The New Polymath by Vinnie Mirchandani has recently landed on our desk, and it’s a fascinating read for people who want to keep abreast of the latest technological innovations and the people and companies behind the innovation.

Let’s start by stating that Vinnie Mirchandani has been one of our favorite bloggers for years. His blog was the first on our blogroll when we initially rolled out Sightlog 6 years ago, and the synergy was obvious: We had both witnessed first hand the problems and runaway costs of the Enterprise Software market and were determined to do something about it. I opted to start a Netsuite consultancy, focusing on the Small and Medium Enterprise market, believing, then as now, that I could offer an enormous software and consulting value while staying true to the values that I had come to embrace as an Oracle Consultant, like the value of integrated software.

Vinnie on the other hand concentrated on the fat in the enterprise software market by helping companies negotiate better IT contracts, and writing about it at the Deal Architect. Enterprise software was such an enormous part of the average company’s budget that there was little left over for new innovations, and Vinnie was out to fix that. He also writes extensively at the New Florence blog about those new innovations, from nanotech to green energy, and a smattering of IT and software thrown in as well.

The focus of Vinnie’s two blogs comes together in his new book, The New Polymath. He sent me an advanced copy of it, which I have been reading for the past couple of months. It’s interesting alright, and filled with interesting people and their innovations. There are chapters on organizations as diverse as General Electric and the National Hurricane Center, and chapters on various disciplines range from Cloud Computing to Cleantech. Mirchandani’s thesis is that innovation happens when talent, energy, ideas and people from different disciplines interact to create something new:

Fortunately, as the database of posts grew year after year, I started to
notice two patterns. I was seeing ever-more complex products and services
that blended a variety of technologies. An example was General Electric’s
plans for the Net Zero Home (as in zero annual energy costs), which plans
to bring together solar, wind, next-gen battery, smart grid interface technology,
and energy management software to efficient appliances, water heaters,
and other devices at home. Or the BP CTO group, which effortlessly weaves
sensory networks, predictive analytics, and other technologies to bring
innovation to a variety of refineries, exploration sites, and other aspects of
its global reach.

And he goes on to give the definition of the Polymath:

Those are modern-day polymaths, I thought. “Polymath,” as in Greek for someone who excels in many disciplines, like Isaac Newton, the English physicist, astronomer, and philosopher, and Hypatia of Alexandria, who was a mathematician, astronomer, philosopher, and teacher.

We call them Renaissance men and women these days. They exemplify an AND not OR mind-set. Put many of them together and we have a fighting chance at some of our grand (and day-to-day) challenges.

One immediately begins to wonder if it is possible today that an individual really achieve the same level as say one of Mirchandani’s favorite polymaths, Leonardo Da Vinci. After all, making a drawing of an aircraft is a lot different that being an engineer for Boeing.

Mirchandani makes a useful turn at this point and explains that the modern polymath is really a group of individuals from several disciplines working together to solve difficult problems:

Given that the grand challenges have grown exponentially in the five centuries since Leonardo lived, the new polymath can no longer be just one person but a collection of many.

From here the book sails along, describing Polymath projects in a variety of fields and functions. It really is quite fascinating to read about how people are bringing so many different talents to bear on difficult problems, or challenges as they are commonly referred to today. If you are a person who likes watching Nova on PBS, or reads The Economist, Wired, The Wall Street Journal or The NY Times for their coverage of the latest in science and technology, then this is a book that you will really enjoy. It goes into great detail in areas as diverse as Nano Technology and Smart Grids. Actually, maybe those areas are not as diverse as you might have thought? Mirchandani answers this question, and many more.

Also of interest are the people that Mirchandani takes the time to introduce. They are a diverse group of thinkers, Polymaths, who are intent on solving the worlds biggest challenges.

There are two undercurrents in the book that require mention. As a man from Michigan I can tell you that when an important industry becomes stagnant, when a whole culture stagnates with it, the results will not be pretty. This idea has been Mirchandani’s greatest contributions to the enterprise software conversation over the years.

