Longer Term View of Software

Happy holidays! I took this week off - seriously - with minimal interaction with work. I've already spent a few days with family and friends, and I'm really looking forward to the following days. Over the last several weeks, I was in Barcelona talking to customers and partners. Before that, I had meetings with folks from IDC, AMR, Forrester, eWeek and ComputerWorld on the east coast talking about Office "12". In the midst of work and holidays, somewhere just in between, it's given me a chance to really think about the long term. So while this blog posting is targetted to Enterprise Software, Portal technologies in particular, it can be applied to other aspects of business. It's specifically targetted to decision makers who don't quite understand software but need to make decisions on them AND to the IT department who understand software but can't make the decisions. :-)  I realize this is quite long... even if you glance at this, be sure to read #10 carefully.

Over the last many years, the software industry has really taken off. In fact, software is the number one underlying theme for "The World is Flat". A large part of this has to do with the Internet. The Internet has allowed people to access services, allowed people to connect with one another, allowed people to get educated and find information and, we must not forget, led to the dot com boom in the late 90s. Software is still a very strong industry and important to all companies, big or small, when it comes to running their business. Because of the Internet, coupled with the fact that the number of PCs are increasing, WiFi hot spots are everywhere from NYC to suburbian India, computing is very accessible.

With the software hype, most non-technology companies have an IT department to support their employees and business. Some of these IT departments are small ranging from 1-5 people, and others are extremely large. The majority of these organizations, however, unless they are a technology or Internet company, look at their IT centers as a cost center. Needless to say, the IT departments are expected to be agile and at the same time reduce costs. With IT budgets shrinking every year, this becomes nearly impossible. Most non-tech companies have non-tech CEOs who, quite simply, don't understand the value of software; other companies simply have to make trade-offs. The onus, if given an opportunity, comes onto the IT department's fearless leader to prove to the business folks that they need to spend money... that IT isn't a cost center... that software does have strong ROI. It's here that heroes emerge. I've had the fortune to meet some of these heroes who have changed the way their business operates by making some bold moves... by educating their users how they can change their routine; how they can share information.. and how they can ultimately change the way they do business. These heroes, unfortunately, are too few... and it's sad that it even has to come to that.

It's not surprising that with the software hype, the number of developers has increased significantly. And when developers cannot be found, off-shore development has taken off... developers, by many non-tech firms, are seen as comodities (dime a dozen). This, unfortunately, is a sad reality. The quality of software developers and ultimately the software written at non-tech enterprises is not always great.

Whether you're a CXO or a member of the IT organization, here are some pointers on how to make the right IT investments in your organization:

1) Change your attitude - "IT can change your business"
If you are a VP, CXO or stakeholder and really care about the long term health of your company, you need to start thinking about your IT department as a value center vs. a cost center. There is an incredible difference in the two: when perceived as a cost center, you want to drive costs down... when perceived as a value center, you want to focus on revenue, your margins. One's positive, one's negative... your IT department can fundamentally change the way you do business AND bring down your costs. If you keep looking to cut costs, you'll suffer in the long term and you're competitors will beat you. BTW: subtle difference between value vs. profit center. A value center provides value across the board and  lead to profits in other groups.

2) This one is for the IT deparment: Be a Hero. Show the value.
The higher level folks don't really understand, and you can't blame them, the intricacies of software. They care about the bottom line. They want to reduce costs, mitigate risks and increase revenue. The truth of the matter is, when you know less about something, you want to see more numbers - something you do understand.

I have been in many conversations with CXOs where the conversation was around ROI. ROI is not a simple calculation. It depends on the business, depends on the software, depends on how long term a view you take. Assuming an information worker saves 2 hours a day, you save so many millions... hardware consolidation -- you save so many millions. What about the quality of the products you ship? What about the number of units you ship? What about the number of orders you can process? It's a very complicated model... one thing is for sure, software is your competitive advantage and can help you scale your business.

Trying to come up with that ROI model is not going to be easy. I recommend doing some of your homework here... but if you really want to get buy-off from your executives on something, there's NOTHING better than showing the value. Show them a practical application that they can relate to. Demos, demos, demos - there's nothing better than a demo.

You want to download eval software and show a practical executive application. Show a BI dashboard, in the case of a Portal. Show the executive how he/she can view revenue, can take a look at KPIs, can see orders, et cetera. Now the executive understands this and can rely on instinct/gut vs. a super methodical outlook on ROI... trust me, ROI is there, it's just that  showing technology speaks louder than numbers in a spreadsheet or PPT slides.

Needless to say, when you demo, don't demo how to manage a web server farm to your executive... it's not something he/she can relate to. Demo something he/she can relate to. Plain and simple.

3) Invest in Great Enterprise Software. Developers should be adding value on top of that.
Don't be penny wise, pound foolish. Executives sometimes offshore development or buy cheaper software. For example, if you're a corporation and want to deploy a Portal, you really want to think about the longer term view of your Portal. It might be cheaper to get it built in India, but then, what you have effectively done, is extended your IT department; you are investing in services. An operating cost that, while low and in budget, is going to carry on for years to come. What does this mean? If you are a short sighted decision maker, the option of developing your own software (offshore or inhouse) will seem attractive - 1) costs will be low for the year allow you to make your budget and 2) perceived complexity is lower.

