INTELLIGENT SYSTEMS
Volume X,
Number 2 June, 2003
Conflicts of Interest
Sometimes information technology consulting can create new problems not previously expected. In other words, many large consulting firms have formed “strategic alliances” with well-known software companies, such as Oracle, Computer Associates, SAP, PeopleSoft and J.D. Edwards forming a software industry version of the military-industrial complex. Since they are representatives of these products, they compromise consulting independence and objectivity. A lucrative sale of the software product, and the consulting hours to implement it, may become the focus instead of the real business goals of the client.
In addition, for the
same reason a family will design and own a custom built home instead of leasing
a manufactured cruise ship, a business may custom build software and have
ownership instead of leasing a system off-the-shelf. The cost can be much less and they have control. The following is a very good article from
the ITWorld.com web site newsletter section and explores the consequences of
this business problem in more detail.
Companies recoil
from software overspending
Investing in technology without adequate analysis of
business requirements, "buying ahead" for planned future rollouts
that never happened, over engineering networks and data centers, and failed
multimillion-dollar corporate wide ERP installations have burned many
organizations in recent years. Many companies are still "digesting"
major technology investments -- rolling out systems that have been deployed in
pilot programs and redesigning work processes to reap value from new software
that they have installed. As a result,
many companies are now taking a much more skeptical view of technology
investments, requiring thorough analysis and justification before approving new
projects.
"Fifty
percent of ERP installations are only marginally successful," says META
Group analyst Dale Kutnick. "People are frustrated because they do not see
much ROI for many of their major investments."
These
frustrations are a hangover from the "me too" buying binge that began
in the late 1990s with Y2K fears.
Organizations are now realizing that they spent millions on software on
the basis that "everyone needed it" or that someone thought it was a
good idea without performing "Business 101" due diligence --
analyzing business needs, identifying expected ROI, and enabling accurate
measurement of benefits.
Software
upgrades exacerbate the frustration.
They cost more money for license purchases and retraining of support
staff and, in some cases, end-users.
Too often, these upgrades provide few benefits in terms of productivity
or enhanced functionality -- and the software that is being upgraded may
already be stalled in terms of delivering tangible value to the corporation.
Some
major software vendors, selling now to disillusioned customers in saturated
markets, are strong-arming users into upgrading anyhow by discontinuing support
on older versions or, in some cases, attempting to force users to sign
contracts requiring that they "stay current" with the latest version
of the software (or pay significant future upgrade charges). Microsoft is a prominent offender in this
area, but Oracle, CA, BMC Software, SAP, PeopleSoft, et al. also use these
tactics.
Many
users are suffering severe software indigestion. For instance, many companies "bought ahead" in CRM --
purchasing large numbers of licenses in anticipation of eventual rollouts. Siebel has grown into a $2B company on the
basis of such sales. However, most of
our clients are still in the early stages of their CRM installations, so that
license fees anticipating early corporate wide rollouts were wasted. Instead of
"buying ahead" for eventual rollouts that may never happen, we
recommend that organizations limit software license purchases to seats that
they need in the short term.
We
are seeing some indications that vendors of monolithic applications are
reacting to the new market dynamics.
For instance, i2 is promising that it will repackage its supply chain
applications into easier-to-digest modules based on a Web services model. SAP also promises eventually to create a
modularized version of its monolithic ERP solution. We believe Siebel and other vendors will eventually be forced to
rewrite their applications into a modular format or see their markets dry up,
leaving them to attempt to survive on shrinking revenues from maintenance fees.
Despite
the reaction to past spending excesses, some companies are still making similar
mistakes. For instance, some
organizations that use Lotus Notes are making “strategic moves” to Microsoft
Outlook or vice versa based on perceived differences in the long-term direction
of technical development between the two packages. “They are spending millions, and when they are finished,
basically they will still have e-mail and calendaring,” says Kutnick.
However,
companies should avoid overreacting with knee-jerk negativity to prospective
technology investments. In fact, the
current atmosphere of retrenchment provides opportunities for firms with strong
planning disciplines to move ahead of their competition by making technology
investments that will cut their future costs and increase the value they
provide to customers.
