To get business value out of new IT solutions, vendors have to get them right.
In the heady days of the technology business, vendors could push products and leave CIOs to figure out how to make those products deliver business value. Nowadays, CIOs are more demanding. They want vendors to sell them solutions, not products. They want vendors to make different products work together, to customise products to their business and to augment their products with professional services. As a result, every major technology vendor is scrambling to improve its capability to design and deliver solutions.
But getting solutions right is difficult for vendors that are used to thinking in terms of products. In my work with technology companies, I find that few vendors get their approach to solutions right. For CIOs, choosing vendors that understand how to deliver solutions with value can spell the difference between the success and failure of a project.
Potholes on the Road to IT Value
Here are some common pitfalls that CIOs should watch out for in evaluating vendor solutions.
The “One-Size-Fits-All” Solution: A solution, by definition, needs to be tailored to the customer’s business. Technology vendors that pay lip service to customisation often end up creating one-size-fits-all solutions that appeal to nobody in particular. Consider a vertical market like financial services. Within that market segment there are many subsegments, such as regional commercial banks, mutual fund companies, investment banks and hedge fund companies. Those subsegments may have very different business processes, legacy IT infrastructures and end-customer needs.
CIOs should be wary of vendors that tout generic industry solutions. They should ask for solutions that are customised for their industry subsegment. They should also demand that vendors provide references from clients whose business context is sufficiently similar to their own.
The “Wolf in Sheep’s Clothing” Solution: If you were ever forced to wear hand-me-down clothes that were too big for you, you will understand this problem. Technology vendors typically design their solutions for large enterprise customers. Most vendors believe that more features and services can never hurt customers, so they try to shoehorn solutions that are optimised for large enterprises into the small and medium business (SMB) market. As a result, SMB customers are forced to buy feature-laden, complex products and services.
If you’re a CIO at a small or midsize company, a good test of this problem is to examine the differences between the “enterprise version” and the “SMB version” of a solution, to see if you’re being sold an overengineered solution in disguise. Also, ask vendors if they have a dedicated sales, partner and support channel for SMB customers. You’ll get little attention from “trophy hunters” who are more interested in big game than in a small fry.
The “Just in Case” Solution: Sometimes vendors don’t quite know who they are designing their solutions for or which customer problems they are addressing. They throw everything but the kitchen sink into their products and services just in case some customers find them useful. But most of these product features or service bundles have no value to most customers. Users end up confused and frustrated as they wade through a laundry list of features looking for the subset they need.
CIOs should probe vendors on what product and service features they have deleted from their standard offering so that the solution consists of just-in-time, not just-in-case, functionality.
The “Vapourware” Solution: When CIOs hear vendors’ claims of “end-to-end solutions” backed up with elegant white papers, they should take the claims with more than a pinch of salt. Ask these four questions to determine whether the advertised solution is more than vapourware.
1.Does the vendor have an established model for customer engagements, whether it’s vendor-led, partner-led or a joint approach?
2.Who will be accountable for designing and delivering the solutions: the vendor or the partners?
3.Does the vendor have a solutions organisation that spans sales, professional services and support?
4.How many real client references can the vendor produce for the solutions it advertises?
Generating Value with Solutions
Fortunately, there are ways to make solutions work for CIOs and their technology vendors. They include:
Start with the problem: Before a vendor starts designing your solution, make sure it understands your real problem. That will require vendors to observe customers, learn about their businesses, map their business processes and understand their needs. Then customers are more likely to get solutions that are relevant to their business, instead of solutions that are of limited value.
Design whole offerings: Solutions don’t necessarily require products to be customised for each customer segment. While some customisation is inevitable, customers’ specific requirements can be addressed in other ways. These include add-on modules, third-party products, services, customer toolkits, support channels, partners and even pricing schemes. Vendors and customers should work together to take advantage of customisation possibilities on all dimensions of the total offering.
Create “products” from services: To design solutions, vendors inevitably have to add services to their product offerings. These services may support application engineering, integration and maintenance, among others. Such services initially may require tailoring for each customer. However, as vendors gain more experience, they can encode this tacit knowledge in standard processes, templates, tools and software code.
Consultancies such as Accenture and McKinsey have created relatively standard service lines that can be cost-effectively scaled. Service products provide customers with more predictable support. Vendors will improve their gross margins and reduce their dependence on key employees by not reinventing the wheel for every engagement.
Let customers customise: The best way to help customers avoid having to pay for features or services that are of no value to them is to allow them to buy solutions à la carte instead of selling them bundled. Companies such as Dell, Dow Chemical and Baxter Healthcare allow customers to choose product features, add-ons, services and support channels that best suit their needs, using vendor-provided menus and configuration tools. The self-service model ensures that customers get only what they need and eliminates the need for the vendor to have to figure out the exact solution configuration for each customer.
IT solutions done right benefit CIOs by improving the business value they get from technology vendors. And a solutions orientation can help vendors improve customer satisfaction and open up new revenue streams. By avoiding the common pitfalls in thinking about solutions and by following these simple tips for solutions design, customers and vendors alike can improve the odds of success in technology projects.
Mohanbir Sawhney is the McCormick Tribune professor of technology at Northwestern University’s Kellogg School of Management. He can be reached at mohans@kellogg.northwestern.edu
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