinessWeek.

What Microsoft knows is that corporations like to share documents with other corporations, with their workers at home, with sub-contractors, etc. The current Microsoft Office suite, warts and all, operates relatively effectively as a communication tool for all of these disconnected parties. Companies don’t want people reformatting documents that get mangled from one word processor, spreadsheet or presentation technology to another. Interoperability is the key value driver that Google and others must offer to win over customers. To do so, Microsoft competitors must offer something different and value-adding while providing interoperability with Microsoft Office. Microsoft will likely continue to make small interoperability problems for its competitors and the competitors will need to double down on their innovation-added capabilities. This is a see-saw exercise that will take time to sort out. Momentum is great but it must overcome a mountain of inertia.

Interoperability is always the other guy’s problem when your firm offers the (standardized) solution everyone is using currently. Interoperability must address the de facto market standard.

Zoho is different animal all together. They’re interested in building dozens and dozens of applications that play together and play with Microsoft’s products. Their model may actually continue to prosper. Why? Zoho can do what Google Docs do: cloud based inexpensive desktop apps but Zoho can also make their apps run on customer specific servers. Their desktop may now be much broader than Google’s and growing. Zoho is trying to be a software firm with a very wide product offering. A top executive at Zoho described his firm as “‘trying to be the IT department for SMB’s (small to medium sized businesses)”.

Zoho’s market success and longevity suggest that they may be onto something.

Let’s get back to Google though…

Google is also saber rattling about developing a desktop operating system. Android has doubtlessly emboldened them. Personally, I believe this initiative has a better chance of short-term success than its Office-killer apps. An operating system requires a few key hardware vendor sales and some application software compatibility. That means, for their device to gain market share, it must come equipped to run all of Google’s tools and applications and a large number of the zillions of software products that also run on Mac and Microsoft Windows platforms. That is a big requirement and an expensive one for Google and every software vendor that is betting that Google’s desktop OS will be a winner.

For us, the mere mortals, the consumers of technology, the arms race breaking out in desktop software will likely present several likely outcomes. The following will likely transpire:

- many new products will emerge
- many of the new products will contain some amazing breakthrough innovations that will entice some of us to switch
- some of the new products will be lacking in needed features and/or disappoint us with substandard performance
- low pricing will persist for some time so that new competitors will acquire much needed market share, sales momentum and street cred
- all users will likely experience some frustration as files we share with others will doubtlessly experience compatibility issues
- Microsoft is definitely going to feel some competition for its Office Apps and Google will likely see Microsoft stiffen its resolve to get more of the search engine business

July 14th, 2009

Why the best get better in sourcing

Posted by Brian Sommer @ 7:40 am

Categories: Contracting, Current Affairs, Selling & Marketing Software, The Application Software Buyer, The Applications Market, negotiations, software. applications

Tags: Supply Chain, Sourcing, Aravo, Purchasing & Procurement, Supply Chain Management (SCM), Strategy, Business Operations, Enterprise Software, Software, Management

Late last week, I took a call with Tim Albinson, CEO of Aravo. Aravo manages, supplements and enhances supplier information.

Tim and I discussed the types of firms that adopt better supply chain practices and technologies. While we spoke, I sketched out several 2X2 matrices that illustrated some of the points we made. One of these looked at the different types of spending organizations and how they buy.

We discussed:

- Why do the best sourcing & supply chain organizations use the best technologies, best practices and get the best business returns while so many firms have difficulty getting even the basics of sourcing right?
- Why so many firms struggle with picking the right suppliers at the right time?
- Why decentralized firms are so political and inefficient when it comes to sourcing?
- Which industries are doing well in today’s economy particularly when it comes to sourcing?

The Few True Users of Supply Chain and Sourcing Tech

The brief answers to some of these issues are:

- The best firms are the best because they make the pursuit of improvements a mission/competence of the firm. Sadly, too many firms are too complacent with innovation, risk taking and becoming an industry leader to do much to advance their sourcing and supply chain activities.

- Supplier decisions are often default decisions at firms and these decisions are rarely changed/challenged unless some significant external event forces the issue (e.g., bankruptcy of a supplier).

