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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Microsoft Select Agreements Due For Renewal? Convert Them To Select Plus

Duncan Jones

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.

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Open (Letter) Season on SAP

Duncan Jones

Dear SAP Customer,

Hopefully you’ve all read SAP’s co-CEO’s open letter to you (http://ceos.blogs-sap.com), and also some of the great responses such as this one: http://bit.ly/b5foPD . With all these open letters flying around, I thought I’d write a slightly different one. Unlike most of my fellow commentators, I’m not going to tell SAP how to run its business. Instead, I’m going to give you, its customers, a suggestion on how you can cut the cost of your SAP environment. You ready? The answer is “buy less stuff from them”.

Actually, it is not as facile as it sounds. Many companies that I speak with automatically favour their incumbent vendors for new projects, while their IT vendor managers complain to me about their negotiation impotence. You won’t be able to get the contractual protection you need, such as limits on CPI maintenance increases, unless you make them a condition of future purchases. Large software companies such as IBM, Oracle and SAP focus predominantly on license sales. It wasn’t customers’ unhappiness, resulting from the Enterprise Support blunder, that caused SAP to fire its CEO and rethink its approach. It was the fact that you showed that unhappiness by voting with your purchase orders, delaying projects, going to competing vendors, and causing SAP’s license revenue to plummet. When Jim and Bill promise to “accelerate the pace of the innovation we deliver to you”, the d word is a euphemism for ‘sell’.

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What Do SAP Clients Need To Know About Implementation And Support Services, SAP's Cloud And On-Demand Services, And Offshoring?

Liz Herbert

The SAP services market is undergoing significant change: provider consolidation, changes in pricing models, new delivery options, and cloud-based deployment. At the same time, firms are entering 2010 with an eye to growth and business strategy enablement, after significant focus on cost-cutting during the recession. Firms struggle with finding the best services provider for their SAP project and the best delivery, pricing, and deployment models to ensure value, ROI, and success in achieving business goals,. Increasingly, firms are also considering Cloud and SaaS delivery models.
SAP users wondering about the latest trends in SAP services – from pricing models to multi-sourcing to cloud – are welcome to join us for an interactive session next Thursday March 25th. Moderated by Forrester’s George Lawrie, Bill Martorelli, Euan Davis, Stefan Ried and I will lead an interactive discussion around:
- SAP services provider landscape. The market has undergone significant consolidation, with major acquisitions by firms like PwC (BearingPoint), Xerox(ACS), and Dell(Perot) as well as numerous smaller acquisitions. Leading India-based firms have rapidly built their strategy consulting capabilities and now challenge the MNCs in higher value project work.
- Offshore delivery. Offshore ratios have grown extremely high. Implementation and project work is commonly 60% or more offshore; support and maintenance work surpasses 90%. Firms’ offshore strategy is broadening beyond India into geographies such as Latin America, China, and Philippines.
- Outsourcing and AMS work. Firms weigh the trade-offs between single-sourcing their project across implementation, AMS, and hosting versus using multiple providers. Firms also struggle with pricing models and SLAs, with many firms exploring outcome-based pricing models that shift risk to their provide. Outcome-based pricing also provides a potential foundation for innovation and savings beyond labor arbitrage.

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CSC Sharpens Its Innovation Focus

Christopher Andrews

In my recent interviews with IT services providers on the topic of innovation, one of the key findings was the many different ways in which innovation can be categorized.  Some companies view innovation as simply an extension of their traditional R&D capabilities, others view their innovation as a way to prove their thought leadership, still others view innovation largely as a strategic marketing imperative. Sometimes, it’s a combination of these factors.

One interview that stood out was with Lem Lasher, the Chief Innovation Officer (and Global Business Services President) at CSC, who described to me a deep and holistic approach to transforming CSC’s innovation capabilities.  Three things that stood out at me about Lem’s approach:

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