In our discussion, Dion proclaims the era of IT essentially over, with line of business functions inevitably absorbing technology and leaving the CIO to reign as steward over nothing more than low-value technical plumbing. Think phone systems. Dion's perspective appears fatalistic, implying highly devalued IT departments that merely provide basic infrastructure while other groups in the enterprise absorb strategic aspects of technology.

Dion explains that, "our existing model for IT is broken in a highly proliferated universe," because organizations increasingly demand rapid access to solutions with a relatively short lifespan. Therefore, he calls the traditional IT model a "choke point" for technology innovation in the enterprise.

Following the CxO Talk show, I asked Dion to elaborate his views regarding the state of IT in its present form:

It's pretty clear to most technology leaders that traditional IT, as we know it, is undergoing the biggest challenge in its history. The advent of intense competition and tech innovation from outside the organization has reached an unprecedented and -- more importantly, an unsustainable level.

Internal business customers can now far more easily obtain IT service from the cloud, SaaS products, app stores on mobile devices, and outsourcing partners. And they can do it far more cheaply, faster, and with less hassle this way. IT departments are now the hardest way to get things done (albeit there are many risks for shadow IT as well, though widespread problems due to it are not emerging as fast as many would have thought.)

BYOD is just another proof-point and canary in the coal mine as cheap, agile, disposable consumer tech remakes today's IT landscape. This means the infrastructure of IT in most organizations will recede into the cloud while digital strategy moves into other areas of the organization, including the much-discussed new role of Chief Digital Officer.

The global CIOs I talk to in general see this writing on the wall: The overly-centralized IT department as the provider of all technology is just as outdated a concept as sourcing all your IT from one vendor, like we did with Microsoft in years past and IBM before then.

It's a very challenging time to be in IT, yet also perhaps the time of greatest opportunity. IT seems to be splitting into 1) tactical infrastructure and 2) strategic tech innovation as applied to the business. The former is heading largely to the cloud, while the latter is going to move across the C-Suite in a variety of interesting ways.

These arguments are hardly new. For example, in 2008 I wrote a piece called, "Is IT becoming extinct?," which summarized a variety of reasons explaining why IT has lost influence in the enterprise. I followed that a post titled, "5 tips to prevent IT extinction," that offered advice to a scared IT crowd. In 2012, I also wrote about a devalued future for IT. However, since 2008 more data has emerged to strengthen Dion's argument. 

For example, Dion calls out data that shows flat IT budgets while lines of business increase their spend on technology. Gartner presents this graph, showing flat IT budgets:

Meanwhile, this next chart, from Retail Information Systems, shows the growth of technology budgets in retail marketing between 2012 and 2015. The chart demonstrates that marketing will have significant increases in technology spending over the next few years. Although focused on retail, similar shifts are happening in many industries:

Dion's comments are also consistent with recent survey data described in a Harvard Business Review blog, showing a high level of CEO dissatisfaction with the current state of IT:

57% of the executives expect their IT function to change significantly over the next three years, and 12% predict a "complete overhaul" of IT

With project failures remaining at high rates and IT continually blamed for lack of responsiveness, it's no wonder that the existing model seems to have broken down. But, this problem will not be solved by simply waving a magic wand that transfers technology to marketing or other groups inside an organization. The problem and solution are more nuanced than that.

Simple technology transfer arguments fail to recognize that when IT becomes less involved delivering specialized technology to lines of business, those groups must learn to become deep technology experts. When lines of business transform into IT departments, they will face similar challenges as IT itself. Unless, of course, we give the easy and fun stuff to lines of business and leave IT with the harder problems.

(This discussion does not even address core computing functions that must remain centralized — security, data integration, bandwidth, and network infrastructure, for example, should remain basic IT activities.]

The ability for lines of business to absorb massive change relating to technology will be an ongoing challenge in this new world. Therefore, the real solution is a new kind of collaboration between IT and lines of business.

'The most innovative CIOs I talk with recognize the essential importance of partnerships to address these issues. For example, during another episode of CxO Talk Kim Stevenson, Intel's CIO, said:

The next decade is about business transformation and business efficiency; how does IT help the business grow? You can't do it alone, it's always in partnership with the business, but IT can be a catalyst to that business growth. There are no IT projects; they are all business projects today.

During yet another CxO Talk conversation, Gartner group vice president, Mark P. McDonald, also elaborated on partnership between IT and the business:

Turning sparks into flame and growing that flame requires a scalable, very capable platform. That's what the CIO brings to the table. The most powerful combinations we've seen are the CIO and CMO working together with a shared goal to grow the business. When my goal is to grow the business, everybody has the potential to win.

On a different episode of CxO Talk, the CMO of LexisNexis, Steve Mann, said that marketing tasks such as campaign deployment and management, for example, require "intricate knowledge" that IT cannot fulfill unless they provide dedicated resources to marketing. Steve's comment further implies the kind of partnership that both Kim and Mark advocate.

Yes, the relationship between IT and lines of business are ambiguous and fraught with difficulty. However, the bottom line is this: partnership based on deep collaboration is the only solution that will work. Both IT and the business need each other; both sides must adapt and bend to the winds of change.

If you are a CIO, the message is clear: gain a more sophisticated awareness of business needs, actively forge cooperative partnerships with your business counterparts, and learn to say "yes" when the business seeks assistance. Your survival depends on taking these steps.

===============

CxO Talk is a weekly talk show that explores the tension between technology and lines of business in the enterprise. Our guests include senior level executives, analysts, and other top thought leaders who can offer a valuable perspective on the issues.

Here is a video of the entire conversation with Dion Hinchcliffe:

Read more from the Beyond IT Failures blog

More important than "feeds and speeds" is the CIO's ability to drive strategic business goals such as increasing revenue, enabling innovation, and helping the company enter new markets more quickly.

