No More Big Bangs

Software Magazine, August, 2001 by Joshua Greenbaum

A leverage-your-investment strategy drives new products

EVEN WHEN TIMES WERE GOOD and IT budgets were flush with cash, the proverbial big bang implementation took a lot of well-deserved heat. Spending tens or even hundreds of millions on a multiyear, enterprise-wide software implementation was risky business at best. At worst, it was the ticket to monumental fiscal and management failure. The most recent, and most public, example is the now infamous failure of Nike's i2 supply-chain management system, a $400 million big bang that misdirected $100 million in Nike inventory and cost the company over $2 billion in market cap once the company publicly acknowledged the failure. The Nike disaster was classic: too much money spent on too much software and consulting, with too little to show for the effort.

Tough economic times tend to fine-tune sensibilities toward this kind of massive project and the prospect of equally massive cost overruns, or worse. So it shouldn't come as a surprise that the pendulum is shifting from the big bang toward a leverage-your-investment (LYI) strategy.

LYI economics are simple: Spend as little as possible to get the biggest gain by using new technology to make existing technology work better, smarter, and cheaper. And use new technology investments to potentially raise the value of the technology investments of partners, customers, and suppliers.

Conversations with dozens of users and vendors have shown LYI to be a highly favored strategy during this time of flat IT budgets and market uncertainty. It's an Aesopian tale: In the eyes of many CIOs, the small, incremental, strategic investment beats the big, complex, multiyear investment every time.

Parameters of an LYI Product

A true LYI offering covers five key parameters. The first is focused functionality. Instead of reengineering the entire corporation, an LYI solution provides a fix or new process that solves a specific problem or offers a highly leveraged opportunity. This limits expectations, as well as implementation and impact: If things can go right they will do so relatively easily; if they go wrong the impact won't be felt across the entire enterprise.

Second, the LYI product must have a low-technology footprint. This doesn't mean it's a low-tech solution--remember, functionality is rule number one. But the technology impact must be minimal or the prospect of meeting LYI requirements will diminish quickly.

The next two requirements play well off each other. An LYI solution must integrate with existing enterprise applications--this is, after all, about leveraging existing investments. And, ideally, that leverage must extend beyond the enterprise. This latter requirement is particularly important for the acceptance and longevity of the LYI offering. When strategic partners and customers can also make hay with an LYI solution, the win/win benefits that come from mutual return further enhance the solution's ROI.

Finally, an LYI product or technology enables implementation in less than three months and produces a measurable ROI in year one. More and more successful deals hinge on these two facts. Restricting implementation time by definition limits implementation fees, which still sop up the lion's share of any IT acquisition. And requiring a year-one ROI makes more than just economic sense for the buyer. It also keeps vendors on their toes: If ROI is a far-off, difficult-to-establish fact, then it's time to go back to the drawing board.

Emerging Solutions

The good news about LYI strategies is that an emerging buyers' market is giving CIOs an opportunity to move their IT investments forward without breaking the bank or risking a disaster. There's a host of LYI solutions on the market, and many more on the way.

One company with a solid LYI solution is Trigo Technologies Inc., a sell-side B2B vendor in Brisbane, Calif. Trigo's Enterprise product does one thing very well: It allows selling organizations to manage the online buyer channel, particularly those buyers using e-procurement products from Commerce One and Ariba. Trigo connects with internal order-management systems, supports catalogues customized to a buyer's requirements, and otherwise facilitates these B2B interactions. Trigo Enterprise boosts not just the seller's technology investment in B2B, but the buyer's as well by leveraging the use of e-procurement software at the buy side. And Trigo's early customers are getting a solid return on their investment well before year one.

Another emerging LYI solution comes from supply-chain vendor eB2X Inc., Santa Clara, Calif. The mission of eB2X is to push order promising out to the masses of second- and third-tier manufacturers who want to participate in new online exchanges and extended supply-chain systems. The eB2X ePromise solution allows these suppliers to meet the shifting requirements of the supply chains in which they participate, without adopting a massive supply-chain management system. The win/win aspect of ePromise is particularly noteworthy: The supplier's ability to accurately meet the requirements of the supply chain benefits all participants, and helps cement strategic business relationships.