Are custom solutions really a viable option in the current state of IT applications ?

Being a market leader has its advantages; you can get away with a lot of things, customers tolerate a lot more than they would with startups or mid players. The market looks up to you for direction and whatever you do gets imitated quickly. Even if you are not innovating or creating new products, your copy outsells others by virtue of base effect. After all reaching the pinnacle of success and building a reputation takes a lot of effort and you have to do the business better than everyone else in the same business.

That is how it appears from outside to the external world and to a large extent from within to partners, employees and customers; because most of them don’t get to see the machinery that runs the business. In the background the robust technology solutions keep the business running with every transaction for every customer across products, geographies and hype waves that keep appearing with regular frequency. Inefficiencies if any surface as customer incidents and get addressed efficiently.

When news emerged that a top 5 leading global company wanted to engage domain and technology experts for their planned technology refresh, it was big news in the consulting industry. Everyone who had any experience in the industry wanted to pitch for the business, at least part of it if possible. It was well known that the company had a collection of all kinds of technologies somehow intertwined and operating together; being early adopters during the mainframe days, they had custom developed everything they used, well almost !

With the evolving software solution market, many younger and smaller competitors had embraced the COTS world (Commercial Off-The-Shelf) and successfully keep moving ahead of the technology curve. Thus they enjoyed the benefits of automation with faster and cheaper processes which did give them the advantage of being able to react fast to market. On the other hand, the company continued to stay with their legacy bespoke solutions serviced by a large contingent of people who had spent decades in the company.

Innovative products by the leader were quickly copied by the nimble with a technology edge; the reverse too happened fairly quickly which belied imagination of the market considering the size of the company. It was fairly evident that custom tech solutions did not slow down the leader. People poached by competitors talked about tight alignment of objectives between business and IT as the secret sauce; legendary leadership and culture had sustained the business through difficult and good times.

A century of existence ensured they were miles ahead of their nearest competitor, but the gap was slowly and surely being bridged. Retirement of first and second generation of IT leadership brought some doubts about sustaining continued success. The next generation technology leaders had grown with COTS and found it challenging to continue the existing paradigm. Since the company had gained leadership position and sustained it well, and status quo was not an option, they approached the predicament with kid’s gloves.

And that is how the market went abuzz with an opportunity that sought qualified expert opinions on the future path. Should they move to a COTS model ? Sustain their existing seemingly crumbling monolithic yet fragmented solution ? Rebuild a replacement solution ground up with the experience and domain expertise within, or take a hybrid approach with parts of the legacy being chipped off and replaced with COTS ? And there was the Cloud and what not to consider in their new reference architecture.

Debates grew with every consulting company worth a name throwing their hat into the ring; some approaching the situation directly with the new IT leadership, few used Board level contacts and many pitched to different parts of the business; each had an opinion and pushed a viewpoint based on their frame of reference and comfort. Consensus eluded them with the landscape confusing them even more than where they began from; finally they decided to engage a few individual experts and go at it themselves.

My view: re-architect with best of breed COTS, prioritize investments and set a stretch timeline. Involve people across layers, make sure that quantum of change and potential disruption is known upfront. Execute with chip and consolidate actions while leveraging core domain expertise that runs the business. That part of legacy would be the last piece to change. COTS offers one key advantage that the solution becomes people agnostic, which custom solutions don’t. So the journey moves from legacy to hybrid to COTS.

If you were the CIO or Advisor, which approach would you choose ? How would you strategize ? 

When you leave does the company sustain or hurry to change your legacy ?

Step by step, brick by brick, one person at a time, year after year for four decades, the promoters built the business into a large force in the industry, becoming a dominant force in markets where they operated. They were not in the global top 20 but they were number one in their home ground garnering respect of partners and competitors. Their success was a result of investments in people, process and technology well ahead of the curve, and then retaining them; technology played an important role in their profitable scale up.

With the Promoters endorsing investments, they thrived through the transition of IT from monolithic mainframes to client-server, moving to web-based technologies as they evolved. At that stage they hired an experienced IT Manager who was brought into a specialist role to take charge of the future. He rallied the diverse investments across business units and brought in sanity to IT enterprise architecture. He created a technology team which build applications suited to business need and evolving customer expectations.

He was quick to understand the business and participate in discussions on business growth and how IT could help. As the solutions kept increasing in number and complexity, so did the IT team to service the growth in business and IT. At the turn of the century the advent of COTS (Commercial off the Shelf) solutions created a buzz that could not be ignored; so on behest of the business and the Promoters he started evaluating solutions. Vendors lined up to demonstrate their wares anticipating a high value, marquee, and referenceable customer.