Against this backdrop, I was delighted to welcome Intel's chief information officer, Kim Stevenson, to the latest episode of CxO Talk. With co-host, Vala Afshar, we had a fascinating conversation about a range of subjects including IT strategy, driving relationships with lines of business, social media, importance of encouraging girls to enter technology, employee development, trust and credibility, shadow IT, and even baseball. 

Throughout the discussion, which you can watch in the video below, the primary emphasis reflects how IT at Intel contributes to crucial business objectives. Based on a term coined by CIO Phil Komarny, I call this approach #Rockstar IT, because it gets to the heart of how IT can increase value in the business.

Here is the entire 45-minute conversation — although I outline a few highlights below, the recording presents a rich and inspiring wealth of information:

As CIO of Intel, with 6500 people in her IT organization, the lessons Kim presents in the video are best practice examples based on having sufficient resources to solve difficult management and strategy challenges. Although most CIOs operate on a smaller scale, the lessons and goals she describes are ultimately relevant to companies of all sizes.

Kim describes achieving operational excellence as "table stakes:"

The CEO and board of directors really want IT to add value to the company. Intel is diversifying, we're adding new businesses, in software and services and foundry models, and all of that requires a different IT model. The single most important thing is all of that is happening very fast and IT has to enable the velocity of these business changes, so that Intel can transform and accelerate our position in the markets in which we aren't the leader today. IT is a critical component in that, to help the company be successful in those new markets.

Regarding the practical role of IT in a technology company, she discusses how IT is a testing ground for Intel's own products:

Most of intel is about creating technology; IT is about applying that technology to its fullest potential. IT are the "appliers."

It makes to have a very good relationship with the creators of technology because are able to give them real enterprise use cases, we are able to help debug, and see real operational experience with their products

The conversation highlighted the evolution of enterprise IT, from a back-office technology provider to customer-centric business partner:

The next decade is about business transformation and business efficiency; how does IT help the business grow? You can't do it alone, it's always in partnership with the business, but IT can be a catalyst to that business growth. There are no IT projects; they are all business projects today. There isn't a project today that doesn't require IT and if you are not using IT to make your business better, than you are shortchanging the real opportunity.

During a segment about shadow IT, Kim made clear that IT is responsible for meeting business unit needs. Personally, I believe this view is precisely correct: 

The business units make those decisions because they are trying to accomplish their objectives in the way that they think is the most efficient. If they are not choosing you, there is a reason.

I never bash shadow IT because they are fulfilling a need that ultimately IT could not fulfill. Once you get your head around that principle, then you can start working to figure out how we can best fulfill it for the company.

Kim's perspective reflects a highly business-oriented approach to IT standing in stark contrast to IT shops that see their primary mission as delivering technology projects on-time and within budget. Although operational and delivery capabilities are essential, they are not a substitute for contributing revenue, innovation, process improvement, and efficiency.

CIOs who want to learn from Intel's experience should take the following steps; this is a mini tutorial on building #Rockstar IT:

1. Watch the video embedded above closely, paying careful attention to Kim's core perspective on IT's role, responsibilities, and relationship to the business.
2. Conduct a realistic self-assessment to determine the capabilities of IT in your own organization; discovering areas for improvement creates the foundation and opportunity for achieving goals.
3. Create credibility and influence by ensuring that IT delivers operational excellence, to use Kim's term.
4. Build on that credibility by engaging with the business, listening to their needs, and establishing relationships based on trust.
5. Finally, identify ways to help the business innovate, make money, and be more efficient.
6. Rinse and repeat. Improvement is a continuous process not a one-time event.

When IT takes its rightful place as an equal participant with other line of business and administrative functions, then the real magic of #Rockstar IT can emerge and flourish. Making this happen is the CIO's job. 

Also Read:

• Marketing and IT tensions: 'CxO Talk' debuts today
• CxO Talk episode 1: Guy Kawasaki on influence for APEs
• CxO Talk episode two: Big data, analytics, and HR technology
• CxO Talk: Microsoft, Salesforce.com, CRM, and the science of hugging
• CxO Talk: Gartner says 'provide and pray' collaboration won't work
• Enterprise startups against the big guys: CxO Talk 7
• CxO Talk: Trust, engagement, and influence for the CIO

Read more from the Beyond IT Failures blog

The conversation got me thinking about the importance of trust and influence for chief information officers. Too often, the CIO is left behind in strategic conversations because his or her influence and credibility are not sufficiently strong inside the company; that's an issue for any CIO who wants to drive organizational transformation.

Five Steps to Build CIO Relevancy

Based on my research and conversations with many senior executives, a CIO can take affirmative steps to cultivate organizational influence. However, any action should begin with understanding how influence interweaves with trust, credibility, and relationship.

The equation is simple: trust equals relevance and credibility in the context of a relationship. Expressed differently, meaningful engagement is the gateway to influence.

If you want to gain influence inside your organization, take the following steps:

1. Become relevant by offering constituents useful information, advice, and services. Many stakeholders view IT (and the CIO) as primarily a supplier of technical services and infrastructure, a view that devalues the entire information technology function. To combat this perception, you must listen hard -- learn to understand what stakeholders find important and then address those needs. Sadly, the people who most need this message usually think it does not apply to them.
2. Drive credibility by increasing relevance. CIO credibility arises when IT delivers relevant activities and projects in reliably and consistently. When asked about this issue, Shakespeare said that credibility happens automatically when IT does what stakeholders need and fulfill its commitments with operational excellence; in the words of Shakespeare: "And it must follow, as the night the day."
3. Forge relationships based on credibility. Trust happens over time; it's not a single event. Therefore, becoming influential requires you to develop an ongoing pattern of relevance and credibility. Relationship happens when you engage stakeholders, listen carefully, and then offer practical, compelling, and useful solutions. Establish this pattern and mutually beneficial relationships are inevitable.

For a CIO (or anyone, really) who wants to play a strategic organizational role, all these components work together as a seamless model for daily interaction. The real key is recognizing trust and influence as facets of a single whole and not isolated attributes to implement independently.

