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Beware of Vendors
Bearing Solutions
By Dave
Stein
Contributing Writer
Article Date: 03.10.03
Hype. Years ago we called it "leaning into the wind." It was a
philosophy--maybe even an art--that enabled software companies to be competitive,
to build market share, and to sell sufficient product in a timely enough fashion
to fund ongoing development. If you leaned too far into the wind, you fell on
your face. If you didn't lean far enough, you would watch their backs as your
competition took the market share upon which you built your dreams.
Leaning into the wind is a metaphor that used to mean announcing, marketing, demonstrating--even
selling--something that you calculate will be ready by the time the customer is
prepared to actually use it. It was a complicated calculation back then. Not quite
the "square root of development effectiveness times the standard deviation of
sales aggressiveness divided by the total number of competitors in your market
minus the pressure from the venture capitalists," but close.
Ten years ago business was done aggressively, but ethically. The intent with most vendors was to deliver to the customer what they needed when they needed it, however close to the deadline it was. Once in a while you were late, but you always made it up to the customer. Always.
During the last five years, leaning into the wind has transmogrified itself into a level of hype in the enterprise solutions marketplace that would make the aluminum siding salesmen of the 1950's hide their wallets and run for cover. That hype has been a major factor in the recent downfall of some of the enterprise application industry's most illustrious players.
Were lie detector tests available to IT management today, fewer of them would have to leave their former jobs in embarrassment, fewer companies would be at the brink of survival due to new system implementation "snafus" and far fewer vendors would be out there PowerPointing their way to the next quarter's sales goal or the big IPO.
Two of the reasons for that hype are the vast number of competitors that are transforming what were differentiated solutions into commodities and the pressures felt by the publicly held companies to deliver numbers aligning to Wall Street expectations.
Consider these examples of how serious the hype has become that IT management
is facing:
- A sales team employed by a publicly held ERP provider surreptitiously coded
an application prototype matching customer-required functional capabilities, and
then represented that as standard product to win the deal. When the customer found
out what happened, they sued the vendor. It was not the first time this happened
with that vendor.
- A well-known solutions provider's sales teams routinely "forgot" to tell prospects
that an additional (and expensive) piece of hardware was required in order to
run that vendor's next generation version of their product. Even after the requirement
was mentioned in a Gartner group report, the practice reportedly continued.
- Some vendors routinely announce partnerships with other vendors. In many cases,
this is not strategic, but rather slapped together to win an individual sales
campaign where the prospect requires integration of both products. A press release
is issued, the deal is signed, and three months later the customer is left without
the answers to such questions as, "what happens to me when there is a new release
of either product." By the way, most often the names of those partners remain
on the websites of both vendors as proof that they are offering a "broad footprint."
Prospective buyers are left with the mistaken impression that something more valuable
than the distribution of a press release was accomplished. This too is hype.
- Some of the vendors who have failed to turn a profit for the past number of
quarters and whose very survival is at risk today are the same vendors who cut
their prices far below profitable levels to win deals out of desperation because
none of their other questionable selling tactics worked. (And they managed to
convince those buyers they were getting a good deal.)
- Some vendors who claim hundreds or thousands of customers have trouble producing
five good references when pressed by a prospective customer.
- By now we are familiar with how the "Big 5" and other consulting firms steer
ERP evaluations to the vendors with whom they have partnerships. At the same time
the fact that those very consultants have trained, in some cases, thousands of
their own people on those vendors' products is not hidden from those who would
look on the vendors' and consultants' websites. Is it possible that the consultants
steer the customer not toward the best solution, but toward the consultant's partner's
solution to keep that consultant's thousands of employee's utilization rates high?
If you believe that this is possible, you understand hype.
- As the tier-one ERP players drive downward into the mid-market, pictures are
painted and visions are portrayed of the benefits of Fortune 500-like systems
in those $80 million companies. It just doesn't work that way. More hype. The
people implementing and using the systems are different and the cultures are different.
Smaller companies generally have very limited experience managing complex projects
and most importantly, the financial and personnel tolerance for mistakes is dangerously
low. A mid-market company is not a small Fortune 500 company.
