When Not to Invest in Tech
- 27 August, 2012 10:33
A few years ago, when Bill Weeks was CIO at a leasing company, a big vendor pitched some software intended to manage leasing throughout Europe. Weeks was skeptical. "We noticed that half the stuff they were showing us was PowerPoint slides and not actual functionality," he says. "We decided it wasn't strong enough to run a business on."
He and his team decided to pass.
It's the kind of decision that CIOs have to make all the time. With the pace of tech innovation growing ever faster, IT leaders find themselves under increasing pressure to make one difficult decision over and over: adopt a promising new technology and risk the unknowns that a new implementation brings, or decline -- and risk letting their companies fall behind the technological curve. The wrong decision could destroy a career.
Saying no will often leave a CIO wondering what might have been. But in the case of the leasing software, Weeks got a definite answer. Some time after taking a pass on the system, he took a job at a different company -- one that had already implemented that software. Sure enough, "the vendor had oversold and underdelivered," he says. "It was supposed to work in all of Europe, but they had only completed the program for one country, and even with that one we needed manual workarounds."
Timing matters. You look at a product and say, 'Good idea, but not now.' Rob Meilen, CIO, Hunter Douglas North America
Weeks spent the next five years working with the vendor as it gradually developed its product to the point that it offered the functionality originally promised. "Fortunately, the CEO had mandated that this be a fixed-bid contract," he recalls. "The contract said what the software was supposed to do, and we would have an annual conversation about how it wasn't quite there yet."
Manual workarounds were put in place initially, and a triage approach was established with the vendor, so that the problems that were the biggest productivity drains would be fixed first. The other costs were people and travel. The business unit was headquartered near London, and most of the IT team was based in the U.S., so travel to the U.K. was required several times a year.
The original decision to forgo the leasing software "was one of those cases where you say, 'Wow, I made the right decision!' Although I wound up inheriting the problem anyway," says Weeks, who today is senior vice president and CIO at SquareTwo Financial, a Denver-based asset recovery and management company with annual revenue of about $227 million.
Unfortunately, it's rare that a new technology is as clearly not ready for prime time as the leasing software that Weeks encountered. Most products and services look good -- on paper. And most come with clear case studies that show how they will help boost your company's ROI -- again, on paper.
In the real world, those calculations can be tough to make. Nevertheless, IT executives must decide every day whether to invest in a great-sounding new technology, or leave it alone. Sometimes, products that are well designed and work great -- and might even create value for your company -- are still not a good investment. Here are four good reasons to say "Thanks, but no thanks!" to an enticing new offering.
It's Too Early
"Timing matters," says Rob Meilen, vice president and CIO at Hunter Douglas North America. The Pearl River, N.Y.-based company, which makes window treatments, is part of the Hunter Douglas Group, headquartered in the Netherlands, with annual revenue of more than $2.4 billion and more than 17,000 employees worldwide. "You look at a product and say, 'Good idea, but not now,'" Meilen says. Though he does point out that "no may not be the same as never."
Before working at Hunter Douglas, Meilen was CIO at a national retail chain. In that position, he chose not to adopt an early version of Google Wallet. "The technology had some promise, but it wasn't well thought through," he says. "It would have worked well on the consumer's phone, but Google was unprepared for how it was going to connect back to my enterprise systems."
In addition, he noted, most smartphones at the time didn't contain the Near Field Communication, or NFC, chips required for Google Wallet to work. "I look back at that, and it was the right use of our resources at the time," he says. "That's not to say that same piece of technology wouldn't be a good fit somewhere down the road, as NFC chips in phones become more common."
In general, CIOs agree, it's probably best not to be a truly early adopter. "A lot of organizations I work with don't want to be on the bleeding edge," says Rachel Dines, an analyst at Forrester Research. "Before there are a lot of positive-use cases to review, there's no good scientific way to sort out the hype from the reality. So while there's a lot of benefit in that approach, there's a huge risk, too."
Kevin Roberts, CIO at Abilene Christian University in Texas, which has about 4,700 students, knows about early adoption risks firsthand. "We made a big run at document imaging," he says. "This was a long time ago, in the late 1990s. We had the whole paperless office mentality. We thought, 'We'll scan everything and sit at our computers and pull up whatever we need.'"
The problem, he says, was tagging documents with metadata that would make them easy to find. "We spent a lot of money on this, and we had to walk away -- we couldn't make it work," Roberts says. Today, he adds, the university has more-robust document scanning and tagging capabilities, so some of that dream of a paperless office is now coming true. But "13 years ago, it wasn't the right time," he says.
