Supply chain suites are fraud?

DougColbeth

During my travels around the world it is common to find failed implementations of supply chain suites which resulted in software, maintenance, and consulting costs much greater than $20 million. Worst yet, it took many years to figure out these projects were doomed to fail. One executive used the term “fraud.”  In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual. Regardless of the words used to characterize these situations, no company should have to invest this kind of money or time to realize something will not work for their business.

Selling suites of software is great for software vendors, but is bad (at best) for the customer. Take a look around and see how many software modules are focused on fixing “symptoms” of much larger business challenges. It is my belief the vendors should be forced to offer customers affordable on-demand services which address significant underlying business challenges like Revenue at Risk. These services should not require tens of millions of IT dollars or never ending implementation cycles.

What have been your experiences?

DougColbeth

Douglas Colbeth became president and chief executive officer of Kinaxis in March 2003. As one of the true visionaries of the Internet explosion in the mid 1990’s, he envisioned the opportunity to be a leader in delivering an on-demand supply chain management service. He then came across what he describes as a “gang of supply chain geniuses” in Canada, who had already developed very powerful modeling and collaboration technology.

Doug understood what the Internet’s influence on consumer behavior would be and how it would dramatically increase demand volatility. The problem of effectively responding to consumer demand would be further exacerbated by the dramatic market shift of outsourced manufacturing operations. Under Doug’s leadership, Kinaxis developed a world-class offering which enables companies to build better supply chain plans and quickly respond to constant changes in demand, supply and product — driving breakthroughs in customer service and operations performance. Today, the Kinaxis RapidResponse® cloud service empowers front-line decision makers at brand name companies and contract manufacturers with multi-enterprise visibility and collaborative analysis tools to effectively respond to change across an entire distributed supply chain.

Prior to Kinaxis, Doug was chief executive officer of Spyglass Inc., a leading provider of Internet software technologies. Spyglass technologies are utilized inside millions of products including PCs, televisions, telephones, and other hand-held devices. Most notably, Spyglass technology is the foundation of the Microsoft Internet Explorer browser. In June 1995, Spyglass became the first Internet software company to conduct a successful Initial Public Offering. In March 2000, Doug negotiated its merger with OpenTV Inc., at a value of $2.4 Billion.

Outside of his work with Kinaxis, Doug and his wife Margaret are pioneer philanthropists in the area of juvenile brain diseases. Established in 2000, the Colbeth Clinic is operated by the University of Illinois Medical Center and serves inner city children in the Chicago area. This state of the art clinic employs a multidisciplinary approach to treating a wide range of brain diseases including: autism, depression, bipolar, OCD, ADHD, and post-traumatic stress disorder.

Doug holds a Bachelor of Science in Economics from Siena College in Loudonville, New York, and studied Quantitative Economics at Rensselaer Polytechnic Institute (R.P.I.) in Troy, New York. While attending R.P.I., Doug was awarded a research grant from Texas Instruments Inc. to develop modeling software for various Texas Instruments products.

More blog posts by Doug Colbeth

Discussions

  1. I totally agree. Much of the software that is purchased today can not be installed with any hope of getting an ROI, or with much hope that the business problems will be fixed by it.

    But how you will hold vendors accountable is beyond me. There is a thin line between truth and lie, between hope and reality, and the problem of advertising hype is a societal one, not just a business one.

    There is a group, however, that I blame even more than the vendors. Business leaders. The people who are running the show. The C level. Time and time again I have seen a business leader read a single sentence (generally ad hype) and decide right then and there that is the direction they are going to go. Of course there is a long tortorous ‘justification’ process but it always ends with the initial direction being approved.

    No one is forcing business leaders to buy all this junk. And why they would even begin to believe that software alone is going to fix their problems is beyond me. In short, we need a higher level of thinking at the top level. It’s not just about making decisive decisions. It’s about making decisions that are well reasoned and backed up by real world evidence. And that sad part of that is that bringing that about is about as likely as getting vendor sales people to police themselves.