- Decentralized firms can have efficient supply chains and sourcing activities while still coordinating some buying between business units. The reason inefficiencies occur has more to do with politics, power and other human factors. If more buyers were logical, rational entities, we’d see far less inefficiency in the supply chain. People, not technology, are often the problem in getting better practices and technologies deployed in sourcing and supply chain matters.

- Traditional sourcing and supply chain technologies work best in industry sectors that are experiencing typical changes. When atypical change occurs (e.g., bankruptcy of two large auto companies in the U.S.), some technologies will be of absolute importance or necessity while others are not needed at all (e.g., do you need a sourcing solution when a particular commodity is extremely scarce?).

June 15th, 2009

Open letter to all HR software vendors

Posted by Brian Sommer @ 6:30 pm

Categories: Analytics - Performance Management, Current Affairs, ERP, Future of Application Software, GRC - Governance Risk Compliance, HR, The Application Software Buyer, Web/Tech, software. applications, vendors

Tags: Human Resources, Boss, Brian Sommer

HR products haven’t really evolved much the last decade. Sure, many have changed their business and delivery models to become SaaS (software as a service) vendors but the functionality is still little changed from the 1990s. Yes, I know that talent management has seen some changes over the last few years but, honestly, are concepts like 360-degree evaluations and tying compensation to performance all that new? No.

Today, I will get a call from a dear friend who I’ve had the pleasure of working with for approximately 10 years in two different firms. About 10 years ago, she went to work with a firm closer to where she lives. The commute was great but the workforce, pay and management weren’t. She then left to join another firm but will likely tell me today that she is leaving them. Why? Gross mismanagement from the top.

I know from whence she speaks as I have toiled under inept, corrupt, morally bankrupt and vile bosses. I have seen what bad bosses do to organizations and the people who work (or worked) for them. I’ve seen them fire great people to make room for their toadies or people who won’t become a threat to their position. I’ve seen bosses with an air of superiority so bad that they wouldn’t dare think of listening to a mere commoner like me or others.

Did you know that close to 85% of the time that people leave one employer for another is because of their boss? I can believe it. And yet, amazingly, human resources (HR) software vendors don’t do anything to detect bad bosses. Seriously, how can you have a talent management product if you can’t even detect which of the managers or executives are causing large numbers of people to leave?

Now before every HR vendor out there flames me, let’s establish some basic tenets. Yes, many HR systems and firms support exit interviews. It is in these interviews that employees are supposed to tell an HR person why they are leaving. Do you really think they’ll cop to “My boss is a demeaning, narcissistic twit who verbally abuses everyone and makes our lives a living hell”. No – they’ll give some passable statement like needing to make a quality of life change. That way they’ll still have some chance of getting a neutral or positive reference from this soon to be former employer.

Many HR software products also support 360-degree feedback. This allows workers to provide upward feedback to their bosses. Well, this may be a shock to HR software developers but the average employee knows their responses to this evaluation will not be kept confidential and private. If these employees ever did spill the beans about a bad or dysfunctional boss, repercussions would likely follow but unfortunately they’d likely clobber the employee not the boss/manager. Even when bad bosses do get some tough feedback, research indicates that the narcissistic tendencies in these folks ensures that they will not change.

Third, HR products often possess analytic modules today. HR vendors will contend that these solutions can report which boss has higher than normal attrition. Well, isn’t that a great help! This tool causes firms to lose a lot of great talent until enough people (a statistically significant quantity) have left so that a monthly or quarterly report shows that there is a problem. This is such a waste of analytic (and executive) time as a great analytic tool should be predicting which managers may need an intervention before the attrition goes off the charts. Instead, the current analytic tools wait until the problem is really bad before the software reacts to the problem. Businesses need analytics with foresight not hindsight.

Here’s what an analytic application should do. First, HR vendors must learn to use something else besides just transaction data. They need to ask questions of executives to learn how they detect a bad management situation. They would learn about ‘proxies’ or ‘clues’ that something is amiss. They would then build an analytic application that scans all employees, all managers and all departments to see:

- which departments are experiencing higher than average transfer-out requests
- which departments are experiencing higher than average sick time
- which departments have personnel cashing in all of their stock options
- which departments are seeing their average personnel evaluation scores dropping
- which departments have a higher than average vacation time usage rate
- etc.

When a single department is leading many of these indicators, these are ‘early warning’ indicators that a bad, dysfunctional, ineffective, toxic or pathologically flawed manager is in charge.

