I get a lot of input into my research from speaking with software buyers and sellers, which I analyze and process to come up with firm conclusions and recommendations in my published research and forum speeches. I'm going to use this blog to air some work-in-process analysis, to solicit additional thoughts and information from you. Just recently, Ive been considering why people are talking about 'pay-per-use' a.k.a. 'utility pricing' for software, and to me, the disadvantages to buyers and sellers outweigh the benefits.
Software pricing should be simple but fair, value-based, future-proof and published (see The Five Qualities Of Good Software Pricing). Yes, a one-price-fits-all 'per user' fee isn't fair or value-based, but that doesnt justify the potentially horrendous complexity of tracking detailed usage. Role-based user pricing, such as SAP user categories, is a much better way to reflect diverse usage profiles.
Im not arguing against flexible, on-demand services, particularly for temporary needs, such as renting some CPU power for a few hours. I'm concerned about pay-per-use pricing models for regularly used applications. To me they would be:
"Well, as of this moment, they're on double-secret probation!"
Dean Wormer, Faber College
Recently I have had a number of conversations regarding the role of pre-moderation of internal social networks. Just by way of explanation, pre-moderation would be the approval of all content (posts and comments) prior to posting. Over the past several years and hundreds of conversations with enterprise clients, this has rarely come up.
Just to be clear, there is risk associated with enterprise social networking. There is nothing about social technologies that precludes requirements for privacy, security, maintenance of intellectual capital, regulatory compliance, etc. However, given the right degree of attention, these all are manageable. In fact, over time, social technologies will reduce the risk associated with all of these (more on that later).
OK, so if anyone can say anything at anytime, that's risky right? Well, in thoery, but in reality, not really. Remember, we're talking about internal social networks. Presumably, these are IT sanctioned, authenticated solutions. In other words, everyone knows who you are. And, we can assume that with some degree of planning and education, your users will be aware of the policies that govern the environment. And if you post something not within policy, well you get put on probation (or maybe double-secret probation). Animal House references aside, many a fine internal social networking policy begins with "don't do anything that will get you fired".
There are three key points here:
One, provide a sanctioned solution for your organization because if you don't they may well find something on their own and that could be a whole different kind of trouble.
As I close out my client inquiry records for the quarter, it’s interesting to review some of the common challenges risk management professionals are currently facing. I was impressed to see how closely the issues I deal with were covered in the month’s edition of Risk Management Magazine. In an article entitled, “10 Common ERM Challenges,” KPMG’s Jim Negus called out the following issues:
Assessing ERM’s value
Privilege (of access to risk information)
(Selecting a) risk assessment method
Qualitative versus quantitative (assessment metrics)
Time horizon (for risk assessments)
Multiple possible scenarios
Simulations and stress tests
Negus provides good perspective on these challenges as well as some ideas for solutions. The list is fairly comprehensive, but there are several other challenges that I would have included based on the inquiries I get. First and foremost, the role of technology in risk management – whether for assessments, aggregation, or analytics – comes up very frequently, and vendor selection initiatives have been plentiful since mid-Q4 of last year.
Defining risk management’s role within the business (and vice versa) is also an extremely common topic of conversation. As rules and standards keep changing, this will remain a top challenge. Other frequent issues include event/loss management, building a risk taxonomy, and evaluating vendor/partner risk.
For those of you unable to attend, I will summarize some of the content that I presented on SAP’s overall growth and innovation strategy. SAP has a double-barreled product strategy focused on Growth and Innovation.
The Growth strategy rests heavily on the current Business Suite, which includes the core ERP product that is used by approximately 30,000 companies worldwide. SAP claims that it touches 60 percent of the world’s business transactions, which is hard to validate but not all that hard to believe. The main revenue source today is Support, which comprises 50% of the total revenues of the company at more than 5 billion Euros annually, and it grew by 15% in 2009. Other growth engines include:
Over the weekend I took my daughter to see "Alice in Wonderland" and couldn't resist comparing Johnny Depp's Mad Hatter character to Pega's recent move to acquire Chordiant. For those of you who haven't seen the movie, it's not as weird as the usual Tim Burton movie; but the Mad Hatter character is a little disturbing, with his rhymes and riddles that keep you guessing at his true meaning.
For many process professionals, Pega's recent move was just as confusing as having a conversation with the Mad Hatter. What exactly is he trying to say anyway?
A number of clients ask me "how many people do you think use BI". Not an easy question to answer, will not be an exact science, and will have many caveats. But here we go:
First, let's assume that we are only talking about what we all consider "traditional BI" apps. Let's exclude home grown apps built using spreadsheets and desktop databases. Let's also exclude operational reporting apps that are embedded in ERP, CRM and other applications.
Then, let's cut out everyone who only gets the results of a BI report/analysis in a static form, such as a hardcopy or a non interactive PDF file. So if you're not creating, modifying, viewing via a portal, sorting, filtering, ranking, drilling, etc, you probably do not require a BI product license and I am not counting you.
