In 1998, Spencer Johnson wrote the well known parable or business fable: Who Moved My Cheese? “An Amazing Way to Deal with Change in Your Work and in Your Life”. It describes change in one's work and life, and four typical reactions to said change by two mice and two "littlepeople", during their hunt for cheese.
Similarly, I’ve been commenting in my preceding blog entries on how the “cheese” is getting moved for our I.T. departments and functions by an evolving business landscape, and that the industry is forced to re-evaluate itself due to this changes in circumstance. A change I cynically believe has been self induced.
I tried to show how we as I.T. Managers have to contend with the imminent changes we face organizationally and technically as a result. As I.T. functions we are mandated to prepare for a demise in the way we’ve become accustomed to for delivering I.T.. It is time to get ready for something new, and better.
Our vendors indeed face the same challenges.
I comment and draw from my day-to-day experiences when contemplating subject matter for my blog (sometimes with eventful and surprising outcomes when the unintentional collaborators discover their part in inspiring a new insight). The entry for this week is no different. It draws from another “cheese moving” experience with which I was confronted first-hand, while interfacing with an application vendor, and a reputable I.T. infrastructure provider.
The one gets “it”, and the other not yet, and possibly never.
In this blog entry I will cover the typical “classical” vendor landscape perspective discussed earlier in my writings. However, this time I hope to show that the vendor landscape model is still valid, but that the emphasis has been shifting to serve Generation 3 ready organizations moving towards business integration, managed service reliance and outcomes based delivery. Software as a Service is leading the way with rapid solution adoption and with day-to-day operations and support services included. But, there is more to come.
Some vendors will adjust their offerings to the new demands, and others won’t. Those that do, will have a better future and I argue, will prevail. Those that don’t will be relegated to the badlands for a slow and sometimes not so slow demise.
The question that begs is: Just how should vendors adjust their offerings to meet these demands? And, what should they do with I.T. departments and executives that just don’t get “it”.
The Lay of the Land
Vendor offerings can roughly be classified into four distinguishable offerings with a fee charging approach that varies between charges for time and materials to charges for business outcomes.
The four offerings include: Resource Provisioning or Consulting, Solution Implementation and Modification, Solution Operate and Support, and lastly, Business Process Delivery.
Resource Provisioning, Contracting, Body Shopping, or disguised in a more “civil” cloak by some Companies as “Consulting” is the first of these offerings. A resource is provisioned on a fee per hour or day with a promise, or potential outcome for the client.
The contractor or consultant is typically engaged as a specialist temporary arrangement and managed under the client’s prescribed processes, direction, and is mostly required to use the client’s tool landscape.
This offering forms a large part of the prevailing vendor landscape with margins ranging from 5% from recruitment outfits, to 250% from the big consulting firms, depending on the scarcity and demand for a particular skill set (and their value they profess to contribute to your business).
In the next evolution of the I.T. service landscape this offering is bound to come under pressure as organizations move more towards outcome focussed service procurement, and away from in-house, and custom built or configured solutions.
The client’s reliance on temporary specialist technical skills will reduce. The client will leave it to the service vendor to procure, organize and manage the average day-to-day I.T. contractor instead of contracting the labour for in-house initiatives. Vendors will do more work for the clients, so vendors will require this temporary labour to provide flexibility to their delivery.
The service vendor will integrate this skill into defining and delivering their service outcome and offering. The niche opportunities that will remain for contractors or consultants are Advisory Services on Strategy, Business Architecture and Management Services. These consultants will contribute to crafting and motivating the future state for the client’s organization. Executing the state will be left to a larger vendor landscape under management provision by experts, internally and sourced external from the company.
The second offering of Solution Implementation and Modification is where a vendor is contracted to develop, configure and implement a custom configured solution in software or infrastructure. The solution is typically owned by the client. The vendor does it under a fixed price, and owns the majority of the risk associated with success or failure of the engagement.
Due to the risk associated with meeting a client’s ever evolving requirements, vendors have typically shun away from this type of offering in favour of a less risky and more flexible time and material contractor provisioning model (as described above in the first offering).
For example: If one was to buy a house in this approach, the buyer will specify the expectation and the builder will have the responsibility, for a fixed fee, to build the house as per specification.
The alternative under vendor offering one, is when a builder has a reduced appetite for risk, and instead of building a house as per specification for a fixed price, it is more willing to fall back on the contractor offering by making its building skills available to the client to use as they see fit. It is up to the client to apply the skills of the builders, carpenters and project managers for building a house. The builder and crew is rewarded on a fee per hour basis. The risk is transferred back to the client - vendor offering one prevails.
Solutions for Business Outcomes
The good news is that with the advent of more mature standard industry operating frameworks it is becoming easier for vendors to offer outcome based solutions and customizations instead of bespoke custom and unique systems. This has become easier in customer relationship management, financial management, service level management, and others.
For example: A project management software vendor can now offer a feature set in its solution that is underpinned with as much as eighty percent or more common, industry accepted features and processes (PMBOK). This greatly reduces the risk, implementation time, and requires a lower level of customization. The client can fast track mature industry compliant business practices on solutions that offer uniform industry accepted functionality.
Vendors like SAP lead the way with configurable solutions that relies less on I.T. technical capability and software development and more on leading standard industry wide business process driven configuration with minimal client customization (still very expensive if one goes the customization route).
The same is prevailing now in the infrastructure landscape with networking, server, storage and even hosted desktop solutions being made readily available to clients without the need for risky and costly implementation and customization cycles, or the need to procure and own technology. These are referred to as Managed Services or Selective Outsourcing offerings.
Where’s the Beef
It is in this part of the delivery landscape that I stepped into it recently.
