Come Join The Sourcing & Vendor Management Analysts At IT Forum

Liz Herbert

Forrester’s IT Forum 2010 in Las Vegas (May 26-28) and in Lisbon (June 9-11) is around the corner, and our team is looking forward to the opportunity to share our latest experiences, research insights, and strategies for maximizing the value of your technology and vendor investments.

The theme this year is "The Business Technology Transformation: Making It Real." As firms embark on the transformation from IT to BT, sourcing and vendor management professionals must assume new roles. They must help the business understand key technology trends and the trade-offs of new and legacy sourcing models. They play a crucial role in optimizing technology spend -- and in making sure their firms are taking advantage of newer models like SaaS and cloud services where it makes sense.

We’ve got a series of great sessions focused on sourcing and vendor management strategies for making BT work across major areas of technology investment in applications, infrastructure, services, and telco. The sessions include:

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Thoughts On Innovation Management From FEI 2010

Christopher Andrews

I just had the chance to attend the "Front End of Innovation" (FEI) conference at the World Trade Center in Boston May 3-5. This event is sponsored by variety of innovation management suppliers, and included some great speakers like James Surowiecki (author of "The Wisdom of Crowds") and Sophie Vanderbroek (President of Xerox Innovation Group). Though I was only able to attend two of the three days at this event, I was able to leave with a solid impression on the innovation management marketplace.

A few of my notes from this event:

  • There is a unique innovation marketplace. With the sheer diversity of innovation discussions taking place at this event, I found it interesting to question whether the there is such thing as a common innovation management marketplace. I think there is. Everyone I spoke to at this event was either trying to unlock innovation potential within their own organization, or was trying to help their clients unlock their own innovation potential. In this regard, the marketplace for innovation is quite different with the boarder market of social collaboration tools and technologies -which I do not think has the same mission.
  • The market is broader than many realize. Despite the common objectives, the companies in this "market" bring a wide variety of different capabilities to the table. For example, at this event, I interacted with:
    • Companies like Spigit, Imaginatik, Idea8, and Kindling who have software tools focusing on idea management (but each with unique strengths)
    • NineSigma and Innocentive who are leveraging their "open innovation" heritage to bring new business models and a distinct offerings to clients
    • Innosight, which brings more management consulting offerings and thought leadership to lead its strategy consulting engagements
    • Seek, Futurethink, and Maddock Douglas which do not focus nearly as much on technology, but instead on methodologies, thought leadership, and workshops that can help clients clarify innovation objectives.
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“If You’re Not Getting Shot At, You’re Not Doing Your Job."

Duncan Jones

Source: Maggie Gyllenhaal, as Rachel Dawes in The Dark Knight, © Warner Brothers, 2008

Recently two large software companies separately complained that I was biased against them in the other one’s favour, which was sufficiently ironic to amuse my British sense of humour. “Biased” is one of the worst accusations you can throw at an analyst, because we strive to be scrupulously fair, and ensure that what we write and say is balanced, and evidence-based. So it started me thinking about fairness, and prejudice versus analysis.

I hear a lot of horror stories from clients about outrageous treatment by software sales reps, so one might think that software marketing execs would be shame-faced and contrite. But, actually, they love their companies and believe that analysts are merely stoking up resentment that wouldn’t exist without us, or that it’s the other guys giving their industry a bad name. “You only hear from the minority of unhappy customers,” they say. “Clients don’t ring you up when they are delighted with us.” This is true, but I speak with hundreds of clients every year, so I think I’d have found more evidence of a silent majority of delighted buyers, if it existed. The problem is that the good corporate intentions don't always translate into sales' behavior, when it's a question of spiff or rif.

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“Noughty” Software Licensing — Is The Obituary Premature?

Duncan Jones

My colleague Andrew Bartels just published this interesting take on SAP’s recent results:

Software License Revenues Roar Back In Q1 2010 -- And Why Licensed Software Will Co-Exist With SaaS Beyond 2010

Liz Herbert and I will be speaking on this theme at Forrester's IT Forum on May 27 in our session: "Noughty" Software Licensing — Is The Obituary Premature? Andrew is absolutely right. In addition to the points he raises, there are other reasons why perpetual licenses aren’t dead yet, such as the financial results they generate. The new models haven’t yet shown they can generate both high levels of re-investment in R&D and high profits for investors. Many SaaS providers have to spend a large share of their income on sales and marketing to retain existing customers and renew subscriptions. That leaves less money left over to fund innovation or fewer profits than their old-model rivals whose entrenched installed bases guarantee high maintenance renewal rates.