——----

This episode of CxO Talk offers suggestions on driving the culture changes needed to take maximum advantage of social media. The conversation includes a discussion of trust and influence, which depend on credibility and can only flourish in the presence of long-term relationship.

Here is this week's entire CxO Talk discussion:

Also Read:

• Marketing and IT tensions: 'CxO Talk' debuts today
• CxO Talk episode 1: Guy Kawasaki on influence for APEs
• CxO Talk episode two: Big data, analytics, and HR technology
• CxO Talk: Microsoft, Salesforce.com, CRM, and the science of hugging
• CxO Talk: Gartner says 'provide and pray' collaboration won't work
• Enterprise startups against the big guys: CxO Talk 7

Read more from the Beyond IT Failures blog

Here is the entire video conversation:

The conversation starts with the venture business and how Evangelos’ firm approaches investing. It is interesting to note that his firm sees about one thousand companies each year, but invests in fewer than ten. Yes, it's competitive! If you are interested in this topic, watch the video interview, because Evangelos discusses the venture capital business in some detail.

Cloud disruption

Many cloud advocates believe startups (and newly-public companies) will disrupt existing enterprise software vendors, by offering narrowly-focused products that are more innovative, cheaper, easier to use, and faster to deploy. According to this perspective, enterprise buyers will increasingly use pre-built, cloud-to-cloud integrations to weave these new, focused products together into a seamless mosaic of software from different vendors. 

Evangelos has invested in companies, such as PivotLink and Host Analytics, which are taking advantage of this trend. Given all the vendor hype from startups on this issue, I asked Evangelos for his thoughts (which I have edited):

For new applications at the periphery, there is a great opportunity for change, especially in areas where new core systems are being developed. Systems of engagement are an example, because the enterprise does not yet have incumbent vendors for these systems at the core. Therefore, there is opportunity for new companies to provide such systems.

Evangelos continues that business units and functional departments are leading the way in this disruptive cloud transition. Departments such as marketing, sales, and the CFO's office are open to new tools and technologies that support innovation and improvement in their parts of the company: "A startup with the appropriate solution, that is clearly differentiated, can inject itself into departments in the enterprise."

This "new class of applications," as Evangelos terms it, can "enter the enterprise by means of the business unit." He notes that these applications must integrate with core enterprise systems, which helps shrink the scope of established systems. Consequently, innovative and cost-effective startups have an opportunity to replace functionality that legacy vendors supplied in the past.

Evangelos correctly points out that large companies do not lightly make the decision to replace core systems, which is a significant barrier to smaller vendors that want to displace incumbents:

Large companies will not rip out and replace core functionality with new systems even if the new software does not have the same functionality. However, the purview of core systems is shrinking, supplemented by these new systems coming to market.

Although startups face obstacles when selling to the core processes of large companies, opportunity exists when large organizations create new processes; for example, when large companies add processes to embed social computing and mobility into everyday operations. 

In smaller organizations, cloud startups can more easily become the new system of record because there are fewer large legacy systems in place. Today, smaller companies are more likely to adopt cloud vendors as their core systems. 

Salesforce.com and the disruptive cloud

In response to a question from Twitter, we discussed the nature of salesforce.com's disruption in the enterprise, particularly when the company started. Evangelos explains that salesforce.com created a new business model around sales force automation and contact management, rather than actually disrupting the business process itself:

Salesforce.com showed that cloud could be done with large scale and different economics than in the past. Absolutely innovation. Cloud applications would not have existed until salesforce.com showed the way. They created an entire industry.

To enable the business model, salesforce.com created important technology innovations including multi-tenancy and the zero footprint client, which allowed them to create scale at low cost.

Final thoughts

This episode of CxO Talk raises fundamental issues about the nature of innovation and cloud disruption in enterprise software. Evangelos Simoudis is an experienced entrepreneur and a highly informed VC investor, so his views are worth considerable attention.

As the show closes, both Evangelos and I acknowledge a debt of gratitude to the Enterprise Irregulars; we both feel privileged to participate in the group and be members. 

Also read:

• Enterprise software wars: 5 points of advice for CIOs
• Marketing and IT tensions: 'CxO Talk' debuts today
• CxO Talk episode 1: Guy Kawasaki on influence for APEs
• CxO Talk episode two: Big data, analytics, and HR technology
• CxO Talk: Microsoft, Salesforce.com, CRM, and the science of hugging
• CxO Talk: Gartner says 'provide and pray' collaboration won't work

CxO Talk: Gartner says 'provide and pray' collaboration won't work

Mark's comments shed light on reformulating IT strategy to reflect changing corporate needs and the evolving relationship between the CIO and CMO:

Turning sparks into flame and growing that flame requires a scalable, very capable platform. That's what the CIO brings to the table. The most powerful combinations we've seen are the CIO and CMO working together with a shared goal to grow the business. When my goal is to grow the business, everybody has the potential to win. When my goal is to control costs, there is automatically a system of winners and losers.

Listen to this one-minute video clip to experience Mark's passion and insight about the topic:

Strategic CIO implications

The shift in technology budget allocations has two important implications for the CIO and IT:

1. IT will become increasingly commoditized, devalued, and irrelevant unless the CIO gains a stronger sense of strategic purpose.

Supporting your organization's strategic goals is the most direct route to establishing relevancy in the enterprise. It's not rocket science but rather common sense — meet business users' needs and of course they will perceive you as being relevant. I have previously written about CIO relevancy:

The world of CIOs and IT is likely to split into infrastructure providers and innovation partners. To become a genuine partner to the business, start taking steps today. If you don't make a change soon, your IT organization may end up a commodity shop in a transforming world. 

2. Chronic conflict between IT and the business does exist.

In the current economic environment, many organizations want IT to innovate and simultaneously reduce costs. It is up to the CIO to resolve these tensions through improved collaboration with the business. The following diagram presents a view of chronic conflict as applied to IT and the CIO:

Chronic conflict between IT and the business will suck your life away in an endless sea of frustrating pain; far better to work closely with leadership, be strategic, and define explicit IT priorities based on open communication with the people setting business priorities.

