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Improving Incumbency: A tale of two marketing efforts

A couple of weeks ago, I wrote Improving Incumbency is the best innovation

This week, I saw two very contrasting vendor approaches to tackling the incumbent efficiency issue.

IBM whose 85% of revenues defines “incumbency” – from software, data centers, maintenance of legacy applications 10, 20, 30 years old suggests in its CEO study that we move beyond a focus on incumbency

“In conducting this study, it’s not hard to understand why. CEOs are looking beyond the benefits of connected supply chains and more integrated back-office systems. Their focus is shifting to the power and potential of recent advances in social media and analytics to reimagine connections among people — whether that’s customers, employees, partners, investors or the world at large.”

Translation: Don’t focus on squeezing our revenues from incumbent DB2, Tivoli, Notes, SAP contracts even though we have not made them efficient over the last decade. Help us expand the 15% in analytics, customer experience and newer practice revenues.

Why not do both? How about IBM showing how to squeeze the former to pay for the latter, and other innovations that companies are lining up?

In contrast, I got an invite to a NetSuite webinar “Why it’s time to upgrade from Great Plains to Cloud ERP”. What I liked was the no-pretense theme and the fact that two customers will  talk about their migrations and payback.

Not high-falutin themes, but a focus on improving incumbent operations.  Concept Enterprises “simplified and accelerated its financial close and benefits from anywhere, anytime visibility into key business metrics, customers, orders and suppliers.” Revolution Prep “streamlined complex recognition of deferred revenue upon delivery of service (complying with GAAP) for students who pay weeks in advance for a course.”

As an innovation author, I love to hear about and profile IBM’s Smarter Planet projects and NetSuite’s cloud innovations. In the end, though, IT spends so much on such more mundane incumbent operations that we cannot afford to ignore the efficiencies there.

The elastic Workday

We have long written about the elasticity of the cloud computing business model. Salespeople in the field have just as long used FUD about the supposed rigidity of its applicability. It only works for small and mid-size businesses. It only works well in the service sector.

Really?

I was pleased to see Workday share names of some of its recent customers. In parenthesis are the industry sector and workforce size.  

• Essilor of America, Inc. (healthcare/manufacturing, 9,000)
• Exelis Inc. (aerospace and defense, 20,000)
• GameStop Corp. (retail, 40,000)
• Medtronic Inc. (medical technology, 45,000)
• The Standard (financial services, 3,100)
• Toyota Financial Services (financial services, 3,300)
• Toyota Motor Sales, U.S.A., Inc. (automotive retail, 6,100)

The main pattern here is Workday, since its inception not just recently, has shown it can work in a wide range of enterprise sizes, industries and countries.

The IBM CEO Study: The Director’s Cut

Francis Ford Coppola edited plenty in the Director’s version of his classic The Godfather. The studio made him add almost 50 minutes back to the movie when it was released.

I smiled when Jon Reed shared with me IBM’s CEO Study (register here for a copy). It is a nice read, but I would love to see what was left at the Director’s cutting table from IBM’s notes and audio tapes from “speaking face-to-face with 1,709 CEOs, general managers and senior public sector leaders around the globe”

I am going to hazard a few guesses:

a) Why are Apple, Google, Microsoft, HP, Oracle doubling down on hardware? Will IBM also reverse course?

b) The new digital customer demands technology in every product. Our R&D group is spending more on technology in our products than our CIO, but very little of that is with IBM

c) Our marketing staff recently went to an Oracle customer experience event in New York and a Salesforce Social Enterprise event in London. They think the product centric solutions will be a better place to start than a strategy project

d) My CIO tells me the Amazon and the Google data centers are the most efficient in the world. I may be showing my age but I used to think IBM’s were?

e) John Chambers keeps calling me and saying no one does collaboration better than Cisco.

f) I read in an airline magazine open source analytical tools are now some of the best in the world. True?

g) My VP of HR tells me to get to strategic HR we should not renew our BPO contract and migrate instead to Duffield’s company…

h) My Asian executives tell me they could run much leaner with NetSuite, but our IBM rep there keeps telling them to stick with SAP

i) I need to cut the IT budget by 20%. IBM is one of our biggest line items. Has our VP of Procurement talked to you?

j) You know I am ex McKinsey. For the first time in my career I am seeing all kinds of boutique firms walk our halls – Frog Design, Doblin, Bluewolf. No McKinsey, Accenture, IBM. What’s going on?

k) I saw an analyst report which said everyone who writes big checks for old technology like DB2, lives on a “Dumber Planet”. Should we be offended? 

l) Between friends, what really happened at Augusta this year? :)

Update: In the spirit of the post, here are a couple more that got left on my editing floor:

m) I went home and bragged to my kids I would have a Watson assistant at the office. My son has had Apple Siri for a year, my daughter will soon have Google Now, and I still have no Watson.

n) GM plans to go  from 90% outsourced IT to 90% internal staff in 3 years. Why shouldn't we?

Every company is now a technology vendor

Joe McKendrick quotes The New Technology Elite in his Forbes column

“The list goes on, and points to a trend both Vinnie and I have been watching in recent years — the blurring of the lines between technology providers and consumers. Vinnie’s message in his latest book is quite simple, yet profound: tech-savvy companies – whether they sell insurance or airplanes – are becoming tech vendors themselves.”

Read more here

“We wanted flying cars, instead we got 140 characters”.

People howl at me when I ask enterprise vendors to benchmark themselves against operational efficiencies and innovations at Apple, Amazon, Facebook and Google or I mock Western telcos for not matching broadband speeds and economics in Japan and S. Korea.

Different worlds, they tell me.

