Archive for March, 2010

Death of Enterprise IT startups?

Tuesday, March 30th, 2010

I had been mulling over writing a post about enterprise IT buying behaviour in relation to smaller vendors.  Then I spotted Joe McKendrick’s piece Why are enterprise IT startups vanishing?

Joe is bang on the money that enterprise IT has become so complex that startups are disincentivised.  With my CEO of Blue Prism hat on (we are not one of Joe’s big five), I thought I would add my thoughts to the debate.

Large enterprises like buying IT from large vendors.  Minimise the number of suppliers, and negotiate hard.  Reduce management and procurement costs.  Nobody really wants tangential relationships with small suppliers that might go out of business (or get bought by Computer Associates).

So enterprise activity, driven by corporate IT, has created rules and procedures.  A frustrated startup might think of them as guard dogs, fences, sentries and barbed wire, with the sole objective of keeping new vendors at bay.  IT calls this a supplier consolidation strategy and you can see why it makes sense on the face of it.

Even when a small vendor gets some limelight in a corporate account, they have to fund increasingly long and expensive sales cycles.  Free Proofs of Concept, deferred licence fees, an intricate (and near infinite) maze of decision makers to negotiate, and pressure from enterprise procurement to “recognise the reputational gain of working for us” – in other words drop price.

This is all bad for innovation because large vendors are not innovators.  They are not incentivised to innovate, nor agile enough to do so.  Quite the reverse.  So the enterprise actually loses out.  The lost opportunity of delivering real benefits by simply acting and delivering change quickly. Acting in this way may produce a small number of failures, but I believe that the overall benefit to the enterprise from increased agility and speed to deployment for the successful projects will more than compensate.

Nonetheless, startups need to acknowledge and accept that selling to the enterprise is much harder, much slower, and much more expensive than it used to be.  Investors have already realised this and diverted their funds towards companies in the Cloud, SaaS and virtualisation spaces because there is an apparent shortening of the sales cycle, partly by bypassing IT and selling straight to the business.  This leaves “traditional” enterprise IT startups struggling for funds, struggling for sales and struggling for recognition.

The good news for enterprise IT startups is, that it is now an underinvested space.  This, I believe, will create fewer but more exciting, and less competition bound, innovation opportunities.  In the end the economic case wins out.  If startups can find the most compelling of propositions, then corporate IT will ultimately adopt the innovation or have to find an alternative.  If I was investing right now, I would be looking for enterprise IT innovation.

Joe argues that most enterprises don’t have “anywhere near” the agility promised by SOA, cloud and Enterprise 2.0.  I agree that there is plenty of room for innovation and smart startups are the sparks that will create new fires in this space.

IT – Provider or adviser?

Friday, March 26th, 2010

There is an interesting article over at Outside the Box by Todd Biske.

If IT is providing less software and less hardware to the business as a result of industry trends towards SaaS, virtualisation, cloud etc, then what is left to “provide” other than advice.  Todd contends that whilst it is obvious that IT should play a more advisory role to the business, execution of that vision is harder than it first appears.

I happen to think that it is good for an organisation to buy SaaS et al through the IT function and that IT has a key strategic and advisory role.  I find it helpful to think of IT and the Business as a supplier and customer relationship.  For such a relationship to work, though, there needs to be a commercial element and competition.  In other words IT should have a clear recharging structure to the business – not just hide costs as IT overheads on the corporate P & L.  Equally the business needs to have the choice to buy IT elsewhere, if it feels that it can get better service or lower costs.

All things being equal, all but the most inept internal IT functions ought to be able to deliver IT services to the business most efficiently:

  1. because they are not under pressure to make a profit – merely break even
  2. because they have zero sales and pre-sales costs
  3. because they have intimate knowledge of the organisation

External suppliers (and I include SaaS and the like) do have some advantages, of course, such as providing a more flexible resource pattern to manage peaks and troughs, and being able to share expensive specialist resources (human and capital) across accounts.

One step at a time, though, and addressing Todd’s point about executing against the vision, I guess I am trying to argue here that if IT thinks of the business as a customer and starts acting as a supplier (with or without any commercial implications) then the advisory role is automatic.

This is one subject where I am in rare disagreement with Nick Malik.

Why IT and the business don’t trust each other

Wednesday, March 24th, 2010

Ask any business operations head what they think of their IT department and they will moan about IT being too slow, not connected enough to business strategy, too focussed on its own goals, too expensive, not addressing everyday business needs etc.

In truth, most experienced business heads are a bit more pragmatic than that.  They understand the IT side of the argument.  The importance of data integrity and security, system stability, centralised procurement of technology, coherent architectural strategy.

Whilst these are all very plausible and necessary requirements, the fact is that the speed of modern business requires operational responses measured in hours and days, rather than the months and years associated with traditional IT projects.

IT people are not dumb.  They recognised this ages ago.  Initiatives like SOA and BPMS are designed to provide business flexibility, speed of response, agility.  But these are major IT programmes in themselves and in business eyes can take too long to deliver even small benefits.  They can also be disproportionately costly, so the economic case only makes sense for major business requirements.  What about the 750 item (and growing) change list?

The business is coming under ever greater pressure to reduce headcount so the old option of simply recruiting a few more operational staff is no longer available.

The result is that well intentioned business ops people create their own solutions under the guise of “end user computing” but more likely referred to by EAs as “Rogue IT”.  Spreadsheets, local databases, emulator macros, even amateur VB programming.  All delivered without any control, governance or thought for future maintenance.  So, guess who gets called in to fix a “mission critical” system when the creators have moved on?

No wonder IT doesn’t trust the business to do IT.

The last thing IT needs is maverick business users creating their own solutions, so maybe they clamp down on end user computing, causing further frustration in the business.  A spiralling circle of distrust is normally masked by a resigned acceptance of “that’s just the way things are”.

Random quote I’ve heard from an operational head “IT have slowed the organisation down to a pace where we can’t react to business opportunities and it takes an age to get anything done”.

Random quote I’ve heard from an EA “Business Ops are continually doing their own skunkworks initiatives with no regard to data protection laws, system resilience, disaster recovery or central IT strategy and yet when they fall flat on their face, it becomes our problem to fix”.

As an external vendor interacting with business and IT, I can genuinely see both sides of this argument.  I also think there are ways of reconciling the two views.  More in a later post.

Hard times inspiring IT innovation?

Monday, March 22nd, 2010

I picked up this from James McGovern’s excellent blog today:

“In case you haven’t noticed, we are in a recession and modern CIOs aren’t struggling with how to purchase SAP or other large dollar multiple year packages.  They are however struggling with how to optimize their processes, how to leverage the technology they already have, and novel ways to innovatively deploy products they have installed in their data centers.”

In my opinion hard times bring out the best in people.  Another way of saying this is that necessity is the mother of invention.

Innovation is not, however, the exclusive domain of the IT function.

I hope that what emerges from the current economic climate is a more harmonious relationship between IT and the Business.  One in which innovative ideas are shared and not owned by one side or the other.  One in which collaboration, delegation, responsibility and ownership are not dirty words but positive statements of adding value to the enterprise.

As you will see from older posts on this blog, the relationship between IT and the Business gets me fired up, so it has prompted me to start blogging again.