Thanks to author, Gene Kim, for formulating this concept in a CIO innovation workshop he and I co-presented. For more information on chronic conflict, see the work of Eli Goldratt. 

Also read:

• CxO Talk: Gartner says 'provide and pray' collaboration won't work
• Engage or die: Five lessons from a CIO innovation workshop
• Research: The devalued future of IT in a marketing world

Read more from the Beyond IT Failures blog

CxO Talk episode five is a powerhouse of information on enterprise social media and strategic advice for chief information officers.

Social collaboration beyond "provide and pray"

The conversation begins with a discussion of the social media maturity model that Mark presents in his book, The Social Organization, which presents a straightforward, business-oriented view of collaboration technology. Here is a diagram of the model:

Mark, and co-author, Anthony J. Bradley, designed the maturity model to help organizations move beyond a "provide and pray" mentality, in which management provides social media technology and prays that something good will happen. Watch the CxO Talk video, embedded above, to hear his in-depth comments.

Mark says that collaborative communities can tap the power of employees across the organization, reduce siloes, and encourage employees to prioritize organizational goals over personal or departmental agendas. He continues that implementing social collaboration successfully requires establishing a goal or purpose, along with "just enough structure" to make the program work. In other words, management should create rules of engagement and get out of the way, avoiding too many guidelines and mandates.

Mark introduces the concept of "relationship leverage" to help employees understand cultural expectations and encourage them to adopt social collaboration for business purposes. For example, senior executives can blog about their expectations and goals, while demonstrating what appropriate online social behavior looks like. Mark describes it the minimal structure needed to "create the informal value that comes from better communication."

Management should not push social media with generic goals, such as, "We will be more collaborative." Instead, Mark recommends establishing a meaningful purpose to magnetize participation and encourage employees to volunteer their "time, attention, purpose, and interest." He advises management to build a coordinated monitoring body that will support grassroots growth while maintaining formal executive support. In this context, traditional, top-down demands are less effective than encouraging group participation to create community growth collaboratively and organically.

CIO / CMO wars: "Technology is not a zero-sum game"

We asked Mark to explain a recent Gartner report that predicts CMOs will eventually control a larger share of technology budgets than the CIO. It's an important issue because large and small software vendors quote this number frequently.

Mark puts the issue into context with two points:

1. Distinctions between "IT" and "technology." The concept of technology is far broader than the platforms IT provides; for example, some companies place Google advertising investment into their technology budget. Although spending on core applications, infrastructure, and analytics will not migrate away from IT into the business, it is true that front office activities touching technology are likely to grow over time.
2. Increasing technology spend outside of IT is not a zero-sum game. Cost savings have become a focus point for IT, which ultimately devalues both the CIO and IT, despite reasonable business rationale for wanting to reduce costs. Therefore, Mark says conversation must shift from, "How IT will control costs?" to "How will technology support growth?".  These questions can precipitate a strategic change that drives a shift in the relationship between IT and the business.

Also read:

• Research: The devalued future of IT in a marketing world
• Three tips to escape the tyranny of IT metrics
• Marketing and IT tensions: 'CxO Talk' debuts today
• CxO Talk episode 1: Guy Kawasaki on influence for APEs
• CxO Talk episode two: Big data, analytics, and HR technology
• CxO Talk: Microsoft, Salesforce.com, CRM, and the science of hugging

Read more from Beyond IT Failures

The discussion includes an insider's look at the CIO and CMO roles, along with advice for technology vendors selling to senior executives.

Steve Mann on the CMO role

According to Steve, CMOs "sit at the intersection of creativity and strategy." Steve says he partners with the CEO to translate his company's vision into marketing strategies that deliver revenue and customer satisfaction:

The CEO's strategy comes to life in the various strategies and channels the CMO uses to touch the market. The company's branding, communication efforts, demand generation, pricing and packaging are all manifestations of translating a business strategy into a marketing strategy.

Digital, social, and mobile. Translating a business strategy into a marketing strategy affects what the business does digitally. For example, ecommerce on the web site and creating products for sale electronically are "digital personas" of the company. Among Steve's key measures is the degree to which LexisNexis digitizes its marketing and moves to a "digital style" of engagement.

Steve believes that mobile is a primary platform for translating marketing strategies into "something that is consumable," although the company wants to be platform-agnostic. Although he looks at all channels, Steve is more concerned with the engagement model than the consumption device. Therefore, LexisNexis follows "social first," rather than "mobile first," as a primary strategy to drive market engagement.

Relationship with IT.  Prioritizing projects and budget is a tension point, because IT may focus resources based on its own strategic goals rather than placing marketing goals and efficiencies first. To bridge this gap, the CMO must recognize that IT has valid, yet competing, demands for limited resources.

When asked whether he ever bypasses IT and buys cloud solutions directly, Steve remarks that having web development and marketing operations teams within the marketing organization is a "great thing." Certain marketing tasks such as campaign deployment and management, as an example, require "intricate knowledge" that IT cannot fulfill unless they provide dedicated resources to marketing. Although not trying to cut IT out of the loop, Steve does ask IT to help his organization get to market faster.

Phil Komarny on the CIO role

Phil explains that the CIO must support core organizational objectives, much as the CMO does. In higher education, these goals include increasing enrollment and student retention, as well as establishing digital initiatives to communicate with stakeholders across all parts of the business.

He continues that cloud, social, and mobile computing help remove siloes, which can blur roles while helping people across the organization work together. During conversations with Seton Hill's director of marketing, Phil has asked whether IT can help reduce marketing spending by developing platforms the school can own and reuse.

Phil is deliberately consumerizing his infrastructure to create a more collaborative and social environment. For example, he built HTML5 portals to bring together data from multiple systems, including ERP, to make interacting with systems and data easier for users. When management uses these personalized views on mobile devices, they can make decisions based on real-time data during meetings; instead of requesting reports from IT, as in the past, management can simply look up the data they need, on the spot.

