That’s what one of the clients said during my early days of consulting. It was huge meeting to discuss specific business problem for the client. People from different IT companies were there to propose IT solutions.

One could easily find unease on client’s face as he sat bravely through series of presentations. Every IT outsourcer presented totally different approach (& commercials) for same problem on same IT platform (in this case, SAP). Client obviously could not understand how same business problem would be solved in multitude of ways in same SAP IT platform.  He finally decided to voice the frustration and asked for ‘one’ answer to his problem.

He had valid concern.

He asked,”If he wants to develop complex enhancement on SAP platform , why it would take 40 days for one IT vendor, while other one is able to do it only in 20 days, while third vendor offering to do it in 10 days flat ?”

Let us understand how this problem originated in the first place.

IT Industry is run by three types of organizations –

  1. Software/products companies – They are the ones who make IT products like SAP, Oracle or SaaS companies. Their primary source of revenues is software licenses.
  2. IT services companies who deliver IT projects revolving around major software products as well as custom technologies. Their primary source of revenues is services.
  3. Ancillary companies who  either deliver infrastructure (networks,PCs,data centers) or consulting/change management programs

Traditionally, these organizations worked independently of each other. In general, IT services company has little insight into software product roadmap. Also, product development guys do not know how their product is being implemented in the market. While there were fewer instances of  collaboration among them, they are specific to the IT project often initiated by the clients.

Client are often at receiving end of IT procurement cycle.

Reason being –

  1. They can not figure out how much it is worth if they are buying particular IT service whether its set of RICEFs to be developed in SAP system or large-scale IT transformation. There are no set of rules or benchmarks available in the market. Customers often do not have ‘insight’ into cost structures of IT industry.
  2. It is also complicated by inability to arrive at ‘Total Cost of Ownership’ as it is up to client to piece together information across multiple channels. If you want to consider internal resourcing on top of it, it becomes even more difficult. Imagine doing it for latest technology like cloud or newly released module for SAP like S4HANA , you are pretty much shooting in the dark.
  3. ROI for an IT project is very difficult to calculate. IT projects eventually produce business outcomes. Such outcomes occur far into the future and often dependent on lot of other factors as well.
  4. Rapid pace of technology changes has flummoxed clients. Afterall, it is difficult to predict where you want to be on technology roadmap in couple of years. So, you end up doing lot of catch up and lot of wasted IT opportunities (thus necessary capital).

As IT industry, we should make life easier for our clients how they asses and buy our services/products.

Here is how –

  1. Biggest onus is on Software product companies. If you are considering that you are only responsible for product features/functionalities, you are living in fool’s paradise. As a product company, you should be aware of how much effort it takes to implement the product. Such effort should also include activities client is expected to do to successfully derive business benefits out of IT product. Ideally, product companies should release implementation estimating guidelines every time they introduce new modules/functionalities. After all, it should not be difficult to provide consistent guidance on effort required to implement software product.
  2. IT Services companies operate in the field, so they know whether estimation guidance from product companies has worked or not. Key data from IT projects can be fed back to product companies who eventually should revise estimation guidelines based on planned vs actual numbers.
  3. As IT product matures, productivity improvements can be factored into the effort estimation. It should not take same amount of time when product was newly introduced to the market.
  4. Such guidelines should be tied to technology/product roadmaps. Afterall, why should client invest in mobility initiatives if product vendors plans to offer standardized apps in next release, for example ?

Smart clients are already warming up to idea of setting up estimating guidelines or drawing up technology roadmap tied to business outcomes before getting into contracting discussions.

Whether that would force Product and IT services companies to work together better, verdict is still out there.

 

 

 

 

 

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