POWER ZONE CONVERSATIONS

User Focus. Business Success.

The results of our 2012 Adoption Insight survey are in. Effective usage rates of enterprise software are down from two years ago and more disturbingly end-users are experiencing productivity losses of around 17%.  This is a big number.  At 17% the economic value of user-losses outweighs 100% of total IT spend.  Ouch. 

Many factors contribute to this problem, but simply put end-users are struggling to absorb the glut of IT investments made over the past several years.  This IT consumption short-fall may have been excusable a decade ago, but with the industry's collective deployment experience being so mature it is fair to ask – how did this happen?  And further, how could any IT organization possibly declare deployment success when software’s promise is so heavily overshadowed by end-user struggles?

The results of our research show that almost 80% of companies cannot declare victory if the bar is set at the level of user success. As we dug into the details of 300 companies we found that the less successful are characterized by an outdated focus on Technology ahead of Users; a Tech-Focus versus a User Focus if you will.  The gap in success between these two ways of thinking is quite stunning.

 

USER-FOCUS SHOULD POWER THE SOFTWARE LIFECYCLE

A User-Focused approach to the software lifecycle is superior, and here are three reasons why:

Lower Technology Costs.  Technology focused organization’s spend ~13% more on IT than their user-focused peers as a percentage of revenues.  Spending levels would not be a problem if they delivered better results business results.  But they don't.

Lower User Productivity Losses – The efficiency with which user’s consume their enterprise applications is affected by many factors, feature complexity, information overload and application documentation.  The user productivity loss of Tech-Focused organizations is 2.3 times greater than User-Focused organizations. Tech-Focused organizations are leaking almost a quarter of their user’s application usage time.

Higher Business Productivity – We compared revenue-per-employee within industry peer groups to get a sense of how well each profile drives business productivity.  Again User-Focused organization’s outperformed the Tech-focused, achieving 23% higher revenue-per-employee against their industry peers.

So what key practices do User-Focused organizations do differently?

 

USER-FOCUSED.  WHAT ARE THEIR POWER-PLAYS?

Invest in User Empowerment – One of the stand out practices of User-Focused organizations is their commitment to investments in Self-service, Education Simulations & Super User Programs.  Investments that enable user self-sufficiency.  This focus is contrasted with the traditional investments in a reactive help desk and premium support during upgrades.

Work Adoption well before Deployment - There is a direct correlation between starting user adoption efforts in the discovery phase of the Software Lifecycle and adoption rates of technology.  User-Focused companies start their organizational change efforts early and achieve  300% higher returns on their end-user programs than the Tech-Focused practice of starting with or after deployment.

Share Usage Transparency - Organizations getting the best business results from their technology are monitoring the usage behaviors of their end-users and sharing this adoption insight with all the service functions (development, education, support).  This visibility is critical to avoiding redundant and conflicting agendas that are typical of fragmented service delivery.  Organizations that monitor usage also receive higher customer satisfaction scores.

These three power-plays acknowledge a significant reality - that most users live in dynamic business environments and cannot be adequately served by temporary, implementation centric user programs.

 

WHAT IS THE RIGHT USER-TO-TECHNOLOGY SPENDING RATIO?

All this discussion of investing in users versus technology begs the question of what is the appropriate mix for user-to-technology investments. On average, the 300 companies in our study allocated 8.32% of their application budgets to spending on users.  Clearly this is not enough if these investment levels deliver a 17% end-user productivity loss and only 52% effective usage.  For most companies when it comes to spending on users, more money is better.  But how much is enough?

Should the bar be set at 30% just like the innovation-to-maintenance investment target of application portfolios?  That would be a fantastic stimulus package for user adoption, but not a practical recommendation in an environment where user-service functions are rarely able to explain their economic contribution.  What we do know from the study is that organization’s that are considered high-performers in the delivery of their user-services are spending closer to 12%, much higher than the under-performing laggards in the dreaded Drag Zone (low adoption, high user losses). 

This 50% increase above average investment levels sounds hefty, but the economic upside is quantifiable and compelling.

USER SPENDING.  LEADING INDICATOR OF SUCCESS

As leading indicators of IT success go, the ratio of maintenance-to-innovation spending has been used for as long as I can remember.  The logic follows that more spending on innovation is good for business.  That the dreaded 80/20 ratio must be overcome to declare CIO success.  This logic is true, but woefully limited in the context of underperforming software investments and end-user productivity losses.  The problem with the maintenance-to-innovation success measure should be obvious.  If users are still struggling with the “old stuff” a whole bunch of innovative “new stuff” isn’t necessarily going to make things better – at least not without more spending on users.