Are CMOs "attention-seeking land grabbers invading IT turf?" Phil responds to this impertinent question by saying that some CIOs and IT organizations "deserve" marketing to go around them. He explains:

If you are not around the table adding to the discussion, you don't deserve to be at the table. Too many IT departments "default to no," which does not work in today's cloud, social, and mobile world. 

Phil's team plays a significant role in the procurement of business applications because IT has "earned the right to be part of that conversation." Getting to this point required Phil to transform the IT organization; today, he says, "Everything we do is based on the user experience. Everything." 

Sales advice to vendors

Steve's environment at LexisNexis is based on the Oracle stack, including Seibel 8.1 for CRM. He also has several Salesforce.com deployments ongoing, due to their shorter 30-60 day implementation time. The Oracle and Salesforce.com implementations each integrate with Eloqua as a marketing automation umbrella; he wants both systems to share the same master data for customers and prospects. 

Steve says that vendors fall off his radar when their products are "too difficult to understand." He points to Semphonic as companies that quickly understood his needs and rapidly created an execution plan.

Phil's current software projects at Seton Hill University include Workday and Salesforce.com. He is concerned about SaaS vendors that do not make clear what the cost of ownership will be in year one. He says, "It's becoming difficult to judge cloud implementations; there are hidden costs requiring due diligence."

Both Steve and Phil want to engage with vendors over social channels, including Twitter and LinkedIn. Steve suggests three vendor ideals:

1. Transparency on strengths and weaknesses
2. Openness to learning new ideas
3. Collaboration and willingness to partner

Related stories

• Marketing and IT tensions: 'CxO Talk' debuts today
• CxO Talk episode 1: Guy Kawasaki on influence for APEs
• CxO Talk episode two: Big data, analytics, and HR technology
• CxO Talk: Microsoft, Salesforce.com, CRM, and the science of hugging

Larry Dignan's ZDNet article on Tidemark Storylines.

Looking at Tidemark I wondered, "How can startups best compete against big companies such as SAP and Oracle?" Although not a boxing fan, the following words from Muhammad Ali came to mind as the answer: "float like a butterfly and sting like a bee."

In this short video, Muhammad Ali speaks this famous phrase and presents a competitive view that enterprise startups should examine closely:

Here's a transcript of the video:

I'm gonna float like a butterfly and sting like a bee
George [Foreman] can't hit what his hands can't see
Now you see me, now you don't
He thinks he will but I know he won't
They tell me George is good but I'm twice as nice
And I'm gonna stick to his butt like white on rice
Cassius [Clay, Ali's former name] is the greatest of all time, of all time!!!

Ali's comments reflect innovation, agility, and confidence backed by execution and skill. It turns out that Tidemark's Gheorghe, who grew up in communist Romania, studied Ali as a role model:

There was lack of everything from food to books to basic freedoms. I remember Ali saying 'impossible is nothing' so fast, so brilliantly confident, that the seeds of freedom were set for me. I never forget it and it still guides me every day. Impossible is nothing.

The video below shows Muhammad Ali putting agility into practice — watch him dance lightly with intelligence, focus, and intense determination. This is definitely the right way to compete as an enterprise software startup:

Here are important topics from the discussion:

On Microsoft Dynamics CRM:

• Microsoft held its annual Convergence conference in New Orleans last week

• Last year, Microsoft focused on their new user experience and placing a bet on Windows 8

• Convergence 2013 emphasized the product and executing with customers, showing that Microsoft is delivering on promises made last year

• Corporate Vice President for Dynamics CRM, Bob Stutz, whom Paul calls a "legend" in building CRM technology, has ripped apart the entire set of Dynamics CRM applications to improve the technical architecture and fill holes in the product

• An example of filling out the product includes the acquisition of NetBreeze, a sentiment and social analytics platform, which Microsoft will embed as a layer in the CRM platform

• Microsoft also discussed the Marketing Pilot acquisition, which addresses the marketing components of CRM. Paul calls Marketing Pilot a "very good" set of applications but too dense for marketers; he suggests that Microsoft integrate Marketing Pilot fully into the product suite

• Paul adds that Microsoft has "caught up" with salesforce, Oracle, SAP and now has "about six months to really rev it up"

• We also discussed Microsoft Dynamics new, and strong, focus on customer stories. Paul said "that part was fantastic" and added Convergence had "one of the best customer panels I have ever heard," because it was focused on outcomes rather than technology.

On Salesforce.com:

• Vala and I attended a salesforce event in Boston, which CEO 
• The primary message positions salesforce as a "customer company," which I find unclear and vague. Despite my view, Vala was decidedly impressed with what salesforce is doing.
• Vala notes that salesforce presented demos on devices, demonstrating the company's commitment to mobile and smartphones.

• Paul notes that salesforce, Microsoft, SAP, and Oracle should all do a better job demonstrating how they put the customer first as a partner, rather than just the object of a sale

• I follow with a point that software vendor objectives and customer needs diverge in important ways. Although SaaS vendors say that a subscription model creates complete alignment between customer and vendor, I am not completely convinced

• Paul responds: "If a customer likes you they will continue to do business with you, otherwise they won't"

• I said that Paul's comment sounds like CRM means love; Paul answered that the purpose of CRM is to know something about customers so you can either take action or maintain compliance.

On Net Promoter score:

• Both Paul and Vala believe it's time to reconsider the

• Paul suggests replacing Net Promoter with a four questions, advocated by professor V Kumar, that reflect customer lifetime value and customer referral value:

  1. Would you recommend this company to someone you know?

  2. Did you recommend this company to someone you know?

  3. Did they become a customer?

  4. Were they a profitable customer?

On customer love and professional sports:

• Microsoft featured professional basketball team, Oklahoma City Thunder, at Convergence 2013. Both Paul and I were impressed by the degree to which the team works hard to keep fans engaged and happy. We gave a special call out to Scott Loft, the team's Vice President of Ticket Sales, Retention and Data Base Operations. Basically, Scott is VP of everything

• We also discussed customer attitudes at the Philadelphia Flyers, New York Yankees, Boston Celtics, and New England Patriots. Not to mention the genetic makeup of New York baseball fans

• I noted that the DNA of a true customer-focused company is lack of ego, which means putting customer needs first.

