IT failures, power shifts, and social media

Information sharing and social media are shifting the balance of power from enterprise vendors to corporate buyers. This is great news for anyone who follows IT and the CIO.

Writing about IT failures can be a tricky game of chess because one must describe specific accountability as the facts demand. Sidestepping the noise to understand what really happened is not always easy. Fortunately, a strong group of practitioners, vendors, users, and consultants keeps the flame burning for careful and thorough analysis.

IT failures, power shifts, and social media
Image by Jens Gyldenkærne Clausen (Flickr Creative Commons)

Among these advocates is Doug Hadden, who is Vice President of Products for Freebalance, which develops public sector accounting software. Doug writes an active blog, called Sustainable Public Financial Management, related to government and international IT issues. I respect his strong opinions on behalf of enterprise buyers and doing the right thing on IT projects.

Recently, Doug commented that social media is opening up relationships between enterprise software buyers, sellers, and consultants, by letting users share information about the once-secretive enterprise software market. The argument goes that doing so improves buyers’ bargaining position, reduces costs and helps their overall negotiating position. It is an intriguing topic, so I invited Doug to write a guest post, which is presented below.

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We are confronted almost daily with stories of enterprise software failures, particularly in the public sector: from Azerbaijan to Vietnam, California , and Oregon. Of course, the private sector is also not immune to botched implementations delivered late, over budget and that fail to meet objectives. These problems have been going on for decades and we should be smarter by now.

Too often, consultants offer ineffective solutions while blaming victims for failures. Michael Krigsman calls this dysfunctional set of relationships the “Devil’s Triangle,” to explain how economic pressures can drive software vendors and system integrators to act in ways that do not serve customer interests. Too often, these relationships reflect conflicts of interest that make project failures worse.

Power shifts and information flows

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The good news is that transparency and social networks have empowered enterprise buyers by increasing the flow of quality, timely information at low cost.

Historically, a relatively small, expert network of ERP specialists has migrated among software manufacturers, analyst firms, and systems integrators. These experts and industry analysts provide advice to enterprise buyers and therefore possess significant influence in the market, gaining their own benefit from information arbitrage. In recent years, new entrants into the analyst market have taken a more open approach. Companies such as Altimeter, Constellation, and HfS Research leverage public methods for research and are active on social media, reducing the effectiveness of data hoarding as a business model.

While analyst firms have moved toward open research, social networks have reduced vendor control over the information flow available to buyers. The transparency of social networks have placed all vendors under greater scrutiny, an important driver in the changing dynamic between enterprise sellers and buyers.

On Twitter and Facebook, enterprise vendors cannot hide from "#fail," making them wary of creating an enterprise version of “Dell hell” and “United breaks guitars.” Broadcast marketing methods of the past are no longer sufficient for vendors to control the flow of information about their brand. Although a truism of consumer products, this reality has finally come to enterprise software.

We can quickly identify examples of the power shift from software vendors to external constituencies and buyers, including:

  • SAP and Infor have adopted design thinking to become more customer-centric
  • Microsoft added a concurrent licensing option for the Dynamics product line.
  • Negative customer reactions forced SAP to change pricing policies on premium support and the Fiori user interface upgrade.
  • Salesforce.com was rebuffed in its attempts to trademark the term “social enterprise”

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The competitive environment has created incentives for enterprise vendors to improve transparency and responsiveness to customers. The larger on-premise vendors, especially, are in a mature market, characterized by consolidation and stagnant organic growth; this has led to acquisitions and changes in product mix toward the cloud. Meanwhile, many smaller cloud-based companies, especially with their subscription business model, have already adopted a mindset shift toward being transparent and customer-centric.

It is worthwhile noting that public sector IT has taken a lead in being transparent to stakeholders. For example, governments around the world have implemented e-procurement systems that allow interested parties to see contract bidders, prices, and amendments. Procurement portals help bidders, watchdog organizations, and citizens monitor buying practices in the government. In the U.S., public audit reports from organizations such as the Government Accountability Office (GAO) and the Department of Defense Inspector General shed light on the details of unsuccessful projects.

As increased information flows give more power to enterprise buyers, the IT landscape going forward will look much different from the dysfunctional Devil’s Triangle of today. Transparency allows buyers to follow the money, band together, force change by voting with their wallets.

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Thanks to Doug Hadden for writing this guest post.

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