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• It’s often said that people in the gold rush did not make money; the money was made by the people selling the gold rushers supplies and tools.
• Similarly, during the railroad boom time, the rail companies didn’t make money; the money was made by the people supplying steel and other tools.
• Now, during this cloud boom time, the money will not be made by the people providing the cloud services, but providing cloud formation + migration tools and services.

Do you want to be in the gold rush, or provide supplies to the people in the rush? That’s the question.

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When I was growing up (the eighties) there used to be TV and Refrigerator repair shops in every 4 to 5 km. They used to do a reasonable amount of business; it was definitely enough to run a family of 4 to 5 people. Fast forward 20 years and you see no signs of such shops. All have vanished, the cost of repair does not commensurate with the benefits of it. Secondly, the products now are more robust and don’t require much repair and maintenance. Slowly, that repair business is now a history.

In the nineties and the early part of the 21^st century, the Software ADnM, Application Development and Maintenance business (you can call it the software repair business) was thriving. Companies such as EDS, TCS, Wipro and Infosys et. al. couldn’t do any wrong, their business was growing. But now and similar to the TV and refrigerator business their ADnM business is under threat.

Similar to the TV and refrigerator business, the software products became more robust and required less maintenance. Take the case of SAP implementations; in the nineties companies customised or changed their SAP Software to meet their requirements. This customised software then required a significant amount of manpower for maintaining it. In the 2010 decade SAP improved its product and customisation was minimised to near zero, this has reduced the need for software maintenance.

The SaaS, Software as a Service model is further shrinking the need for application maintenance services. SaaS leaders such as Salesforce.com, Workday and ServiceNow claim 80 to 95% in application maintenance spend. In real terms and roughly, if 2000 people were providing CRM maintenance services to the Fortune 500 companies, then today that work is done by only 200 people only. OR 1800 staff’s role has been made redundant.

Harvard Business Review did a seminal article: Consulting on the cusp of Disruption. https://hbr.org/2013/10/consulting-on-the-cusp-of-disruption

This article has an exhibit to assess if a business is disrupting or not. In the table below there is a broad-brush analysis of the ADnM business. I was in a gathering of friends and colleagues and I took some informal inputs. Below is the assessment not very scientific but this assessment tell how the ADnM business has got Red warning signs flashing all over.

If your company’s core business is ADnM, then you should be worried and start looking for an alternative go to market strategy. If your career is attached with ADnM then you’ve to be either in the top 5 to 10% of the specialists or you should be enrolling yourself to a career-changing training course.

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Uber and its business model are gaining popularity; these days you often hear Uber of laundry services, Uber for housecleaning services and Uber of this and Uber of that. Similarly, does an Uber-inspired model for IT consulting industry is also knocking on our door?

IT industry is likely to adapt the principles of the Uber’s model, this will change the structures and the operating model of the IT firms. Importantly, it will have a massive impact on the people performing box standard roles such as project management, business analysis, software development and testing.

In the IT Consulting Industry, there is one phrase that one learns very quickly, “I am on the bench.” Being on the bench means a consultant is not doing any revenue earning client billable work and he or she is an idle resource.

This industry is very competitive now, to reduce cost IT firms are constantly pushing the envelope of utilisation, 95% utilisation is the norm nowadays. This means a consultant can count on fingers the number of days in a year he or she can afford to stay on the bench.

Being on the bench is now considered a crisis by both the consultants and their firms. A consultant on the bench feels nervous, he or she worries to be sacked and their firms definitely consider them a burden. All their good work whilst billable gets wiped out in days. There is no glory on the bench, consultants on the bench feel like a pariah.

IT consulting industry’s model has similarities with the Uber model, instead of Taxis, it has  IT consultants sitting on the bench, waiting to be deployed.

This makes us think, “An Uber-inspired IT consulting industry model beckons?” This model will fundamentally change the consulting firms’ structure. In this Uber-inspired model, IT consulting firms will stop paying salaries to the consultants on the bench. Consultants will have access to their e-mails, knowledge management systems and to a marketplace App. that will advertise available jobs / roles but no salary whilst on the bench.

Uber-inspired model is used today by the retail and restaurant industries through their zero-hour contracts. Retailers call their staff to come to the stores as and when the demand arises through text messages or Apps. and they are paid only for the hours they work.

