Analysis: The software maze - Making the right IT decisions.

Selecting software has never been easy. With vendors spending up to 27% of their annual revenue on flashy marketing and sales activities, it is hardly surprising that customers find trawling through competing claims difficult in the extreme.

Technology choices are made more difficult by vendors’ insistence on using an ever-increasing raft of TLAs – three letter acronyms – a practice elevated into an art form by the technology community. The term customer relationship management (CRM) for example has become synonymous with Siebel Systems, the largest vendor in the category. But to assume that Siebel delivers everything in the CRM stack would be wrong. The bulk of its revenue derives from activities only loosely associated with the management of customer relationships. The lesson here is that sales literature has to be read with a critical eye.

Almost without exception vendors will refer to themselves in terms that suggest they are the ‘leading’ provider in a particular category. Often claims are worded in such a way that it is easy to think the company leads a much wider category than they really do. Navision claims it is ‘a leading global provider of cost-effective and adaptable integrated business solutions that help companies in their quest to grow’. CODA says it is ‘a leading global provider of internet-architected business intelligence, accounting and procurement software that provides the financial intelligence needed to make business-critical decisions’.

Neither of the statements is technically untrue, but as one vendor’s chief operating officer put it: ‘We all have to lead in something, it’s just a case of finding the combination of words that gets past the legal department.’ But there are other, more important considerations to take into account.

The first is vendor viability. Dennis Keeling, chief executive at the UK software trade association BASDA, has warned about this issue for years.

Enterprises rely on software investments to stay in business and if the supplier goes belly up, there is no guarantee that a white knight will gallop to the rescue.

The recent collapse of QSP was something of a shock. Software companies rarely crash in such spectacular fashion and in this case, it is Walker that cherry-picked the pieces.

It is unclear whether QSP’s application service provider (ASP) model for doing business will survive in its ‘old’ form but as Walker points out, QSP had a strong reputation in certain markets that are not going away.

Financial collapse is not the only cause for concern. Mergers and acquisitions bring their own difficulties. Navision’s acquisition of Damgaard has created uncertainty because the merged companies have not yet found a way to merge their technologies. Ole Hansen argues somewhat unconvincingly that each brings strengths that allow them to address different parts of the overall market. But that is of little comfort where a company starts on one technology and then finds it needs to move to another. In those circumstances, customers find they are faced with a re-implementation.

Microsoft’s acquisition of Great Plains appears to be going nowhere.

Sources indicate the software is undergoing a major rewrite as part of Microsoft’s.NET initiative. How this will affect customers is a moot point, but it introduces the next issue – technology shift.

The 90s was the decade for client/server based technology. The principle was to build technology that distributes computing between the central server and client PCs to optimise performance and spread the load. But the advent of the internet has skittled this concept.

Today, applications have to operate in a much broader context. Analysts believe that in the next five years most companies will be drawn to collaborative computing or collaborative commerce business models. Unlike past buzzwords used to sell technology hype, c-commerce is a world where enterprise is part of the customer driven value chain. This means that customers are as much a part of the stakeholder community as shareholders.

In addition, enterprises will need to link with others to participate in what management guru Don Tapscott describes as ‘business webs’. This means that rather than acting as a technology fix to a business problem, technology becomes a business issue in its own right. This is because making the right choices won’t be a question of choice based on a beauty parade of functionality. It will be based on whether the software is capable of talking with any potential partner’s software.

Under BASDA’s sponsorship, the UK accounting software segment has risen to part of the challenge creating industry specific eBIZ-XML standards which define the way different software exchange documents between applications.

In most cases it is the order and invoice that receive attention because these are most frequently exchanged.

Although apparently mundane, the impact of this advance should not be understated. Seamlessly exchanging documents directly between applications removes a considerable amount of friction in the value chain and radically reduces costs. Paper, postage, time spent on the phone and a myriad of other activities associated with processing orders and invoices can be dramatically rationalized.

More important, members of value webs are brought closer together in the value chain. Keeling reports roaring success and Exchequer Software, one of the most aggressive proponents’ is finding many companies and channel partners beating a path to its door.

Technology is going through one of the most difficult phases of its development.

Uncertain economic conditions foster averse buying attitudes and internet-based technologies are too new to be widely proven as a tool for delivering value. For many enterprises, it doesn’t help when the best examples come from global companies that invest tens and hundreds of millions in software where the starting price tag is a six-figure sum.

Very few companies have demonstrated the value of taking a bold buying decision. YHA Retail threw 5% of its #16m annual revenue into an SAP implementation, yet attributes the investment to its ability to survive the foot-and-mouth epidemic relatively unscathed.

Today enterprises are seeking tactical gains from existing investments.

This should not be difficult. Analysts estimate that up to 50% of available functionality has yet to be deployed. So without spending on software, it may be possible to get more from sunk investments.

Even so many enterprises have yet to deploy meaningful analytics into their business. Analytics that provide cross-functional insights into business activity, profitability and stakeholder value can act as the springboard for process improvement at relatively low cost.

But there is one final ingredient to add into the selection mix – the technology base. Today, there is a conceptual war being conducted between Microsoft’s.NET and everyone else about which standards will dominate internet-based operations. The short answer is both will, alongside other emerging standards. If history is an accurate predictor of the future, Microsoft will ‘own’ the small and medium-sized enterprise; everyone else will use something different based on an open standard called J2EE. But it is not a done deal and there is much to play for.

For those who have to buy new software soon, there is much to think about.

Software houses can endure downturn www.accountancyage.com/IT/1126074

ERP is dead; long live strategic enterprise management. www.accountancyage.com/IT/1125668

LOOK BEYOND THE HYPE…

Vendor hype continues unabated. Look behind the marketing and examine what the sales materials are really saying to you as a customer. Beware TLAs and extravagant claims for leadership.

Vendor viability is once again in the spotlight. Financial due diligence should be close to top of the selection agenda and should be conducted thoroughly. Acceptance of financial reports is only part of the exercise.

Look at trends in both financial and chairman’s statements.

The world is changing to a collaborative model of business. But do you really need to prepare now? Some software companies have demonstrated excellence in this area and are making a serious play that shows pragmatic innovation. Look at what vendors deliver and consider your position in your chosen industry before making a quantum leap.

Look for untapped functionality in existing investments. You might be surprised just how much can be easily delivered from that which is to hand.

Analytics have yet to permeate the business as a tool for discovering areas for productivity improvement. Analytic application costs are relatively small, but results can be startling and a valuable addition. Keep an eye on technology trends. The development of standards will heavily impact applications going forward. Today’s emphasis is on pragmatic value delivery.

The wild vision of the late 1990s is dead. Do a sanity check on vendors to see where they seem most closely aligned.