 

The Great IT Choke

The GREAT IT CHOKE: an unprecedented level of technology deployment that has exceeded the absorption capacity of end-users.

Starting in 2010 we have seen historic levels of IT spending in the US.  Part recession rebound, sure.  But what made this period so historic is that the information economy achieved its greatest share of GDP in over 15 years and this was after 19 consecutive years of price declines.

So what's the impact of such a significant outlay? From a business productivity perspective we will not know for some time, IT productivity usually lags investment by 3-4 years.  But from a user productivity standpoint we know that the effect was immediate and negative. 

We have just finished our 2012 Adoption Insight Report: Service Beyond the Great IT Choke.  Collectively the 300 companies that participated are averaging a 17% end-user productivity loss from information overload and feature complexity.

Is 17% a significant number? Absolutely.  To put it in perspective, the total economic value of user losses is currently greater than most company’s entire IT spend.  Some might suggest that this is just the by-product of the usual technology refresh cycle and to some degree that’s true.  But I think we are witnessing something even more troubling.  A perfect storm of investment catch-up intersecting with software’s increasing dependency on end-users to deliver value.  And in this storm, the average user-service model is a boat that can't float.

Over the next several weeks I will address many of the findings from our 2012 Adoption Insight Report.  We are hoping the report will accelerate efforts to improve the adoption landscape for end-users and by connection business results.

Cloud Saves. Where did they go?

The short answer if you're talking to the CFO is that there are NONE. The short answer if you're talking to the CEO is your USERS. Either way it's a good thing for Business.

Confused? Although SaaS, Iaas and Private Clouds (the Holy Trinity of cheaper IT) have been on a growth blitz for the past several years, total IT spending has still increased. So if the Cloud is not reducing IT run-rates overall where did all the Cloud Saves go?

SaaS: Loving the long Tail.

SaaS is supposed to be cheaper. Saas is growing faster than traditional software. So why is the application software market still growing and growing bigger than the gains from SaaS adoption? Because so far SaaS hasn't cannabilized on-premise investments, SaaS has been loving the long-tail - SMBs.

Take a look at the SaaS poster-child. Over the past few years they have impressively doubled their customer base - during this time the "old guard" grew revenues also. But as SaaS has expanded from SFA to Customer Support to Paas to Social Enterprise the average revenue per customer has been falling. This is because Saas is largely mining the long-tail of the market. The previously neglected users that couldn't overcome the Capex hurdle of traditional licensing models.

New Users get access to valuable software, but no material Cloud saves.

 

IAAS: Early days.

Less than 2% of workloads. Let's revisit in 10 years.

 

Private Clouds: Foundations of Modern applications.

Last year virtual workloads installed grew greater than 20%+. Obviously this was not driven purely by business growth. At the same time Data Center hardware spending basically stayed flat while Infrastructure software revenues went on a tear. So where did the cost advantages of virtual infrastructure go?

Capital starved organizations spent their virtual capacity on two fronts - modernizing development and business continuity environments. At first glance this could appear selfish. Highly virtualized IT shops reduced their own backlogs anywhere up to 15% while their ratio of IT spend to revenue held higher than their under-virtualized peers.

Not so selfish. As it turns out these were smart investments in the foundations of modern applications. Investments that have delivered returns quickly. In the past 2 years these same IT shops have achieved 20%+ improvements in application provisioning speed and mission critical uptime. Both areas a boon for Users.

The formula for Private Clouds is simple - speed times stabiity equals USER productivity. And the proof is in the pudding. User productivity (as measured by revenue per employee) for highly virtualized organizations is 1.3 times greater than virtualization laggards. This is a huge difference.

Again, no material reduction in overall IT spending but USERS are the big winners.

Q&A: Improving IT’s ROI (interview with Enterprise Systems Journal)

By  JAMES POWELL editorial director of Enterprise Strategies

IT is often seen as a cost center, not a benefits center. A new survey sheds light on how IT’s ROI is viewed and what IT can do to improve its return on investment.

Enterprises are being pushed to improve the return on investment in IT as never before. It’s not just a matter of doing more with less -- it’s a matter of getting the most from your IT dollar. In its new report,Software Success 2010, Neochange, Datango, Knoa Software, and iRise set out to discover what is driving -- and how IT can maximize -- software adoption and value.

