The role of the technology vendor is central to digital transformation success, yet too many organizations are still receiving poor advice from their business software partner, according to respondents in a global research report.
It has been noted in a number of studies conducted by IFS that companies in the middle market feel this pain more acutely than others. This is borne out in the research as companies with between $550 million and a billion dollars seem more likely to identify poor advice from vendors as a failure factor. These companies are generally larger and more diverse and have multiple divisions and business models and a global footprint, when compared with their smaller counterparts.
While they have all the complexity of companies with greater than a billion dollars in revenue, they have fewer resources to manage the intricacies of these projects. Caught in the middle with complex needs and limited resources, they are more dependent on vendor guidance and cannot validate and thoroughly vet each claim or recommendation.
A study of 3,000 IT decision makers, C-suite executives, and individuals working in operations in six markets solicited insights about the digital transformation projects they have planned and those they have completed.
So how do they wind up saddled with vendors who may not be trustworthy? After all, respondents also said having a vendor whose ethics align with those of their own organization was the third most important trait in their selection process. This trails just behind industry expertise at 32 percent and the ability to deliver long term solutions at 30 percent. And again, middle market companies were even more likely to identify this trait as central by more than 10 percentage points.
One reason these respondents find themselves working with vendors they perceive as less than trustworthy may be that selection teams are pressured by senior management and boards of directors to select vendors who are well-known but are unfortunately a poor fit for their actual functional needs. Again, companies in the middle market as well as those with greater than a billion dollars in revenue report this problem more frequently than smaller companies.
A substantial amount of companies report getting bad advice from vendors, and that is indicative of poor marketing practices. I think it is probably caused in part by a lack of ownership of projects and a lack of clarity in identifying which problem is to be solved and how.
Companies buying and implementing these technologies probably have a hard time getting reliable information on what to expect from their investment. That is because vendors have been overselling a lot of these technologies too early, long before they really know whether they can deliver the results customers expect.
There is more distrust of technology vendors on this front than two or three years ago, and it is contingent on the vendor community to win that trust back. At IFS, we are taking a systematic approach to providing good advice in the form of our business value engineering (BVE) methodology. We spend the time with customers going in to identify where they can realize value through the application of enterprise technology, how much value they can expect and then chart a way for them to succeed.
The Importance of Specialization
The number one desired vendor trait among study respondents was industry expertise, and this makes sense for a variety of reasons. The technology itself may have functionality or features designed to facilitate a specific business process. For example, project risk management for construction for instance, or maintenance repair and overhaul and airframe maintenance for an airline.
The vendor’s personnel may also come to the table with deep industry skills or knowledge. In some cases, these features and expertise may enable a business to adopt industry best practices. In others, the technology and people the vendor offers may help a company conform a solution to their unique or proprietary approach endemic to their company.
It is no surprise then that when looking at who in the organization values this expertise the most highly, it is the operations people, at 42 percent, who are on the front lines between very industry-specific business processes and the technology that supports them. Coming in second are sales and sales support, at 35 percent, who likely face industry-specific purchasing strategies and customer requirements.
Success Factors and Trust
When it comes to critical factors for success, 45 percent of respondents identified technological fit, but the more frequently reported factor was the presence of clear objectives at 50 percent. When it comes to critical factors for success, 45 percent of respondents identified technological fit, but half specified the importance of clear objectives. Only a quarter identified a collaborative relationship with the vendor as a success factor, which may be an indicator that such relationships are rare, rather than undervalued.
Some technology and software vendors are following a strategy that channels post-implementation resources to the largest customers so those with the largest spend subsequently receive better advice and information. This can lead to other, often smaller customers being left to rely on ad hoc advice which could be coming from a salesperson, consultant or from elsewhere in the ecosystem.
What may work better is when software vendors provide knowledge platforms, forums and channels where the basis of helping customers is not defined by the contract value but based on the nature of customers’ needs. This results in a collaborative relationship designed to satisfy what are often pressing needs.
The Value Lifecycle
The value of any software is realized over a lifecycle of several years or even decades, so a failure to provide adequate access to information and resources can starve customer teams of innovation even if they have already licensed software that will solve their problems.
When a collaborative approach to knowledge and expertise is applied, new and disruptive opportunities can appear which lead to true transformation, competitive advantage and in the case of a select few innovators in the industry, a way of continuously delivering incremental value for a predictable cost.
Ethics, industry expertise and the ability to deliver long term solutions are all mission critical. A vendor with deep expertise in your business and industry not only understands what you need now but can see where the industry is headed and what you will need 6, 10, 12 or 36 months into the future. They can give you additional advice to help you not just get to where you want to go, but where you will have to go next.
Some companies just want to sell you stuff regardless of whether you really need it or not. But partnering closely with a vendor with strong ethics means you have a confidant who can first of all add value and second of all will not push something if it will not add value. What you need is intelligent advisory, and you only get that with longer term partnering because your vendor has skin in the game right along with you. They are not going to sell you something and run away.
Learn more in the full 2020 survey “Digital Transformation Investment in 2020 and Beyond: Factors in the Success or Failure of Technology Investments in the Post Pandemic Era”.
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