Services Safari

What Will People Say @ Software 2007

Conversation With MR - A Preview of a Must-See Event

MR Rangaswami is a long-time friend and a fixture in Silicon Valley. Vinnie (www.dealarchitect.typepad.com) and I even approached him re: venture funding during our brief dot.com adventure.

I've attended most of MR's events over the years. Of late, he's been attracting a couple thousand software executives each year at his show in Santa Clara. If you've never been, you should attend. I doubt you'll find many other venues with so many entrepreneurs, VCs, tech luminaries, Wall St. analysts and big-time tech CEOs in attendance. The side deals and introductions there are especially worth the investment in this show.

This year, alas, a client is requesting my presence a half-world away during Software 2007. So, I decided to call MR today and find out what he believes will be the big discussion items for this year's event. Here's what we covered:

• When MR set the agenda and conference theme, he wanted to highlight innovation in the software space. MR believes that all of the focus on software industry consolidation (instead of innovation) has led outsiders into believing that innovation has slowed or stopped. MR sees the evolution in new business models (e.g., Software as a Service), new development processes (e.g., utilization of offshore resources), new process design capabilities powered by SOA, etc. as evidence of considerable but 'hidden innovation' within the industry.
• While innovation is the key intended discussion item, MR and I both agreed that recent events involving Shai Agassi at SAP and the SAP/Oracle/TomorrowNow lawsuit will get lots of discussion in the hallways, too. We even discussed, briefly, the recent Merrill Lynch report that speculated on whether Silverlake would buyout one of the SAP founder's stakes in that company. Private equity, we agreed, is a force that will continue to make for interesting reading in the software space.
• On-demand applications are now at crucial juncture. MR wants to hear more discussion at the show as to whether these applications are really scaling, gaining material market share and becoming profitable for those offering them. While the story looks encouraging for these solutions, definitive proof points are needed now.
• Open Source software is another area we discussed. MR wants more proof that firms can make money with open source solutions. Red Hat looks like a winner but how many more big winners will/can emerge?
• Services, one of my favorite subjects, is also expected to be a big discussion item. MR expressed a need for service organizations to upgrade their marketing tool chest and processes. They should use more Web 2.0 techniques in their sales and marketing efforts. I would certainly agree that services marketing is still mostly undifferentiated, trite and ineffective. While I could write books on this subject, let us hope that at least a few big ideas/best practices surface at this event and some of them get implemented.

I asked MR if anything is changing this year re: attendees. He told me that a significantly larger number of attendees are coming from out of the United States. He indicated that attendees from Israel, Finland, China, UK and more have already registered.

MR's show is May 8-9. You can get info on it at: http://www.sandhill.com/conferences/sw2007/index.php

One last thing, if you do attend, please post some blogs on it. I'd love to see what else gets discussed at this show.

This post is cross posted on www.softwaresafari.typepad.com 

A Book to Think About

                       Workers: Assets or Disposable Items?

Louis Uchitelle has penned a book titled "The Disposable American" that relates how the social contract between worker and employer has been devastated over the last few decades in America. If you'd like to read what others have to say regarding this piece follow this link to Amazon's posting of the book ( http://www.amazon.com/gp/product/product-description/1400034337/sr=1-1/qid=1175284961/ref=dp_proddesc_0/103-4423196-6031053?ie=UTF8&n=283155&s=books&qid=1175284961&sr=1-1 ).

Yes, offshoring, contract manufacturing and the corporate wasting of middle management positions have all taken their toll on U.S. workers. Interestingly, there's an OFF THE RECORD column in this week's InfoWorld (www.infoworld.com, 3/19/2007, "Attack of the Suits") that really gets me riled. It details what happens when some sharp-dressed folks embed themselves with the top management of a service firm. These folks execute a series of layoffs and other actions to temporarily improve the looks of the company's books so that the firm can be sold at a premium. Obviously, the new buyers and the current and former employees are the losers. Only the management folks benefited from this deal.

I've met "DEAL" CEOs. They're brought in to tart up a company and make it attractive to another firm. These folks have no soul. They're in love with themselves, their ego and their pocketbook. Personally, I think there will be a special place in the afterlife for these soulless monsters. They don't care about customers, employees or anyone save themselves. Their compensation is a pittance compared to what they'll make once a sale/merger is completed. Post-sale, you'll find these folks looking around for another workforce and customer base to torment. And, surprisingly, there's always some board of directors willing to hire these people.

