Research Summary: Best Practices – Three Simple Software Maintenance Strategies That Can Save You Millions

Published on March 18, 2012 by R "Ray" Wang

Forward And Commentary

Software ownership costs continue to escalate as vendors accelerate their efforts to capture support and maintenance revenues. Some vendors have gone to the extreme to eliminate third-party options for their customers. This best practices report examines three strategies to free up unnecessary costs to fund innovation and new projects.

A. Introduction

On average, IT budgets are down from 1-5 percent year-over-year, yet software support and maintenance costs continue to escalate ahead of inflation. Hence, continued pressure on IT budgets and a growing need for innovation projects have top business and technology leaders reexamining their software support and maintenance contracts for cost efficiencies.

Based on experience from over 1500 software contract negotiations, Constellation suggests three approaches to reduce the cost of software support and maintenance. Key strategies include third-party maintenance, shelfware reductions and unbundling maintenance contracts as part of every organization’s tech optimization strategy. Successful implementation can lead to savings from 10-25 percent of the IT budget, freeing up cash to fund innovation initiatives.

B. Research Findings – Why Every Organization Should Consider Third-Party Maintenance, Shelfware Reductions and Unbundling Maintenance Contracts

Most organizations suffocate from the high and hidden cost of support and maintenance. On average, Constellation’s surveys reveal global IT budgets trending down from 1-5 percent year-over-year since 2008. Consumerization of IT, rapidly changing business models, and aging infrastructure have exposed the high cost of software support and maintenance. Because most organizations allocate from 60-85 percent of their budget to keeping the lights on, very little of the budget is left to spend on new projects (see Figure 1).

Organizations can unlock millions by considering third-party maintenance (3PM), reducing shelfware, and keeping support and maintenance contracts unbundled. Each strategy on its own creates opportunities to drive cost savings. All three strategies combined, provide a roadmap for funding innovation.

  1. Third-party maintenance (3PM) delivers the most immediate cost savings and opportunity for innovation. Third-party maintenance describes support and maintenance offerings delivered by non-OEM providers. These vendors can provide a range of options from basic break/fix to bug fixes, performance optimization, tax and regulatory updates, and customization support. Keep in mind, 3PM does not provide access to upgrades and future versions of the OEM’s product. One big driver is the lower cost of delivery, as much as half the cost of the original vendor’s pricing.  The report shows a survey of 268 respondents and why organizations choose 3PM and who the key vendors are.
  2. Reduction of shelfware remains a key pillar in legacy optimization strategies.  Shelfware (i.e. purchased software, not deployed, but incurring annual maintenance fees) is one of the biggest drains on operational expenses for enterprises. The simple definition of shelfware is software you buy and don’t use. For example, an organization that buys 1000 licenses of Vendor X’s latest ERP software and uses 905 licenses, becomes the proud owner of 95 licenses not being utilized. That’s 95 licenses of shelfware because the user will pay support and maintenance on the license whether or not they use the software or not.  The report details 4 successful and proven approaches.
  3. Unbundling maintenance contracts prevents future vendor mischief. About a decade back, vendors would offer support and maintenance as two separate line items on their contracts. Support would run about 5-10 percent of the license fee and so would maintenance. Keep in mind, average support and maintenance fees were under 15 percent back then. Unfortunately, many users have expressed a growing and concerning trend with support and maintenance contracts. Vendors concerns about support and maintenance contract retentions have led to new initiatives to consolidate contracts. At first glance, this may appear to be proactive and beneficial to customers, but the report details three rationales vendors provide and three strategies how to avoid bundling.

Figure 1. Visualizing the High Costs of Support And Maintenance

(Right-click to see full image)

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Executive Profiles: From Transaction To Engagement – Michael Park, Microsoft Business Solutions

Published on March 12, 2012 by R "Ray" Wang

Welcome to a new series of interviews for 2012 with business leaders making the move from transaction to engagement. The interviews provide insightful points of view from a customer, industry, and vendor perspective.  We’ll be taking limited interviews throughout the year for publication as we also try to catch up on the Disruptive Tech Leaders series.

Michael Park, Corporate Vice President of Microsoft Business Solutions

Biography

Michael Park is the corporate vice president of Microsoft Business Solutions (MBS) sales, marketing and operations at Microsoft Corp. MBS develops and markets Microsoft Dynamics, a line of simple to learn and use enterprise resource planning (ERP) and customer relationship management (CRM) applications which bring together a broad array of Microsoft software and online services to deliver end-to-end business solutions for customers. Microsoft Dynamics is designed to work the way people and organizations work, enable them to make more informed decisions, and is delivered through a global network of partners with deep industry expertise.