The survey of 204 individuals in the last quarter of 2010 represents a cross-section of company sizes, industries, and staff roles. We spoke to Chris Dowse, CEO of Neochange, to get his perspective on the survey’s results.

Enterprise Strategies: Your survey found an 50 percent average effective usage rates for IT investments in terms of performance. Is that a high or low figure, and is it what you expected to find?

Chris Dowse: We know from past studies that effective usage is the best proxy we have for measuring value realized, so 50 percent is not a good number. Relative to prior years, effective usage rate is rising. Even though the 50 percent mark is important as it is a tipping point of sorts, I don’t think anyone would claim that getting half the value they could from their software investments is good enough.

Expected? Yes. When you get down to any one individual application (ERP/CRM/BI), it is rare to see adoption and value realized greater than 50 percent.

The survey results also indicate organizations taught themselves how to do more with less during the most recent recession. What are the leading ways IT is getting more value from its resources?

The recession has given companies some time to focus on what they have, to make their IT assets sweat. The research outlines specific tactics to do this, so I will not repeat those verbatim, but the thing that is most important overall is an understanding that a focus on the human element is the key to getting a better result. Whether that be improving communications across the IT-business divide, focusing on the adoption behaviors of the end user to improve an application/process, refreshing end-user education, and/or the IT organization taking a leadership role in measuring the value of usage. Basically a rebalancing of money and focus from technology to people. 

I was surprised when I read that more than half of all respondents experienced a breakdown in requirements communication in a quarter or more of their IT projects. That’s a lot of miscommunication.  I think enterprises are looking for that special best-practice that will help them cut this to zero.

We outlined two best practices in the report, both to do with visualization of usage as a way to avoid communication breakdowns.

The first is actually analyzing end-user usage patterns of 100 percent of end users to determine what productivity needs should be addressed -- versus the usual practice of only speaking to a few “experts” and then coming up short on expectations. This 100 percent transparency practice ensures a common understanding of what changes are really needed and -- more important -- which application/process changes will be most valuable.

The second is creating applications mockups during the early stages of development, rather than relying solely on verbiage in requirement documents, specifically like the iRise solution, that allows training and change management to occur before development is finished.

The report asked respondents about their IT investment focus for the next 24 months and found that 11 percent answered “Aggressive: satisfying pent-up demand or business growth strategies.” These are the same organizations that “are currently experiencing significant success with their end-user strategies and experiencing a trend of improving IT ROI from their application portfolio.” What’s the connection? Why does an aggressive approach lead to improved ROI?

I think it is actually the other way around. Companies that have been working their portfolio and achieving and improving ROI are more likely to be given the opportunity to invest into “pent-up” demand. It may also be true that organizations that aggressively invest in growth-related IT achieve better ROI because their investments are focused on revenue expansion versus cost optimization.

Your survey reveals that 90 percent of organizations are currently unable to measure the levels of value delivered through their application portfolio. Why? Do they not have the right tools? Do they lack the time or staff resources to do this?

All of the above -- and more. Going into the recession IT investment levels had been flat as a percentage of GDP since just after Y2K. Even though IT-driven productivity fell over that same time period, there wasn’t much pressure to demonstrate the value of software investments after the initial business case. This meant that IT organizations had to be very progressive to build the tools, skills, and bandwidth to own the “value dialogue.” On average, they didn’t need to evidence real capital return like a new business venture. Business managers accepted that IT investment was necessary. 

Things will be different. The pressure to produce results from the recession will likely remain. Also, over the past two years we have seen an explosion of application monitoring capabilities that are throwing off useful data around adoption behavior within the enterprise. These two trends will reinforce each other until most organizations have a “feedback loop” on the impact of their development and usage efforts.

According to your report, end-user performance strategies have struggled during the recession with most companies investing less than 5 percent of their application budgets on end users. How are they spending that money, and is it the best use of that 5 percent? Assuming 5 percent is too low, in your opinion, what SHOULD the percent be? What ROI does a higher percentage provide, and how can IT sell that division of funds to management?

Answer: Good question. Before we talk about an actual percentage we should acknowledge that whatever is being spent today is not being spent very wisely. “Drink from the gushing water-hose” training at the beginning of a project is problematic and end-user support on the back-end touches less than 1 percent of end-user-generated transactions. End-user services need to touch 100 percent of users for 100 percent of transactions to make a difference in productivity. There is no reason not to do this today with the advancements in end-user performance capabilities.