What are the implications?
When these systems fail to do what was promised there is always a hefty price
to pay: Reduced profits, lost customers, angry shareholders, unpaid suppliers,
erosion of market share, out of control budgets, damaged careers and in some cases,
such as FoxMeyer Corporation, bankruptcy court.
As people responsible for some of these unfortunate decisions move on to
other jobs in other companies, only now are we beginning to see the
impact of the hyper-marketing and -selling trend of the past five years:
Software that has never been implemented, where companies are still
paying annual license fees, as well as past due bills for all the
consultants who were part of the "solution;" Aborted projects
where replacement packages were quickly found driving the cost as high
as two to ten times the original project projections; Companies missing
critical IT deadlines for the openings of new plants, acquisitions of
new divisions, and meeting requirements of key customers, leaving those
companies' personnel and executives severely exposed from a financial
and personal perspective; and the very companies that did the hyping are
losing money, or in some cases out of business, leaving their customers
in an understandable state of fear.
With news about the latest IT disaster coming every week, evaluation
committees are trying desperately to figure out how to assure themselves
and the companies for whom they work that every risk is at least
recognized, if not eliminated.
In many cases they are going about it the wrong way. The elimination of risk is
not the result of a thicker RFP.
Recommendations:
Without intending to outline a comprehensive evaluation process, there are some
very simple things that you can do to prevent yourself and your company from being
tomorrow's lead story in the industry trades:
- If you
are going to hire a consulting firm to assist you with your
requirements, consider using a different firm to manage the
implementation, so there is no conflict of interest.
- If you
use an RFP as a tool, warn each vendor that you will be
spot-checking the answers. Then spot-check the answers. If any
vendor is found misrepresenting their capabilities in any way,
eliminate them from competition.
- Require
a minimum of 15 to 20 references from each vendor who makes your
short-list. They should be in your general industry, of your size,
and with similar requirements. If the vendor claims they have
hundreds of customers and can't produce 15, eliminate them. They
have a sales ethics or customer service problem. Call every
reference and speak to at least two people at each company. That
will likely eliminate the "friend of the salesrep" effect.
- Carefully
measure how well the vendor understands how their solution will
impact your business. If the sales team doesn't take the time and
effort to understand your business and has no knowledge of or
experience in your industry, history suggests you will lose.
- Check
on the employment longevity of the sales and services teams. If
attrition is high, there are likely problems.
- Make
absolutely sure that you go to a user group meeting and don't let
the vendor restrict your movements. If they try to control your
access to other customers, they have something to hide.
There are
certainly vendors who have great products and services that don't
oversell and overmarket. They have happy customers who have been more
successful since implementing those vendors' products. But ironically,
those vendors are often not included on long lists because of lack of
market presence. That is most often due to relatively small marketing
budgets, and a generally unwillingness to play the hype card.
Summary
The burden remains on IT management to understand and minimize the risk involved
with evaluating and selecting business solutions.
Once the risks posed by the negative trends affecting the enterprise
solutions marketplace are internalized, IT management will likely search
out a greater number of potential solutions, not just the obvious ones.
IT management must relentlessly qualify all of them. Tough questions
must be asked and answered. In some evaluations, for example, one
vendor's integrity (validated by their current customers) must have more
weight than another vendor's future product announcements, long list of
partners, or the number of buzzwords embedded in their latest press
release.
In this vortex of hype, when it comes to new ways of evaluating potential
suppliers, an open mind is definitely required.
As originally publshed by TechnologyEvaluation.com
About The Author:
Dave Stein, president of The Stein Advantage, Inc. and author of the best-selling
book -- How Winners Sell -- is much in demand as an executive coach, sales consultant,
trainer and speaker. His unique skills in competitive sales strategies and the
selling of business value to executives have helped thousands of sales professionals
in 48 states and 22 countries win hundreds of millions of dollars of business
against insurmountable odds.
http://www.HowWinnersSell.com
http://www.LearnHowWinnersSell.com
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