“There
is an irony to Wall Street and industry analysts now joining the crowd to decry
past software spending as misguided,” says Kutnick. “Two years ago, they were
among the loudest cheerleaders. The Wall Street analysts were pushing software
sales to jack stock prices up.”
To
avoid being unduly influenced by ebullient market hype or gloomy obsession with
cost cutting, users should approach current and planned future software
purchases as holdings in an asset portfolio and apply asset management analysis
tools to their software decisions. They
should recognize that software, like hardware and other assets, has a life
span. In some situations, the enterprise
will benefit from being near the leading edge, while in other instances it can
save money and minimize risk by staying with proven, trailing-edge platforms.
Instead
of blindly slashing software budgets, organizations should identify how
existing assets and proposed purchases map into the three basic portfolio
management investment categories: run the business, grow the business, and
transform the business. While avoiding
software purchases based on amorphous promises of strategic benefit far in the
future, companies should be prepared to make investments whose future value contribution
has been quantified and balanced against the accompanying risks.
META Group analysts
Jack Gold, David Cearley, Val Sribar, Mark Coggin, and Dale Kutnick contributed
to this article.
Monks and Software
Development
By
Tom Chenault
With due care, we use proven software tools to develop our systems quicker than more traditional firms and their methods. We do this with the “prototype method.” In other words, we will build prototypes, which are strongly reviewed by the client in regularly scheduled meetings. With this interaction between client and consultant the project will move in a positive direction because both sides understand all the changing issues in detail with a lot of teaching going on. If something is not quite right or takes longer or less time than expected, then everybody knows why that very day and the issue is resolved before it becomes a problem.
There are no misunderstandings. The reason why most software projects fail is because of a lack of communication trying to develop the one big solution all at once, or the latest proven software tools are not used.
Often times we are surprised how some organizations
are still not taking advantage of the higher end database and Internet tools
that we use with our prototype philosophy.
Out of the fear of the unknown or self-preservation many organizations
are not ready to make this commitment.
Rapid Application Development (RAD) database systems automate computer
programming and do not force management to hire large numbers of programmers or
go off shore for cheaper programmers.
Internet software will automate the sales function
along with cost cutting in back office order entry. Why are several companies still in the dark ages regarding these
tools? This is really nothing new. We can go back to the dark ages to explain
why there is always resistance to change regarding technology.
In the year 1450, an innovative entrepreneur named Johann Gutenberg developed a rich decorative typeset modeled on the Gothic handwriting of the period. This project took fourteen years of prototyping and incremental changes before it was finally finished. More importantly, he perfected the concept of letterpress printing, fulfilling the needs for more and cheaper reading matter. One major work became known as the Gutenberg Bible, but not before serious confrontations with many employed papal monks who were producing Bibles one-by-one by hand.
Out of self-preservation, the monks ruled Gutenberg’s printing machine as blasphemous, expensive, and unsafe. They may have even cited security and data integrity as other judgmental criteria. The priesthood (upper management) accepted the monks’ explanation for a long time. Later, they finally realized that this first form of word processing could rapidly spread the “Word” to a wider audience. Of course, a wider audience meant much larger collections and early retirement. Six user-friendly Gutenberg presses working simultaneously could process an unheard of 20 to 40 pages per day. Therefore, mass marketing through technology was a major factor in making Christianity the most popular religion in the world. Meanwhile, legions of monks, without unions or political lobbyists to protect them, were re-deployed as missionaries or underpaid gardeners. They missed out on a medieval Internet.
Some software programming tasks require a great deal
of inventiveness. However, a great deal
of programming is repetitive, giving programmers the same monk-like existence
of hand copying Bibles over and over again.
The right software tools can save management from hiring too many less
experienced programmers. This could
also stave off using off shore answers, which is usually not a good idea
because of the lack of control.
Quotes Worth Noting
“Education is learning what you didn't even know you
didn't know.” -- Daniel J. Boorstin