Back to an actual percentage. I think we should be pragmatic, if half of companies spend less than 5 percent we should be looking to move everyone closer to 10 percent, but this shouldn’t happen without a sound economic justification. Luckily, there is a really straightforward business case to sell this advancement around end-user productivity erosion. Once you get some transparency into usage, it is not unusual to find a significant productivity loss from laggard users, overly complex technology, and misaligned support/training efforts. The ROI for moving to 100 percent end-user performance support informed by actual adoption behaviors is very compelling.

Your survey categorized IT’s role with business as order taker, partner, or leader. What distinguishes IT in each of these roles? In other words, what makes IT a leader? Your survey concludes that “IT organizations that take a leadership role in this discipline [value assurance] experience effective usage rates approximately 150 percent higher than their “order taker” counterparts.” Why do you think that is?

When you consider all the factors that influence IT value (IT availability, application development, IT-business alignment, end-user capability, business management information practices), all can be heavily driven, influenced, and enabled by IT. If your IT organization is inherently reactive (aka order-taker), then it makes sense that it will not address a value shortfall unless “the business” makes a request to fix a specific area.

On the other hand, if your IT organization makes value assurance their responsibility (aka leader), they will proactively reach out to business managers and suggest areas where IT adoption is deficient and end-user productivity can be enhanced -- so the 150 percent effective usage delta comes from IT being proactive about driving end-user adoption. The IT organization is using their unique position at the intersection of all applications to make sure end-user productivity and performance is optimal.

 

 

 

Are you enabling End-User Performance Erosion?

World-class support driven by needs of the dysfunctional few, ultimately leads to a lose-lose for everyone.  It is akin to an unhealthy codependency.  With the enabler addicted to pleasing and avoiding “the big issues”.  The “dependent" for their part continues asking for help that ultimately doesn’t improve their overall situation.

So how does this play out in the end-user support world?

• Support organizations struggle to get past "break-fix" conversations; we

• Spend 80% of our time meeting the needs of less than 5% of users; and we

• Rely on feedback from users that have no idea what service standard is possible.

The problem with this situation is that it can become like some sick groundhog day – no matter how fast you reactively address the current set of support needs there is always something new coming down the pipe. But what doesn’t change is the fact that you're still only touching the proverbial tip of the iceberg.  

If you're like your peers you're probably actively working less than 1% of end-user generated transactions.  

This is more than the simple understanding that users have struck out 7 times on their own before they call you. This is about the silent masses – the calls that never come. The herd that unknowingly plods along with waste and rework for lack of a good example or knowing any better. The mass of the iceberg below the surface that remains unknown until your ship is sinking.

Below the surface is significant END-USER PERFORMANCE EROSION.  Up to 25% of end-users' application face-time can be lost productivity.

How is this possible?

1. Well for one the traditional model of technology/process deployment. Forget about “IT debt”, we have a significant underinvestment in end-user education and support - users don't really understand their enterprise software.
2. We also don’t have real-time support capabilities that can keep pace with the reality of business change.   Processes keep changing, roles keep changing and features keep changing.
3. Moore's law happened to features.  Over the past 2 decades users have been asked to go from navigating 1lb of features to 10,000lbs.  No wonder they have major adoption issues!

World-Class Support is not enough to stop Performance Erosion.

The way out any dysfunctional relationship is for the enabler to understand they have the power to change the dynamic. To provide the user with something truly exceptional that permanently improves collective performance – enlightened servant leadership if you will.

In the enterprise software adoption world, what does this look like? In future blogs I will outline this new form of value assurance service in detail. But in brief, there are three key moves to address END-USER PERFORMANCE EROSION.

1. Benchmark and manage 100% of workforce adoption behaviors 
2. Optimize end-user support efforts with 100% usage transparency
3. Tactically nuke software ROT and simplify the "bleeding edge" of usage

 What are we really trying to do here?

Fundamentally these three actions encompass the introduction of a closed feedback loop on our support efforts for 100% of the workforce. Service less driven by the relative squeaky wheel, informed by a deep understanding of usage bottlenecks and interventions that deliver measurable impact.  A SERVICE REVOLUTION.  Stay posted for more.

Private Cloud BENEFITS. Are Users destined to live in the RAIN SHADOW?

I live in Marin county in California, very close to Mount Tamalpais.  Mt. Tam to locals. What is striking about Mt. Tam is how the treeline abruptly stops at a certain point up the mountain.  A point where clouds have already sufficiently cooled, condensed and dumped their valuable rain.  This is a common weather phenomenon; and it is also characterized by a lack of rainfall on the other side of the mountain – aka the RAIN SHADOW. 