Just like in autos, enterprise software is undergoing the same consolidation and anti-competitive evolution that ultimately leads to its demise. Between Oracle, SAP, Microsoft and IBM, innovation has become nearly non-existent while the corporate budget is eaten whole. Is there room, cash or energy for innovation in software? Not enough, Mirchandani claims, and he has a strong point. In this respect the book is a real push to see the ‘fortress’ of legacy systems and companies fall, at least enough to allow innovation to take hold again.

The other undercurrent I noticed is the tension, as I mentioned above, between the polymath culture and the need for specialization. In the Outlier, Malcolm Gladwell introduces the idea of the 10,000 Hour Rule. It’s simply this: To be really good at something, good enough to make a good or perhaps a great contribution, you need about 10,000 hours of practice. Regardless of your talent level, practice is a very important, perhaps the most important attribute of the ‘genius’.

Practice not only makes us better at something, but specialization has made the world we all inhabit, and love, truth be told. Specialization allows the standard of living to rise. Without most of us putting in our 10,000 hours, the world we know would be a much different place. Anthropologists now believe that trading is one of the most important attributes of our human evolution. Trading ideas, trading our wares, has allowed us to evolve from small families of hominids to modern societies. And what does one trade? What one is best at producing, of course.

One man might have seeds, another smelts copper, a third makes bows.  Over time our specialization has become deeper and deeper. Most of us now devote the better part of our lives to a single pursuit. But how does this need, requirement for specialization exist in a world that also needs Polymaths? Mirchandani, to his great credit, has not avoided this problem, but instead looks it right in the eye and gives one great example after another of how teams of specialists can find ways of working together.

It is a serious question, how to balance specialization with the need for polymaths. I think Mirchandani is on to something in The New Polymath. It is a subject that deserves much more attention at every level of our society.

NetSuite, I maintain, has an excellent opportunity with the Newly Born and the Reincarnated, and I believe this shows in the client list, both ours and the larger NetSuite customer base.  So is there any chance to talk to the Buried, to get them excited about NetSuite, to bring them on board? And who do we talk to over there? The owner, the office manager, the IT guy?

One way to tackle the problem is to take a look at how the competition does it. Want a great example of business system marketing, read this article about Microsoft’s latest edition of Great Plains, from Mary-jo Foley of ZDNet :

(A quick PowerPivot refresher: Codenamed “Gemini,” PowerPivot is integrated with SharePoint Server 2010 and SQL Server 2008 R2. Microsoft is touting PowerPivot’s benefits as integrating “massive amounts of data on the desktop from virtually any source”: and the performance fast calculations and analysis on large data volumes.)

Like previous GP releases, the 2010 version will include a built-in connector allowing two-way information sharing between GP 2010 and Microsoft’s on-premises Dynamics CRM and its cloud-based and/or partner-hosted CRM Online offerings. In addition, by taking advantage of the presence functionality in Office Communications Server 2007 and its Office Communicator client, GP 2010 gives users the ability to right-click on a contact to send that person information with fewer steps.

Now, these two paragraphs may not seem interesting to you, and that would make you normal; however, if you are an IT guy at an SME, these are marketing gems. They are subtle and press all the right buttons. They don’t blare “look, long term job security!” but they make the point very well, indeed. In just those two little paragraphs there are 7 different products mentioned: PowerPivot, Sharepoint, SQL Server, GP, CRM Online, Office Communicator Server and Client. If you could get your boss to invest in this, you could buy that little cabin on the lake. May not have a lot of time to hang there, but you could own it.

The upshot is that it is useless to talk to the IT guy. He has no interest in hearing about a single, integrated system with no infrastructure. And the office manager, well that’s also probably a waste of time. They hate learning new systems, unless the current system starts creating unwanted overtime. That really leaves the owner. In some cases whenever the ownership hands over to a new person, son or daughter or buyer, there is an opportunity to talk to someone with some energy for the business who can see the difficulty of running an organization with a 100 data silos. The message?

