As product lifecycles continue to shrink, the very real issue of technology adoption comes into play. Businesses can’t afford to purchase new hardware, software, or a new network type just because it happens to be available. The product or solution has to solve real business problems and deliver tangible business value.
IT executives are constantly weighing the availability of new options against the reality of implementing them. What gets acquired and when depends on a number of factors, not the least of which include budget, existing technology, the competitive environment, and business benefit.
Some businesses are addressing the problem with Software-as-a-Service (SaaS) alternatives to on-premise software. The business model allows them to enjoy continuous software updates and upgrades as part of a subscription. Cloud computing similarly provides a data center alternative or extension as a service rather than a set of physical products. Still, a number of procurement decisions remain.
“It’s tough for CIOs to keep track of technologies because there are so many options to consider and product lifecycles are shrinking,” said Rich Watson, a product marketing manager at Meru Networks. “If you’re approaching procurement from a pure technology standpoint, there is a higher risk of making the wrong decision, because while you’re looking for new technologies you may have lost business opportunities. And, if you choose the wrong solution, it will have a negative impact on the bottom line.”
Investing in Change
While nearly all businesses are bound by budgetary constraints, not everyone manages budgets in the same way. Some companies allocate a percentage of their budget to new technologies, and invest in experimentation to stay competitive. Innovative companies in highly competitive markets may see a need to remain nimble enough to jump on early stage technologies that appear to have game-changing potential.
A financial services company information executive said his company invests in early-stage technologies knowing that some of them will fail commercially in their current form. One reason the company does this is because at least some of its competitors will wait until the early-stage risks have been resolved. So, if the early-stage technology proves game-changing, his company enjoys a competitive advantage that may take competitors months or years to duplicate.
“If a procurement organization lacks agile policy, they’re trying to avoid risks,” said Bo Pitsker, a solutions consultant at Polycom. “A more sophisticated approach is risk management in which you accept a certain level of risk.”
Because the number of technology choices is growing, some CIOs are putting policies and procedures in place that govern procurement practices. The formalities help ensure that a product or solution is purchased for the right business reasons and that it is (hopefully) the best choice for the job. While technology decisions have increasingly involved a mix of business and IT titles, the responsibilities among team members often differ.
“Ideally, you want the execution of procurement to be embedded in the organization it is serving but not the policy,” said Pitsker. “Policies may differ from business unit to business unit so there needs to be enterprise-level oversight.”
Formal procurement policies and procedures are also helping to bring some order to the Bring Your Own Device (BYOD) chaos which has spurred bifurcated policies governing company-owned equipment and employee-owned equipment.
Flurry Analytics recently estimated that smartphones are being adopted 10 times faster than the PCs, two times faster than Internet connections, and three times faster than social networks. All of those things – PCs, Internet connections, social networks, and employee-owned smartphones – have disrupted the IT infrastructure and related procurement workflows. So have tablet computers.
“A phone that’s more than two years old is obsolete. On the other hand, PCs may stay around for four or five years,” said Pitsker. “With iPhones, older models may not support all the features of the new operating system. Android phones older than two years old will not get the latest version of an operating system, which is pure poison for IT.”
Meanwhile, new offerings – whether they’re mobile, social, computing, telecommunications, or networking related – are pummeling IT decision makers at an unprecedented rate. How exploratory investments are executed can make the difference between success and failure. While pilot projects remain the preferred method of experimentation, someone still has to decide whether a pilot is warranted.
“It may help to have a subject matter experts evaluate new options from the organization’s applicability-benefit point of view and unless it fits the bill, it should not be recommended to be used in pilot projects,” said IT veteran Vijay Kurhade.
Living in the Now
Sooner or later, every organization has to evolve its IT infrastructure to remain competitive, but it is not always clear which technology or product should be adopted or when it should be adopted.
For example, big data has several advantages, but it’s hard to know when to put it to work in one’s own company. A number of Fortune 500 companies are adopting the open source Apache Hadoop with the goal of correlating unstructured data with structured data. Meanwhile, other less mature organizations realize the potential benefit of Hadoop and similar solutions but they are still trying to master structured data or even digitize paper-based business processes.
“You have to understand the use case,” said Watson. “End users don’t care about technology; they care about getting their jobs done.”
Nevertheless, sophisticated companies in highly competitive markets are attempting to push the envelope of what is possible to achieve with existing and emerging technologies. At the same time, they are striving to understand the limiting factors so they can help expedite a solution through their own innovation, through work with standards bodies, through industry partnerships with supply chain partners, or through cooperative relationships with vendors and universities.
Pitsker said IT organizations should consider adopting a “wave strategy” similar to technology vendors so, for example, server and desktop software are upgraded simultaneously. At San Francisco Airport, an Outlook upgrade was executed this way so users were not deprived of familiar features simply because IT upgraded the server software but not the desktop software.
“If you don’t have the network guys talking to the application guys talking to the server guys you are setting yourself up for failure,” he said.
As always, some of the most exciting new products and solutions emanate from startups which bring with them yet another set of risks, not the least of which is the financial viability (and corresponding longevity).
“I've done due diligence on prospective vendors once or twice by applying for a job and asking the hiring manager straight up if the company is cash flow-positive and if not, when it expects to run out of money. If the answers were not to my satisfaction, the prospective vendor was automatically put on a waiting list to be reviewed in 12 months or so,” said Nick Chauvakin, a partner at FortRoss Capital Management.”
While the typical IT executive would likely not go to the same extreme, it is not uncommon for potential customers to scrutinize the viability of a start-up’s product strategy and solvency. And, when business is operating at the speed of light, it is tempting to circumvent some of the due diligence details that can have a detrimental effect on the IT infrastructure and business operations over the long term.
Bottom line: There is no one-size-fits-all procurement strategy that meets the needs of fast-moving startups, highly regulated titans, and companies in between. Nevertheless, organizations must balance the need to stay competitive with the need to minimize business risks.
While it has become more common for cross-functional teams to cooperatively identify solutions that work for business units and departments while benefitting the enterprise, it is important not to create a new level of bureaucracy.
“If your policy requires 13 signatures, you’re dead in the water,” said Pitsker. “By the time you get the signatures, what’s been approved may have become obsolete.”