On the science of hugging:

• The components of a successful hug are: 1. Don't be afraid to close; 2. Throw your arms around the other person, and; 3. Then squeeze

• The key point to successful hugging, according to Paul is "close and go strong without fear"

• My final advice to software vendors regarding customer service: use a full blown bear hug and don't forget to close.

Related stories

• Marketing and IT tensions: 'CxO Talk' debuts today

• CxO Talk episode 1: Guy Kawasaki on influence for APEs

• CxO Talk episode two: Big data, analytics, and HR technology

Disclosure: Microsoft Dynamics is a strategy, positioning, and messaging client.

CxO Talk is a weekly show that explores the CIO/CMO relationship through conversations with thought leaders, practitioners, and others with strong and important voices.

Both guests this week are amazing:

• Naomi Bloom is perhaps the most well-respected HR technology consultant and analyst out there. Naomi's influence extends to the largest companies in the world and she advises virtually all major developers of HR technology products.
• Nenshad Bardoliwalla is an analytics expert, author, and part of the founding team at two venture-funded startups. He possesses one of the smartest, most insightful minds in enterprise software today.

The show begins with Nenshad offering a brief history of enterprise software, tracing the history of reporting and analytics back to the Medici days. Seriously, I'm not making this up.

The show continues with a discussion of the challenges organizations face when trying to use analytics effectively. As Naomi says:

There aren't enough people who understand which analytics to use let alone how to put it together. CMOs are drowning in analytic opportunities but need to learn to take advantage of the data.

An important part of the conversation offers advice to enterprise software vendors who want to design better products. Nenshad explains that, historically, software designers created products based on computer limitations rather than the human factors, which created serious user adoption issues despite the economic success of enterprise software.

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He suggests focusing on user needs and better communication, along with instrumenting the software to test whether users are getting value from the system.

In other words, the value of analytics lies in providing information that decision makers find relevant, useful, and measurable.

Here is the entire CxO Talk episode with Naomi and Nenshad. It's a rare opportunity to hear two brilliant people discuss topics that should be important to every CIO and CMO:

Read more about CxO Talk:

• Marketing and IT tensions: 'CxO Talk' debuts today
• CxO Talk episode 1: Guy Kawasaki on influence for APEs
• Guy Kawasaki: Twitter Is No Longer the Most Enchanting Social Platform

CxO Talk is a weekly show that explores the CIO/CMO relationship through conversations with thought leaders, practitioners, and others with strong and important voices.

Although APE's purpose is bringing advantage to authors by disrupting the traditional publishing model, the book expresses an underlying philosophy of personal and brand influence. This approach to influence relies on the power of social media to "democratize" (that's Guy's word) access to buyers in a way that was not previously possible.

Historically, media such as television and newspapers favored large organizations and well-known brands, simply because of cost. If you wanted to get the word out on a mass scale, you bought expensive advertising and hoped for the best. Although companies such as Nielsen continue to help brands understand the impact of their investment in advertising, mass media remains a shotgun approach.

In contrast, this segment of CxO Talk discusses how to gain maximum benefit from social media, spread the net of influence, track results, and gain influence in ways that were not possible in the past.

Here is the video replay of CxO Talk, episode 1:

Also read

• Marketing and IT tensions: 'CxO Talk' debuts today

A new breed of chief marketing officers seek data-driven answers to tough challenges, such as establishing clear links between marketing spend, activities, and specific business outcomes.

To meet these goals, marketers have taken over an increasing slice of the overall budget that enterprises allocate to technology. Not surprisingly, this trend corresponds to the growth of social media spend in enterprise marketing and the rise of chief digital officers.

As data becomes more important to marketing, the relationship with IT loses clarity. For a growing number of organizations, marketing now rivals IT as a sophisticated consumer of advanced technology and analytics.

ZDNet's Dion Hinchcliffe described this tension between IT and marketing:

In contrast, IT is still looked at largely as an overhead expense, something to be contained and reduced, even as digital business has finally experienced a modest renaissance in the last few years as a direct driver of revenue and competitive advantage.

To explore the relationship between the CIO and CMO, a new web-based talk show, called CxO Talk, will debut today.

CxO Talk will dive into the full range of issues, tensions, and relationships between marketing and IT in today's world. I will be co-hosting the show with friend and client Vala Afshar, who is chief marketing officer and chief customer officer at Enterasys. The show will feature compelling thought leadership along with practical tips and advice.

Today's inaugural show features author, investor, and marketing thought leader Guy Kawasaki. Future guests will include Intel's CIO, Kim Stevenson; CRM leader Paul Greenberg; Gartner analyst Mark P McDonald; world leading HR technology analyst and consultant Naomi Bloom; and many other experts. Each week, we will discuss a different aspect of the evolving relationship between marketing and IT.

CxO Talk details

Time: Every Friday from 4:00-4:30pm Eastern Time

How to watch: Access the live broadcast by going to cxo-talk.com. No registration is necessary, just show up and watch!

Twitter hashtag: #cxotalk

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Vala Afshar is an author and Chief Marketing Officer (also Chief Customer Officer) of networking equipment manufacturer Enterasys. [Disclosure: Enterasys is a consulting client for market strategy, positioning, and messaging.] Vala's role at Enterasys gives him a unique perspective on mobile, with projects like providing wireless for 70,000 seats at the New England Patriots football stadium, specifically to help the team enhance its fan experience with social computing, video content, marketing, and other mobile applications.

Professional sports innovation: Patriots, Celtics, Red Sox, and Bruins

The panel discussion covered a range of topics including:

• Consumerization of IT
• Growth of mobile computing
• Machine-to-machine communications and the Internet of things (IoT)
• Contextual computing
• Future of call centers and customer service
• Implications for the CIO

This panel was great fun for both participants and audience, as evidenced by great enthusiasm in the room and high ratings received afterwards.

