Monthly Archives: October 2012

It Doesn’t Matter How Strategic The IT Vendor Is …

This post originally ran on April 1, 2010, which is ironic as this post was as serious as you can get.
And, in case you haven’t figured it out yet, this is technology selection week as it’s that time of year when many of you will be renewing your technology solution provider agreements or looking for new ones. Since SI has already given you a lot of the secrets in these classic posts, I’m reposting them to set the foundation for my Technology Selection 2012 post. So be kind, refresh, and rewind.

It Doesn’t Matter How Strategic The IT Vendor Is … it matters how strategic the solution they offer is! I shouldn’t have to point this out, but after encountering a recent article in Intelligent Enterprise on the 10 most strategic IT vendors which basically just tooted the horn of the usual suspects (IBM, SAP, Microsoft, Oracle, Cisco, HP, Teradata, VMWare, and EMC), I feel that I have to because most of their primary offerings — namely operating systems, hardware, networking products, and virtualization software — are not strategic to your business at all! Even relational databases and ERPs on their own are not strategic anymore. Everyone and their dog has a database these days, and ERP is open source software now (think Compiere). You can even get a professionally managed solution with unlimited records in the cloud for as little as €99 a month from providers like Erply.

And just because no one ever got fired for buying IBM, it doesn’t mean it was the right decision. The value isn’t in the name, it’s in the solution that is being delivered and the returns you are able to generate. If SAP or Oracle was everything you need, why would
BravoSolution,
CombineNet,
DecideWare,
FieldGlass,
Global Data Mining,
Hiperos,
Iasta,
JDA,
all the way through Wallmedien, and hundreds of other companies have successful businesses when they all have solution offerings that are fundamentally based on the analysis of transactional data stored in relational databases? Because the “strategic” is in the advanced analysis that the big-name vendors offering old-school solutions don’t have yet, or only have through acquired solutions (as SAP has acquired Ariba and IBM has acquired Emptoris since this post first aired).

So don’t get suckered by the name or the market size. What’s important is what the solution can do for you and whether or not the vendor is financially stable and will be around to support you on it. If the ROI is there and the vendor’s not going anywhere, after confirming that the solution meets your (global supply management) needs, you go for it. Simple as that!

Federalist No. 21

In Federalist No. 21, Hamilton returns to the helm to discuss other defects of the present Confederation. His goal is to proceed in the enumeration of the most important of those defects which have hitherto disappointed our hopes from the system established among ourselves.

The next most palpable defect of the subsisting Confederation, is total want of a SANCTION to its laws. The United States, as now composed, have no powers to exact obedience, or punish disobedience to their resolutions. There is no express delegation of authority to them to use force against delinquent members. As a result, the Confederation provided us with another example of an extraordinary spectacle of a government destitute even of the shadow of constitutional power to enforce the execution of its own laws. This puts it in a weak position relative to the powers of Europe.

The want of a mutual guaranty of the State governments is another capital imperfection in the federal plan. This is a rather sad state of affairs as, without a guarantee, the assistance to be derived from the Union in repelling those domestic dangers which may sometimes threaten the existence of the State constitutions, must be renounced. Usurpation may rear its crest in each State, and trample upon the liberties of the people, while the national government could legally do nothing more than behold its encroachments
with indignation and regret.

The principle of regulating the contributions of the States to the common treasury by QUOTAS is another fundamental error in the Confederation. Not only does this result in an inadequate supply of the national exigencies, but it can weaken the overall economy. IN addition, since the wealth of nations depends upon an infinite variety of causes, this implies that there can be no common measure of national wealth and, of course, no general or stationary rule by which the ability of a state to pay taxes can be determined. As a result, the attempt to regulate the contributions of the members of a confederacy by any such rule, cannot fail to be productive of glaring inequality and extreme oppression. The inequality would of itself be sufficient in America to work the eventual destruction of the Union. The reality is that there is no method of steering clear of this inconvenience, but by authorizing the national government to raise its own revenues in its own way.


The suggestion put forth is that these taxes should be levied on articles of consumption, as they contain in their own nature a security against excess. They prescribe their own limit, which cannot be exceeded without defeating the end proposed.

Why Your “Peers” Buy Stupid Products


Since we’re on the topic of technology acquisition, which for many of you translates into SaaS renewals, it’s a great time to dig this post up from the archives, that was originally posted on 6-Jan-2010, on why your “peers” buy stupid products because it’s a great education on the pitfalls you could fall into if you lose sight of the goal.

For a while, I was thorougly confused as why your not-so-enlightened peers (who aren’t the smart and sexy leaders and innovators that you are, as they don’t constantly educate themselves and read industry leading blogs like this one) buy stupid products. While there are a number of great products out there, which I attempt to profile here on Sourcing Innovation as often as circumstances permit, there are also a number of bad products out there (which fall into the “products I don’t cover” bucket, which, to be fair, also contains “products of vendors who still think new media is a fad not worth spending time on” [even though they should probably be covered on SI]). This mix includes some really bad (installed) products that, year after year for reasons that escape me, keep selling, often for obscene amounts of money — especially when you consider what these products actually do compared to what newer, leaner, meaner, SaaS products do for a fraction of the price.