But perpetual license vendors mustn’t be complacent. The SaaS model may prove equally remunerative to the license-plus-maintenance alternative when the providers get bigger. Software buyers can encourage the established companies to learn from their SaaS competitors by insisting on some of that commercial model’s advantages in their own contracts, such as low up-front commitment and cost flexibility. 

To Understand Innovation, Start By Tracking Innovation Stakeholders

Christopher Andrews

In my recent report, “Contracting for Innovation With Service Providers,” I argue that many sourcing and vendor management professionals have difficulty contracting for innovation, because the term “innovation” itself is elusive and subject to interpretation.

In my research, I note that for sourcing professionals to effectively contract for innovation, they need to be able to understand the business objectives of a broad base of internal innovation stakeholders – and consider whether their service providers can align with these objectives.  In the report, I considered the needs of three primary stakeholders – IT, business, and executive-level stakeholders.

But there are far more innovation stakeholders. After writing that report, I decided to review all of Forrester’s inquiries related to innovation over the past year to see if I could identify other innovation stakeholders.  After a review of about 500 detailed client inquiries about innovation, I’ve compiled a list of categories I have seen.

This list of innovation interests is quite diverse (and this is just a preliminary summary!). But the exercise helps us see how innovation is interpreted differently by different parts of the organization.  With this information, we can identify unique innovation objectives and have a much more informed discussion about what innovation is and how it is generated (eventually leading us to conversations about specific topics like structures, metrics, and goals).  

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How Are Leading Technology Service Providers Bringing Innovation To Clients?

Christopher Andrews

Over the past few months, I had the opportunity to interview representatives from 10 leading technology service providers about how they help their clients innovate.  My recent research summarizing those interviews is available to Forrester clients on our website. For those interested in the high level points I raised, here are a few of the key findings:

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Spiff Or Rif - The Key To Effective Negotiation With Software Vendors

Duncan Jones

I haven’t been blogging or tweeting recently because I’ve been on an unprecedented two-week vacation, but didn’t want any potential burglars to know that. Now, thanks to Eykanmuckyourlifeup or whatever its called, that vacation has turned into an extended business trip states-side (see #ashtag). So I’m taking the opportunity to meet more clients on the smoke-free side of the pond, to help them with their software negotiations.

This is a busy time of year, particularly for Oracle and Microsoft deals in front of their financial year-ends of May 31st and June 30th respectively. One of software buyers’ frequently asked questions is, “what extra leverage does a vendor’s year-end really give us?”

The answer is in the title above. On the one hand, if your deal would give your sales rep a Spiff, an extra bonus for selling specific products, then he’ll be very keen to prevent your order slipping into next quarter, when the spiff may not be available. Even better, he’ll be desperate to close your transaction now if he needs it to make his annual target, to avoid becoming part of next quarter’s reduction in force (RIF) program.

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TCS Continues To Build Its Innovation Capabilities

Christopher Andrews

During a recent set of interviews with IT service providers on how they help their client’s innovate, I had the opportunity to speak with K Ananth Krishnan, CTO at Tata Consultancy Services (TCS).  Ananth described to me what I consider to be one most progressive innovation programs I encountered during these interviews – it was consistent with TCS’s capabilities, holistic in scope, and has the potential to be a important part of the company’s long-term evolution.

A few key findings from my discussion with Ananth:

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Jive Enters The Innovation Management Space

Christopher Andrews

I just took a briefing from Jive Software about their new innovation management tool, Jive Ideation.  The fact that Jive is now formally dedicated to the innovation space is significant – a move that has ramifications for the broader innovation management market, and for sourcing professionals. 

Forrester has been covering the innovation management market for several years, and written about it as a “unique” market.  We have always, however, recognized that the distinctions between this market and other markets -- particularly the social collaboration market -- were thin.

The arrival of Jive into the ideation space shows just how thin those boundaries are.  Jive has made a name for itself over the past few years as a social collaboration tool.  The company differentiates on its ability to connect a wide variety of enterprise users (both internal and external), and integrate easily with a host of technologies – making it appealing to a range of business and IT buyers.  Since collaboration is a critical component of innovation, its not a stretch to see how Jive’s collaboration tools can be applied to their client's innovation objectives.

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Pay-per-use Software Pricing? No Thanks!

Duncan Jones

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:

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