The Ovum View: The reality of end-user IT circa 2002

Gary Barnett, IT research director at Ovum, says it's bleak out there for vendors without a good ROI story and real referenceable customers.

The dot-com aftermath has given birth to new discipline...
The past 12 months have seen the environment in end-user IT change dramatically. As the tidal wave of enthusiasm that created the 'ecommerce revolution' has receded, IT departments have been left to survey the aftermath. For many, the situation is bleak.

This has had a profound effect on the priorities of CIOs and technology suppliers must recognise the equally profound effect it has had on the way they need to present, market and sell their products.

...and deep scepticism
End-user organisations are increasingly jaded and cynical when it comes to the merits of new technologies and 'solutions'. In the words of one CIO: "We are tired of promises. We want execution."

Suppliers cannot just wave their arms around, promising the usual mix of 'time to market', 'ROI', 're-use' and 'flexibility'. End users will expect suppliers to provide proof of these things.

The only effective counter measures vendors can apply to this level of mistrust are to:
- be absolutely clear about what they can and cannot do
- have genuinely referenceable customers that prospects can contact.

What does the business want?
Businesses have a relatively short list of imperatives. They want to:
- reduce cost but not at the expense of value
- reach more customers
- offer a more flexible range of channels to sell through
integrate the business - but do it from a business perspective.

Technology vendors have to demonstrate they will enable the IT department to help the business address these goals.

'Innovation ache'
End-user IT is in the middle of discovering the irony that constant innovation actually makes it more difficult to innovate over time.

A natural short-term response to this is to cut back on innovation - to raise the bar in order to make innovation work harder to justify itself. 'Innovation ache' is driven by the fact that:
- very few applications ever get decommissioned as a result of innovation
- new technologies always add to the overall complexity of a system.
- it is extremely rare, if not completely unknown, for a technology to meet all of the expectations a vendor creates.

Very few applications ever get decommissioned
At the heart of this dilemma lies the fact that while new technologies arrive within end-user IT with an inevitable regularity, they rarely completely replace something that was there before. They simply add to the overall number of things that have to be maintained, managed and enhanced over time.

Innovation adds to complexity
With each additional technology, there are a number of inevitable side-effects:
- the integration burden increases
- in-house skills become harder to find and manage
- the cost of change increases.

This is doubly ironic since it flies in the face of the most frequently cited 'benefits' of new technology - time to market, cost reduction and ease of use. One CIO we know has put a stake in the ground: "If a new idea can't demonstrably reduce complexity or at least hide it from my developers I simply won't approve its purchase."

Complexity is the enemy of time to market, adaptability and manageability.

Promises, promises...
IT users have very little faith in vendor marketing and who can blame them? Successive waves of technology from client-server and objects to EAI and business intelligence have fallen a long way short of the 'radical benefits' that were hyped.

End-user IT is increasingly asking vendors to 'prove it' through pilot projects and proof-of-concept applications. Interestingly, there is a degree of suspicion when vendors ask prospective clients to pay for help in creating proof-of-concept applications.

One of our European finance clients takes the view that if a vendor is not willing to invest some of its own effort in proving the technology case, they cannot be that confident that they'll get the deal.

Cost reduction
Across end-user IT, budgets are largely frozen with little in the way of increase expected over the next 12 months. This is particularly noticeable in Europe, where economic uncertainty in the telecoms, technology and finance sectors has led to widespread cutbacks.

This means that ROI arguments will often be irrelevant, as end users are less concerned about 'savings over five years', and much more inclined to ask 'how much will I save this year?'

Suppliers need to focus on the here and now and be able to demonstrate tangible benefits on project #1.

For the second part of this column, click on http://www.silicon.com/a55199 .