Top executives want to know who is driving off their best talent. AND THEY WANT TO KNOW ASAP! But, do HR products do this? No way. Should they? You bet.

So will you, HR vendors, create these predictive (not historical), analytical tools? Will you help businesses identify and purge themselves of the narcissists, egomaniacs, paranoids, bullies and other managerial misfits that hurt your customer’s profitability, efficiencies and effectiveness?

The current crop of HR products was apparently designed to manage workers but not managers. These technologies are embarrassingly light when it comes to putting appropriate focus on middle and top management. It’s almost as if these vendors don’t want to upset those who might authorize the purchase of their products. In my conversations with HR executives, many of them are frightened to confront bad managers. Giving them the real insights into their business and its management might embolden HR professionals to rid their firms of bad managers/executives.

HR software vendors seem too content to stay in the HR transaction processing sandbox. Analytic thinking is not about presenting transactional data in new, pretty formats. Yes, it’s nice that a vendor can show a graphical correlation between performance reviews and compensation. But, that correlation isn’t exactly innovation. An innovative idea would be to look at non-transactional matters and create a new way to study, analyze and resolve those issues. So far, HR analytics have come up way short on the truly innovative scale.

I started this blog because of my frustration with HR vendors and their inability to spot bad bosses. My last word on that matter is that while you can’t legislate integrity, you can get rid of those who lack it. HR executives need better analytics and HR vendors should be creating the innovations in this area to enable them.

April 19th, 2009

The immediacy of value – Where SaaS must go next

Posted by Brian Sommer @ 3:53 pm

Categories: Current Affairs, Future of Application Software, Implementing Technology, Selling & Marketing Software, Selling & Marketing Software, Software Marketing, Software Vendors, The Application Software Buyer, The Applications Market, sales, software, software. applications

Tags: Software-as-a-service, High-velocity SaaS, Software As A Service (SaaS), Managed Hosting, Cloud Computing, Emerging Technologies, Brian Sommer

The issue isn’t just SaaS vs. On-Premise - It’s also about the speed that value is delivered

Recently, I had a good conversation with Jan Arendtsz of Celigo. His firm makes connectors for NetSuite and Salesforce.com.

The really interesting part of our conversation though centered on this sentiment I’m hearing from many software buyers. In essence, they are saying that they need:

- solutions that have a low initial capital appetite. So, that means SaaS (software as a service) trumps the on-premise products.

But

- They also need these SaaS products to be implemented within the quarter or the project doesn’t get green-lighted. This is an advantage for SaaS vendors with great consultants, fast conversion tools and pre-supplied integration tools/connectors (Celigo has these).

But

- These projects still do not get the go-ahead unless they also start to deliver value within the first quarter. Now this is a high hurdle. But, it also points out that SaaS alone is not enough in this economy. High-velocity SaaS is what’s needed.

What would high velocity SaaS contain? Minimally, it would have:

- capabilities to connect to other enterprise applications whether they are SaaS-based or not
- fast integration tools that take a lot of research, guess work and coding out of the implementation process
- data conversion utilities
- product consultants

But more than anything, high velocity SaaS apps must provide clear proof of value, a way of capturing the value delivered and a mechanism for repeating this value capability in customer after customer. It’s the value delivery speed that will create great market uptake for SaaS vendors particularly in this economy.

April 14th, 2009

How Multi-Nationals Should Use ERP

Posted by Brian Sommer @ 12:13 pm

Categories: ERP, Financial Software, Future of Application Software, Implementing Technology, Outsourcing, SAP, Software Vendors, The Application Software Buyer, The Applications Market, internet, software. applications

Tags: Solution, NetSuite Inc., ERP, Tools & Techniques, Enterprise Resource Planning (ERP), Software As A Service (SaaS), Enterprise Software, Management, Software, Emerging Technologies

One Size Fits All? I’m Not So Sure…

Years ago, I did an evaluation of back office software packages that served small businesses but had robust international capabilities. I did so because clients were always asking about solutions they could deploy to small offices or subsidiaries where:

- a standalone solution may be most appropriate
- the workforce there was so small that a large solution was overkill
- the infrastructure in that part of the world was too primitive to support 24×7x366 electricity, phone service and/or internet access

At that time, I thought that products like the SunSystems’ Sun Account were a pretty good fit. I even interviewed executives whose firms used products like this and learned some pretty interesting and practical business needs along the way. For example, one big consumer products firm would buy two PCs and configure each with the needed application software, chart of accounts, etc. and air freight them to their new destination. Upon arrival, the local staff was advised to uncrate one of these systems and use it until it broke. At that time, the second system was to be uncrated and the broke system placed in that container and sent back to corporate HQ for repair. It was an inexpensive solution to a complicated international accounting problem.