Technology hype vs. reality: How to tell the difference
There's one thing everyone working in enterprise IT agrees about: Technology for its own sake is bad. Every new product you adopt has to bring a business value to your organization, either by reducing costs or otherwise improving the bottom line.
Sounds great, in principle. In practice, every technology vendor has a detailed explanation of how each of its products will help your company. It's up to you to figure out which ones really will. Here are five questions that can help, courtesy of Rebecca Wettemann, vice president at Nucleus Research, which specializes in measuring the ROI of technology projects:
1. Can I find a role model? "Look at other companies that are like yours and have implemented this technology," Wettemann advises. "Take the best data they have on the ROI they received. Use that estimate as a tool for making our own decisions."
2. What are the top three benefits? Some vendors claim that their products will benefit your business in 10 or 15 ways. While that may be true, "most ROI from new technology comes from only two or three benefits," Wettemann says. "So only look at the top three benefits, and try to quantify them in a meaningful way."
3. How many steps to ROI? If virtualization software lets you skip buying a new server, calculating the ROI is pretty straightforward. But when ROI doesn't come from direct savings or specific efficiency gains, it's harder to pin down. "An increase in brand value might increase the likelihood that new or existing customers will make purchases," Wettemann says. "The more steps I have to go through to get to dollars, the more indirect the value proposition."
4. Am I buying it because of its category? If you know you need a CRM solution, or you've been hearing the term "big data" and wanting to get in on it, you may be considering a product because of the category it falls into, not because of its actual capabilities. "We've seen it over and over again, with knowledge management, Web services, SOA and many other acronyms," Wettemann says. "People need to categorize something and make generalizations about it." Forget the category, she advises, "instead, ask yourself: What is the specific business problem I'm trying to solve, and will this help me do it?"
5. Will it pass the Mom Test? "We call it the 'Mom Test,'" Wettemann says. "To be able to get employees to use a new technology effectively, they have to be able to understand it and what its benefits are. So if you couldn't explain it to your mom and have her make sense of it, you shouldn't be spending money on it."
-- Minda Zetlin
The Vendor Is Unproven
Many of today's most innovative new products are created by small, entrepreneurial companies. That's great news for the American spirit of innovation, but working with startups can make an enterprise CIO nervous. "In one case, we were going to be funding 100% of a company's payroll," Weeks recalls. "We had to wonder, 'Will they have other companies that use it, or are they going to go out of business as soon as we stop writing checks?'"
If that happened, the company might have been left with a great product, but no support or continued development. "There are ways around that. For instance, we could have said that as part of our agreement we could take over the source code if that happened," Weeks says. "But having developers work on someone else's code is very painful."
I've been a CIO for 13 years, but in the recent past, it's become like the I Love Lucy episode in the candy factory. Kevin Roberts, CIO, Abilene Christian University
Weeks and his team decided to pass on the new product, and when they did, he recalls, "I remember the [vendor's] CEO saying, 'I'm going to call you once a week until you buy our product,' He only called for about three weeks." Sure enough, about a year and a half later, the vendor went out of business. "It was a company that wasn't solid from a financial perspective, even though they had a great product," Weeks says.
And even if the vendor offering a new product is on solid footing, switching away from a vendor you have a long-term relationship with can be risky. "You have to look at your partnerships," Weeks says. "Bringing in a new vendor will have a benefit in the short term. If you're looking at other products, your long-established vendors will be on their toes -- they won't want you going to that product. But if you do it, will they be upset? If you were a high-profile client for them, you might not be as high-profile anymore. You might get less attention, less focus and less expertise. I'm not suggesting you should base your decision solely on that, but it's something to consider."
We're Not Ready
Sometimes, both a product and its vendor have proven track records. It might be clear that this would be a solid investment -- but your organization might be unprepared to take advantage of it. Recently, Jason Cohen, CIO at New York-based Diversified Agency Services (DAS), considered a move to the public cloud. But he eventually decided that DAS -- a holding company for more than 190 of the world's largest advertising agencies and communications firms -- wasn't ready.
"Our companies all have different IT footprints and different processes and procedures, so we determined there was a significant risk in moving to the public cloud," Cohen notes. "We realized we aren't mature enough for the move, whether for storage or email. Instead, our determination was, 'Let's build the best technology we know how and aggregate our IT approach. And then we may be ready later on.'"
Before adopting a new technology, Meilen says, it's important to determine whether your IT organization can take on all the tasks that an implementation would require. "If it's a small or young [vendor], do I have the skills in my organization to engage with them?" he says. "There are capabilities a large, well-established tech company would bring that a smaller startup won't. I'll have to supplement those. I'll be teaching a young company how to come to market in the enterprise space."
