Converting an IT horizontal into an industry vertical

Leveraging IT is not just for outsourcing vendors in India. Other Industries are fast catching up. I would say it's a fantastic opportunity for sectors that are not particularly doing well, Real Estate and Construction for example.

HCC is a Bombay based infrastructure and construction major in India. The industry is going thro some real rough weather but that doesn't seem to have influenced their business propensities. Though operational departments have been sagging, the IT department of the company has warmed up to the situation and is now pitching in with its own might of experience gained so far. It is trying to develop as an end-to-end IT solutions service provider for the infrastructure industry. According to Satish Pendse, CIO, initially, the services sought to be provided by the upstart could be SAP implementation, GPS-based tracking devices, multiple-packaged application implementations, and end-to-end services going forward.

Innovation does not just mean feature addition or product enhancement. It can also me converting a horizontal into a vertical.

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Come out of the cocoon, Mr.Ellison

Bob Evans of Information week in his open letter to Oracle CEO Larry Ellison to wind down its sinful 22% software maintenance cost –

“No one's asking you to slash the 22% fee irresponsibly and give away your ability to create great new products and support the ones your currently have. But the longer you dig in and tell CIOs that you're not interested in the wicked expense challenges they're facing, the longer they're going to remember that when the current recessionary climate fades and new alternatives gain strength. As Manjit Singh, CIO of Chiquita Brands, suggested to InformationWeek, what about some alternative tiers for which you charge less and in turn provide less? Singh proposed a 12% fee that would offer bug fixes but not upgrades -- is that not an idea worth considering? Or 12% for support 9-to-5 rather than 24 hours?

Or 15% with support delivered by a third-party network of Oracle (NSDQ: ORCL)-authorized teams? Mr. Ellison, it's easy to see why you like the current system, where someone pays, for example, $4,000,000 for a software license and then pays you $880,000 every year for "maintenance." And maybe CIOs will continue to find that's a fair exchange of value. But maybe they won't -- as you know better than just about anyone, the IT industry is an archetype of creative destruction, where faster/better/cheaper alternatives relentlessly stalk, attack, and kill older/slower/more-expensive models. Perhaps the model you and Charles Phillips and the entire Oracle global team have built is so extraordinarily singular that it will endure forever and remain unassailable from the forces that have ground down every previous eternal model in the technology business. But may be not.”

Oracle is not immune to challenges of the times. No company is. Sooner they recognize and change, the better ! Hubris loses in the end, always.

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Regulate enterprise vendors first

I can’t really hazard a guess on the coming regulatory overkill. It always does following a massive crisis as the one that is now blowing across the Wall Street and rapidly spilling across the world at large. It’s no longer an American crisis or developed markets crisis, it’s a global crisis now sweeping across economies and industries. Similarly credit tightening does not just entail a crisis of liquidity that folds up investment banks; it’s a business crisis that scuppers momentum out of every enterprise - big or small, global or local.

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If there is one breed that still feels a bit casual about it is that of software vendors. The large enterprise vendors like SAP, Oracle, HP, IBM, Microsoft all of them have developed software package applications for different verticals even as the industry itself has been evolving. SAP talks about being able to support 28 industries. It also suggests 100% solutions in each. Yet if you look at its solution maps, it has several "white spaces". It talks about extending them with its partner ISVs and SIs with NetWeaver platformed xApps or has future R&D plans for them. So where is it really? Who will watch them?

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How did they do that? Ask any investment banker about the logic behind a CDS, ABS, MBS, CDO, CLO or such alphabet soup, he will still be wringing hands. But the tech vendors seem to `get it’ all and boy they ran with it – screaming vertical capability! Why haven’t the earliest developer / functional analyst that studied the prototype of subprime mortgage and the excessive leverage blown the whistle on the wobbly nature of the foundation?

Answer lies in casualness of approach. To hell, with outcomes. They are concerned with operationalizing a functionality as advertised. So if they provide the plain vanilla financial, CRM, pay roll or HR package to an Investment bank, they claimed I-banking vertical capability. Business transformation – does it also mean driving a healthy business to bankruptcy in a matter of days? Or is it Paramedic filling in for surgeon? God save the patient.

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"We need just Information; Vendors can keep the Tech"

Michael Krigsman predicts end of IT –

“Since the days of punch cards, IT has believed itself to be guardian of precious computing resources against attacks from non-technical barbarians known as “users.” This arrogant attitude, born of once-practical necessity in the era of early data centers, reflects inability to adapt to present-day realities. Such attitudes, combined with recent technological and social changes, are pushing IT to share the fate of long-extinct dinosaurs.”

Yes. Complexity can no longer ensure CIO’s job security and worse, he has to make way for user onslaught.

To that, Vinnie Mirchandani brings out a stellar insight –

"I am amazed how arrogant the category of social software really is. Why does it feel the need to boil the ocean, change the enterprise? It has its role particularly in collaboration - but along side not instead of CRM, SCM, ERP, security, telecom and a bunch of other software categories. It needs to do its job well, not worry about the rest of the enterprise.

When it hones its focus and shows appropriate payback, it will find the CIO or IT is not the enemy. Just a bunch of folks trying to juggle a wide range of competing technology initiatives."

I agree with both. But I have this user perspective –

Enterprise IT faces extinction if it does not progressively busy itself with envisioning where a company is going and take over its IT complexities. Clients have just Information needs; spare them the pain of Technology. Enterprise IT vendors can very well keep it.

Here are some more areas where Enterprise could play a larger role. Think of Master Data Management, Meta Data integration, App streaming and moving from process centric to information centric architecture. In effect, transform Business Intelligence to much wider Business Activity Monitoring (BAM) that yields the big picture. In that I see the end of licensing model as we know it. Transition to significantly more flexible memory based pricing or even by the no. of virtual cores.

Darwin said "extinction presages evolution" and in all this, they sure will be doing Darwin a lot proud :)

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Upgrade upgrade

So Oracle Database 11g is here. How do users view upgrades? I ask.

Most of Oracle database users haven’t yet started using all features in their existing versions. It’s like the new car full of new knobs that you may seldom turn. Given an option, I would say *no* to those premium features if that means lower priced pack. But I get no option if it comes as part of the basic version, ex-works. In the enterprise software world, users get no choice on their first buy even as they could make do with far less features. Visualize the downtime for installation of the new version, you would swear by SaaS models. The new database environments of 11g may be chic, more automated and may even free up a lot of DBA resources, but the pricing rankles. DBAs in charge of the earlier versions come comparably a lot cheaper.

Customers see frequent across-the-board upgrades (except where new applications warrant them) as candid confessions by vendors that their older releases suck. Over the years, vendors have carved a lifeline along that business model. It just means they gave crappy database environments earlier, right?

How about some refunds, Mr.Ellison…? Your friend Steve Jobs did that with his iPhone recently.

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