If Uber is so successful and its model is copied successfully by other industries then it will be adopted in some shape or form by the IT consulting firms as well. However, one critical point to note is that Uber is easy to apply to commodity services such as Taxi driving, laundry or waiter jobs and can not be applied to super specialised roles and skill. It’s difficult to fathom Uber for nuclear scientists or Uber for a brain surgeons.

Writing is on the wall, roles or certain functions of the IT consulting industry will be Uberised. This includes box standard roles and activities such as project management, business analysis, coding or testing. People doing these kinds of roles beware, “your job will be Uberised.” If you want to remain insulated from Uberisation then the trick lies in developing super specialisation.

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I have professed CIO = Chief Information Intrepreneur Officer, responsible for creating new businesses for the business. To be a successful Intrepreneur one of the most fundamental requirements is an ability to build a good team.

In 1996, Jim Collins and his research team set out to answer one simple question: ‘Can a good company become a great company and, if so how?’ Their findings are described in his book, “Good to Great”. After 5 years of laborious research of analyzing 1435 companies, one of their findings was that to make a good company great, the successful leaders do not begin by setting new vision and strategy, they first get the right people on the bus (and wrong people off). If you end-up having a wrong or weak people in your team, failure will be written all over your project.

Success = Get the right people on the bus (and wrong people off)

 

 

However, there is a fine print which is often missed, “getting good people is tough and often ‘appears to be’ insurmountable.” In my current role, I am recruiting heavily and often we struggle to get the exact ‘fit for purpose’ person. Towards the end, we compromise and accept ‘not so fit for purpose’. We give ourselves excuses such as, “We accepted this candidate because of the money constraint, and we were losing precious time on the project”. The other way of looking at it, if it were easy to get good people, then everybody would have been extremely successful.

In summary: getting good people is difficult, but perhaps that is the secret sauce of successful people. I wonder, “An average person gives up too quickly?” and that is why they are an average person.  

 

Recently, when I heard the news that Mark Carney, a Canadian citizen, is going to be the new Governor of the Bank of England, my eyebrows went up and stayed there for a while. I was shocked to note the Chancellor George Osborne’s decision to appoint a Canadian citizen for such a prestigious and critical post.

Mark Carney : The Governor of the Bank of England took charge on 01st of July 2013

Appointing foreign nationals is not alien to the Great Britain, in the past national team’s football coaches have been foreign nationals but the post of the governor is a different ball game. A governor’s decisions impact common man’s life and he can make or break the country’s economic future.

Mark Carney is definitely the first among equals candidate for the post. His actions as the Bank of Canada’s governor are said to have played a major role in helping Canada avoid the worst impacts of the 2007 financial crisis.

George’s appointment of Mark Carney made me think that the magical trick of successful people is that they ensure good people are in their team, come what may. George knows the governor is the critical member of his team. His own success depends upon the success of the governor. He has worked hard to make sure the best person gets the job, even if he is a Canadian national.

Chancellor’s decision is particularly courageous and inspirational. His every statement and every step is analysed and criticised by the British media. Secondly, he is a beleaguered chancellor, he had to stand up in the parliament, swallow his pride and concede that economy will contract by 0.1% compared with the 0.8% growth he hoped for. When you are pushed to the corner, courage also shy away from you, but George has against all odds secured Mark Carney for the post.

If George Osborne can do it so can others, particularly a Chief Intrepreneur Officer should certainly try and do it. George’s challenges are even bigger and open for public criticism. If he can be patient and persevere then we (Mr. CIO included) should also go out and get best people in our team, wherever they are. Leave no stone unturned.

 

Pitfall 5 : No cost saving in real terms, on the contrary large deal size gives better deal.

When buyers go for multi-vendor strategy, often the BIGGEST argument is, multiple vendors will bring competition and a better price. This aregument is possible the biggest myth, the buyer will always get a better price if the Total Contract Value (TCV) is high.

larger the total contract value, the better is your negotiating power.

Higher TCV yield a better discount or price because suppliers are keen on assured contracts. Particularly nowadays, with soaring sales cost, any day giving discount is a better option if it yields higher and assured business. In other words the carrot of higher TCV will yield a better price in the current times.

With this I would like to close this series of notes on 5 pitfalls of multi-vendor sourcing. In summary again the 5 pitfalls of multivendor strategy are:

Pitfall 4 of the multi-vendor strategy: Tragedy of the CIO’s Wallet

Pitfall 3: Collaboration with supplier doesn’t happen

Pitfall 2 : Frequent management intervention required, creates overhead.