We Can't Handle It
Even if a technology is perfectly ready and could be perfectly useful for an organization, it may simply be something that IT can't take on. "I've been a CIO for 13 years, but in the recent past, it's become like the I Love Lucy episode in the candy factory," Roberts says. "There was a time when new technologies and new ways of doing things came along at an acceptable pace. I could take the time to make a thoughtful decision whether to invest in them. Now things are at such a rapid pace, I find myself making decisions not to invest in this, or to stop doing that."
Getting these calculations wrong can have dire consequences. "One company decided to make a $10 million investment in SAP over three years," Weeks recalls, of a former employer. "They were going to take it out of the operating budget, rather than finance it. The company was in a cyclical industry and the second year, it hit a recession. It wasn't going to make any money that year. They fired the CIO, saying, 'It was a bad decision to start this project when you did.'"
This happened not with an unproven newfangled idea, but with a solid technology that would unquestionably have created benefits. "If they'd been more conservative in their approach, perhaps implementing it in stages, that project would have been a lot more successful," Weeks says.
And When to Say Yes
There are many excellent reasons to say no, but doing so too often can hurt you. If you wait too long on a new technology, you might lose competitive advantage or spend too much on old systems. For example, Cohen acknowledges that "we may have waited a bit too long on virtualized storage and wound up investing a little more in hardware than we needed to."
The risks can escalate the longer you wait. "I see a lot of companies that are still highly mainframe-based because they've never gotten away from their core software," Weeks says. "The problem now is finding people to support that environment. I don't think there are a lot of people coming out of college saying, 'I want to support mainframes!'"
"Someone early in my career said to me that part of the role of the CIO is knowing which frogs to kiss," Meilen says. "You have to try out some new things. But if you're not clever about which ones, you're going to waste a lot of time and not get much from it. It can't be chosen at random. It's an important element of what we do that we will take some risks on new technology. That's part of our responsibility within the enterprise. There aren't a lot of functions that own responsibility for taking risks, but IT and the CIO do."
And so, he says, it's imperative to keep trying new things, even if some of them wind up as failures. "By playing it very safe, you're not serving your enterprise as fully as you could be or should be."
How to handle tech mandates from the CEO
"Hey, I was just reading an article..."
Those six words strike fear into the heart of many CIOs. It happens like this: The CEO or CFO reads an article about an interesting new technology and directs you to implement it -- without knowing any of the details. What do you do if you know it's not a good fit?
"CIOs struggle with communicating both upward and downward," says Jason Cohen, CIO at Diversified Agency Services. "Some CIOs I talk to tell me, 'The CEO dropped it in my lap and I have to do it.' I say you aren't doing your organization or your CEO justice unless you fully explain the pros and cons."
The secret is to carve out pieces of information the CEO can understand. Cohen says he'd approach it this way: "I might say, 'I read that article, too -- about transferring files through the cloud. But did you know the average file size for an advertising agency is much larger than for a manufacturing company because of the large graphics? That's why that doesn't work for us.' "
Bring-your-own-device mandates can be particularly challenging. "Executives always ask, 'Can I use my iPad?' " says Pete Lee, engagement manager at SWC Technology Partners, which provides IT services to midsize businesses.
BYOD programs offer many advantages. "But they can kill IT staff, because they have to manage so many different things," he says. "If you implement BYOD, there will be more cost for managing those devices and more licensing costs."
The best approach is to make sure upper execs understand those costs. "Every executive responds to ROI," he says. "If you can compare the return on investment with what it will cost to implement BYOD, they can make the right decision."
Knowing that an article that a CEO has read could land on your desk at any moment should serve as a motivator to stay informed yourself. "The best approach is to stay ahead of it," says Rachel Dines, an analyst at Forrester Research. "You need to be reading the same magazines, so when the CEO drops an article on your desk and wants to implement this whiz-bang thing, you'll already have looked into it and talked it out with your reports. You'll be ready to say, 'Yes, we've been thinking about suggesting this,' or 'No, we can't, and here's why not.' The worst thing is to be blindsided."
And, she says, make sure you're not doing the same thing to your own IT organization. Make sure you get buy-in from every segment of IT before committing to a project. "When I see an implementation go wrong, it's usually because someone from above mandated it," she says. "I see that more than you might imagine. Something is brought in all of a sudden, and the infrastructure folks are saying, 'I wish someone had asked me because this doesn't jibe well with the technology we have.' "
-- Minda Zetlin
Zetlin is a technology writer and co-author of The Geek Gap: Why Business and Technology Professionals Don't Understand Each Other and Why They Need Each Other to Survive. Contact her at email@example.com.
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