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I grew up on a 1000-acre wheat farm in central Idaho. It's hard business, with simple rules. You prepare the soil, plant the seed at the appropriate depth, nurture its growth, and reap healthy wheat. When you deliver your product to market, you get paid: The better the wheat, the bigger the payday.
I wish I could say the same about the enterprise software business. Instead, I see an industry built on promising too much, delivering too little, and answering to shareholders instead of customers. Software vendors and a cast of accomplices—from industry analysts to systems integrators—are too worried about their profits and losses to deliver quality products on time and on budget. Sometimes the shortfall is the result of honest attempts at good business, other times it's a matter of greed, but the customer is always the big loser.
Why does enterprise software have such a black eye with customers? Why are the statistics on costs, implementation times, and success rates so abhorrent? Why does the industry not guarantee the best interests of the customer? There are several reasons, and it helps to understand each accomplice's motivations and pressures.
As a company becomes more successful, it is increasingly driven by the search for bigger profits and market share. Making more money more quickly and adding customer names to a list becomes the focus and the challenge. Time initially spent on customer care gives way to achieving short-term financial and marketing results. In farming terms, too many enterprise software companies spend too little time preparing the fields, nurturing the crop, or even checking its quality before delivering it. The company ends up cutting corners, and quality suffers.
The problem starts in a crowded market with lots of noise, where vendors are not heard unless they shout something extravagant and shout it loudly. And there's no shortage of shouting—the industry is accustomed to claims and product announcements as early as 18 months before a company delivers anything remotely like what it promised. In addition, there is a many month grace period after the delivery, if it ever comes, where customers go through the effort of implementing the technology. Often the costs of the effort make it impossible for the project sponsors to admit defeat.
Early on, vendors can make promises to a small number of customers and for the most part keep them, because there are no problems of scale. So, the money in the beginning comes fairly easily, and the margins are good. The vendor has little incentive to hoe the tough row and build infrastructure or scalable business practices. The allure of the easy way takes over. Revenues of $2 million, $10 million, and even $20 million are feasible, even for an unstructured company. Most companies, however, don't have the discipline to adjust these practices as they grow, making sure the customer is still the winner, once they can longer promise to do whatever it takes.
Companies enjoy this honeymoon of hype and sales and, when the realities of scale arrive, fall back as the rigors of real business issues such as product delivery, profitability, and customer satisfaction catch up with them. The shortcuts taken to push features out the door and the failure to build necessary internal organizational infrastructure such as MIS and human resources all place larger and larger hurdles before the company as it attempts to scale. It is a cardinal sin to fall behind the technology curve, because once behind it, the public markets don't grant a grace period for catching up.
Industry analysts are supposed to serve as advocates, helping to sort which options best fit customer needs. They get paid to predict the future. Some provide excellent advice and vision. Unfortunately, some analysts spend too much time judging vendors on financial health, feature/function checklists, and vision, and not enough time looking at a vendor's success or failure with active projects. The "morning after" effects (e.g., training and maintenance costs) that early customers endure can be the best indicators of a vendor's potential. But some analysts don't actually study such results.
Typically, industry analysts give advice in the form of, "Vendor X's product will have the functionality you are looking for, and the company is financially stable enough to be around in 5 years." Rarely do they advise that, "Vendor X's product typically costs 250 percent more than quoted, takes twice as long as predicted to implement, routinely meets just 60 percent of the objectives outlined by its customers, and requires three seasoned technical employees to maintain or modify." So, it is often times the companies with the biggest budgets with which to court the analysts that end up in good favor. This is not solely the fault of the analyst, it’s just a symptom of the marketing wars of the 90s, in that he who shouts loudest will be heard (and believed). Analysts, as "experts", should be holding vendors accountable for their claims, and including time, cost, and objectives obtained data from current customers. They should also include detailed studies of how businesses actually use technology.
The good consulting firms take the long-term approach to partnering with their clients. They understand that quick, low-cost projects foster repeat business and expanded reach within accounts. But there are the consultants whose search for profits is driven by one thing: billable hours. These consultants make money only when they're involved in a protracted project. Often, a successful large-scale project requires an integrator's expertise—but not always. An otherwise routine project can be drawn out to ensure work for the consultants.
When considering a consultant or systems integrator to work with, expect to see a solid project plan which includes timelines, costs, resources, and objectives. Integrators and consultants with experience will be comfortable being held accountable to delivering the specific results they promised.
Customer accomplices are the most culpable in the entire process. Faced with hard decisions about technical investments, customers welcome an easy solution—the mythical magic bullet. Unfortunately, there isn't one. Not all vendors and integrators operate philanthropically. Customers have to do a better job of asking themselves the tough questions and accepting the real answers. Customers have to take control of the decision process when buying enterprise software—by understanding their business processes, understanding the goal and the limitations of the system, and by checking references thoroughly—that's the only way they can stop the cycle that can conspire against them.
As the chief executive of a competitive enterprise software vendor, I have a vested interest in the course the industry follows. Therefore, I urge customers to hold the entire industry more accountable and raise the bar. I am willing to compete at that level. Here are a few key ways you, as customers, can hold the industry to a higher standard:
- Clearly understand your objectives. Know the business and technical needs of your system before you go shopping for software.
- Realistically understand your internal resources. Know the state of your current software systems and the money and time you can devote to integrating the enterprise software.
- Require and review the vendor's comprehensive work plans and estimates in writing. If a vendor hasn't thoroughly considered all the effects up front—from pre-installation work to training and maintenance—you'll end up paying for it later. Get specific contractual commitments from your vendors.
- Check references for vendors, analysts, and integrators. Ask for a complete customer list and see if past customers are happy. Inquire about what percentage of promised objectives the vendor has achieved. Find out whether the vendor has met cost targets. If you're working with analysts, ensure that they've looked at a company's successes and failures, as well as its potential.
Be informed. Be realistic. Know whether you are facing a quick fix or a major overhaul, and be prepared to pay for it. There are some outstanding industry analysts, consultants, and software vendors. Only the customer can reward this group and hold the alternative accountable. So remember, software, like any business, is about supply and demand. If you demand a better product, and the service and support that surrounds it, you'll get it. Otherwise—to use another, less tidy farming metaphor—as long as there's a demand for manure, it will be available.