Watch the entire panel in the video below; I'm sure you will find it enjoyable and informative.

• Time to value
• Continuous innovation
• Accelerated solutions
• Big data
• Mobile first
• Increase performance
• Process improvement

With content-free language like this, it's no wonder different vendors sound so similar.

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This sameness happens for two reasons. First, software vendors frequently try to ride whatever wave seems to be popular at a given time, so they respond to a relatively small group of bloggers, analysts, and press; and second, the vendors copy each other. A revolving door of personnel across the major vendors makes this copying almost unavoidable: executives often leave one vendor for another, sometimes even returning to the original company. All of which creates homogeneity in marketing messages, product positioning, and use of language across the enterprise software industry.

As an experiment, I went to several vendor web sites and created a Wordle word cloud of their primary ERP product page. The word cloud highlights the key terms used on those pages. To create a fair comparison, I searched for each vendor's ERP page and then removed certain words such as company name.

The results are presented in alphabetical order.

Epicor

The Epicor ERP word cloud is based on this web page. T

Infor 

The Infor ERP word cloud is based on this web page. Terms removed: Infor, ERP, and Solutions. Click the image to view an interactive version:

Microsoft

The Microsoft ERP word cloud is based on this web page. Terms removed: Microsoft, Dynamics, ERP, solution, contact, and 6:00. Click the image to view an interactive version:

NetSuite

The NeSuite ERP word cloud is based on this web page. Terms removed: NetSuite and ERP. Click the image to view an interactive version:

Oracle

The Oracle ERP word cloud is based on this web page. Terms removed: Oracle. Click the image to view an interactive version:

SAP

The SAP ERP word cloud is based on this web page. Terms removed: SAP, ERP, February, and solutions. Click the image to view an interactive version:

Strip away the top level of language veneer and here is how each of the vendors positions its ERP offering, based strictly on the word cloud:

• Epicor: software solutions for business
• Infor: efficiency for manufacturing and supply chain companies
• Microsoft: business solutions based on partners
• NetSuite: management and financial software in the cloud
• Oracle: advanced management applications
• SAP: software, services, and mobility for customer processes

What do you think about the way vendors present themselves? Please add your thoughts to the comments.

Thanks to Louis Columbus for suggesting the Wordle idea. He's a smart guy.

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To give us that insider view, network infrastructure provider Enterasys Networks brought together CIOs from all four major sports teams in Boston to discuss mobility, social networking, fan loyalty, and other issues that matter to the business of sports. [Disclosure: Enterasys is a consulting client for market strategy, positioning, and messaging.] I was honored to be a member of the panel.

The professional sports CIO panel consisted of the following participants:

• John Gallant, chief content officer, IDG Enterprise

• Fred Kirsch, VP of Content, New England Patriots

• Jay Wessel, VP of Technology, Boston Celtics

• Lorraine Spadaro, VP of Technology & eBusiness, Boston Bruins 

• Heidi Labritz, director of Business Applications/IT, Boston Red Sox 

• Michael Krigsman, CEO of Asuret, Inc

• Craig Mathias, principal analyst, Farpoint Group

As with all companies, these sports teams face the challenge of selling tickets and gaining customer loyalty in a down economy with increasing competition. For sports as a business, significant competition comes from the television in fans' living rooms, where they can watch games comfortably at home without cost or the hassle of travel. Therefore, the teams invest significantly in finding ways to get "butts in seats", as one CIO described it.

This fundamental issue, finding a way to get fans into the stadium, drives the teams to use technology to the entire customer experience, including how teams sell tickets, make content available inside the stadium, ease the purchase of concession items, and maintain a relationship with fans through the year.

You can watch a video of the entire panel below, but here are several highlights:

• Because creating a positive fan experience is so important, the CIOs focus on innovation rather than cost savings alone. Using technology to support strategic business goals is baked into the DNA of these sports CIOs.

• Stadium experience is a critical factor in getting fans to leave home and attend a game. To make live attendance attractive to fans, the teams are actively investing in mobility and high-density wireless networking. As analyst Craig Mathias noted, the stadiums need infrastructure that lets them offer both "coverage and capacity".

• Mobility based on solid infrastructure is necessary to help teams stay in contact with fans during the game. Mobile devices are the common denominator through which teams help fans shape their own game experience, through social networking and photo sharing; mobile devices let fans stay in touch with content and context information the teams supply on what's happening around the field and in other stadiums around the country.

• Creating a positive fan experience includes maintaining a relationship with these customers throughout the year. To accomplish this, the teams segment their customer base and craft outreach programs targeted to different fan groups. For example, season ticket holders receive substantial attention from the teams, because they supply significant revenue; as the Celtics' Jay Wessel said, "season ticket holders are the core of our business". Each of the teams has its own plans for loyalty programs, special content, and other benefits aimed at season ticket holders.

Below is a video of the entire panel discussion. If you care about technology and sports, then this is the video for you!

For chief financial officers, the survey offers compelling insights and is worth reading carefully.

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System integrator, Panorama Consulting Solutions, conducted the research survey during the four-month period of September, 2012 to January, 2013. The results are based on data from 172 respondents who completed a survey on the Panorama website. Seventy-one percent reported revenues of $300 million or less and 21 percent of respondent companies had revenues of $1 billion or higher.

Although project duration and cost fluctuate from one year to the next, three points stand out about the current data:

• Over 50 percent of projects experienced cost overruns 
• Over 60 percent experienced schedule overruns
• Fully 60 percent of respondents received under half of the expected benefit from their ERP implementation

This chart summarizes the top-level results:

.