Comparisons between handcrafted bespoke solutions which the business used and the evolving though comprehensive solutions from global players followed. Most COTS solutions fared badly on industry functionality out of the box, but scored on flexibility which was declared unimportant by the IT team citing better fit to processes which had withstood the test of time. References to challenged implementations in the market were enough to defend existing set of solutions which had started slowing down the business’ ability to deliver.

The quickening pace of technology change resulted in additional stress on the team that was unable to cope with keeping the lights on and innovation simultaneously; the well-entrenched CIO began feeling the pinch. In the absence of headcount addition being allowed, he partnered with external services vendors to build satellite systems barely sufficient to keep the business satisfied while competitors had started enjoying the benefit of simplicity and agility set on the foundation of evolving and now better COTS solutions.

Business continued to grow on the shoulders of high customer traction to the brand; uneasy calm had occasional ripples due to difference in outcomes that their complex IT enabled. Lead times to deliver new functionality crept north and noise came in random spurts subdued by the personality exuded by the CIO. The Promoters sensed trouble and hired a big name consultant to create a plan and roadmap for the new desired state in a world that had begun embracing Digital and the industry was facing disruption from new business models.

Consultants love situations where recommendations are fairly straightforward and easy to implement; even a fresh management graduate with exposure to technology would have come up with a solution – reaching for the proverbial low hanging fruits – which would have been marked improvement over existing legacy which had now become a weight to carry on with. They went through the song and dance, interviewing people, benchmarking against industry, talking to experts globally to prepare a strategy and lay out the solution to alleviate them from the current state of affairs and regain lost glory.

Coincidentally the superannuation of the CIO neared emboldening the CXOs to seek new ideas and fresh IT leadership. The consultants were tasked with finding a replacement and refresh/replace the technology solutions as appropriate; confidence in the IT team and their legacy had reached an all-time low. The writing was on the wall, it was no longer going to be incremental innovation, rip-and-replace would prevail to get rid of the legacy that may have served well in the past, and it was no longer relevant or useful.

As a CIO barring a few instances, I have always been careful to protect past investments to whatever extent feasible and build on top of whatever technology may have been deployed. At the same time I have also attempted to keep current the landscape in every enterprise to ensure that the company does not lose the innovation race and stays on par if not ahead. Emotional or insecurity led decisions can hurt growth and career aspirations. Stay relevant, keep your ear to the ground, be ready for the next disruption, better create it.

Why is IT so different from other industries ? A Customer’s perspective

We are amongst the largest construction houses in business for many decades; we have provided homes to tens of thousands of people, offices and commercial spaces to many companies. We build them to standard specifications with nominal deviations depending on customer requests. We also create custom commercial spaces for customers which we deliver within timelines and budgets; they love us for the quality and with some we have done repeat business too. We strive to stay the benchmark for the industry.

Why cannot the IT industry also follow similar principles when they build software solutions ? Take the case of our homes or standard commercial offering: they are like packaged software, you the base product and customize it with your own décor, furniture, and fixtures, to personalize the way it looks. Standard software products implementations are like this; Vendors offer AMC contracts to maintain and provide continuous support, we do that with our facilities management offerings in larger complexes and commercial offerings.

Our built-to-order or custom campus/buildings for large companies are similar to IT industry offering of bespoke solutions based on defined requirements. Requirements are signed off before construction starts; any changes post sign-off are expensive and follow change management process. IT does the same, right ? The difference comes after that ! Once we have built and handed over the building, we move off giving the customer the source code (drawings); they rarely come back to us after that for anything.

My IT project has been on for years; a large team has been working on it. They have delivered in phases though there have been many changes from where we started. The large team appears to have become a permanent fixture, always tinkering with the software, modifying it, tuning it, making changes at times unknown to us. I think they will be around as long as we use the software ! In my business nothing like this ever happens; can you imagine construction workers and others lingering on after residents have started staying ?

The comparison set me thinking about the differences and similarities not just with the construction industry but also drew parallel with other industries like automobiles, white goods, consumer products and even the service industry. There were many similarities like the above comparison, but none of the industries came anywhere close to the characteristics observed in IT. Why is the IT so industry different when compared with some of the long-standing behaviors that depict the way business is done by other industries ?

Let’s bifurcate the industry into two parts: the first which manufactures physical devices like desktops, laptops, mobiles, printers, networking equipment etc. These come from different manufacturers with their own brand identities and features; nominal change is possible, mostly using add-ons, rarely with change in core. Customers buy based on their preference and brand affinity; the industry competes on features and value added services, no different from the value proposition articulated by the CEO of the Construction Company.

