How to influence the enterprise software chess game

Summary:Understanding your vendor is a first step toward cultivating the knowledge needed to buy software and negotiate effectively. This primer explains the basics.

When I read work by Constellation Research Group analyst, Holger Mueller, his experience and insight quickly became evident. For that reason, I invited him to write a guest post for this column. Well, the guest post grew into a double header, of which this is part two.

Also read:  Inside the mind of an enterprise software development organization

In the first part of this double header , Holger examines market dynamics that pose a challenge to enterprise software vendors. In this continuation, he offers suggestions for influencing your vendor’s future products and direction.

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How to influence the enterprise software chess game

Always remember that information is power – understanding your vendor will help you gain maximum value and benefit from relationships that sometimes appear like a chess match.

How to influence an enterprise software vendor
Image credit: iStockphoto

The broken customer feedback process

Most enterprise vendors struggle to find workable and fair approaches for incorporating customer input into future releases. For the vendor, the challenge lies in deciding how to prioritize requests among the hundreds or thousands of customers they may have. Although focus group testing and independent customer advocacy groups are vital, the prioritizing process quickly becomes unwieldy with a very large customer community.

Facing this challenge, the vendor’s product strategy team may emphasize so-called “table stakes” and develop only those features that maintain parity with competitors or meet pre-existing, short-term commitments. Vendors that ignore customer input in this way render the feedback process dysfunctional.

Existing contracts and commitments can create formidable challenges for any development organization, particularly when marketing and sales makes promises to customers without first consulting development. When this happens, as it often does, the development group may not possess sufficient capacity or technical capability to deliver within promised timeframes. Relationship between the vendor’s product and sales leadership often determines the extent to which sales people make unrealistic promises to customers without first consulting the development team.

A sales-oriented vendor, especially one desperate to close a quarter, may make concessions that reduce sales pressure in the short term but create a Scylla and Charybdis situation for the development organization. When this happens, the company may re-align development and sales priorities to hit revenue targets, even at the cost of sacrificing committed roadmap items and jeopardizing relationships with existing customers. The vendor’s CEO plays an important role in deciding how to address these competing goals and objectives.

It is worthwhile pointing out that Workday is an exception to this particular set of revenue games, and does a very good job at collecting and prioritizing customer requirements. In fairness to larger vendors, however, Workday’s customer base is still relatively small, making it easier to balance revenue with customer satisfaction. It will be interesting to watch how Workday manages tensions between short-term revenue and long-term customer satisfaction as the company grows. Virtually all other vendors have failed to sustain a highly collaborative product design process, based on dialog with customers, over the long-term.

Customer impact

Of course, you will be concerned and upset if changing priorities cause the vendor to delay critical functionality they promised you. Your anger may be even stronger if you based the purchase on specific vendor commitments and timeframes to deliver functionality your company needs.

No matter how justified your anger, the vendor’s financial health depends on meeting its own internal revenue and profitability targets. Vendors that miss these goals may need to cut costs across the entire company, including areas such as development and support. When a vendor reduces costs to maintain margins or combat slowing sales, the negative impact on customers can be substantial, especially if product development slows or service goes downhill. For all these reasons, vendors have great incentive to close new deals, despite potential risks, and deal with unintended consequences later.

An experienced development leader always maintains spare capacity to handle unplanned demand for product development. However, if the vendor signs several mega-deals at the end of a quarter, development may need to re-purpose that excess capacity, which can exhaust spare resources and have a negative impact on product development activities. Understanding this underlying conflict can help you recognize forces that may derail a vendor’s timeline for delivering new functionality.

What not to do

As we discussed in part one, it is always best to remain part of the vendor’s core (or “mainstream”) functionality. When evaluating enterprise software, try to find a product with a close fit between these mainstream functions and your business needs. If you must request special features from the vendor, gain assurance they will develop this out-of-mainstream functionality within a definite time period. However, if the vendor does not follow through with these special features, as promised, your risk of a failed implementation may increase.

If your company has non-standard process requirements, consider the possibility that your way of doing business may be inefficient. Although your enterprise may possess uniquely innovative processes, most likely the need for non-standard software indicates processes that are inefficient, ad hoc, or incomplete. Therefore, before demanding custom development, ask the vendor to validate whether your ideas make sense; even then, be sure they agree to incorporate your distinct process needs into their mainstream functionality within a specific time.

Some companies do have processes that are genuinely unique and central to maintaining competitive advantage; in these cases, it may be best to avoid a standard enterprise vendor and build custom software tailored to your particular needs.

In general, do not push any vendor to accept unrealistic expectations, which they cannot fulfill, as a condition for closing a sale. Pushing vendors beyond what is realistic, and feasible to deliver, will almost certainly backfire for both of you.

What you should do

As a customer executive, there are important steps you can take to influence a vendor.

To start, reach out to peers and coordinate their requirements with your own; importantly, work with other customers to prioritize your collective roadmap requirements. When multiple customers make a common request for software functionality, the vendor is more likely to prioritize the features and deliver quickly. In addition, if you become an informal leader among their customers, the vendor will appreciate you even more, which is always helpful.

Similarly, avoid missing opportunities to serve as a reference for your vendor. Be an honest reference, but do help the vendor attract more customers. Helping the vendor as a customer reference is one of the best ways to bring your requirements more attention. If you have ever wondered why companies such as Proctor & Gamble, as an example, serve as a public reference for SAP over the course of 20 years – well, now you know.

Developing realistic expectations of what your vendor can reasonably accomplish is also a necessary survival skill. The software industry creates substantial hype, especially at user conferences and trade shows. It’s okay to be excited and party with vendors and influencers, but discount what you hear at these events by fifty percent. Then, make sure the remaining fifty percent consists of functionality that will actually benefit your organization; just because a vendor offers new products and features does not mean they will be useful to you.

Concluding thoughts

The art of dealing with an enterprise vendor comes from being fair, firm, and patient. Be fair when asking the vendor to do something; be firm expecting that develop will be done on time with the right functionality; and be patient by understanding the constraints and dynamics underlying your vendor’s decisions.

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Thank you to Holger Mueller for writing this guest post.

Also read:

Topics: CXO, Enterprise Software

About

Michael Krigsman is recognized internationally as an analyst, strategy advisor, enterprise advocate, and blogger. For CIOs and IT leadership, he addresses issues such as innovation, business transformation, project-related business objectives and strategy, and vendor planning. For enterprise software vendors and venture-funded star... Full Bio

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