Pitfall 1 : Too many moving parts, increases the risk of failure

5 Reasons why multi-vendor strategy doesn’t work for the CIO office

“You perform best when you haven’t got lots of fermenting ideas/thoughts (open loops) clogging up your brain.”

braincutlery

When I started this blog I mentioned a certain childish glee I’d felt as a young man reading Getting Things Done and ultimately not “Getting It Done”. My main issues at the time were:

• A lack of understanding of what poor time management under pressure feels like
• A lack of understanding of what it feels like to have multiple goals/projects in flight at once
• A lack of experience of what it feels like to be on top of these things and “in the zone”.

Something that has always resonated with me though, since the first time I started reading Getting Things Done, is David Allen’s notion of ‘Open Loops’.

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My interpretation of an open loop is that it’s a bit like a process running on your computer that takes up some of the…

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Pitfall 4: Tragedy of the CIO’s Wallet: Vendors focus on maximising their self-interest of revenue maximisation, in doing so they deplete the funds in the CIO’s wallet.

This blog is in continuation of my blogs of professing to the CIOs to adopt a single vendor procurement strategy (to the extent possible) and I am listing the pitfalls of a multi-vendor procurement strategy, this blog covers the Pitfall 4:

I had a recent experience, where the Director of Software Development had multiple vendors providing bodies in a Time and Material mode for the various software development projects. In this instance, I observed that every vendor was busy adding ‘bodies’ to various projects, driven by a narrow focus of maximising their revenues and not caring about the business goals or budgets of the project. Often the project didn’t require another body still the vendors pushed them in. The vendors knew that their own action was actually depleting the CIO’s wallet but their short term and self-interest driven goals continued to drive their behaviour.

I called this situation, “Tragedy of the CIO’s Wallet” drawing from Garrett Hardin’s theory of the Tragedy of Commons.

Garrett Hardin was an ecologist; he came up with this theory of Tragedy of the Commons. How he developed this theory is an interesting story. The settlers in New England, USA, created commons area for cattles to graze. Garret used to sit in the commons and watch the activities. Observing them he realized that as settlers were adding more and more cattles to maximize their gains, the commons area was depleting. Garret also noticed that there was a clear dilemma in every settlers’ mind i.e. every settler knew that their actions of adding cattles was not in their own interest because it was depleting the commons but, they continued to do so for their own self-interest. Garret called this the tragedy of the commons.

 

This dilemma was described in an influential article titled “The tragedy of the commons “, written by ecologist Garrett Hardin and first published in the journal Science in 1968.

Similarly, in a multi-vendor scenario the IT vendors focus on maximising their self-interest of revenue maximisation. The vendors don’t care about the CIO’s wallet, and hence the Tragedy of the CIO’s Wallet. This is my Pitfall 4 of a multivendor : Tragedy of the CIO’s Wallet – Supplier focus on maximising their self-interest of revenue maximisation, in doing so they deplete the funds in the CIO’s wallet. 

Pitfall 3: Collaboration with supplier doesn’t happen

The third pitfall of a multi-vendor strategy is that no collaboration hppens between the buyer (The CIO Office) and supplier. CIO office needs collaboration similar to a manufacturing company.

Collaboration within the manufacturing industry is well established. Toyota designs a car but depends on its suppliers to design the gearbox, Axel and tyres. Apple designs their iPhone in California but depends on supplier such as Foxconn to design and supply the componets collaboratively. These days manufacturers and their suppliers almost sleep together whilst designing the product. Once the product is launched they jointly forecast and build a supply chain to meet that forecast. Manufacturers and suppliers collaboration is everything.

Similarly, the CIO office needs to collaborate with its IT vendors for designing and developing new applications or services. This is particularly pertinent nowadays, when the expectations from the CIOs is not just a supplier of IT services but a contributor to revenues too. Read my blog on CIO = Chief Intrepreneur Officer.  Failing to contribute to the revenue can cost CIOs their job.

In a multi-vendor scenario it becomes difficult to collaborate with the vendors. Trying to collaborate with multiple suppliers is an expensive proposition, cost of collaboration multiplies, and that makes collaboration prohibitive. Trying to collaborate with a number of suppliers often becomes a confusing proposition because of a multitude of advice. Such advice is often driven by selfish motives. A multi-vendor scenario is cost prohibitive and not conducive for collaboration at all.