Fast forward to today and the landscape has changed a bit. Now, internet access is more ubiquitous. The vendor order has changed as have software delivery models. Now, large multi-nationals can choose to:

- force all subsidiaries to use the same software (via the internet or an outsourcer)
- put those subsidiaries that contribute a small percentage of total firm revenues or transactions on their own, SaaS-based solution that will be interfaced or integrated with the parent company’s systems

Shared Service purists would choose the former option as they prefer everything be standardized. However, a 10 person sales agency doesn’t really need a full blown enterprise ERP solution. The learning curve for the employees on this is significant and won’t make a material difference in how the firm runs anyway.

Others will like the second option as it provides a solution more in-line with the business needs of the local operation. It’s not too hard or too easy, it is (in the words of Goldilocks) just right.

Today, NetSuite announed its NetSuite OneWorld for SAP. This product has pre-built connectors to the SAP R/3 Enterprise product that many global 500 firms use. The NetSuite software permits plants, divisions, remote operations, etc. of a conglomerate to easily connect to the mothership’s SAP application suite without requiring each operational entity to be running on the R/3 solution.

In a briefing I had with NetSuite about this, I also learned that their solution also contains consolidation and multi-currency restatement capabilities. This permits a multi-national to see all of their non-SAP businesses in a consolidated, common currency view.

SaaS based applications do change the landscape and require a rethinking on how large, global or multi-nationals should approach their IT ERP deployments. Is it time for your firm to re-visit its strategy?

April 2nd, 2009

Compuware’s New Application Portfolio Management Accelerator

Posted by Brian Sommer @ 10:23 am

Categories: Implementing Technology, PPM - Project Portfolio Management, PSA - Professional Services Automation, Software Development, Software Vendors, The Application Software Buyer, The Applications Market, software. applications, vendors

Tags: Software, Information Technology, Compuware Corp., Portfolio Management, Strategy, Tools & Techniques, Management, Brian Sommer

Tying PPM and APM Together

Compuware recently briefed me on their new ChangePoint Application Portfolio Management (APM) product. Here’s my quick review.

The Business Problem

CIOs and the IT departments they are responsible for often spend very little of their budget on new development, implementation or upgrade projects. When they do, there are a multitude of products (most notably, Project Management and Product Portfolio Management (PPM)) to help them decide which projects to undertake, how to staff each and how to report the status of these initiatives.

If typical, most IT department budgets are spent keeping the lights on and supporting the application software they already have. There are a number of different decisions that must be made regarding these application portfolios. Decisions such as:

- When should this application be retired/replaced?
- Is this application no longer cost effective with regard to vendor maintenance?
- What can be done to reduce the ongoing operational and support costs associated with this product?
- If company revenues and the IT budget decline, what options does IT have with regard to the application mix it possesses?

IT groups, especially those that manage multiple data centers and numerous applications, need a better set of tools to help them make the tough, business calls. A fact not lost on many IT leaders in this economy.

APM – In General

APM allows IT groups to make a number of operational and budgetary decisions regarding their IT application portfolio.

APM tools should work with PPM software and together these should accommodate 99% of the application spend within a firm. A total spend visibility is needed so that more intelligent decisions can be made when it comes to the usage of scarce shareholder capital.

Over time, APM technology should help a CIO identify opportunities to rationalize their IT application spend, reduce redundant or unnecessary maintenance expenditures and free up more of this operational spend for more strategic initiatives.

It’s this changing of the spend, from operational to strategic, that could be APM’s best value creator for IT shops and the firms who employ them.

Compuware’s APM Accelerator

Compuware’s solution effectively utilizes an inventory card for each application within a firm. This record captures a number of criteria about the application. That data is then crunched against Gartner’s TIME framework for assessing applications. Potential redundancies, questionable upgrade decisions, etc. can then be surfaced and dealt with quickly.

