Next big thing?

Next big thing?

Summary: What will be the next big thing? Not Service Oriented Architectures, Open Source, or Software as Service, argues Mike Nevins, former managing partner of McKinsey & Company's Global High Tech Practice at SandHill.

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TOPICS: Tech Industry
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What will be the next big thing? Not Service Oriented Architectures, Open Source, or Software as Service, argues Mike Nevins, former managing partner of McKinsey & Company's Global High Tech Practice at SandHill.com.

He contends "all three will miss the mark for one simple reason. They don't address the real constraints to growth for enterprise software...Those real constraints have some thing to do with software vendors and a lot to do with customers."

As Nevins sees it, "Enterprise customers complain that software vendors disappoint all too often. However, if you examine many of those failures they are self inflicted wounds. The customer fails to make the changes to their operations to get the benefit of the software. Or they fail to sufficiently understand the new data that is available so that they can act on it."

With this in mind, he concludes that the "next big thing" will, in fact, be software companies that combine software, content and services and take responsibility for outcomes. 

One example Nevins cites is Zyme Solutions, which enables "semiconductor and software companies manage the flow of inventories thorough multi level distribution.They have a sophisticated software platform that collects and aggregates the data and crunches the numbers to support decisions. However they don't sell the software. What they sell is the data. They have built relationships with major distributors around the world to get have them flow their data into Zyme's platform. They have expert staff to edit and clean the data. They produce reports and databases for Zyme's customers and work with those customers to find ways to improve decision making and execution based on the data."

As he concludes, "This potent combination of content, software and services is a very different business model. Over time the most valuable asset of the business becomes what they know - hard data about inventories and trends and soft knowledge about how to use that data to good effect."


 

Topic: Tech Industry

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  • Maybe

    I see the logic of Mike Neven's argument, but I doubt his prognosis.

    Software companies able to handle content and data? Software companies able to handle Business Process Re-Engineering (BPR)?

    Nevins' comment: "Enterprise customers complain that software vendors disappoint all too often. However, if you examine many of those failures they are self inflicted wounds. The customer fails to make the changes to their operations to get the benefit of the software. Or they fail to sufficiently understand the new data that is available so that they can act on it." is right on the mark.

    The fact that CIOs, and their departments, often fail to deliver (even when they have the right tools) has been historically tackled in two ways:
    - Insert a 'marzipan' layer of personnel; and/or
    - Replace the CIO, and direct reports, with business managers - who must then learn ICT.

    The marzipan layer, typically, consisted of a lot of MBAs employed by business units, or by the CIO, to act as mediators and communications channels between business functions and the ICT department.

    Replacing ICT staff with others always seemed a little desparate to me - would you plug the Op's Chief into the Finance Chief's chair ... ?

    These tactics, by and large, failed.

    I suppose it depends on Nevens' definition of 'Software Company', but there are a lot of software companies out there who do not have the skills and experience to manage this interface. Taking two well known examples:

    Microsoft has almost no track record in this area - except in the SME market. It seems to me that Microsoft relys on the Microsoft product family to do everything you might want - plus open standard interfaces to other systems in the rare cases where you need to go outside (leaving aside what Open Standard actually means...).

    Oracle has been hurridly buying up ERP companies, and others, to try and compete with Microsoft's wide-ranging, integrated, functionality. In so doing they have done a better job at addressing corporate customers.

    In both cases though, they lack the BPR expertise needed to reach Nevins' nirvannah.

    Then there is content and data. These companies may (?) be great at managing their own ICT Industry content and data, but does that make them experts in manufacturing, or banking, or government, or energy, or... Then there is Nevens' example of Zyme. It seems to me, and I'm prepared to admit I may have misread this, that Zyme Solutions is only providing supply chain support. They have driven up the value chain from being the extranet provider to being a value-chain support operation. This may be a revelation to Nevens but I have to say it is pretty old thinking for those of us who have been involved in developing extranets and on-line communities.

    The key to adding value within a extranet, or on-line community, is to match needs and to be the fount of knowledge (the Guru in an open ended Q&A).

    To whom do we turn to find all these skills and experience? The obvious places are:
    - Media companies (who target publications at specialist markets);
    - Existing 'hubs' (Industry-specific standards organizations, exchanges, clearinghouses, etc.);
    - Arbitrators and advisers;
    - Traders, Wholesalers, and other 'middle-men';
    - Central Registries;
    - Governments
    - and so on...

    Note that software companies (as most people would define them) lack the management expertise, assets, connections, track record, industry knowledge, industry-specific certification, skills, and much else besides. This does not mean Nevens' plan is not workable - but it does mean that software companies will need to:
    - Grow new skill-sets quickly (and create a vertical market focus);
    - Find partners quickly (lots of them);
    - Develop software that is designed, primarily, to be delivered as a service (over the extranet or via the community address book); and
    - Connect these new parts of their firms to their existing development cycle - in the sense of:
    - - Electronic connection (Internet, or Extranet, or both + Web Services + Industry Specific messaging - starting with standardized XML documentation and Schema); and
    - - - Build (or acquire) the extranet and/or community service infrastructure;
    - - Strategic Buinesss to Business dialogue; and
    - - - Engage in industry-specific standards development;
    - - Steering long term software development (incl. vertical fragmentation); and
    - - - Developing Industry-Specific BPR knowledge and experience based on vertical market software.

    To be fair, most are doing well at attacking my list - though many take too much for granted at the extranet level, and many prevaricate too much and too often at the partnership angles.

    There is a class of supplier that can cover most of these problems quickly and easily, and that already handles the vertical market focus well. These are the ICT Service companies (IBM Global Services, HP Services, Fujitsu Services, EDS, Accenture, and so on). The difficulty for 'pure' software companies like Microsoft, Oracle, or Adobe is that these service companies are way out in front. As an ICT investor (one day I may retire), I have to say I would rather that those companies that are 'pure' software would be better off sticking to their knitting. But, understanding human nature, I am spreading my bets.
    Stephen Wheeler