The IT industry is one of the most hype-driven business sectors, constantly promising to deliver the next big thing since... well, the last next big thing.
Somewhat bizarrely, users appear ready to go along with this fickle pursuit of the new, shiny and glamorous. Repackage and reinvent an old technology, give it a lick of PR paint and companies will reach for their cheque books.
Buying into brand
This plays happily into the hands of vendors who are constantly in search of new revenue streams. Sold just about all the software you are ever going to sell to your target customer base? Then rebrand the product, give it a new acronym and tell those same customers that this is what they really needed all the time. In what sane industry, could Oracle CEO Larry Ellison get away with declaring that client server computing did not meet user needs after spending 15 years selling his customers client server software?
But – at the risk of straining the analogy – if IT is a fashion statement, where is the little black dress at the back of the wardrobe that can be trotted out season after season?
Actually, it is not a little black number but a Big Blue one. ‘You don’t get sacked for buying IBM’. CIOs down the years have taken enormous comfort from that cliché, even if it does not necessarily live up to the closest scrutiny.
That said, there are thousands of examples of companies that have enjoyed decades long working relationships with IBM, through good and bad times, when the siren voices of sexier start-up companies called for them to defect. One such organisation is Land Registry, which began working with IBM back in 1946 and continues to do so to this day.
It was a bit before his time, admits Ted Beardsall, director for business development at Land Registry, although he has worked with IBM kit since the 1960s.
“I can’t remember a period when we have been distinctly unhappy,” he recalls. “Of course, we have had systems performance issues at times. Computers don’t work perfectly 24-hours a day. We’ve had some slow running and interruptions but it’s completely unrealistic to expect that not to happen.
“But we have been impressed by the way that the problems have been tackled when they have arisen. We expect very high standards from our suppliers. All of our staff are sitting behind PCs, they get frustrated if there are problems and they can’t complete property applications in a day. We are very exacting customers. When we have had problems, we have been very pleased with the response we’ve had from IBM.” It is all about a willingness to work together on both sides. “We value IBM’s global resources and expertise,” says Beardsall. “That gives us reassurance that we can call on those resources when we need them. We get their best experts from wherever they are in the world. We did have a problem last year, a glitch that was very quickly escalated to the number one priority to solve. I’d rather it hadn’t happened in the first place but when it did, IBM pulled out all the stops.”
The lay of the land
Land Registry is the government department responsible to the Lord Chancellor for keeping and maintaining the Land Register of England and Wales. It boasts the status of being keeper of the world’s largest property database, guaranteeing ownership of £1,300 billion worth of property. Over £1 million worth of property is processed every minute in England and Wales.
"Hype plays a huge part. It’s important to distinguish between hype and something that does genuinely change the industry"
James Governor, analyst, Redmonk
When IBM first came on board at Land Registry the technology landscape was very different, and of course very much smaller. The first computerisation projects began in the late 1960s and 1970s.
“The first thing that IBM did was very simple stuff by today’s standards but it was pioneering at the time,” says Beardsall.
“The choice of providers was much more limited than now. At the time, there was strong pressure for government departments to use ICL as their provider. We were one of the first to use IBM. I do remember that the CEO was quite a visionary and very keen on computerisation.”
"I want to deal with companies where if something doesn’t work, the vendor comes back. There are so many small firms that come and sell you a great idea and then it all turns out to be vapourware"
Prasanna Dhore, executive vice-president, The Dreyfus Corporation
While initial work was basic computerisation of paper-based records stored in filing cabinets, over the years the organization has expanded and enhanced its technology vision.
Originally IBM ran the first database for the Land Registry. Later, they supported its first venture online to provide public services. Most recently, IBM bagged a £21m deal to implement an e-conveyancing service which will replace the current paper-based system with electronic documents and signatures. This will make it quicker and cheaper to exchange documents and transfer funds when buying and selling properties.
Despite the long relationship between IBM and Land Registry, the supplier still has to bid for business in common with other providers.
“IBM won through competitive tendering,” affirms Beardsall. “The IBM relationship has taken a long time to grow but they came to the e-conveyancing project through a competitive exercise, not because they knew us so well.”
So last year
However, IBM’s status as a safe pair of hands does not imply that it is stuck in the past. The firm’s behemoth status and the reach of its corporate fingers into so many technology pies is testament to that.
That said, there are companies that ‘stick to their knitting’ and whose products and services do exactly what it says on the tin. They may not have the glamour and sex appeal of some of the flashier vendors but their customers continue to invest in their products because they do that rarest of things: they work.
The lower profile of these companies can lead to them sometimes being overlooked and not given their correct recognition. Take the CRM sector, for example. Siebel was the posterchild for the industry while lately Salesforce.com is where the ‘sex appeal’ is in the sector.