The following table reports Panorama data for the last four years:

Implementation budget, schedule, and realizing benefits. According to the survey, 53 percent of ERP projects exceeded their budget:

Regarding schedule, 61 percent of respondent ERP projects went beyond planned time duration:

The survey shows a significant problem with respect to realizing benefits from the ERP implementation:

• 27 percent of respondents realized less than a third of anticipated project benefits
• 11 percent realize no benefit at all from their ERP implementation
• 22 percent achieved between a third and one-half their expected benefit 

In other words, fully 60 percent of the ERP projects in the survey realized less than half their desired benefit. By any reasonable measure, these projects are problematic:

At the same time, various measures related to ERP software, vendors, and implementation results showed poor satisfaction:

• Implementation service of vendor: 40 percent satisfaction
• Implementation service of third-party: 25 percent satisfaction
• Ability to meet business needs: 49 percent satisfaction
• Employee adoption: 35 percent satisfaction
• Overall implementation experience: 44 percent satisfaction

ERP vendor selection. As the following graph shows, the primary candidates for ERP software were SAP, Oracle, Microsoft, Epicor, and Infor:

The cloud question. Despite the hype, only 14 percent of respondents are using ERP delivered as Software as a Service (SaaS). Although the best cloud vendors can deliver superior security and reliability than most internal IT departments, market momentum to ERP in the cloud is not there yet, as the following diagram illustrates:

 The survey reports an average payback period of 25 months (down from 32 months in 2009). The graph below shows that over half the respondents did not recoup their costs or were unsure:

When reading this data, bear in mind that respondents who have not completed an implementation will naturally report no payback — after all, the software is not yet operational. More troubling is the 25 percent who are unsure of their ERP payback period. One wonders whether these people had a clear set of goals and business when starting their project.

Key points for the Chief Financial Officer

The survey data presents a contradictory view of ERP success and failure. Although mAt the same time, 60 percent called their ERP project a success and 30 percent expressed neutrality on the success / failure issue. These numbers indicate that buyers' expectations are too low — it is indeed unfortunate these numbers are so low.

Important lessons. Implementing an ERP system is always complex because the deployment drives changes to both data and processes that extend across departmental boundaries inside the organization.

Market analyst and ZDNet contributor, Brian Sommer, offers the following advice to chief financial officers considering new investments in enterprise technology:

Software projects aren't just technical endeavors. They're also political, financial, emotional, structural, strategic, process and people-centric initiatives. Ignoring any one of these dimensions is done at the project manager's peril.

Regarding process changes and application software, the stakes have definitely increased in the last few years as wave after wave of disruptive technologies have swept across the IT landscape. Just try to imagine any business process that isn't affected by social, mobile or cloud technologies. Ditto for big data, analytics and in-memory processing technology.

Today's CFO must balance the demands of two competing forces: the extraordinary wave of innovation (and the process changes these bring) against the regulatory, control-driven forces who want every process, every exception, and device to be documented, controlled and secured. In recent years, CFOs have spent tens of billions of dollars (or more) with audit firms to document the control points and risks within their existing ERP solutions.

The costs, a result of regulations and legislation (e.g., SarbOx) in a post-Enron world, were staggering for many firms. After all that expense, companies may find their processes 'locked-down' and unchangeable which is unfortunate as these same companies may be forgoing phenomenal opportunities to adjust and improve business processes with some of the newer, cloud-enabled, social data driven, mobile-connected, video-powered products and ERP extensions available today.

Can we trust the survey? The Panorama Consulting research offers a useful benchmark for understanding ERP success, failure, and drivers of value. Because Panorama has run similar reports for the last several years, the data presents a consistent picture over time. In addition, the results are in line with similar studies run by other companies.

Nonetheless, the survey does have several deficiencies: 

• Since 71 percent of respondents work for companies with revenues of $300 million or under, this is primarily a small business survey. We cannot assume that large organizations would show the same results.
• The survey population was only 172 respondents; a larger sample size would be desirable
• The editorial content in the report seems slanted toward services that Panorama sells to clients

Despite these issues, the data seems solid and I recommend you trust the numbers.

Final thoughts. The most important measure of project success and failure enterprise buyer's perception and opinion. Since only 10 percent called their implementation a failure, we must accept that number as the failure rate reported in this survey. However, the survey as a whole makes clear that genuine ERP success is elusive, at least among this group of respondents.

ERP can bring significant benefit but implementation requires careful attention to both business planning and technology activities. For this reason, achieving project success and business value demand that CFO and CIO work together as a collaborative unit.

Therefore, it is essential to create this partnership and show your entire organization that the business and technology teams can communicate, collaborate, and share knowledge on a systematic and consistent basis. This collaboration is the true underlying strategy for gaining maximum value from ERP or any other enterprise initiative. 

Also read:

• New ERP research: quantifying failure and growth (2007)
• ERP failure: New research and statistics (2010)
• 2011 ERP survey: New IT failure research and statistics
• ERP change management: The silent killer
• 13 warning signs to prevent ERP doom

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California’s Marin County settled a longstanding lawsuit with Deloitte Consulting over a failed ERP project involving SAP software. The agreement offers Marin County little benefit and allows Deloitte to avoid bad publicity.

It is important to note that neither Marin nor Deloitte placed any blame on the SAP software: dynamics between customer and system integrator caused this failure.

 (.pdf download) issued by the County describes the legal agreement:

The settlement follows the Court's dismissal of several of the County's claims, and the County's conclusion, after a full investigation, that it should voluntarily dismiss its remaining fraud claim and its allegations of improper influence of a County employee who managed the project.

According to the Marin Independent Journal, the County received $3.9 million from Deloitte, which is less than the $5 million it paid in legal fees. The settlement is covered by a gag order, which allows the parties to avoid disclosing details their agreement and prevents transparency or openness.

 of this case as follows:

Marin County bought SAP software in 2005 and engaged Deloitte Consulting to perform the implementation; after spending almost $30 million dollars, the county abandoned the effort, citing problems and deficiencies, and initiated a fraud lawsuit against Deloitte.

To understand this case, we must recognize that both Marin and Deloitte seemed to make serious errors in judgment and each pursued its own agenda irrespective of shared goals. The entire situation illustrates what happens when incompetence, inexperience, and greed shape a business relationship. At least, that's how it looks to me.