Park is a software industry veteran with more than 20 years of experience in key leadership roles, most recently as head of Microsoft’s U.S. Small and Midmarket Solutions & Partners (SMS&P) Group leading sales, marketing and partner professionals, including U.S.-based Microsoft Dynamics partners, serving more than 6 million business customers.

Prior to joining Microsoft in October 2005, Park held key leadership positions with major companies such as SAP where he defined the market strategy for the company’s service-enabled business applications platform and built the infrastructure of people, processes and systems for small and mid-sized businesses. He also defined product strategy and pioneered Siebel Systems Inc.’s first vertical CRM solution for consumer products and life sciences. Park began his career in sales and brand management at Procter & Gamble.

Park has an MBA from Harvard University and a bachelor’s degree in economics from the University of Rochester.

The Interview

1. Consumerization of IT (CoIT) is playing larger role in the daily lives of workers and the workforce. How do you see this shift playing out?

Michael Park (MP): Ray, it comes down to people. In our case, it’s making business applications easier for people to consume. If people can’t do their jobs better, then the technology isn’t delivering on its promise. Why? People are the heart of every business and you have to empower them for success. What’s happening on the consumer side is that people are getting their hands on some really exciting technology that is easy for them to use and this is getting those in the enterprise thinking. People want to work with anyone, anywhere, on any device; they want to be connected. And even though running an enterprise requires complex technology, this trend is forcing us to address the customer experience. It is where the rubber hits the road– the power button is the training manual. It has to be that easy for everyone.

2. In this new shift from transaction to engagement, what changes within organizations from culture, to process, to technology do you anticipate happening in the next three to five years?

(MP): I think this shift will put enormous pressure on IT to deliver effective technology and flexibility at low cost to the end users. Business apps will need to enable the connected state; anytime, anywhere, through any device. These new apps must support how people work and the fact that they want to work collaboratively and communicate with other people, systems and data both internally and externally. Simply rendering forms and lists doesn’t cut it anymore. Apps of the future are connecting people across organizational boundaries, across the business ecosystem and across cultures, time zones, and languages. Culturally it means that employees will be impactful if they can actually use the applications they implement the way they expect them to work. This leads to better context upstream and downstream which helps you not only make better decisions but have better ideas about how you can move the business forward. And that is also where flexibility comes into play. Business applications will need to be flexible enough to change, create, and refine themselves on a different order of magnitude than what’s previously been possible and this needs to go hand in hand with ease of use.

So in the next three to five years, if we give the software the ability to do this, employees will be in a good position to make decisions and deliver impact. When an employee or employer is making a difference, it’s the highest level of impact and accomplishment. If all your apps can help that happen then you are on your way to becoming a dynamic business and leveraging the full power of what your people can do.

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Quark Summary: What Every CMO Needs To Know About The Six C’s Of Customer Engagement

Published on March 8, 2012 by R "Ray" Wang

Forward And Commentary

CMO’s seeking to avoid the desensitization that comes with the adoption of new media will want to quickly deploy the Six C’s of Customer Engagement.

A. Introduction

Social media effectiveness for brands and enterprises will rapidly mirror the trends that email and web sites experienced during the late 1990′s to early 2000′s.  In fact, social media adoption has passed ubiquitous usage and has mostly begun the process of relevant deployment.  Avoidance of  Phase 4 Desensitization can be avoided by applying the Six C’s of Engagement (Figure 1.)

B. Research Findings

Recent early adopter surveys identify five key phases of social media adoption:

  • Phase 1: Eager early adopters. Users eagerly experimented in the newness of the medium.   Early adopters attempt to apply the medium to everything.
  • Phase 2: Ubiquitous usage. Rapid adoption put the medium in the hands of the masses.  Adoption exceeds 50 million users.
  • Phase 3: Relevant deployment. Brands and enterprises apply the medium to the right business use cases and processes.
  • Phase 4: Desensitization and fatigue. Inundated with marketing, bombarded with irrelevant content, and tired of the newness of the medium, customers begin tuning out.
  • Phase 5: Rejuvenation. Maturation of the medium ushers an improved era of engagement apply the Six C’s of Engagement.

