The most interesting aspect to my work as a generalist covering an industry that basks in narrow specificity is uncovering the gaps – at times more like chasms – between what vendors say and what customers do when it comes to acquiring new technology.
The generalist in me cringes every time I see product pitches that dive deep into feature/functionality without paying attention to the larger context of how products have to become part of a holistic system. There’s an aphorism that calls out this problem aptly, and it’s one I’ve been using for years: The biggest mistake enterprise software vendors make is to sell products the way they build them, not the way they’re consumed. In other words, vendors fail to pay attention to the reality of the software acquisition process – which is chaotic, irrational, and prone to almost whimsical decision-making, and all too often not about deep feature/functionality – and instead focus on what they think or wish would be the case with the highly-engineered products they develop.
There’s a lot of problems that arise when vendors look in the mirror and think they’re speaking to their customers, but none is more problematic today than the failure to acknowledge the heterogeneity of the customer base of all large enterprise software buyers, and many small and medium-sized buyers as well.
The problem is even more glaring given the current – and frequently opportunistic – emphasis on customer success across the industry. Too often the concept of success is predicated on expecting customers to succeed the way the vendor defines success, which is usually aligned more with sales goals than with what the customer actually needs.
This isn’t just about the fact that heterogeneity means that some customers have a single vendor for running manufacturing, another for their supply chains, and third for financial reporting, a fourth for CRM, etc. That kind of best of breed strategy is only the tip of the iceberg. An extraordinary number of companies I’ve worked with or researched in the last few months have more than one vendor in each of the major categories, spread across their different operational and geographic entities. Sometime it’s more like two or even three versions of ERP, CRM, and SCM are running simultaneously in a single company. Even more complex, there may be different versions of the same vendor’s software running simultaneously as well.
The Problem of Extreme Heterogeneity
In fact, based on my research and conversations with dozens of customers over the last several months, a phenomenon I call “extreme” heterogeneity is more the norm than the exception, particularly among companies with annual revenues that top $1 billion. These companies may have, once upon a time, standardized on a single suite or set of best of breed applications. But as they have merged and acquired, divested and reinvested, reorganized and restructured, the standardization of IT assets has gone by the wayside.
Some of this extreme heterogeneity is the result of shadow IT run amok, or line of business buying that’s unaligned with corporate IT priorities, or just lax control by IT of overall IT spending priorities. Regardless of its origins, extreme heterogeneity puts to the lie the concept that buying software is a rational process governed by rational people thinking rationally. Or at least as vendors’ go-to-market strategies define the term “rational.”
One of the other truisms belied by extreme heterogeneity is the notion of “account control.” Vendors love to talk about our customers, implying ownership where indeed there usually is none. The braggadocio in extremis can be seen during quarterly financial calls, where vendors trot out their latest “wins” as though every deal is a zero sum game which, by virtue of last quarter’s deals, their competitors have definitively lost another customer. Which, for the record, is usually far from being the case.
In reality, what exists in many large companies are circles of influence that coalesce around a given vendor’s presence in the company’s IT stack. The circles of influence are more like city-states than wholly-sovereign entities. This means that they have a decent amount of choice regarding what they buy from whom within their specific bailiwicks. But when it’s time to make a major corporate-wide buying decision, the decision-making process starts looking more like a Darwinian fight for survival between the rival vendor’s internal influencers. Which vendor will prevail in the next upgrade/transformation/re-platforming becomes a game of brinkmanship often won by the loudest, the most persistent, and the most politically connected, not necessarily the “best.”
Customer Decisions are Driven by Vendor Openness – or Lack Thereof
This decision-making mess is where vendors’ lack of attention to extreme heterogeneity begins to actually do damage to the customer, and of course by extension to the vendor itself. In my last set of face-to-face meetings before quarantine last spring I met with a team inside the office of the CIO that was responsible for the software and services provided by a single vendor’s product set. It was the archetype of similar conversations I’ve had in recent months: That particular vendor, I was told, was actually harming the team’s position by their rabid insistence on marketing their software – and only their software – as the solution to every customer’s problem. The vendor – in its marketing pitches and in its sales execs’ kit bag – had only one vision for digital transformation, and that entailed a rip and replace implementation of their software – and no one else’s.
(If you’re trying to guess which vendor I’m talking about, the answer is simple – it doesn’t matter, this is pretty much true for everyone.)
This team I was talking to was only one of several in the company. Each circle of influence was vying for a seat at the table, and their boss, the global CIO, was navigating between three primary vendors all vying to take the lead in the company’s digital transformation.