Look at it pragmatically. Siebel defined a market but fell from grace into the arms of Oracle. Salesforce.com may have the glamour and the hype but its installed base remains small compared to on premises CRM firms. If you asked who the main players were in the CRM space, most users would name Siebel, Salesforce.com, maybe NetSuite and RightNow, probably SAP and increasingly Microsoft. To that list you should add SAS Institute, one of the most successful software firms in the industry but a prime example of that most empty of marketing clichés – the best kept secret.
SAS is a prime example of a company that has thousands of committed customers. While some firms struggle to produce a single customer, SAS customers are generally among the most loyal in the industry.
The Dreyfus Corporation, a subsidiary of Mellon Financial Corporation, is one of the US’ leading asset management companies, currently managing more than $170bn in mutual funds, separately managed accounts and institutional portfolios. It has used SAS CRM to reduce attrition rates by 50 per cent to be one of the lowest of any mutual fund company.
Always in style
“I’ve been using SAS software for more than 20 years,” says Prasanna Dhore, executive vice-president at Dreyfus. “I started using it when I was a grad student when I used to program using SAS in the evenings and then go to school in the mornings. I’ve been at Dreyfus now for 10 years. There are two things we use SAS for. The technology group uses it for the mundane tasks but we have also been using it to address a huge business challenge on redemption. SAS is a very solid and reliable way of analysing data.”
Dreyfus has created a database used for all marketing, sales and strategic planning. Focused on retaining assets, Dhore and his team of statisticians can examine and analyse data which includes demographic information, credit and loan applications, spending habits and transactional history – to find out which customers might be thinking about leaving.
Warning signs are surges or decreases in the amount of contact from customers and increased numbers of transactions between funds. “We’ve been able to predict that the customer is going to exit three to six months before it actually happens and with accuracy of 80 to 85 per cent,” says Dhore. He says the stability and solid nature of SAS Institute has been.
very important. “SAS has been a very good partner to us. In the pharmaceutical industry they use something called survival analysis. We wanted to use the same technique to see how long a customer was likely to be with us. It was a ground-breaking methodology and we worked to implement it with the assistance of statisticians at SAS. We’ve also had a lot of good discussions with [SAS founder and CEO] Jim Goodnight.”
Long term trends
In a fast moving industry, it is clearly a gamble to choose which horse to back with a view to long term security. Dhore says there are certain factors to be considered. “It is very important to us as a huge corporate that vendors demonstrate certain criteria before we sign,” he explains. “Is it going to be long term or is it a fly-by-night operation? I want to deal with companies where if something doesn’t work, the vendor comes back. There are so many small firms that come and sell you a great idea and then it all turns out to be vapourware.”
Stability and a focus on long term relationships are also factors in the continuing investment in Novell products by the Royal Society for the Prevention of Cruelty to Animals (RSPCA). “It’s been a pretty natural progression for us,” argues Chris Rolfe, RSPCA network manager. “In the 1990s, we were predominantly using Wordperfect which was then purchased by Novell. We did consider at that time doing a ‘rip out and replace’ but at the time, we would have had a fourfold increase in cost to move to something else. Novell products do what they say on the tin. We can manage everything through the eDirectory and our applications run on top of Novell’s infrastructure. We’re currently rolling out version seven of GroupWise. It’s been remarkably easy to upgrade.”
The RSPCA’s status as a charity has implications for any change of procurement strategy. “From our point of view as a charity, we are very focused on costs,” says Rolfe.
“We have looked at other things, such as moving to Microsoft and other groupware offerings. We’d have to look at total cost of ownership, the administration costs and ease of use of any product. It’s all very well having low upfront costs but you need to understand what the ongoing costs are going to be,” says Rolfe.
“We’ve had a very good relationship with Novell over the years. Obviously it varies from account manager to account manager but they treat us very well in terms of their list of brands. They’ve helped us out a lot, sometimes with free consultancy,” he adds.
Ultimately it is down to the customer to avoid being caught out by empty promises and hype. Sometimes customers resist: when Oracle attempted to force its applications customers off its client server versions and on to internet only replacements, its user group rallied and managed to extend the life of the old
"It’s all very well having low upfront costs but you need to understand what the ongoing costs are going to be"
Chris Rolfe, network manager, Royal Society for the Prevention of Cruelty to Animals
product. But how do you know when to take a stand and not be pushed into that inappropriate fashion statement?
Don’t believe the hype
“The question that gets asked is, ‘how long is the hemline this month?’ That’s not the right approach,” advises James Governor, analyst with Redmonk.
“From an IT architecture standpoint, you need to ask yourself where you can get that little black dress from Chanel that’s going to last you for years rather than worrying about how wide your trouser leg should be this year. If the new technology doesn’t bring you additional benefits, then why are you investing in it?
“Old technologies never die, they just go into maintenance mode. Look back at the ‘death of the mainframe’ hype in 1995 and you see that IBM was about to die. Of course, you can’t say that today. The great irony is that the IT industry doesn’t know the meaning of the word ‘dead’. The challenge is that users buy on hype and sell out on value. It needs to be the other way around.”