The software is part of Compuware’s Changepoint PPM solution set. Like the PPM tool, the software is designed to provide top executive visibility into software portfolios and the economic decisions that affect them.

Changepoint APM screenshot

One key input into assessing application help is the use of user survey data. The software polls end-users to understand how well an application is meeting the needs of it users. Obviously, this helps change IT priorities re: upgrades or software replacements.

The APM Space

The market needs these tools (and more of them). Too much of the IT budget is spent here and too little visibility exists on some of these costs. I look forward to second and third generation APM products. These products would provide even deeper dives into software contracts, maintenance agreements, outsourcing arrangements, outsourcing service level agreements, etc. Let’s get more of the IT spend into these tools.

But, I’m impatient. Let’s see more IT shops get this far and do so with a toolset more advanced that a couple of spreadsheets.

Finally, I am aware of other firms developing APM capabilities. This should trigger a wave of innovation and value creation within the PPM and, possibly, PSA (professional services automation) space.

March 11th, 2009

The ROI needed to sell software/services

Posted by Brian Sommer @ 9:11 am

Categories: Marketing, Professional Services, Selling & Marketing Software, Selling & Marketing Software, Selling Professional Services, Software Marketing, The Application Software Buyer, The Applications Market, sales

Tags: Prospect, ROI, Sales Strategy, Sales Force Management, Sales, Brian Sommer

(Hint: It must be substantial and believable)

I do a lot of sales and negotiating training, and contrary to the current economy, it’s becoming a brisk bit of work. That said, there’s often a tough sticking point for many technology and service firms: crafting compelling ROI statements and tying these to some burning platform issue that motivates buyers to move NOW!

Yesterday, I saw an ad that Initiate Systems ran in the Chicago Tribune. Initiate makes MDM (Master Data Management) software and their ad copy identified these ROI statements:

- Saving $10,000/month by eliminating 1,000 pieces of returned mail daily
- Reducing days sales outstanding, saving $4 million annually
- Improving accuracy of revenue recognition and reporting, translating to $47 million in productivity gains

Amazingly enough, too few technology or service providers can do what Initiate stated. They can’t offer convincing proof of the difference their efforts or products can make. Instead, most firms tell prospects unconvincing attributes about themselves. They subject prospects to endless, narcissistic slides about themselves. Slides with old bromides like:

- We only hire the best people
- We deliver value
- We have offices in 77 countries
- We have over 6200 professionals
- Over 200 firms use our products/services
- Blah, blah, blah

How Firms Pitch Poorly

Those egotistical, self-serving statements are unfortunate on a couple of levels. First, the vendor in question is probably pre-qualified and all of the restatement of qualifications just bores the listener. Second, the prospect doesn’t want to hear the vendor’s boilerplate, generic statements. No, they want the prospect to speak with them about the prospect’s business, its problems and specific methods to clear the issue.

Even when great sales people can show convincing (Note: there is a big difference between selling and convincing) data about a prospect and the financial magnitude of their business problem (or solution opportunity), it is not enough. No, the sales person must also light a fire, figuratively, under the prospect to get them to move on this issue now. This is called ‘creating the burning platform’. In an exercise I had a client complete two weeks ago on a potential prospect, the sales proposal team was stuck on the burning platform statement until one bright lad noted that the prospect was wasting $120 million/month on the wrong advertising going to the wrong demographic and generating little of the company’s much needed sales. That number is hard to get out of any client’s mind and it framed the rest of the sales discussion handily.

If your sales efforts in this economy are flagging, take a critical look at your sales practices and proposal materials. If it’s ego-centric, generic and vague (with regard to value delivery), it won’t work in a tough economy. Prospects today are sitting on their scarce cash reserves and won’t pry open their checkbooks unless you can convince them that:

1) their firm has a real problem;
2) this problem is one of this executive’s top 3 business problems;
3) you absolutely understand this problem;
4) you possess a solution that will solve the problem; and,
5) you can deliver the promised value

Many of the projects that get green-lighted in a tight economy are those that solve break/fix matters. Discretionary (aka nice to have) projects are the ones to get deferred or shot down altogether. Sometimes all a good service or software firm has to do is better understand the prospect and educate them on the materiality of the project. The more your proposed project is seen as a break/fix necessity (and not a discretionary matter), the more likely it will get approved.