Caveat Vendor

The world of IT is changing fast, and the rate of change is itself increasing. This insight is almost a tautology by now, I admit, but what I want to explore here is what this means for enterprise software customers and vendors.

A recent newsletter from Ben Kepes, of Diversity fame, includes this aside in the introduction (emphasis mine):

 One theme that I kept coming back to was the risk that IT vendors run in continuing to communicate under the false expectation that enterprises are all at the same level of adoption. It’s easy to sit in a conference room and think that everyone “gets it”, but the reality is that organizations are complex beasts and sometimes it’s hard for IT practitioners to look beyond simply “keeping the lights on”. IT vendors have a responsibility to articulate their solutions in a way that helps them plot a progressive journey from where they are today to a better future.

This is basically a reformulation of Clayton Christensen’s Innovator’s Dilemma. If you innovate beyond your customers’ needs, your position is at risk of being undermined by less sophisticated offerings that match your customers’ current needs. The insidious part is that for a while this feels good. Those are the customers which are a stretch for your product, and the ones where the return on investment is weakest. Dropping those raises the average among your remaining customers - for a while.

The really insidious part is what Ben Kepes points out: not all customers are at the same point along that journey. Vendors have to strike a balance between the Scylla of out-innovating their less sophisticated customers and the Charybdis of not keeping up with their more sophisticated customers’ requirements. This dilemma has been articulated already by Massimo Re Ferré, so I will just point to his blog for the full treatment.

For vendors, the trick is finding that sweet spot in the market. You don’t want to chase every will o’ the wisp promising technology - nobody has the development dollars to do that. You also can’t afford to get left behind by your customers’ adoption rate. You have to surf that wave constantly, and never fall off.

Sticking with the surfing metaphor for a moment, surfers like smooth, predictable waves. The worst thing for surfers is chop - but chop is exactly what we have in the enterprise software market. The pace of technology churn is accelerating.

It used to take years, sometimes even decades, for new technologies to be widely adopted in the enterprise. Sure, there might be testbeds experimenting with crazy notions such as relational databases or object-oriented programming, but they remained isolated.

This gave vendors the time to adapt their own offerings, whether that meant using the New Hotness themselves, integrating with it, or managing it - or buying a smaller player who had worked it out faster. Once they had built an offering, they could also count on getting revenue from it for a good few years, as their customers kept on using the now mature and widely adopted tech.

So what changed? The pace of adoption of new technologies in the enterprise has accelerated enormously, and indeed is still accelerating. The plateau of productivity has also shortened, since there is a new technology wave coming right behind the current one, and another one even closer behind that.

Meanwhile, vendors have not been able to accelerate the pace of development, distribution and adoption of their offerings to match this heightened tempo. In other words, the rate of churn within the enterprise is now, or will soon be, inside vendors’ OODA loops.

What does this mean? Is it the end of the commercial software vendors, as some argue?

I don’t think so, but it is the end of what has been business as usual, and some vendors will not survive the transition. To survive and prosper, vendors need to let go of their old engagement models.

Agile is not just a development buzzword, it needs to be adopted as part of the DNA of vendors. Multi-year product roadmaps are as out of date as the Soviet Union’s infamous Five-Year Plans. By the time the roadmap reaches its first milestone, it’s already obsolete. If vendors - or customer architects1 - try to stick to their roadmaps, they will find themselves wildly out of step with their customers after a few rounds, which is hardly a recipe for long-term success.

So, both customers and vendors need to build flexibility into their plans. No more huge monolithic projects that will show return on investment only after twelve, eighteen or even twenty-four months. Instead, modular projects with loosely-coupled milestones, with each milestone able to stand alone in terms of its own RoI. In this model, milestones can be rearranged, cancelled or replaced with others as the project develops and its goals and usage evolve.

This new model also requires a different type of sales process.

Traditionally, vendors start engaging with customers only once a sales process begins, with activity really ramping in the delivery phase. Once implementation is complete, the vendor generally disengages, handing the implemented solution over to the customer’s IT team to manage in production. As I posted yesterday, customers don’t see a huge amount of value in this approach, especially nowadays.

The New Normal requires a much more constant engagement between vendors and users. This contact begins long before an official sales or procurement cycle, as part of what is known as the Zero Moment Of Truth or ZMOT. The ZMOT requires a constant exchange between vendor and user. This conversation will cover topics such as:

  •     New technology developments
  •     Changing user requirements
  •     Level of satisfaction with existing technologies
  •     Constraints on adoption of new technologies
  •     Expected benefits from new technologies

This conversation has obvious benefits for the vendor in enabling them to prepare their solution for the user, reducing the lag time between when users want to adopt a new technology and the vendor being able to support it. The benefit is also for the user, because the resulting solution will be much more closely matched to their actual requirements, rather than to the vendor’s theory of what those requirements might be at some point in the future.

The gap between the user’s requirements and the vendor’s projections is often large, and the reason is that lag time. Vendors must not simply divine what users want today, but what they will want a year from now, when their solution will actually be ready - a much more difficult task.

Vendors talk about building a “trusted advisor” relationship with customers. Sometimes this is no more than a code for “persuading customers to buy whatever we are selling, sight unseen”, but when it is done right, this relationship is a two-way one. The vendor-adviser needs to understand the customer’s needs in depth to provide good advice.

Good advisers do not hand out their advice and then disappear, they stick around for the long haul and are available to give advice at any juncture. The rapid churn of technologies means that advice is needed regularly, not just every twelve months or so, when it’s time to set the budget for next year or renew the maintenance contract.

Next up: what can customers do in this brave new world? Follow Mum’s advice: Tech in Layers.

Serendipity: Seth Godin’s post for today has an example of a company failing to engage in this way. His example is more consumer-oriented - an inkjet printer - but the general point about continuous engagement holds. Vendors that sell something, then disappear until it’s time for them to sell something again, are actively pushing customers away. What do you call a vendor who doesn’t vend?

  1. If you think it’s only vendors who have inflexible roadmaps, I have a bridge here that is going cheap to a good home. ↩