After a few enlightening conversations with some old pros and highly intelligent consultants (who shall forever remain nameless to protect the innocent), I have realized it is either because

  1. the buyers are timid field mice afraid to make a mistake;
  2. the buyers are lazy and inept, they know it, and they don’t want anyone to find out; or
  3. the buyers are yes-men and work for managers who are morons and
    • way too easily impressed by flash without substance; or
    • way too easily impressed by name dropping; or
    • (real) good buddies with (a member of) the vendor management team (who they just happen to be sharing a hotel room with on a regular basis)

In the first case, the buyers often look for the biggest vendor in the space who currently has the “best” reputation and simply use the “Well, no one ever got fired for buying IBM” excuse, replacing IBM with the “big” vendor of the day. This isn’t always bad, as some of the current “big” vendors do have some pretty darn good solutions, but it often is a bad choice because not all products in their “big” vendor solution suite are equal, and, most importantly, even the best product the “big” vendor has might not be appropriate to a particular company’s situation. An MRP won’t solve your problem if what you really need is an on-line RFX and e-Auction tool.

In the second case, the 9-to-5 buyers — who give intelligent, hard-working, and successful procurement professionals like you a bad name — are pretty sure that a good product would quickly uncover the millions of dollars of waste from unmanaged or non-compliant spend, or quickly uncover the lack of process that allows maverick spend to run unchalllenged, or quickly uncover the sheer amount of work they are not doing but should be (like managing spend, sending out RFPs, doing post-bid briefings, etc.) and want to do everything in their power to make sure that they get a solution that is as inept and inefficient as they are.

In the third case, even if the yes-men identify, and want, a good solution, Maury the Management Moron steps in and strongly recommends the worst solution identified (and indicates the buyer’s job could very well depend on making the “right” choice) because:

     

a) it has a nice flash interface with (useless) dashboards and colorful graphics-rich reports that make his under-developed brain go “ooh” and “aah” (while failing to tell you anything that you didn’t know already, like you spent 800M and your top 10 suppliers included 8 of the suppliers you regularly send million-dollar purchase orders to)

b) the company has a lot of “big-name” competitors as customers and / or a number of “big-name” companies your CXO really admires and, therefore, must know what they’re doing and be the right choice (even if they haven’t upgraded their solution in 5 years).

c) the company “obviously has a superior product” even though the real reason is that the company has one or more senior managers that are your boss’ golf buddies and/or hotel room buddies.

And sometimes, it is a combination of these reasons. The buyer knows he is lazy and/or inept, isn’t overly concerned with improving himself, but desperately wants to keep his job (which pays very well considering the amount of effort he actually puts in). He also knows he works for Maury the Management Moron who is easily impressed by flashy dashboards and pretty reports and so chooses a solution that will simultaneously make Maury’s mouth moisten while failing to uncover anything that could be embarassing and jeopardize his job in anyway.

For example, for our timid buyer with Maury the Management Moron for a boss, it would be really bad if he acquired a modern contract compliance system when he recently spent Millions on the current EIPP system two years ago and just found out it contains a big gaping hole, that a few of his suppliers have been exploiting since it was installed, that allows the supplier to charge whatever they want on substitutions and holds, regardless of what contract pricing is in place. For example, he just found out that if:

  1. he punches out for a SKU and
  2. the vendor is out of stock and
  3. the vendor places the order in the “on hold” queue because they don’t want to reject the order then
  4. when the SKU arrives and
  5. the vendor brings up the “on hold” order to “fill” it
  6. the price field isn’t carried forward to the “active” queue so
  7. the vendor can enter any price it likes, which is usually “list” and
  8. the system doesn’t do an invoice-price-vs-contract-price comparison, allows the “list” price, and doesn’t even flag it as pricing that violates the contract.

So, because he thought a few million would buy him perfect software (and didn’t do his homework), he just assumed everything was wonderful, paid what the vendors asked, and lost millions over the last couple of years. He’s not entirely sure how many millions, but is fairly certain that 15% to 20% of purchases were made off of contract pricing. He can’t let the boss find out! (Even though there are specialist consultancies out there who are great at finding these overcharges and helping their clients recover their money.)

Finally, he knows that his boss, easily impressed by flash, is too dumb to realize that dashboards, static reports and “real time alerts” are — when you really think about it — incredibly stupid ideas at the core. For example, so what if the boss can instantly see that 90% of shipments are on time. All that tells you is that 10% of the shipments are not on time. It doesn’t tell you what shipments, to whom, why, and more importantly, what to do to fix the situation. A report that you spend 10M with Wesley’s Widgets isn’t very useful. If that’s all I have, here’s how the negotiation is going to go. “We demand a 10% discount because we spent 10M last year.” ‘So? The price of steel went up 20% … you should be thankful we only raised prices by 15%!‘ “Uhm … erm …” If I don’t know what % was on steel parts, and what % of cost was steel in those parts, I can’t negotiate anything meaningful. And how useful is a “real time alert” at 3 am in the morning that tells you that your container is stranded 500 miles from port because the 3PL forgot to transmit the manifest 48 hours in advance and the carrrier isn’t allowed to enter American waters. Not! You need a system that tells you what you have to do before the order is shipped.