  2. I know there are a range of outcomes in this situation. Starting from instances of mis matched expectations at one end to what is called as fraud here.

    In my view, the fault has to be shared between business users, internal IT systems / CIO and team and the Software vendor / implementor and the team.

    If the users and internal IT is not clear about what they really want, one cannot have a clear specification. If the buyer is not clear about what is required, let us not blame the software vendor or other players. If the starting specification is poor, you can hardly expect the final product to be good.

    Software vendor – as a standard recommends that there should be no customization. The standard functionality may not be suitable as is for a customer. But if there is no real solution to address the customer needs, one would expect a decent player to bow out. We can really not expect a sales person to bow out in this manner. Hence they will make a hard sell – with some exceptions naturally. Hence the customer will be saddled with a product which is not really suitable for actual usage. But it may be selected due to pricing and other commercial reasons. If the selection will depend more on these commercial aspects one can be reasonably sure that operational aspects will take a hit.

    A second allied issue is with the client company – and possibly more with finance than with the operational users. Companies spend millions on ERP products or hardware but will hesitate to spend even $ 20000 to $ 50000 on training the users for effective usage of this expensive resource. Naturally the users are not comfortable with using the systems in the way it should be used. With this background, it is quite natural to see the systems and their components being mis used more often than being used properly.

    Lastly, the implementation partners – number of times they do not necessarily have the corerct skills or expertise to understand user requirements. If the basic requirements are not understood properly, they can hardly be expected to be implemented properly. It all starts to fall apart right at the stage of translating the user requirements to basic components of ERP product.

    In number of situations, once again the finance team gets in the act and selects an implementation partner more on basis of price quoted rather than capabilities. The quality of work done suffers in the bargain.

    Really speaking, entire ERP implementation exercise should start with understanding of what should be gained – more in terms of ROI on the investment than just computerization of operations. This will give a more sound basis for all the players to work through. The value to be gained is not just in terms of reduced manpower. It is more related to intelligent usage of information within ERP or other IT systems. This will also give a more valid base for all activities in the cycle. To make this in true spirit, there is a strong need for a bridge to connect between business needs and actual ERP capabilities.

    If this approach is missing, end client will continue to struggle with this problem.

  3. The big vendors have sat around trying to figure ways to extract the maximum amount of money from customers. They have stopped innovating and are buying “proven development” from companies who have a customer base so they exploit maintenance streams. However, this kind of environment creates an opportunity for start up companies who can deliver a disruptive technology. SalesForce.com and Google are two good examples.

  4. It is very easy to try and cast blame on vendors for various failures. It is my opinion that the basic issue is the failure of everyone in the chain of solutions supply to acknowledge the complexity and difficulties associated with major systems upgrades and implementations.

    Generally, managers (C level and senior) do not want to hear or understand the risks and challenges associated with any implementation. In this day of organizational complexity, procedural and compliance complexity, and requirements to integrate disparate data and systems in a presentation environment that is effective and understandable, the factors mitigating against easy wins, easy gains, and low costs are formidable.

    When you consider the complexity of the requirements, the complexity of the environments, and amount of knowledge that has to be contextualized, and then layer it into big implementation projects, given the amount of ignorance that surrounds every significant IT project and the tendency to ignore or seriously discount it, the likelihood of failure (or diminished results) increases dramatically.

    It is hard to see how the “cloud” or Force makes these problems go away. What they do is offer another simplistic approach to a very difficult set of circumstances. Complexity requires expertise, understanding, time, and patience. It demands humility and perseverance. Difficult problems will not be solved by simple solutions. If it were simple, it generally would have already been done.

    I am not suggesting that the ERP model is good; though it does have its place. The “cloud” also has a place. However, as long as people want to believe that there is a silver bullet or an easy answer and do not want to understand how hard it is to “finish” any project, i.e. move through the last of the six stages of an implementation and get end-user, supervisory, and managerial sign-off, all that will happen is that the failure rate moves to another technological arena. Big problems generally do not have easy or simple answers.

    Sorry.

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