The message has to be that NetSuite gets you out from under the thumb of your staff. Everyone who has ever been the new manager at an existing business knows what I mean. The current employees try to run you. They attempt, with all their wits, to box you in, to make you accept the current state of affairs as the only, the necessary state of affairs. “We don’t do it that way because it can’t be done that way.” They despise change. NetSuite generates change, and not just for the sake of change, but for the sake of better business practices, more measurable input and output, greater visibility and better decisions, including which employees to keep.

Every year, there are tens of thousands of SME’s that change hands. This is the secret passage into the market of the buried. There is a narrow window of hope for these companies. With some subtle marketing NetSuite ought to be able to talk directly to the new managers and let them know that there is a system that, together with their iron will, enables them to take back their business, get it on better footing, and grow it like they know it can grow.

Finding customers among the Buried is not easy. It requires the right message to the right audience. It also requires acknowledgement that a lot of the Buried are really lamp posts. But when they change hands, it’s a whole new opportunity.

]]> http://sightlog.sightlinesconsulting.com/2010/04/avoid-talking-to-the-lamp-post/feed/ 0 http://sightlog.sightlinesconsulting.com/2010/04/avoid-talking-to-the-lamp-post/ http://feedproxy.google.com/~r/SightingsInSaas/~3/pAWgt1kOpag/ http://sightlog.sightlinesconsulting.com/2010/04/the-newly-born-the-buried-and-the-reincarnated/#comments Wed, 21 Apr 2010 15:21:20 +0000 Tom http://sightlog.sightlinesconsulting.com/?p=166 I just finished reading an interesting article by fellow EI Mike Krigsman in his IT Projects Failure  blog.  There is also an interesting video interview with NetSuite CEO Zach Nelson about the value of NetSuite, cloud computing and NetSuite implementation.

One thing came to mind for me as I listened to Zach and read Mike’s analysis; that is, the SME, small and medium enterprise,  market is really substantially different from the large enterprise market in one very important aspect: Experience.

In the SME market there are the Newly Born. These are companies that have gotten started within the last 10 years and have grown substantially. They have managed to achieve this growth, in many cases, without the benefit of a well thought out IT plan. They probably have an off the shelf accounting package, email, possibly a small crm system and a lot of spreadsheets. Someone hosts their website. A service bureau does their payroll. Regardless, they have grown and now number 50 employees or so.

At the next level there are the buried. This is a company, sometimes of considerable size, that is now on the second or even third generation of ownership. They have systems, somewhere, and the systems are capable of reporting month end results. Again, they look to third parties for a lot of their needs, like payroll, website, etc. But for the most part, their systems and the costs associated with them are buried.

Finally, there are the reincarnated. These are organizations led by people who have done this several times. They have worked for large companies, and led new startups. They often have venture or angel capital and have as much business savvy as large organizations. They may begin with a limited set of applications, but over time they formulate an IT plan that enables their revenue growth and keeps costs in check. They understand the value of systems. They have been there before and they personally know the costs of on-premise software.

Now which of these three companies is a good candidate for NetSuite? Well, I can take a quick gander at our own client list and tell you that about 1/3 of our clients are the Newly Born looking to upgrade to something better and the other 2/3s are the Reincarnated. The Buried show up here and there, but very rarely. From time to time a new owner takes the reins of one of the Buried and they start down a new path, but by and large the Buried are a very difficult market to sell anything into. Even in the best of times it’s hard to make inroads in this market. Why is that?

Well, the largest cost of on-premise systems, by far, is the enormous distraction they create to what should be normal business operations. Yes, I agree with Nelson that there is huge value to one system, huge value to not having to ’spin up a server’ and even huge value to cloud implementations over on-premise. In the end, however, it is avoiding the cost of distraction that provides, to me, the real value of NetSuite and other cloud computing applications. At the Buried, the distraction has now become the normal. People don’t even notice it anymore.

