On Business, IT And Artificial Distinctions


Whoever started the concept of IT treating Business as a customer did a big disservice to the world. Don’t get me wrong – I grew up thinking that Business is the dog, and IT is its tail, and the tail does not get to wag the dog. My thinking has evolved a lot recently, mostly because in the last few years – I got more exposure to some forward thinking CXOs.

IT is not the only cost center in a business, and neither is it usually the biggest in head count or budgets. Yet why is it that CIOs have to treat others – from both profit centers and cost centers – as customers? How many times have you heard the head of HR or Marketing refer to their fellow  leaders as customer? IT is as much a part of business as HR and Marketing, and hence should not be expected or forced to be subservient to rest of the organization.  How many organizations can even last a week in business these days if IT did not operate with great efficiency? That being the case – why not give IT its due place at the table for decision making?

There is only one customer – the end customer who pays the bills. IT, and everyone else like Sales, Marketing and HR have to work together to delight that one customer. Any change from that singular focus to create an artificial distinction between internal and external customers is just a waste of precious time, money and resources, and rarely results in anything good.

IT is a competitive differentiator – and rest of the organization needs to understand and appreciate that. If IT does not do a good job, it is virtually impossible for rest of the organization to do internal or external work efficiently. And those companies that have better IT capabilities typically have an edge over those that do not. That being said – not all CIOs do a good job in making a case for IT to be treated on par with other parts of the organization.

In most cases, CIO budgets have shrunk over time, or have remained flat. And the vast majority of the CIO budget is just spent on keeping the lights on.  The question is – how many CIOs can spend more time with other parts of business to impact top line and bottom line, compared to the time they spend on operations? If they spend most of their time on operations – obviously, their chance of earning the respect of their peers and leaders decreases. Don’t get me wrong – ops are very important, but that needs to get into a model that sustains itself with minimal supervision. Outsourcing might be a way for CIOs to get to spend less time on worrying about ops, but that is not to say it is a magic bullet. That is a whole another topic though.

The budget constraint is an artificial one in several cases. Budget is a constraint only when there is no way to prove that value obtained through the spend is greater than the cost involved.  Some of the smartest CIOs I know of don’t worry about budgets for the most part. They know that if they approach their peers with proposals that show value greater than cost, they have good chances of securing the budget. Sadly, not all CIOs operate this way. And these are the type of CIOs who are consulted by their peers in rest of the organization on how to take the company to the next level. They are a far cry from being order takers.

Several vendors have latched on to this distinction of IT and Business big time – especially software and SaaS vendors. Their mantra these days is that “We are all about the business, and not about IT” . In some cases this just translates into “CIO’s office will poke so many holes in our offering that we will never close a sale, so we try to circumvent them by going to other parts of business and say that IT is blocking them from earth shattering progress” . In other cases, these vendors have a genuine case to go to non IT buyers directly. But from the customer’s stand point – it makes perfect sense for rest of organization to involve the CIOs office in IT buying decisions. At the very least – this will make sure that non functional requirements like security, scalability, roadmap etc will get more thoroughly checked out before issuing the PO. It should also be not forgotten that IT will probably need to live with supporting the solution once it is implemented.

There are plenty of pundits – and CIOs – out there who say that for IT to be effective, the CIO needs to report to the CEO. I have not seen any real evidence in real life scenarios to support this claim. Reporting to the CEO usually will mean the CEO just becomes a bottleneck to making several IT decisions. This is not to say CIO should not have access to CEO – he or she should of course have access. But adding an additional layer or two should not hurt all that much. CIOs mostly report to CFOs or to head of procurement in several companies. I fully expect them to report to CMOs at some companies too. As CIOs do more and more to help in front line business, I think the conventional org chart will see the impact. But the converse that org chart is what drives CIO success lacks merit in my limited experience.

That was a lengthier rant than I thought I would go into. Many thanks to my buddies who debated this endlessly today with me . Lets keep the conversation going. And sincere thanks to the client CXOs who helped change my views on this matter.