I'll just attempt to do this for the US for now. If the approach works, we'll try it for other major regions and countries.
Number of businesses with over 100 employees (a reasonable cut off for a business size that would consider using what we define as traditional BI) in the US in 2004 was 107,119
US Dept of Labor provides ranges as in "firms with 500-749 employees". For each range I take a middle number. For the last range "firms with over 10,000" I use an average of 15,000 employees.
This gives us 66 million (66,595,553) workers employed by US firms who could potentially use BI
Next we take the data from our latest BDS numbers on BI which tell us that 54% of the firms are using BI which gives us 35 million (35,961,598) workers employed by US firms that use BI
Inside the BPA Group at Forrester, we conducted a little experiment. I suggested that we should collaborate on a piece about the Pega acquisition of Chordiant. What followed was a large number of email exchanges. I drew the short straw in bringing all these thoughts together into a coherent whole. I prepared a document for Forrester clients to explore the acquisition in detail (probably getting through the editing process next week some time), and this blog post is culled from that document. So while the blog post bears my name, it reflects the collective opinions of Connie Moore, Bill Band, Natalie Petouhoff, John Rymer, Clay Richardson, Craig Le Claire and James Kobielus. Of course, I have put my own interpretation on it too.
Pega definitely wants to be in the customer experience/customer service business, and they want to get there by having a very strong BPM offering. It is not that they are moving away from BPM in favor of Customer Experience – they’re just strengthening their hand in CRM (or CPM as they would call it), more forcefully making the connection. We already knew this, but the Chordiant deal just reinforced that point (see related research doc from Bill Band in 2005 !!). This is not a new direction or change in direction for Pega, it is a strong move that takes them faster in the direction they were already going.
From a product point of view, Pega are adding/strengthening their hand – Choridant’s marketing automation and predictive analytics seem to be of greatest interest. Of course, Pega also values the engineering talent that Chordiant has, and will redirect those people over time to work on integrating these capabilities into the BPM offering. They were also interested in the vertical industry and functional expertise that Chordiant had to offer.
CIO job tenure is now averaging 4.6 years, according to the Society for Information Management. That’s up – way up -- from the 2-3 year average that we saw just a few years ago. How do you explain the lengthening time in job? Is it just because CIOs are better at their jobs than CEOs or CFOs who have higher churn rates? Probably not.
My guess is that the post dot-com bust and post 9/11 recession triggered CIOs to hunker down and be a bit more risk-adverse. They stayed put for a few years, then facing the more recent economic slump, stayed put even longer. They stayed busy doing what they unfortunately are known for -- helping with enterprise cost cutting. More reactive, more cost conscious, and less innovative CIOs are less likely to take risks and less likely to be fired for risk-taking.
But I suspect the trend towards longer tenure is rapidly coming to an end. The CIOs I speak with are eagerly waking up to tackle innovation and new investments in 2010. And we’re seeing more and more ex-consultant hot shots and business execs from elsewhere in the company recently hired on to “fix IT” join the CIO ranks. More proactive, innovative, and impactful CIOs are more likely to follow ambitious career paths – or (if your a glass-half-empty kind of guy or girl) get fired for risk-taking.
Well, it's been a whirlwind two days at the Infrastructure & Operations Forum here in Dallas! I know that not everyone has the opportunity to attend these events, so for all of you stuck at home (and not in sunny Dallas), I've summarized some of the keynotes (with help from Christian Kane and Lauren Nelson) for you to check out. There is also a great conversation about the forum on twitter , so you should definitely check that out as well.
Rob Whiteley kicks off the day with a preview of the next two days and some AC/DC music (the theme of the event is "Back in Black"). First up is Glenn O'Donnell:
The New I&O Landscape: Aligning I&O With Post-Recession Business Imperatives Glenn O'Donnell, Senior Analyst, Forrester Ha, this presentation is based on the book "He's Just Not That Into You" and it is about the love story between I&O and the business.
I&O, how can you win the love of the business?
Microsoft announced on Friday that it will stop selling new Select licenses from 1 July, 2011. Customers with existing agreements can renew them for another 36 months, as per their agreements, but the replacement Select Plus program is likely to be a better option. Microsoft launched Select Plus on 1 July 2008, and I wrote at the time that it was an improvement on the basic Select structure: Microsoft Simplifies Its Volume Licensing.
However, Microsoft's pricing team struggled to persuade its LARs to promote Select Plus over the more familiar Select agreement, and customer adoption was disappointing. So the decision to drop the older program makes sense for Microsoft, because it will force its channel partners to embrace the new model. And its no bad thing for buyers - you've one less choice to make, and there's little negative impact.
The biggest advantage of Select Plus for sourcing managers is that they no longer need to submit a three-year spending forecast - this is extremely difficult for central teams buying on behalf of autonomous business units that won't havent planned Microsoft technology adoption that far out. Instead, pricing works like an airline loyalty program, on the current and previous years' actual transactions, as the figure below from my report illustrates. My report explains some more advantages, such as the flexibility to opt tactically for software assurance on individual purchases.