I’ve engaged a professed ITIL Service Level Management solution provider for a rapidly deployable industry standard solution that requires minimal customization. And, in the event of a required customization it should make it easy enough for a non-technical person to execute. I was looking for a business outcome of Service Level Management and did not want to be concerned with the technology. It must just work.
Once the sales honeymoon came to an end, I discovered that instead, I got the all too familiar classical configuration platform with configurability up the yin-yang, and a professional services engagement that will see me come back for more frequently, often and routinely.
This approach just won’t do anymore, regardless of the vendor professing that their flexibility is their customers’ preference. It is my conviction that clients are tired of the professional service engagement. Tired of having to think through customizations where industry processes have already done the thinking for them. Tired of architectural superiority matches while it is all going to be out of date in two years anyway. And, tired of vendors selling flexibility in their technology to disguise their passion and desire for ongoing services revenue.
What customers want is a business outcome in business language, and technology that makes it accessible anywhere anytime. Simple, quickly and preferably without the I.T. department’s involvement.
Please I.T. people and vendors alike, get it!
With the new trend towards ‘Software as a Service” (SaaS), a provider licenses an application to customers as a service on demand, through a subscription or a “pay-as-you-go” model. SaaS is also called “software on demand.” SaaS was initially widely deployed for sales force automation and Customer Relationship Management (CRM). Now, it has become commonplace for many businesses tasks, including computerized billing, invoicing, human resource management, and service desk management, amongst other.
The beauty of SaaS is that it also addresses the third offering in the vendor landscape: Solution Operate and Support. The vendor provides the infrastructure, operation, maintenance and support overhead included in the solution and business outcome. No need for this to be done by the internal I.T. department anymore.
Customers gravitate towards these solutions because it provides easy and rapid access to business outcomes. It makes things simple. It offers a level of customization, but still retains its promise of obscuring complexity in favour of industry standard execution and rapid adoption.
The vendors that prevail are those that firstly meet these demands, but secondly set the tone for the evolution of the business outcome or industry in which it operates. If it is a Project Management solution vendor, they contribute not only through a tool that supports the practice, but they also help define the next evolution of the practice of project management. They make Project Management better. The same applies for vendors making CRM better, Warehouse Management, email better and more.
These are the solutions for the future, and no amount of data security scaremongering by the I.T. department will contain the deluge and migration towards a service where the promises are kept, and the outcome is already available the moment your credit card is processed. And, where the client’s I.T. department need not concern itself with any technical Operations and Support demands.
All that remains is to direct the mice to their cheese.
This brings me to my second vendor encounter the past week. I dealt with an infrastructure vendor that classically sell and implemented infrastructure solutions (servers, networks, etc.). They also provide outsourcing services for these infrastructural components.
The vendor is aware of, and is recognizing that the lifecycle and the nature of the sale is rapidly moving away from the technical, custom and locally installed sale towards the business outcome driven “give me the beef” sale.
They recognize that while the conversation with an I.T. department is still very much about the technology sale, that there is a new audience in town. This audience talks business outcomes with little regard to what the composition of the solution architecture necessarily contain.
Vendors are confronted with no longer selling to an I.T. department on the grounds of their supported or preferred technology choice, but rather to a business stakeholder with a service outcome in mind.
However, the vendor’s sales people are still distracted in interfacing their offerings through their client’s technical gatekeepers - the I.T. department.
They discovered that the very people they deal with in the I.T. department is under threat of being disenfranchised by an outcome based offering. The I.T. department and its techies will become obsolete thanks to an outcome based service.
It is natural that the technical I.T. folk will obstruct these engagements where possible as a result, and call the integrity of the solutions and vendors in question at every opportunity. The very nature of the command and control through complexity culture prevailing in the majority of I.T. functions, are being challenged by vendors, and thankfully by business stakeholders recognizing the issue as well.
This realization leaves the vendor with some soul searching on not only selling their current offerings in a different manner, but also coming up with new services that are meeting the demands for business outcomes. The vendor will have to evaluate and accommodate the impact this is bound to have on their own delivery organization when they assume the service outcome, and therefore business risk, for their clients.
In the past, core platform decisions were usually deferred to the client (even in large outsourcing deals). In managed services, the platform decision is only relevant to the client in so far as it supports the contracted business outcome.
In reality the client should not be bothered with it. The client should not necessarily be concerned about the brand of the devices in the network, as long as the business outcomes of throughput, reliability and security is met. The same applies for storage or servers.
For example: When a mobile phone network access service is sourced, no consumer has any desire to know if it is Ericsson or Motorola providing the technology for the network. When processing is provided by Amazon’s Cloud Services there is no real reason to know if it is done on HP or Dell servers.
The technology decision becomes even more important to the service provider’s business because it underpins the maturity of their offering, and impacts their own cost structure, growth and competitiveness in the market.
Clients mostly don’t care about the platform, as long as it is up, secure, doing what it is contracted to do, and if an option is available to extract from the vendor’s service and move it to another competing service relatively easily.
There are two winners in this story, and one loser.
The first is the solution provider that positions for industry standard business process and service execution on completed (slightly customizable) solutions.
These are solutions that are available to clients for rapid adoption, without the need for professional services engagements (or an I.T. department’s involvement).
These solutions come underpinned with all the required infrastructure, operations and support services. These providers not only provide the solutions, but also contributes to evolving the industry practices its solutions supports.
The second winner is the client signing up for these service outcomes from above solution providers. These are clients focussed on their core business, leaving the experts to do the solutioning.
These clients rapidly evolve their business practices thanks to mature, industry leading (true industry leading) solution providers, that anticipated their needs.
There is one loser in this story. It is the I.T. department that doesn’t realize that their cheese has moved.
Your comments and views are always welcome.
Hendrik van Wyk