 

 

 

 

 

 

I Get It – Middle Of The Road Is Boring, And Won’t Win Elections


It is always election season – there is an election campaign going on somewhere in USA almost at any random point in time. Consequently we have been bombarded with messages on all media. I am a fan of social media, and if there is one reason I will get out of it – it will be because of extreme political messaging flooding it now. What makes me awfully sad is that people I respect a lot for their balanced opinions on sports, enterprise software, dog shows and so on take extreme views when it comes to political views. Once I see that, I start suspecting their judgment on other things they say, that I used to think were pretty balanced. In short, I go through a cycle of disillusionment every now and then.

A good reason for my situation is because I went to school and college in India, where the social policy was always left leaning irrespective of party in power. If I grew up in USA, I probably would have been used to the deep division in beliefs over the years.

Political leanings are generally based on 2 things – social views and economic views, and they are of course kind of intertwined. I remember the endless debates in Business school when various economics theories were discussed. Till our economics teacher pointed it out, I did not realize that the term “left” and “right” just referred to the groups of people sitting on either side of the seating arrangement in a French General Assembly in late 1700s . Same with the concept of “center” in politics.

In theory courses on politics, it is often explained that one person or party can take a left wing stance on one issue and a right wing stance on another issue.  The world has changed considerably from the time of French revolution to today. I seriously doubt whether there is a need for such a hard distinction between left and right today. We still seem to be holding close to us the theories that developed when the world had different social and economic issues.  And there is no universal distinction across the globe on this. Universal healthcare is touted as left leaning in USA. Consequently, it earned the name Obama care from the right. Well, in the UK too it was (National Health Service, I mean) established by left leaning Clement Attlee government  around the time India gained independence, may be shortly after.  But even right leaning Margaret Thatcher government supported it in their term.  Of course in UK, you can buy additional private insurance (and get a tax break for it too I think) .  Here in the US, a right leaning Romney introduced it in MA, although his party opposes it for general elections.  The people of this country see through this, right?

A hard and fast stance on either extreme has hardly proven to improve anything in USA in recent past. There is a lot of criticism that despite Obama administration supporting government spending – it has had no impact on recovering the economy, and unemployment remains high. The opposing idea is that if you cut taxes, and let private companies do their thing – then employment will come back up. Well – if that was the case, then we should not have had this big an unemployment to begin with when Obama took office, right? That and the fact that companies are not short on cash – and even with low taxes – they are not investing here to create jobs with that cash.  There are of course more nuances that can be brought to either side of this argument – but the fact remains that neither policy worked very well in fighting the business cycle. If it did not work in last 2 terms, one by one party and one by the other party – does it matter which party comes to power this time?

And what is the deal with personal attacks any way? Mitt Romney is an extremely successful businessman. He did not want to publish his taxes for 10 years like his dad did. He is in a hard spot now. If he publishes his tax returns – his opposition will use it to generalize and say things like “he paid less tax % than his secretary” or “he donated only to his church” or some such. He made his money in private equity, and probably was very smart in tax planning. If he did not break any law, he should be left alone to enjoy his success. Why make it a big deal on what he does with his money ? If the suspicion is that he did not make the money legally, drag him to court. Either way – criticism of his success is childish.

Same with Obama. It is unbelievable that his opposition overtly and covertly still tries to portray he was not born in USA and that he might not be a Christian. This is after he produced plenty of evidence, and leaders of his opposition stated they have no more doubts. If that isn’t silly, then what is? Did Kenya come out and claim that Obama is theirs and that he should be sent there right away? No – nothing of that sort happened. But yet, if I open my facebook page, every day I see plenty of respectable people making such claims.

When I went to school in India, I did my junior schooling in a Hindu school, then went to a Catholic high school, a Muslim engineering college, and a government run business school. At the end of it – I honestly could not find significant differences between any of their belief systems. Sure they all have differences – but none are more fanatical than the others from what I experienced. And none of those schools made me want to follow one religion over the other. I have friends from several religious backgrounds, and they have never treated me any different than friends from my own religion.  And this is a big reason why I strongly believe in keeping Church and State separate. But that is not an easy thing to do always. A lot of political beliefs intermingle freely with religious beliefs and cause tremendous confusion.

There are probably several LGBT people who lean to the right on economic issues like cutting taxes and cutting government spending, but lean to the left on social issues like gay marriage. If Mitt Romney wins the election based on their support, do you think they will just stop demanding their rights ? No of course not. They will justifiably continue to demand equal and fair treatment. And they should. If right wing ideology needs limited government intervention on economic matters, then it should be the same for social matters too. Freedom of speech and expression should not have to be fought for in a free country. It should be the norm.