The software industry again divides itself into 2 segments: commercial off the shelf (COTS) or custom solutions. COTS personal use solutions are easy to deploy and need little if any expertise to get started. COTS enterprise solutions on the other hand require armies of skilled resources to build a usable version; however this is changing with modular standardized process based offering on pay-per-use similar to renting ready to move-in office space. Most companies are beginning to see benefit in the new way of deploying such solutions.

Bespoke development is different and does indeed require continuous build and manage capabilities from IT. This is like the custom built office which is expected to adapt and keep changing based on multiple parameters like occupancy and attendance, male or female worker needs, external environment, day or night, seasons of the year, and do so with minimal disruption. This leads to a lag between requirement and delivery while requiring skilled resources to change configurations, test and deploy with herculean agility.

Comparisons thus create interesting scenarios to reflect on reality as others see it; as long as companies believe that their enterprise, processes, industry cannot be served by standard COTS solutions, the IT services industry will continue to thrive and grow to meet the demand. CEOs and CIOs will engage in the inane debate on optimizing IT while business has a free hand to create anarchic and at times necessary process change. The other factor being the survival of high maintenance prehistoric solutions which people have found impossible to dislodge. 

Software for free ?

In the good old days IT organizations developed software; the development initially began with an army of developers working for the EDP/MIS/IT organizations and they did deliver customized solutions for each business unit or function though not always in the time that business wanted these solutions. But back then we did have the luxury of time. As momentum grew, it gave birth to software development and maintenance companies who will do it better, faster, cheaper.

Disruption arrived in the form of packaged Commercial-Off-The-Shelf (COTS) solutions with three letter acronyms (TLA) that took everyone by storm. ERP, CRM, SCM, BPM, ECM, the TLA multiplied creating frenzy amongst companies. Fed up with delays and the slow pace, most embraced the new wave; the investment was justified for speed and standardization. IT transformed itself to adapt to the new paradigm while consultants laughed all the way to the bank.

All software have list prices and ironically no one buys at that price; everyone depending on their leverage and volume negotiated discounts. These varied from the low 10% to in a few cases high 70-80% for global and large deals; more so in cost sensitive markets which could not digest Dollar or Euro pricing. And then the slowdown at the turn of the century and another one not too long ago coupled with a market that was drying up for new licence deals created interesting scenarios.

I have been hearing some interesting news from my CIO friends; it would appear that many solution providers are demonstrating desperation to sell to meet monthly, quarterly and annual targets. The discounts are getting bigger and especially so when any of the calendar milestones are close. CIOs know this and leverage this to their advantage. A vendor signed up an existing customer for an add-on solution at 98% discount just to ensure that a competing product does not make inroads.

In current times it is evident that every buy decision goes through higher rigor and diligence than it did in the good old days. Evaluation cycles are longer and purchase decisions deferred to align with vendor financial calendars. Even vendors play the game fully knowing that the CIO and/or the buying team will close the deal once they believe that the discount level is apt. I am not sure anymore if prices at current levels are artificial to give the mental satisfaction to the customer of getting a great deal.

A friendly CIO talked in hushed tones of a solution he got free ! No licence fee, no implementation cost, only support charges payable after go-live ! This was not a small solution provider, but a leader in the segment in which they operated. I probed further to find why would someone want to do that ? The only insight that I could gather was about creating new market segments and a case study. The project worked well and the CIO was a hero in his company albeit it created challenges for him for future purchases of any solution.

New delivery and service models coupled with cloud based delivery have created new operating principles for everyone. Pay as you use, scale up or down based on load and number of users, dynamic pricing linked to revenue or business benefit, are some examples. How do these impact purchases ? Does it take away the charade of negotiations ? Does this start leading to standard pricing ? So far, I think not, but the future may be different.

Consumers today are willing to pay whatever the marketplace asks as a price; the same individuals in a corporate setting expect a different reality. Maybe it is to do with micro-payments versus large cash outflows. Maybe it is to do with task specific applications on the mobile to general purpose solutions that require large implementation efforts. I think if enterprise application vendors started breaking down their apps in a way similar to consumer apps, the sum of parts would be larger than the whole.

But then we will not need large monolithic applications to run our business and that is something worth thinking about, and most applications would have free versions !

What is your ERP strategy ?

Technology evolution has created many opportunities and challenges for IT departments. The pace of change in recent times has been going up exponentially with obsolescence setting in faster than the adoption curve maturity. Each new flavor  trend and hype creates a flurry of activity which forces the CIO to react. Despite claims of various consultants, there is shallowness of expertise to get some real stuff done. Today it may be difficult to find COBOL programmers; it is equally difficult to find UX or Big Data experts.