For certain software projects, building inhouse is a good idea. But for larger initiatives, you should be investing in a framework/platform. Open source and sample software is value-add... it's not the platform! Longer term, investing in the platform will result in lower costs and longer term efficiency.

4) Architect your solution.
If you're looking to grow your business, the demand of your software will increase as well. You want to architect your solution to scale - specifically, scale-up and scale-out. Again, poorly developed software could put you in a corner... it will work just fine for 1,000 users... but won't work for 10,000 users. A great architect is one with a lot of experience - who has succeeded and failed at large companies.

5) Have Standards.
There's a pun on the word standards. Comes back to the last point, of not being penny wise and pound foolish but also around making sure you look at standards. Are you investing in a Services Oriented Architecture (SOA)? In XML? In Web Services? Does SOA even make sense? Just b/c it's a buzz word doesn't mean it has to be on your RFP when you are requesting proposals.

6) Your software is useless if your users don't use it.
This, again, is common sense 101. You *really* need to think about your end users (personas), how they will be more productive and how they will be trained. End use training is a cost that must be forecasted and if done right, can be very effective. Remember, most people resist change. You must make it easy for them to interact with the software (make it as seamless as possible) and you must gently, and sometimes forcefully, make them use it. The strategy you employ depends on your specific situation. Check out this blog entry for more information: http://blogs.msdn.com/arpans/archive/2005/11/29/498159.aspx

From a seamless perspective, think about what your end-users use today. Clearly I have a bias here, but Office is an excellent integration point for enterprise software. Word, Outlook, Excel are applications that most users are familiar with so that is something you should explore.

7) Analysis/Paralysis
It's easy to say, let's wait until x or y comes out. But if you continue to wait, you'll never deploy and consequently not win against the competition. I remember, 7 or 8 years ago, I used to say "oh, I'll wait for a few months until the cost of a computer goes down." Guess what - after a few months, the cost went down but something better was out. I was experiencing paralysis b/c of Moore's Law - things got faster and cheaper and I wanted what was coming out tomorrow for today's price. I eventually caved in, bought a machine, and then upgraded a few years later. Definitely the right thing to do.

There's a fine line here. You don't want to be hasty, but you need to make decisions. Unlike buying a computer, buying enterprise software takes time, takes conviction and takes good decision making. You need to methodically come to a decision and deploy the software to get maximum value.

8) Hardware matters
Don't be cheap when it comes to hardware. If you have to, scrap your current hardware and invest in new technology. Hardware is easy to replace and when you're deploying enterprise software, it's the perfect time to buy new hardware. For example, you may want to purchase 64-bit machines.

9) Invest in Quality people
I would rather have 2 great people than 10 mediocre people on my team. 2 great people with a budget can drive results. When you are hiring folks, you want to think about their longer term role in the company. Very rarely, there are exceptions, do you hire someone for a specific short term task. That's the wrong approach. Hire people who are intelligent, self-motivated, strategic, cross-group oriented, loyal and "pleasant to be around" people. :-) Common sense, but not so common I've noticed.

10) Think long term. Act long term.
This is tough. Very tough. Everything decision makers do, everything sales people do, everything an employee does, is driven by his/her goals. Most goals are set on a yearly basis - budget, forecast, et cetera. This results in people making sub-optimal long term decisions to satisfy short term goals. Bad approach. But, how do you get around it? People don't stay at companies forever? People need annual bonuses. So what to do? How do you motivate people to make great long term decisions and judge them shorter term?

Ideally: You need to really care about your company. You need to wake up every morning wanting to grow your company into a billion dollar (or trillion dollar) company. You need to think of your responsbilities as a business. Even an individual contributor with no budget and no direct reports can do this. When you start thinking this way, individually and across groups, you will do what's right for your business in the long term. You'll fight the battles that make the biggest impact.

Realistically: 90+% of people I've met, executives or otherwise, are about mitigating risks. Mitigating risks for their job => mitigating risk for the business. They want to play it safe. This means they are making sure they meet their annual goals and sometimes in the process make these sub-optimal decisions; they will outsource to get an application written for 100 people b/c it's cheap and quick... not really thinking about what this means if the application has to serve 1,000+ people and not thinking about the longer term operating costs. That's safe short term... bad long term decision.

So, as a shareholder, as the CEO, as someone who really cares (in the "ideally" bucket), what do you do? You have to be the hero... sometimes the silent hero... that shows his/her boss the long term vision through demos... and, in turn, makes him/her the hero. That's one effective way of providing long term benefit by giving your bosses the short term benefit of visibility. But don't forget... you need to show them ROI - and i'm not talking about return on investment, I'm taking about Risk on Investment... you need to show that your approach has a very low R(isk) OI. :-)