The office of the President is an important one for sure in the USA. However, if you listen to politicians speaking on the issue – it will appear that the President also gets to create laws. They conveniently forget to mention what the Congress does.  Nothing ever gets done without both houses of the congress working with the president. Congress has had low approval ratings for a long time now. And every election, we hear from both sides that “Washington is defunct” . Given the citizens have an opportunity to elect congress representatives frequently, why do we continue to have this situation? No politician can afford to do the right thing if he also needs to run for an election shortly after. If you look at people who no longer have to hold an elected office, you can expect more sensible talk from them on issues we face. These are some of the smartest people that the citizens of this country send up to Washington from either side. Just that there seems to be no incentive for them to change the system.

Those who go vote at elections are susceptible to halo effect. If they really like something a candidate stands for (like say universal health care or tax cuts) , they tend to give more credibility to everything else that the candidate stands for too, even if those parts do not make sense for them.  This is also the reason, people will not mind lack of facts or twisted statistics that get thrown around in political debates.  And with plenty of commentary coming from TV and social media, that we hardly get a chance to do any independent thinking . Just too bad, eh?  . I wonder if there is some theory in psychology that proves people like extremes better than middle of the road. I suspect there is – what else will explain the success of the likes of MSNBC and Fox news ?

We talk about disruptive innovation all the time when it comes to business. The one place that is ripe for disruptive innovation is the political system. But just like in business – there is very little actual innovation, compared to the talk about disruption and innovation.

 

Workday IPO – First Impressions


So the much anticipated IPO of Workday is here. http://www.sec.gov/Archives/edgar/data/1327811/000119312512375787/d385110ds1.htm#toc385110_13  . Pretty detailed S-1 too. I just flipped through it and also read Dennis Howlett’s blog on it on ZDNET.

The best part of this is that the founders have a long term plan to keep control of the company, and virtually eliminate chances of a hostile take over. I wonder if this will get punished by market or not – probably it will, just for the short term. Customers should like this arrangement – so in long term this should work in company’s favor.

No surprises on revenue – and excellent growth rate. And while COGS is high, it is not that bad given they are young and need to invest in getting big client names, product development, marketing and so on. That will generally stabilize in future and make the company more profitable.

It is interesting to note in the S-1 that “…most of our non-cancellable contract terms have averaged four years“. I fully understand the reason to do this. I just wish some cloud pundits stop saying SaaS companies somehow always do “pay by drink” and “no lock-in like legacy vendors” .  There is plenty of lock-in for SaaS players, and I never really understood why some pundits try to portray otherwise. Customers are not stupid – they know how economics work for vendors, and they factor it into buying decisions.

Mr McNamara , CEO of Flextronics is a Director for the company, and has stock in the company. Flextronics is a big name customer of the company too. I really like Workday’s strategy of getting some skin in the game from customers, and industry leaders. Interestingly, SaaS pundits don’t always mention this relationship of Workday and Flextronics when they highlight “Flextronics chose Workday” .

There is not a lot of presence outside US from revenue perspective. It is not a big deal since there are plenty of customers to go after in US itself for next few years. But they do need to expand in short order to remain viable for global companies. Workday is still kind of a one trick Pony with just HR as their game since very few customers have used them for Financials. For them to be a credible threat to ORCL and SAP and so on, they have long ways to go. R&D should stay high for many years while they develop all the functionality depth and breadth.

S-1 says it takes 3 to 9 months for an implementation. Dennis Howlett characterizes it as “incredibly fast” in his excellent blog. http://www.zdnet.com/understanding-workdays-ipo-filing-7000003569/ . I am not sure  if this is a completely fair characterization since the 12 to 18 months of on-premises SW typically has multiple modules of functionality unlike what Workday offers today.  Since Dennis definitely knows cloud and Workday more than I do, I assume he had more in mind when he wrote this.

All things considered, I think Workday is a fantastic company with a bright future. Good luck to them on their IPO.

 

Added : https://plus.google.com/118281770914088081017/posts/b8fJR6w71Yq  excellent summary in bullets from Jarret P