The Six C’s Of Customer Engagement provide strategies to overcome desensitization and fatigue

  1. Community. Location for engagement.
  2. Content. Topics that drive engagement.
  3. Context. Relevance that create engagement.
  4. Catalysts. Events or actions that facilitate engagement.
  5. Currencies. Monetary and non-monetary exchange of value behind engagement.
  6. Cadence. The frequency of interaction

Figure 1. The Six C’s of Customer Engagement Overcomes Desensitization And Fatigue

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Best Practices: From First To Worst – Continental In A Post United World, Lessons In Next Gen Customer Experience

Published on March 2, 2012 by R "Ray" Wang

Multiple Respected Research Survey Results Confirm Frequent Flyer Observations

It’s official. In multiple respected customer experience research reports that cover the airline industry, the results are in.  Despite the numerous attempts by CEO Jeff Smisek to gloss over the issue with increasingly slicked up, feel good, on board welcome ads, Continental’s customer satisfaction numbers have reached the abyss of United’s.  While United Holdings may tout their most admired status in the airline industry by Fortune, the award is measured by corporate executives, airline executives, boards of directors and industry analysts – basically not the customers and passengers who fly United Holdings.  On multiple flights this year, I’ve personally heard Continental flyers groan and boo out loud every time they see the welcome aboard video where Jeff Smisek touts how he’s out to help customers, tells them why they are going to like this merger, and brags about how many planes he’s painted in the new livery.  Flight attendants and pilots roll their eyes as well.

What was pure emotional speculation and conjecture can now be quantified.   A quick glance at the latest Temkin Group: Temkin Experience Ratings shows Continental scores as bad as United – basically smack in the poor category (see Figure 1.)Travel Industry benchmark, Atmosphere Research’s US Airline sentiment shows United at the bottom with US Airways.  Even legacy analyst firm, Forrester’s 2012 Customer Experience Index shows a 5% drop for United and a 11% drop for Continental (you’ll need to pay for a subscription to read the results.)  Asked about Continental and United’s customer experience performance, CX Transformist & Managing Partner, Bruce Temkin (@btemkin) pointed out that, “The overall industry actually had a modest improvement between 2011 and 2012 and only two carriers had significant drops: American and Continental. As these economically challenged big airlines focus on wringing out costs, they also squeeze the soul out of their brand, their employees, and the experiences they provide to customers.

Figure 1.Temkin Experience Ratings Shows Continental Falling to United Levels of Poor Customer Experience

Source: Temkin Group

Many Continental employees agree. In a conversation with a Houston senior Flight Attendant who chose to withhold her name for fear of retribution, she stated, “It’s all ‘Jeff’ed’ up! All the goodness of Continental is going away.  Since Jeff took over, they no longer care what we think and sadly, we think they no longer care what customers think.”  A conversation with a few Newark Red Coats in January revealed similar sentiment as they mustered up, “It’s the worst since Lorenzo. The management team is disconnected with the staff. We’re reverting back to pre-Gordon as Jeff destroys our morale.”  One of then pulled me aside and said, “We’re still Continental at heart and I’ll do the best I can while we can. Please stay with us!”

Figure 2. Atmosphere Research’s U.S. Airline Sentiment Scores From August-December 2011 Show United Near Bottom

Source: Atmosphere Research

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Monday’s Musings: Beyond The Three V’s of Big Data – Viscosity and Virality

Published on February 27, 2012 by R "Ray" Wang

Revisiting the Three V’s of Big Data

It’s time to revisit that original post from July 4th, 2011 post on the the Three V’s of big data.  Here’s the recap:

Traditionally, big data describes data that’s too large for existing systems to process.  Over the past three years, experts and gurus in the space have added additional characteristics to define big data.   As big data enters the mainstream language, it’s time to revisit the definition (see Figure 1.)