I am told the Gobi desert lies in the rain shadow of the Himalayas, makes sense, that’s one huge mountain for any Cloud to climb.  I cannot help but think Private Clouds are susceptible to the same phenomenon as their natural counterparts.   That as virtualization rates increase Private Cloud benefits start to cool off. 

That the higher your Private Cloud climbs up the mountain to the IT-BUSINESS INTERFACE (the PEAK) the more susceptible it becomes to losing its BENEFITS (RAIN).

Increasing virtualization and decreasing returns? I admit it sounds counterintuitive.  But having worked on the value of enterprise cloud adoption for 2 years now I think this phenomenon is real and can be avoided.  Here are some thoughts on how the RAIN SHADOW can happen.

 

1. PRIVATE CLOUD loses it CAPEX MOJO:  Capital saves are like water to Private Clouds.  This is where the Cloud gets its initial mass and nothing stops a Cloud from reaching the PEAK faster than the belief that CAPEX saves are done.  Watch out for the following.

Squeaky Wheels go silent.  This happens when capex shortages are filled and we wait for the next capacity problem; aka the bandaid approach to the tech refresh cycle.

Virtualization = Server Consolidation.  This mindset limits lower IT unit costs from being applied to other IT strategies (e.g. business continuity, security)

Investing too far ahead of Demand.  Creating too much virtual capacity for fear of coming up short on all those On-demand Promises.  Or just bad capacity planning.

 

2. IT BACKLOG steals the THUNDER:   Every IT organization has some kind of pent up demand or under-investment lurking around.  This IT backlog wants a piece of your Cloud as it rises beyond capex saves.  Here’s a few examples that will hide your Cloud benefits.

Midnight oil stops burning.  IT admin to server ratios improve over 150% but headcount stays the same, huh?  As it turns out cheaper IT ends up increasing demand.

IT Debt Payoff.  Storage pooling and QA process efficiencies dissolve into a long stream of skunk IT projects and overdue application maintenance.

ITIL program Quicksand.  Real-time, self-service capacity provisioning is offset by tardy service management programs that end up creating two ways of doing business.

 

3. END-USERS kill the SILVER LININGS:  Improved uptime, speedy service, adaptable IT processes – Shangri La. Like any major organizational change Fear-Uncertainty-Doubts needs to be actively managed.  Here’s a few to address. 

Perceived Performance Decline.  Granted, virtualizing applications / desktops involves implementation risk, but do end-users really know the true before and after application performance story?  Is performance degradation real or a myth?

How long to 100% Virtualized Business? If this is the vision for your Private Cloud, it's a fair request to understand the details of the cloud journey, not just how long but also the transition pains that will be encountered.  Transition pains like the SAN Man or dual IT processes.

Just another IT FAD.  SOA, ITIL, IT Utility, Scrum – Users have heard it all before, how will the Cloud be different? Your Cloud needs to be directly linked to a tangible impact on market extension, faster product development or business model innovation to build credibility.

 

You want your customers to benefit from the Cloud.  They want it too.

So in addition to good technology, be vigilant around maintaining your capex saves momentum, understand and communicate where your IT backlog absorb benefits, and finally, proactively address the fears and concerns of your business partners.  This will give your Private Cloud the best chance to rain benefits on end-users and prevent your efforts from becoming just a marketing cliché.

 

In the Era of More with Less, IT serves the Herd, not just the Stragglers.

We have just finished our 3^rd annual IT Adoption Insight Report.  I hope you like it.

The survey results show current application development and support practices both struggling.  It is true that for some time the squeaky wheels often receive a greater share of development dollars and that support is mostly reactive.  But, under the pressure of the recession the requirements communication process has not improved and restricted end-user support budgets are getting chewed up by the problem children.

What is GREAT in the survey - the standout performance of IT organizations not interested in victimization.  IT organizations taking the lead on software value assurance achieve effective usage rates 1.5 times higher than their order taking peers.  

So with the Era of More with Less not likely to leave soon - What’s an IT shop to do about increasing business impact and building credibility?

Quite simple.  LET USAGE BE YOUR GUIDE.  Analyze, understand and act upon the usage behaviors of employees to drive development focus, accelerate process adoption and deliver end-user productivity for the masses.  Not only will this result in IT serving the Herd more effectively, who knows, maybe you’ll get lucky and find some underutilized software.  A nice gift come maintenance renewal time.