« The Beauty of Bias | Main | The Sources of Software ROI »

February 13, 2006

Why You Pay Too Much

One of our colleagues likes to say "My favorite kinds of problems are Other People's Problems and Problems That Go Away By Themselves!"

Some people think that software purchases can get put in there. It might be a department or project with its own "big stick" budget, damn the corporate delays. Poof! More stuff. Different stuff. Cool. Or, it might be annoyed users, hands hovering priestly over hard-to-support legacy stuff, softly chanting "upgrade"... Poof!

But back on planet Earth, lawyers, support teams and vendors see unexamined, untracked software purchases as The Problem That Won't Go Away. And when CFO Magazine runs a feature on taming the costs of software, you know the "Business" is not waiting any longer for "IT" to make things better. CFOs all believe a sales genius named PT Barnum, who told them that "a fool and his money are soon parted." Taking a cue from them, let's get a quick rundown on what the top sources of cost problems are and why they persist.

1. Shopping fatigue. After bruising technology selection projects, everyone is determined to have the winner show up. Tolerance replaces discretion. Bruising vendor selections? Please, not now.

2. More shopping fatigue. After spending 20 to 30 years learning algebra, your company's buyers watch software vendor contracts show up requiring expertise in chaos theory. "Doh!"

3. Inexperience. As CFO pointed out, why would an internal procurement person who does a big deal every blue moon be able to stay on the field with a sales guy who does it all day every day? You've gotta ask yourself a question: "Do I feel lucky?" Well, do ya, punk?

4. Terror. If your company already ran the gauntlet with one vendor, it paid the price of admission and has the scars to prove it. Why run it again with a different vendor just to get back into the same room? No thanks, I'll keep the captor I already overpay!

5. Money! If you didn't need money to get software, software wouldn't cost so much! Yeah, that sounds ridiculous, but the way you get money to buy things is by asking for it. Have you reviewed the budgeting process lately? If you think you need $50K but you can only get $30K, and then you spend the $30K to try to do $50K of business impact, you could either wind up being 40% less productive than you promised, or you might stretch that $30K of software to 166% of its legal capacity. What's the chance your company did one of those two things? Back to the CFO article again for this quote from Attorney Robert Scott: "I can tell you that 100% of the Fortune 1000 are at risk for this..." And those are the guys with the BIG bucks.

6. Software! Why does software cost so much? Because it's SOFT. Like ideas, like luck, like... recipes. There's they way it was supposed to be, and then there's the way it turns out to be, often with a lot of mystery in between, according to who touched it. Not knowing who touched it, and why, becomes the main way to lose track of whether it's going to keep doing what it is supposed to do.

7. Efficiency. What?! Well here's how that works. See items 5 and 6 above, and think "Let's roll out a common image across all the desktops." The law of unintended consequences says that if this is done only as a bandaid, it will create two new problems for every one that it solves.

These are all diferent from each other in a recognized way, but they all contribute to the same kind of problems: omissions, defects and errors that keep you from having the most appropriate software in the right place at the best time.

That mismatch creates three specific kinds of money problems:
(1) lost savings,
(2) extra expenses, and
(3) wasted investment.

If you're the IT department, the good news is that you're not the source of most of those problems. The bad news is that IT has to make the problem go away -- partner with the CFO or else just watch it all get worse.

Three things IT can do to help CFOs be happy:
- IT can help lawyers be sure about what the company is really entitled to, and fortify the company's legal rights and protections.
- IT can help Support teams benefit from less mystery and complexity in tracking down software types and matching them to operating requirements and knowledge.
- Largely due to the above, IT can help turn Vendors into co-operators who use the same game plan that the company uses and who get paid to power the plan with only the right stuff at the right times.

How can IT deliver those bonuses to those groups? Take on the three areas that expenses like to grow in.
- things that arrive before they should have;
- things that change when they shouldn't; and,
- things that leave before anyone knows it.

This will turn out to be your business case for real software inventory management.

Posted by Malcolm Ryder at February 13, 2006 3:50 PM

Trackback Pings

TrackBack URL for this entry:
http://www.malcolmryder.com/cgi-bin/mt-tb.cgi/212

Comments

Post a comment