  1. Volume. This original characteristic describes the relative size of data to the processing capability. Today a large number may be 10 terabytes.  In 12 months 50 terabytes may constitute big data if we follow Moore’s Law.  Overcoming the volume issue requires technologies that store vast amounts of data in a scalable fashion and provide distributed approaches to querying or finding that data.  Two options exist today: Apache Hadoop based solutions and massively parallel processing databases such as CalPont, EMC GreenPlum, EXASOL, HP Vertica, IBM Netezza,  Kognitio, ParAccel, and Teradata Kickfire
  2. Velocity. Velocity describes the frequency at which data is generated, captured, and shared. The growth in sensor data from devices, and web based click stream analysis now create requirements for greater real-time use cases.  The velocity of large data streams power the ability to parse text, detect sentiment, and identify new patterns.  Real-time offers in a world of engagement, require fast matching and immediate feedback loops so promotions align with geo location data, customer purchase history, and current sentiment.  Key technologies that address velocity include streaming processing and complex event processing.  NoSQL databases are used when relational approaches no longer make sense.  In addition, the use of in-memory data bases (IMDB), columnar databases, and key value stores help improve retrieval of pre-calculated data.
  3. Variety.  A proliferation of data types from social, machine to machine, and mobile sources add new data types to traditional transactional data.  Data no longer fits into neat, easy to consume structures. New types include content, geo-spatial, hardware data points, location based, log data, machine data, metrics, mobile, physical data points, process, RFID’s, search, sentiment, streaming data, social, text, and web.  The addition of unstructured data such as speech, text, and language increasingly complicate the ability to categorize data.  Some technologies that deal with unstructured data include data mining, text analytics, and noisy text analytics.

Figure 1. The Three V’s of Big Data

Contextual Scenarios Require Two More V’s

In an age where we shift from transactions to engagement and then to experience, the forces of social, mobile, cloud, and unified communications add  two more big data characteristics that should be considered when seeking insights.  These characteristics highlight the importance and complexity required to solve context in big data. Continue Reading…

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Monday’s Musings: Why Customers And Prospects Expect Clearer Rules About Content Marketing

Published on February 20, 2012 by R "Ray" Wang

Original Mission Improves Engagement Through Relevancy

Content marketing re-emerges as a hot topic and trend in improving engagement with existing customers and prospects.  Marketers can improve the likelihood of engagement through the creation and sharing of relevant information.  Typical delivery formats include advertorials, emails, branded websites, white papers, webinars, podcasts, and field marketing events.  Content marketers believe that educating a customers with high quality information will improve the likelihood of a sale due to brand association with expertise and thought leadership.  Content marketing is a powerful and effective approach when done well.

Many Marketers Will Abuse The Model As Marketer Objectivity Standards Go By The Way Side

As with all techniques, content marketing has the potential to improve brand relevancy and conversion.  However, when applied to social media, there is greater room for abuse.  Why? The speed of social media and the lack of rules creates a confluence of forces leading many content marketers to quickly blur the limits of objectivity.  How? By placing biased marketing content and associating with a known, objective, and trusted brand.  It’s happening with paid blogs, paid tweets, purchasing Facebook likes, thinly veiled advertorials in trusted magazine brands, and biased white papers disguised as objective research.

Though many will claim that a new generation could care less about objectivity, selling out on standards will create short term gain at a more punishing long term loss of trust.  In today’s social businesses, trust is the new social currency.  Without trust based on our actions, we destroy the basis for engagement and relationships.  In fact the newness and pureness of social media is what draws users to engage.  If marketers deafen the channel with the equivalent of ‘junk mail”, spam, and telemarketing in the guise of content marketing, the recipients will hit another level of social overload and disengagement.

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Product Review: SAP’s Recalls Plus App – The Crossover From Enterprise To Consumer Begins

Published on February 15, 2012 by R "Ray" Wang

SAP’s First Consumer App Addresses A Key Consumer Concern

At midnight pacific time, February 15th, SAP launched its first ever consumer app – Recalls Plus. This consumer app, downloadable for free on Apple’s app store, was developed from one of the world’s leading enterprise software companies (see Figure 1.)  SAP’s first foray into the consumer world will surprise many customers, influencers, and observers.  In fact, in an exclusive conversation with Rishi Diwan, who’s the product owner for the new consumer apps team, he reinforced SAP’s seriousness to enter the market, apply lessons learned, and reiterate.

The basic concept of Recalls Plus is elegant and brings the age old, manual and cumbersome process of tracking consumer recalls to today’s world of engagement systems (see Figure 2.)  With a rich and elegant user experience, consumers can quickly see the latest recalls and share details within social networks (see Figures 3).

In addition, the solution allows consumers to track recalls on individual products, categories of products, and food allergens on their iPhone (today) and other mobile devices (tomorrow) (see Figures 4, 5, and 6.)  More importantly, this consumer app touches the customers of SAP’s customers and provides a missing piece in the customer loyalty angle by providing real-time alerts (see Figure 7.).  By proactively outreaching with end consumers, SAP can help its direct customers build long term loyalty and improve customer engagement.

Figure 1. Sign In Screen Easily Works Like Any Other Consumer Mobile App

 

Figure 2.  Tracked Recalls Show Up On The Initial Home Screen

 

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