Every company and function wants to retain talent and leverage the years of experience and expertise rather than losing them. This is more so if the person is really good at what s/he does; which is why we have retention plans, fast-tracked development, high potential identification and many other financial and non-financial incentives. We also face the challenge of managing a few members who have failed to change with the times and are unable or unwilling to adapt to the new world.

The technology treadmill keeps some of us running to explore and evaluate how and what could be potential uses that will create a differentiation. We embrace the technologies when something works and soon you find the trend becoming main-stream with everyone following. Consultants, vendors and tech media keep the hype high with new buzzwords and technology lead disruptions. The already scarce resources end up stretching to explore the opportunities over and above their operational activities if any.

Operations are necessary and critical to ensure that business as usual continues while the new stuff keeps the excitement going. Most enterprises have teams that either built the systems a few decades back or were part of the teams that conceptualized the implementation. If you are lucky they have been able to re-skill and stay current while managing the legacy. It is also possible that some have not been adept. Many organizations outsource the legacy sustenance and thereby the BAU operations.

The challenge that many face is to find productive use for the team members that failed to stay current with technology or business. These old-timers built the legacy that did well for the business contextual to the need at that time. With evolution their inability to adapt makes them dead weight in the current hyper-competitive business environment. The quandary for the CIO is to find useful work for them or find a humane way for their easing into other functions or out of the company.

One of my CEOs in the past had remarked of this phenomenon “We offer employment to qualified people on merit, we do not guarantee employment”. With profitability pressures and economic uncertainties this is true even for the better ones with work not just shifting to lower cost but also adding on to existing staff. Do more with less is here to stay and the bar keeps rising every year. Discussing this with a CIO, when she asked me “What is your ERP strategy ?” I was stumped.

ERP is presumably the new term for Early Retirement Plan, effectively created and deployed with HR. Her company had moved off the legacy technologies that had survived more than two decades and through the planning process she had attempted to re-skill the old workforce offering those positions that would have created a graceful exit over a period of time. Most took the opportunity clutching straws and made the grade. A few who did not had to be offered the new ERP !

In some companies old tech still stays, so do people; the pressures of current technology enabled disruptions will require them to sooner or later transition to newer and contemporary solutions. Recent times have seen many transitions from custom legacies to COTS systems to compete in the new normal. The eventual will arrive; CIOs need to hasten their people strategies to ensure that they are not left with a situation where they are pushed to a wall to take a decision.

All ERPs require planning, so why wait ?

Long tail of IT apps

For most companies that got started with their IT journey in the era of the mainframe, their journey through the evolution of technology created problem of the plenty. Client-server was a favourite for department apps, and the browser made proliferation easier beyond the department. With X-base it was easy to create small specific purpose apps; even users could churn some code that soon turned mission critical. The ERP attempted to consolidate all processes and apps, but most survived the onslaught citing unaligned ERP processes or mission critical status. The cloud now adds to the complexity by making it easier for new apps to flourish.

Every company thus maintains consultants (sometimes ex-employees who developed the apps or maintained them before retiring), vendor relationships, or deadweight to sustain the process these apps enable. Esoteric technologies requiring some antiquated infrastructure continually escapes the axe whenever renewal is discussed. Proportionately, larger the company, bigger the number of apps it has. Examples that I have observed include more than 40 instances of core ERP; another proclaimed build-up of 8000 apps over a 25 year legacy. Many did the same thing for different people using different technologies, but neither wanted to change to the other.

How do these apps defy all attempts at eradication and survive even the strongest attempt to weed them out ? Their patron saints are strongly entrenched in the corporate labyrinth and any change is touted as disruptive to the business. The CIO after a few attempts gives up in favour of bigger battles to fight with higher business impact thus leaving the long tail of applications wagging the IT function more often than pleasant. Thus many people within the enterprise continue to exist to keep the machinery chugging despite options of a better way of life.

An interesting phenomenon was recently narrated to me by a much acclaimed CIO of a well-known and progressive company when his users started defending a not so good a system. This app was a sore point with the functional owner as well as the IT folks with an unusable interface and complex execution of processes. Everyone hated it and it attracted jest and ire in every management meeting. With no change being pushed from the function, the CIO finally decided to do something about it and started an initiative to replace the solution. This is despite the fact the new app offering a significantly superior experience and ease of administration.

Is this only about change management or is the issue much larger ? I believe that the CIO should task some of his/her team members to systemically go behind the hidden long tail apps to wipe them off. When they are working, no one is complaining; they give sleepless nights to IT when they fail. Is there an easy way out ? No, so keep on pushing, nothing good came out of staying put and maintaining status quo. Change is always difficult, but change is the only constant.

If you don’t like something change it; if you can’t change it, change the way you think about it.