Not all that long ago, IT vendors regularly played the role of movie sports agent Jerry Maguire as one customer after another demanded that they “show me the value!” The response usually was couched in terms of “TCO” (total cost of ownership) and “ROI” (return on investment), and the result generally involved a nagging sense that the value returned somehow was less than expected.

One reason for this is that the “T” in TCO already had become all but meaningless, for customers had long since realized that the ongoing nature of technology spending makes costs impossible to “total.” We all know that practically every piece of a modern IT infrastructure constantly needs to be updated and reconfigured in relation to every other piece. So organizations never really do finish spending on their solutions, and therefore cannot really calculate a true “total cost.”

Determining the “R” in ROI is similarly elusive, though for different reasons: in most cases, few people ever take the time to go back and measure a solution’s financial performance after it has been installed – and fewer still compare that performance to what was promised prior to purchase in terms of the desired outcome. But this may be just as well since the salient comparative benchmarks probably don’t even exist: because clear agreement hardly ever is reached on what the goals of the investment were in the first place, they are not available in any event to use as a point of comparison!

These factors being the case, and given the economy’s continuing struggle to break out of its recent doldrums, it is clear that vendors must adopt a different language for describing and measuring the value of their offerings, one that better addresses their customers’ management behaviors and business needs.

There’s More to It than Just Budget
Let’s be clear about this: we are not saying that costs and returns aren’t important measures of value; for sure they are! But we are saying that the imperatives shaping the buy decision today extend past the bank book. Customers are awakening to the fact that that their issues have more to do with improving processes than merely purchasing product, and as they do, they are coming to understand that their value frame of reference needs to expand beyond mere dollars and cents. So while they still do need to know how much a solution costs, they also need to gauge how effectively it can help their people work better, and work better together.

Long-time readers will recognize this as the cornerstone of Kinetic Information’s MaxTV^® value methodology, but this is where it comes from: the need for customers to maximize the total value of the technologies they deploy by (a) orchestrating their myriad workflows and (b) enabling their multiple solutions to interoperate for a cause. There’s no doubt that economics still play a central role in evaluating a system’s value. But adding process change (ref. “working better”) and collaboration (“working better together”) to the mix speaks directly to what most ails customers today, is the key to differentiating value from cost, and – perhaps most significantly – allows vendors to compete on factors other than just price.

Let the Spending Begin?
Kinetic Information research – finally! – is beginning to show support for what we’ve been reading in the financial publications and hearing from government officials for a while now: that ever so slowly, the IT market is actually turning the corner toward recovery. Where customers for so long essentially have been looking for reasons not to spend money, in the past six to eight weeks they seem to have become more open to the possibility, acknowledging that “we do need to spend on our technology, but only where it will be the most valuable.” By our observation, this means opportunity is knocking for solutions that:

• Optimize productivity up and down the process chain. The past few months have seen many announcements about new and improved workflow engines and workflow design tools, business process management solutions, and analysis and reporting applications that are all aimed at boosting productivity. This spate of activity no doubt reflects customers’ continuing preoccupation with their need to “do more with less” since the fitful pace of economic recovery makes wholesale rehiring a bad bet. But it also plays into their growing awareness of their need to better manage their processes – especially those that cross departments encompass multiple systems – and suggests activity is brewing for this reason as well.

 
• Minimize the risk of e-business. Customers no longer have a choice whether to entrust their intellectual capital to the Internet or to extended private networks: like it or not, e-business is a done deal. But they do worriedly and repeatedly ask (in the mode of Laurence Olivier in the 1976 movie Marathon Man) “Is it safe?” and can’t allow themselves to accept “yes” as an answer. Theft and destruction from hackers outside the enterprise, misuse and abuse of resources by insiders, sudden service failures, unwitting infractions of the Sarbanes-Oxley Act: all these seriously threaten profitability and credibility, and offerings that can allow buyers to relax will be viewed as valuable.

 
• Maximize resource connectivity and interoperability. The accelerating emergence and acceptance of a process-oriented view of IT means all the systems involved in an infrastructure must operate as one so they can facilitate, not impede, process flow. Making this happen requires that some very important questions be answered: how many of the customer’s computing systems, software applications, databases, and stores of structured and unstructured content are now integrated in any useful way? Which of these can be integrated, which should be integrated, and in what order should they be addressed? How can work items best be tracked and audit trails created given the involvement of more than one technology? Because individual customers undoubtedly will have individualized answers, there is a service component to value here that carries with it great potential for growth.

Here are a few examples of recent developments that illustrate vendors’ progress in the direction of fleshing out their offerings to better facilitate their customers’ business processes:

• Rich media moves more mainstream. High excitement over multimedia was one casualty of recession, but no one denies that there’s untapped business value in the hours of video and audio tapes filed away and gathering dust in corporate offices instead of living a useful life on the network and the Web. So it made sense when Autonomy Corp. announced July 10 that it would acquire Virage Inc. for close to $25 million, integrate Autonomy’s infrastructure management platform with Virage’s rich-media communications software, and co-market the combined solutions to companies in industry and the media.

 
• BI and reporting become increasingly blurred. This month brought two major acquisitions that draw business intelligence and reporting closer together. Together, the two deals are worth nearly $1 billion, a testament to the productivity value these capabilities are perceived to have despite vendors’ frequent inability to articulate a clear value message.


By marrying its high-end query and reporting systems to Crystal Decisions’ popular reporting tools, Business Objects hopes to broaden its customer base to include both power users and not-so-powerful knowledge workers. Business Objects’ acquisition of Crystal Decisions, announced July 18th, involves a hefty $820 million in cash and stock.

Only five days later, Hyperion Solutions Corp. – which has been reselling Crystal Decisions technology – announced it will acquire Brio Software Inc., guaranteeing that Hyperion will continue to provide customers with the high-value combination of business intelligence, financial management, and query and reporting. The cash-and-stock transaction was valued at $142 million.
 

• Storage systems embrace storage management for a purpose. With its plan to acquire Legato Systems, announced July 8, EMC Corp. seeks to maintain its market leadership by addressing a growing problem in the enterprise: information tends to lose value over time no matter how safely and efficiently it is stored because it remains linked to the application rather than to the business process. The $1.3 billion acquisition, scheduled for completion by the end of this year, is intended to provide EMC customers with a higher level of management – and thus utility and then value – throughout the life cycle of each piece of information.

 
• People are being re-acknowledged as key process drivers. Like the weather, the fact that humans determine the shape and ultimate success of any business processes is something organizations often talk about, but never do anything about. Well, Action Technologies’ new ActionWorks 5.0 has been given the ability to work the way knowledge workers do by readily accommodating the constant negotiations (over shifting deadlines, project assignments, task interruptions, etc.) that characterize business life. By integrating a business process engine with ad hoc capabilities, Action is directly addressing the need to manage not only a given process but also the process exceptions that consume so much of our time. This is the world in which knowledge workers live, and there is great potential value in any technology that can hit this head-on.

Kinetic Information is always eager to hear your opinion, too, so please let us know what you think – send us an email, give us a call, or start a conversation in our Client Forum: visit our Web site at www.kineticinfo.com and choose News & Views – KI Client Forum. Thanks!