I’ve been watching organizations select enterprise software by the most ridiculous means for 30 years. User wants and wishes are often at odds with what’s best for the organization, but that all changes with cloud.
In the 1990’s packaged software gained traction over custom developed internal software, and IT organizations transformed into an internal service organization. Mysteriously, the cost of data management and IT services was mandated to become a profit center, instead of a cost center. The transformation was achieved by charging internal IT services out to the user departments, either by MIPS allocation or project costing and allocations. The notion that this lowered the cost of IT as a whole within the organization was a complete illusion. Instead, IT departments grew and were rarely subject to operational review or justification for their charge backs. Costs accelerated because few people in the operational business area had the technical knowledge to challenge the IT department. In these glory days of internal IT, software selection was user driven and wrapped in a thin veil of IT governance. Your IT department helped document requirements, arrange demonstrations from various vendors and defined some technical standards. In the end, business users and IT jointly selected software they believed was ‘best of breed’. This resulted in potentially different software solutions for Human Resource, for Finance, for supply chain, for operations and for customer and sales management.
With different software from a variety of vendors, your IT department took on the task of integrating all these software packages to work together. The high cost of making each software solution talk to one another was buried in those department charge backs, or provided by consultants called “Systems Integrators”. This is still big business today.
Fast forward to 2017 and the emergence of cloud software (SaaS) and apparently ubiquitous cloud infrastructure. No longer does your internal IT department have a monopoly on technology. It sits on every employee’s devices, whether it’s a smartphone, tablet or laptop. Operational managers and new hires are now tech savvy and more critical of IT spend. CEO’s finally have visibility into the high cost of the IT department, and an easy way to compare internal versus external services, infrastructure and software.
Yet, many organizations still cling to a best-of-breed approach when selecting software. Why?
It’s personal. Gather a group of users from any internal department, whether it’s finance, human resources, sales or procurement and ask them what they do. They often believe their requirements are special and unique. But from an executive or shareholder point-of-view, every organization has finance, human resources, sales and procurement. Is it necessary to be unique? No, not at all. Cloud software says, the best practices have been collected and refined over the last 30 years and built into the software you can rent (SaaS), at relatively low cost. But, who will be responsible for integrating the new cloud software with all our other systems? This is where the old paradigm needs to shift from internal IT to vendor provided integrations.
Vendor provided integration kills best-of-breed selection process.
There are infrastructure savings associated with cloud software, and there are savings associated with rapid deployment through ‘configuration’ rather than ‘customization’, but the biggest savings will come from software vendors that deliver an integrated system. More organizations are realizing the significant cost savings if they buy all their enterprise software from one or two vendors, rather than dozens. The mess a ‘best-of-breed’ selection approach has created is an integration nightmare, but it was a self-inflicted wound.
Cloud software vendors are stepping up by providing integrations through “as-a-service” subscriptions or open marketplaces. It should be no surprise, but the integrations between their own cloud suites is usually best and cheapest. This will diminish the role of your IT department, and drastically lower costs. However, unless the process for selecting software changes, you could still end up with a dozen cloud software vendors, and the responsibility of integrating them to work together.
I receive Requests for Proposal (RFPs) and Requests for Information (RFIs) and they haven’t changed much in the last 30 years. They usually read like a list of user wants and wishes, often with the title “requirements” that could number greater than 1000 items. But they are not enterprise requirements; not even business requirements; they are insight into the personal wants and wishes of a particular department. What’s missing is any associated business value, or even weighting of importance. Not all of these wants and wishes bring any value or efficiency to the organization.
The change I’m advocating is a complete overhaul of the software selection process, that aligns with the promises of cloud software. A model where business value is associated with each requirement, and the good of the organization trumps the personal wants and wishes of department users. In this assessment, the cost of integrations takes top billing, and the benefits of a single vendor’s integrated solution is center stage.