“To collaborate, vendors wants visibility and commitment, ” says Paul Le, one of my colleagues at CSC. In a multi-vendor strategy environment the buyer (Mr. CIO), struggles to give either visibility or a reasonable size of commitment. As a result, the buyer gets no collaboration from the suppliers. In a single vendor scenario the CIO can provide both visibility and commitment and gets a proactive collaboration from its suppliers.

The downside of having a trusted lieutenant is that you never solve the root cause of the problem and shift the burden to your trusted lieutenant.

Pitfall 2of the multi-vendor strategy: Frequent management intervention required, creates overhead.

One of the reasons I loathe multi-vendor strategy is that it never ever work like clockwork, it requires frequent management intervention and that creates unproductive management overheads. It also creates a culture of heroism and because of that you never fix the root cause of a problem.

To elaborate, I would like to share a story. Once I was about to start a meeting with a CIO of a large insurance company. The meeting was due at 5:00 pm, it was raining heavily, and the meeting room’s window appeared to be having a grey curtain stopping any natural light to come in. The CIO walked in about 5 minutes late, with a concerned look on his face, brandishing his mobile phone and fingers visibly etching to dialout some numbers. As soon as he arrived he said to me, “Ashu, I have got a severity one incident in our Intranet, we will have to delay this meeting by 15 minutes”. He walked off from the meeting room hurriedly whilst tapping his mobile phone.

Mr. CIO then retuned back within 5 minutes, now looking a lot more relaxed, plus smiling. I asked him, “If the incident has been resolved?” He responded, “Not yet, but I have got John looking into it, he is very good in working through with various vendors and fixing them”. He went on to elaborate how the various suppliers are incapable of solving the problems themselves, suppliers only point fingers at each other, none of them show initiative to resolve issues proactively and he always need somebody like John to make them work together.

After that initial delay we got on with our agenda for the day but that 10 minute incident at the start of our meeting highlighted an important point to me, it’s not that the suppliers were incapable of solving those issues but it’s the multi-vendor strategy that had created an attitude of, “do nothing” amongst the vendors. They always depended upon the CIO and his team to intervene. This created a must have management overhead within the CIO team.

As an auxiliary effect of this, people like John were treated like heroes because of their ability to fix issues and make the various vendors to work together. This created no incentives for John to fix the root cause of the “do nothing culture” amongst the various vendors.

On the contrary if you have a single supplier, it’s easy for you to review such incidents, their frequency, root causes and make the supplier accountable for fixing them.

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In my earlier blog, I professed that multi-vendor strategy doesn’t work, particularly for the CIO office. It was my conjecture that the technology fiasco at RBS in the month of June & July, 2012 was due to the multi-vendor strategy adopted by RBS. In that blog, I gave the top 5 pitfalls of multi-vendor strategy. As promised, I am elaborating on each one of them; today, we will talk about the first pitfall, “Too many moving parts, increases the risk of failure”

I have seen numerous situations where the buyer i.e. Mr. CIO has got multiple vendors floating around, overall services often suffer, but every vendor reports, “their services are all OK.” CIOs have got no single throat to choke, as a result the CIO and his team spend an enormous amount of effort in troubleshooting and integrating various suppliers to deliver the overall services to the business.

This phenomena is based explained by Peter Senge in his book, “The Fifth Discipline”.

Peter Senge, the author of the book, “The Fifth Discipline”

In the first few lines of the book he has said, “From a very early age, we are taught to break apart problems, to fragment the world. This apparently makes complex tasks and subjects more manageable, but we pay a hidden, enormous price” . The hidden an enormous price he talks about are the cost of integration and the failures occurring due to the too many moving parts.

Here is an example, if you were given the responsibility to organise a conference dinner for 100 business delegates, you possibly have two options. One option is to find a catering company that serves the kind of food you want, at a price you can afford, along with some services that you need like waiters and dishes. Second option is that you take everything on your head and have 12 different suppliers one supplying each dish and a 13^th supplier for services on top. Option 2 is plausible, but it will create a huge overhead of management and integration, and there is a good chance one of the 12 items will have some glitch or other. This one glitch will consume huge management attention and the delegates will give you a terrible feedback for that glitch. In other words, you as an organiser will have too many moving parts to manage and that will increase the risk of failure.

In a single vendor strategy the CIO has a single throat to choke and the risk of failure is minimised.