IMGCAP(1)]Never before has so much value been made available to so many—and yet realized by so few.
In an effort to drive product differentiation, higher margins and greater market share, technology companies historically invested up to 15 percent of their annual revenue in research and development. While this expensive and arguably unwinnable game of feature/function leapfrog has very effectively weeded out the weaker technology players in most categories, it ultimately produced a relatively small number of feature-rich technology solution sets that only the largest or boldest of organizations could possibly deploy in their entirety.
As an unintended consequence, this relentless pursuit of functional superiority has pushed solution complexity beyond the capabilities of most technology implementation partners. Put bluntly, today’s solution sets contain an abundance of potential value, but because so few professional services firms have the skills to effectively unlock it, few customers actually benefit from what they own.
Despite the passionate protestations of software publishers, solution parity is the new normal. Mature product solutions that provide more functionality than its customers can consume become commodities, and differentiation shifts to a new level.
Unfortunately, most organizations feel their IT assets are significantly underutilized. Project fatigue and budget overruns kept most from aggressively building on initial implementations as their initial optimism turned into disappointment, disappointment into pessimism and pessimism into apathy.
The problem with traditional IT selection and procurement models lies in who bears the majority of the project risk. Inaccurate estimates often resulted in significant scope changes, which benefited the technology services partners in the form of increased fees. The estimation errors weren’t malicious they were simply a by-product of knowing more about IT than business. Learning on the job was viewed as an acceptable business practice, and customer conflict was an occupational hazard.
How the Cloud Changed Everything
There is far more to cloud adoption than evolution and economics. While advances in technology have made cloud computing possible, the fuel behind its growth and acceptance lies more in emotion than logic. Historically, large technology-driven business projects meant large up-front capital investments, complex customizations, expensive integrations, unreliable implementation estimates, and a healthy dose of fear and trepidation. Given the lofty expectations that were often set to secure funding support, the majority of these projects were perceived as failures, so “IT” initiatives developed a stigma that discouraged all but the most steely-eyed and courageous of executives from accepting the business sponsor baton. As a result, risk reduction and, more precisely, risk transfer, has become the most compelling benefit of migrating on-premises technology to the cloud. It’s far greater than all the cost savings and capital preservation benefits combined.
At its core, the cloud promise is one of portability and control. If suppliers fail to invest in and improve their cloud-based business offerings, customers have the ability to cancel their “subscriptions” and move to a new provider. In the not-too-distant past, a decision to change technology providers was analogous to an anesthetic-free root canal. This endeavor was not taken lightly. As a result, the “devil you know” argument won out over an intuitive sense that a greener pasture elsewhere existed more often than not. But in today’s commoditized cloud world, the psychological one-two punch of sunk cost bias and risk aversion no longer gets in the way of change. Power and control both emotional drivers have shifted back towards the buying community, and rightly so.
Combine industry-optimized solution sets with the cloud, and best business processes/practices unfold as a service that is continuously optimized by a motivated partner. Capital is preserved or applied to a greater effect elsewhere, and complexity and risk are reduced as business value is extracted more readily and predictably. With technology parity, optimized industry solution sets that address a broader set of business challenges and processes will become the differentiator, both for the companies deploying them as well as the implementation partners configuring them.
Jim Drumm is the partner-in-charge of Sikich LLP’s technology practice, with extensive expertise in business and management consulting, marketing, sales and technology--particularly ERP selection.
