Goodbye big buys of yesterday

Any time you hear an enterprise software vendor wax philosophical about the tremendous economic impact his company's products are having on customers, odds are good that the executive in question only spends time with a highly select minority of their customer base.

Most of that time the executive in question is a CEO who focuses most of his energy on the top 10 customers willing to pay premium dollars for support. So it's understandable that executives across the industry are a little more than confused about the state of an economy that should, in theory, be enjoying massive productivity gains brought on by investments in information technology.

But if you leave the realm of mahogany offices, it becomes quite clear what has gone wrong. The majority of companies that invested in large-scale enterprise application projects have not seen the promised returns because most of the software they bought is underutilized.

Everything starts with the best of intentions, with customers paying millions of dollars up front for software licenses. But after the software is deployed, only a small percentage of the licenses are used to their fullest potential. The software is unusable and only supports narrowly defined business processes.

This "buy big, deploy small" phenomenon is at the heart of what plagues the industry -- and the economy as a whole. Customers no longer have any faith in applications vendors and the consultants that sell their wares. In fact, this issue has reached epidemic proportions. Most customers will never buy big again regardless of the economy. Instead, they will insist on modular rollout of projects in which their return on investment is clear and present rather than theoretical and remote.

In effect, this creates a corollary of the Powell Doctrine for IT organizations, where any action taken must have defined goals and a timetable in order to prevent creating a quagmire along with all the associated carnage.

In the meantime, IT organizations are busy reducing the number of vendors they deal with. Instead of having 10 software suppliers, they are opting to save money by reducing the number to, say, five. The savings in paperwork alone justifies the effort because most of the vendors never delivered on their productivity promises in the first place.

At the end of the day, this move to regain control over vendors and their offerings boils down to quality. As long as software vendors continue to create bloated, complex software with lame user interfaces accompanied by onerous licensing terms and hidden costs that overshadow productivity gains, the industry will not recover.

Alas, most software executives are still addicted to old business models and mistakenly hope for a general economic turnaround that will once again allow them to ignore the fundamentals of the business. But the companies that realize those days are never coming back and can provide quality software at a reasonable cost will be the next industry titans and leaders of the economy.

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