Federalist No. 20

Federalist No. 20 sees Hamilton and Madison continue to address the ongoing issue of the insufficiency of the present confederation to preserve the union.

In this essay, they discuss the United Netherlands, a confederacy of republics, or rather of aristocracies of a very remarkable texture that confirm all the lessons derived so far. Their review of the celebrated Belgic confederacy finds that while, on paper, everything sounds like the confederacy should be strong, in reality, there is imbecility in the government; discord among the provinces; foreign influence and indignities; a
precarious existence in peace, and peculiar calamities from war because it is not a even a true confederacy of republics, but a confederacy of aristocracies that ultimately answers to the stadtholder, an executive magistrate who is also a hereditary prince.

Then they discuss the union of Utrecht, which also reposes an authority in the States-General, seemingly sufficient to
secure harmony, but the jealousy in each province renders the practice very different from the theory.

From here they end the piece with a discussion of the province of Holland, the the wealth and influence that allow her to furnish quotas, without waiting for other provinces in the union, and then obtain reimbursements from others by frequent deputations, sometimes at the point of the bayonet. Furthermore, it was often compelled to overleap its constitutional bounds. This demonstrates that a weak constitution must necessarily terminate in dissolution, for want of proper powers, or the usurpation of powers requisite for the public safety.

But regardless of your view, the reality is that, in Holland, and the other provinces in the weak union to which it belongs, the unhappy people seem to be now suffering from popular convulsions, from dissensions among the states, and from the
actual invasion of foreign arms, the crisis of their destiny.

That’s why Hamilton and Madison make no apology for dwelling so long on the contemplation of the federal precedents. Experience is the oracle of
truth; and where its responses are unequivocal, they ought to be conclusive and sacred. The important truth, which it
unequivocally pronounces in the present case, is that a sovereignty over sovereigns, a government over governments, a
legislation for communities, as contradistinguished from individuals, as it is a solecism in theory, so in practice it is
subversive of the order and ends of civil polity, by substituting VIOLENCE in place of LAW, or the destructive COERCION
of the SWORD in place of the mild and salutary COERCION of the MAGISTRACY. That’s why one union, one nation, is required.

Vinnie Mirchandani on “The Costs of Software Renewal” (Repost)

This post was originally posted there years ago today on October 22, 2009.
Given that three years is a typical mid-term renewal timeframe, I think it is
important to review Vinnie’s advice as renewal season is now upon us!


Today’s guest post is from Vinnie Mirchandani of Deal Architect and New Florence. New Renaissance. Vinnie, a founding member of the Enterprise Advocates, is a tireless advocate of trends and technologies that can help buyers get more for less.

Ray Wang gives us a timely reminder that “Labor Day (US & Canadian Holiday) traditionally marks the end of summer BBQ’s, the beginning of the fall conference season, and yes, the time to begin a review of your software maintenance contacts that expire at the end of the year.”

I would say start with that — and then keep going. Take a look at all of your contracts that renew through the end of 2010.

Several good reasons to this include:

  • Establishment of a savings target on the total maintenance spend for 2010.
    Have your staff focus on every software contract, especially those that have been “auto-renewed” for years now because they were “small” and fell under attention thresholds. If you make the overall target part of a compensation plan for key IT and procurement staff, you’ll quickly find that Thar’s gold in them yellowing software contract files.
  • Multi-year maintenance deals which looked good when signed may now be overpriced.
    Current market trends are driving the cost of maintenance down, especially through third party services. Don’t assume they cannot be re-opened. (See Marc Freeman’s tips for renegotiating with integrity.)
  • If you don’t start now, you might not finish the renegotiations in time.
    Don’t overestimate the ability of your team to get organized — or underestimate the ability of the vendor team to stall — beyond the end of the year. If maintenance expires, and something goes wrong, you could be at the vendor’s mercy in renegotiations. Formally document your new process and let the vendor know next year will be different. Furthermore, be sure to allow 6 months for the renewal negotiation next year.
  • Even if you are looking to migrate, you will still need incumbent vendor support until the cut-over occurs.
    This holds true whether you are looking to migrate away from the incumbent vendor to SaaS, or to third party maintenance, or to do-it-yourself support (and readers of Deal Architect will know I am a broken record on the subject of considering all of these options). This will likely push you into 2010 planning and funding.

So, use Ray’s call for intensity over the next 3 months and build momentum for another 12 months. The payback will be huge — software maintenance continues to be one of the items on the IT menu with the most “empty calories“.

Thanks, Vinnie!