Workers - run from DEAL CEOs. They'll only burn you in the long run. If they don't lay you off, offshore your job, transfer your clients to a less qualified person, cut your salary, renege on bonuses, etc., you'll be a rare exception. Pick another employer fast and get on with moving there. DEAL CEOs have no loyalty to anyone. They'll throw you under the first bus that they believe will deliver a higher sale price for the company. Don't believe them when they promise you stock options, wealth creation opportunities, job security, etc. Even if they put it in writing, prepare to take them to court to get these agreements enforced. Oh, and don't be surprised when you learn that their package includes benefits that are 1000- 1,000,000 times greater than yours.

Maybe, we need someone like Al Gore to spend some time thinking about America's workforce.   

IT & Services Firms

Are Services Firms Getting Better IT? Doubtful...

InformationWeek reported that business service providers are now spending 3.9% of total revenues on information technology. They indicated that these service firms are "lagging behind only the banking and financial services and telecom sectors". (see InformationWeek, 9/11/2006, "SOAs Fuel Handoff of Back-Office Services", www.informationweek.com).

According to InformationWeek, this expenditure by service providers in IT is being fueled by client interest in outsourcing back office functions to service providers. SOA driven solutions are supposedly behind a lot of this interest.

Interestingly, the article did not address the quality of the back office systems and other IT at many professional services firms. There are clear "Cobbler's Children" issues out there and many firms are often well behind their clients in possessing state of the art IT systems.

The problem with many large service providers and their internal IT is best understood from a historical perspective. Many large service firms have a long (often centuries long) history of private ownership (e.g., partnership structure) with sub-entities at the country or regional level. IT systems were often custom designed and limited in size and scope to service the needs of small practice units.

Compounding matters was the need for partners to distribute earnings every year. While that sounds innocuous, the fact that every year some partners will retire has a chilling effect on IT investments. Retiring partners are not motivated to spend capital on long-term business improvements (e.g., physical plant, office space, computing equipment, etc.) and would rather see that money passed to them as earnings. The cumulative effect of this under-funding of IT has been problematic for these firms.

Now, let's get back to that 3.9% statistic. While that sounds impressive, it's not going to internal IT systems. These are investments to serve clients not internal users. As such, I'm not impressed.

What I am pleased to see are the growing numbers of professional services firms using PSA (professional services automation) solutions be they licensed or on-demand. Stronger PPM (project portfolio management) and other collaboration tools are also signs of smart IT expenditures by service firms. It's time to see truly global back-office solutions in service firms as they are no longer an option anymore. If work groups are now global, why shouldn't the systems be global, too.

This post cross-posted on www.softwaresafari.typepad.com

Outsource Laywers

                          The Spreading of Outsourcing

More and more services are susceptible to offshoring especially if they can be completed remotely. In-person services, like lawn care services, are less vulnerable to outsourcing.

CEO magazine (see: www.chiefexecutive.net July/August 2006 "Next, Outsource All the Lawyers") ran a piece last year that outlined the case for executives to move more legal work offshore. The case for using lower cost legal resources is a compelling one. The economics make sense and, for the right kind of work, using these resources is a prudent use of corporate resources.

The article identified several offshore legal tasks that are appropriate for outsourcing. These included:

• drafting of contracts
• documentation reviews (i.e., during the discovery process)
• patent research

The article also correctly points out that many legal services/tasks are not appropriate for offshore providers. Services involving securities transactions, in-court appearances, etc. still require an in-person, local touch. Those roles/services will likely remain unchanged for some time.

Every service industry is being impacted, positively and negatively, from offshore service delivery. Offshoring has had a significant impact, of course, on IT and is gaining footholds in architecture, legal, medical and other disciplines. As these changes are integrated into each service sector, workers and employers must adjust. Workers must get closer to customers and develop deep niche expertise. They must also get really 'local' in the clients they serve and get 'detailed' in the knowledge/service they provide. Employers must alter business models, change compensation methods, adjust offerings and re-think their value proposition.

The labor arbitrage that will likely set in to this profession could certainly have an adverse impact on one group of law workers: the paralegals. These folks currently provide a number of the more repeatable or research oriented aspects of law work. They're less expensive than a lawyer and they provide a great, lower-cost, local source of talent. The tasks they perform are often the same tasks being targeted by offshore legal services firms.

I work with a number of law firms and have yet to see material reductions (or for that matter any reductions) in average rates charged. I'm actually looking forward to seeing some downward cost pressure occur in this space.

This should be an interesting area to watch.