Well, there is someone who is even more demanding of the tech industry. Peter Thiel, an early investor in Facebook and LinkedIn,  and co-founder of PayPal could be long retired and be gloating about the industry. Instead he challenges it, and points out in many areas – from energy to healthcare to aerospace – we have set our aim too low.

In The New Polymath, I had a chapter titled “Modern Day Dark Ages” (download below if you want to read excerpt) where I pointed to stagnation in infotech, cleantech and healthtech.  We need provocateurs like Peter to keep making the point.

Download Dark Ages

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Social: Product and Personal Brands

I have been running a series of innovation posts about the London Olympics on the New Florence blog.  It is expected to be the most interactive Games ever.  What a great opportunity for skilled marketing teams to take advantage of the plethora of audio-visual equipment, perform sophisticated sentiment analysis from the anticipated 2o0 million tweets during the Games, Shazam key athlete factoids from various TV broadcasts.   Should look impressive on their resumes.

Talking about resumes, I see many who are primarily focused on their personal brands and their “social influence”. Sameer Patel of SAP mentioned he seen "retweet rate" on a resume.  Hey, must be influential if people deign to retweet the person’s tweets. Jeremiah Owyang of Altimeter comments “aside from the 'doucheholster' reaction, a truly influential person doesn't have to put their Klout score on their resume”

Perhaps in reaction to the narcissism so common in the social world, the International Olympics Committee has a formal social media policy which includes “Provide the facts and take a journalistic approach to avoid violating restrictions.”  Be nice if that same discipline carried over to resumes.

“We don’t actually do what we propose”

Remember the UPS ad below? 

I thought about the ad as I read this Fortune article about HP.

Two visiting consultants are waiting for the elevator at a big company's headquarters. One is from HP, the other from IBM. The consultant from Big Blue pushes the up button to visit the CEO on the top floor. The HP man, by contrast, hits the down button to see the IT guy in the basement.

What Fortune did not say is the CEO asked the IBM team for a proposal for product development which called for hardware, software and services skills. The CEO also said I have heard Sam (the Chairman) proudly talk to Wall Street about how he divested the PC and printer group. So, where will IBM get its hardware competency for this project?

In the meantime, the CIO tells the HP rep “I heard Meg talk about why hardware continues to be strategic to you. I think our CEO needs to hear her pitch”

We live in a fickle industry. Suddenly hardware is the new software. Microsoft with the Surface tablet, Amazon with Kindle, Oracle with Sun, HP continuing with PSG, Apple with solid hardware AND software are “in”.

Of course, it does not stop people from saying “Software will eat the world”. Another glib one-liner like “hardware is the new software”

The problem is you cannot be one dimensional anymore. In a cloud setting, software companies have to be also good at data centers. Hardware companies have to become SLA savvy like outsourcers. Services firms have to learn to blend mobility with telemetry and logistical knowledge. Social mavens quickly realize their favorite moniker “Enterprise 2.0” proposes way more than it can deliver.

Actually,  the IT industry is lucky to be not expected to be as widely multi-disciplinary as some of the case studies I had in The New Polymath

Conversations in the (GE Global Research Center) cafeteria, in the hallways, and at the 40 - room lodge attached to the center effortlessly drift from pathology to holography, from one “aha” to another.

or The New Technology Elite

Go to the 3M website and you see a “periodic table” with 46
elements. Click on Bi, and it describes 3M in Biotechnology, Mf describes what it does with Mechanical Fasteners, and We with Accelerated Weathering. The company many of us know best for Post-it notes and Scotch tape has more than 55,000 products and has an uncanny ability to combine highly innovative technologies in new and unexpected ways

And yet, in IT we repeatedly try to simplify and narrow our focus. I often hear “Steve Jobs was all about focus”. And my answer usually is “See what he did, not what he said”.

BTW – can you imagine him ever saying “Sir, we don’t actually do what we propose”

Insourcing – more than a political slogan

Insourcing is on US TV every day thanks to back and forth between the Obama and the Romney campaigns.  Outsourcers may chuckle, smirk and discount the term as it is used in an opportunistic, nationalistic way. But they should be wary as Randy Mott, now CIO of GM, has announced his own version of insourcing. He wants to move from 90% outsourced to 90% internally staffed in 3 years. Now many will even discount what Randy says – I have already heard he came with an “agenda” from his last job as CIO at HP and GM’s largest outsourcer is EDS, now part of HP. Or there is ServiceMaster and its insourcing from IBM.  You could argue those are exceptions,  but I started hearing from several CIOs 3-4 years ago they felt they had “outsourced too much”. That led me to write in The New Polymath

…most enterprises spend 80 percent to 90 percent of their IT and telecom budget with outside vendors. That is a dangerously high dependence on a supply chain. ..Even in automobile and aerospace, which have much more mature supply chain management, companies such as Ford and Boeing get around 70 percent of components from suppliers. In those industries, supplier consolidation and tiering makes sense because Ford and Boeing are dominant customers and can dictate design standards and justifiable economics.In technology, by contrast, buyers have little leverage — even companies as big as Ford and Boeing make up less than 0.5 percent of an IBM ’ s or Oracle ’ s revenue.

Many outsourcers are sowing their own seeds of discontent. As I wrote last week, many of them seem bored with their current work assignments. Still others have eyes bigger than their stomachs. I was talking to a salesman at a Tier 2 offshore firm and he told me he is getting invited to deals at many big brand customers. “They are being neglected by their incumbent providers. The Wipros and the Infosyses want IBM and Accenture size commitments from their customers”.

And there are new competitors. In infrastructure services, players like Amazon and Oracle. On customer/revenue opportunities, digital agencies.

So, chuckle if you want when Joe Biden talks insourcing.  But when a CIO mentions it, while he may not bring it all back in, he is likely looking around.

And it will not end in November. 

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