The biggest problem these internal vendor advocates faced was the fact that everyone inside the company, in particular the CIO, knew that there was no way transformation was going to be handed over to a single vendor and its products. The strategy needed to be a multi-vendor one, and it needed to acknowledge that revamping core end-to-end processes would entail integrating a mix of old and new products and technology, most likely in a hybrid on-premise/cloud, heterogeneous environment.
To add to their distress, the CIO was leaning towards bringing in a major consulting company that would add its own biases to the mix, and very likely sideline this group’s favorite software in the process.
What the team needed was ammunition to make a better case for the products they preferred. Which in general makes a lot of sense, even if the motivation is a mix of job preservation (as in, my team and overall influence shrinks if we don’t take the lead) and what’s truly best for the company.
So I did what I’ve done many times – helped them map out a story about how their preferred vendor can actually support heterogeneous end-to-end processes to help them advocate for their seat at the table. It was relatively easy – there is no vendor today who doesn’t at least have an API-based strategy for supporting heterogeneity. All it took is an outside-in perspective that, unfortunately, most vendors and their sales execs eschew in favor of “our way or the highway.”
Enter the Hyperscalers, SIs, and Process Integrators?
What’s important for the vendors that sell enterprise software, particularly the suite vendors – as their best-of-breed counterparts have understood the heterogeneity issue for a while – is that if they don’t figure out how to do a better job talking to their customers about supporting other vendors’ products, including competitors, they’ll be co-opted by the hyperscalers. While I’ve been singularly unimpressed with how the major hyperscalers – Microsoft, Google, and Amazon – are responding to their customers’ problems with managing heterogeneity, eventually they’ll figure it out. At which point the software vendors who haven’t will have lost an important role in the future of the very customer success they’ve all pledged to uphold today.
Indeed, here’s a prediction: the next evolution of the systems integrator market will be in supporting the matrices of heterogeneity that exist in the corporate world. This multi-dimensional support matrix will consist of enabling end-to-end processes that span a mix of applications that run on-premise or in a multi-cloud world. And figuring out the plumbing for these processes will only be the beginning: the analytics that can be drawn from these complex multi-dimensional customer environments will need their own specialized plumbing as well. There are going to a lot of consulting work trying to get this right and keep the matrices up and running, particularly given the rapid upgrade cycles in the cloud.
Another prediction: the more successful the likes of ServiceNow and Celonis are with their messages around orchestrating end-to-end processes that span application silos, the more the vendors will start to feel sidelined by their success. If the number of customers and the complexity of these specialty vendors’ process integrations reaches a critical mass – and to be honest I don’t think it will take a lot of time to scale up these efforts (ServiceNow is already there the IT management space, though its LOB orchestration efforts are still pretty nascent) – these companies will either become acquisition fodder for the hyperscalers or the large vendors. I think the former would be foolish not to buy in, pun intended, and I think the latter may be too foolish to do so, not-invented-here being a too-powerful force for most of them to ignore.
Rethinking Old Imperatives
Indeed, getting the heterogeneity challenge right will take a lot of new thinking inside a lot of vendors that lack an outward-looking strategic vision. The problem starts with a combination of engineering hubris and NIH and extends into sales incentive structures that reward product sales, and little else. It’s a top to bottom cultural shift that can’t happen soon enough, and won’t. It’s going to be that hard.
A similar shift will have to take place in customer DNA as well, but at least in their case there are business imperatives that can help the different vendor stakeholders to try to play well together. The customers will still have to deal with the contradictions that come from both enabling LOB choice and enforcing corporate standards. But once it becomes clear that building end-to-end processes that span the matrix of apps and platforms can yield huge benefits in terms of productivity, cost reduction, and business success, they’ll be able to at least formulate a plan, provided there’s a stakeholder with enough seniority to drive the plan forward. A few have approached me recently about doing so, and it’s not always easy: the work is much more political than it is technical.
Where does this all end on the vendor side? Considering how many times I talk to major vendors about the problem and hear mostly platitudes, I’m afraid it won’t end any time soon. Little baby steps are being taken towards at least admitting how important supporting heterogeneity should be, and certainly those tasked with the success of customers are open to hearing why such an effort is needed. I’ve also been encouraged hearing some vendors talking about the issue in keynotes and other presentations – some even mention other vendor products as part of this conversation. At least it’s sort of on the table, finally.
But vendor leadership addressing the issue is only the beginning. Like many of the problems with enterprise software –implementation failure is another one – this is buried so deep in the culture of the industry that it could take a real revolution to get this to change. Of course, this is the era of digital transformation, so that’s sort of the whole point, isn’t it?
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