09.25.02

Real Returns

Posted in Enterprise Applications, IT Value/ROI at 10:22 pm by Tony Baer

Nobody’s surprised that IT budgets are still dropping and that, according to Meta Group veteran benchmarking analyst Howard Rubin, IT execs are demanding faster ROIs. So, not surprisingly, our ears perked up when we came across a recent study from Nucleus Research showing poor ROIs for Siebel CRM projects.

The kicker was that Nucleus drew its non-scientific sample from Siebel reference clients pulled from the company’s website. “These were supposed to be happy clients,” noted Rebecca Wettemann, VP of Research. (We found similar results when we polled CA Unicenter users 5 years ago. Some ISVs are just not vigilant enough in qualifying their references.)

The best Siebel ROIs came when projects had a tangible focus, such as call center or sales force automation, and foundered when the system was expanded to other areas without business justification. Usability, competence of the consultants, and customization were major problems.

Of course, all enterprise packages are hard to implement. But we believe CRM has unique challenges because it isn’t as mission-critical as back office packages like ERP, and because it serves a tougher audience. When order entry, inventory, or general ledger systems fail, so goes the company. But if sales force automation fails, sales staff often rely on their wits. And, forgive us for cultural stereotyping, but we think that sales and marketing folks are looser cannons compared to back office folks when it comes to towing the line on new systems.

Comparing results, we recall a 1999 Meta Group ERP ROI study that also pinpointed problems, such as 2 – 4 year time-to-benefit and negative net present values (an ROI derivative). Placed in perspective, the ERP installations in the Meta study were much larger, averaging about 3 – 5x costs per end user compared to Siebel. Back then, ERP was justified strategically because who could compete in the 21st century without it? How times have changed.

The Nucleus study was a good start, spotlighting key problems and outlining actual costs, but it fell short in quantifying the benefits. From our experience, that’s the hard part, because the prime benefit of enterprise systems is improved business execution, not productivity savings. Few know how to count those benefits, but to be fair, we’d like to see numbers from Nucleus showing the other side of the story.

09.12.02

Best of Times

Posted in Technology Market Trends at 10:20 pm by Tony Baer

This isn’t the first boom/bust cycle that the technology industry has faced and it won’t be the last. Maybe this time around, the magnitude is different, if only because IT systems are more ubiquitous than ever. Or the demand for ROI. One industry veteran claimed he’s never seen anything like this during his 30 years in the business.

We were thinking about issues like these during a recent New York Software Industry Association (NYSIA) forum spotlighting sales and marketing secrets. A panel, representing the past, present, and future of the industry (semi-retired sales VP, ISV CEO, regional sales director, and Internet entrepreneur), voiced predictably diverse ideas.

Yes, there were some left field suggestions, like conducting guerilla marketing at trade shows. Instead of renting a booth, try cheap gimmicks like giving free insoles with imprinted company logos to tired attendees to improve name recognition.

And we heard questions about whether the dot com silliness tarnished the market for Internet solutions. (Answer: it hasn’t. Companies came to their senses. Maybe the web can’t sell beer over the web, but it can build customer communities. Or perform mundane tasks like integrating enterprise apps and/or business partners.)

Another spoke of silver linings: downtimes are great opportunities for vendors to get to know their customers better.

But there’s one thing that’s still gnawing at us: whether anybody’s preparing for the next upturn (it will happen). Sure, vendors can strategize and staff sales and product development accordingly. But what about preparing the customer? One panel member claimed that’s impractical. We still wonder, however, should vendors restrain their customers once the dollars get freer? In the long run, we think that could boost the longevity of product investments and customer loyalty. Or then again, maybe we’re betting against human nature.