My wife and I saw this firsthand recently when we stopped by a local establishment for dinner and, while waiting for a table, had a drink at the bar. While standing there and placing our order, the system went down. The bartenders made a simple announcement to the rest of the staff and they all started to manually take orders. It became paper based in a matter of minutes. I remarked about it to our server and her reply was “Oh, we’re used to it, it happens all the time.”

This is what the Buried live with every day. They have simply acclimated themselves to the fact that their systems are what they are. It may take a week to produce an inventory report in Excel but once it’s created it’s only a couple of little tweaks every month to fix it up and off we go. Multiply that effort by 200 or 300 and there you are, an information system built on the desktop, ready to go! The Sales Manager(s) may spend hours approving written commission and expense reports, but they’ve worked it into the schedule, no worries. The costs of creating, running and maintaining this ’system’ are buried, and will remain ever so. The auditors might grumble, but they tend to grumble a bit anyway.

The difficulty for NetSuite is telling a story that helps the listener understand how the world changes when you have a integrated system that relies on real, and real time, data. The key is “Who is the listener?” I’ll talk more about that tomorrow. Right now, I must honestly get back to work helping one of the Reincarnated implement NetSuite.

Nucleus polled NetSuite customers to gauge their success and satisfaction with their decision to entrust mission-critical business functionality to cloud computing. Ninety percent of the customers surveyed rated their satisfaction as four or five out of five — satisfied or very satisfied, and no company rated their satisfaction below three. When asked to elaborate on the reasons for their satisfaction, NetSuite’s ability to drive cost reduction was mentioned as a key driver. By offering tremendous scalability and breadth of functionality, with little to no IT expertise required to install and manage, NetSuite has earned long-term satisfaction and loyalty. “Because the application has been validated by users as an effective tool in cost reduction, deployment footprints at existing customers are more likely to increase rather than decrease,” wrote Nucleus in the report.

I’ve long said that running a system, or especially, many systems, has a huge hidden cost. Some might get away with it by putting the brother-in-law in IT, but believe me there is no way that the systems you maintain do not have a cost, I don’t care who runs them.  And there is also a cost to the systems that you do not run, mainly in the time and effort people expend manipulating data on spreadsheets.

6,600 customers, that’s pretty good, too!

Back in my Oracle days I consulted with a Fortune 100 company and two of the CEO/Founder’s children were in the IT Department. Neither of them appeared to be especially talented in matters technical, but there they were, cutting their corporate teeth in 4 hour meetings on system size, redundancy, failover, backup and restore. I even had one instance, early in my career at SightLines, where a client tried to get his aged mother to do the implementation! And the son, supposedly, was knowledgeable about IT. So what’s going on?

I guess it’s not the worse place to learn about a business. There’s always a lot of discussion of key business processes and throughout a typical week/month/quarter you will meet most of the management team, directors and above. But it’s also not the best place to learn about the business. You will rarely meet a customer or vendor, outside of an IT vendor, there. You will never see a sale negotiated, or learn the why your products and services are priced as they are. You will also not see customer service issues managed.

But if your path in life is IT then with all haste take a place in your Uncle’s, Sister’s, Dad’s, Brother’s, IT department. Otherwise I would be a little suspect of how this will play out for you. You may be a trusted family member but hiding in IT will not prepare you for a larger business role, unless you ultimately want to work for an software or IT services firm. More likely than not, your relatives figure that you are trustworthy and since they need a body to handle the work in IT,  your it. It’s also quite difficult to find good IT people and they tend to move around a lot, especially when you ask them to work 60 hours a week, every week. So putting a thankful relative in IT adds some stability for not too much money I would suspect. And they can’t do too much harm there, right?

Well, I don’t really have a dog in this fight to be honest, so maybe I’ll let it lie. I have asked my daughter on several occasions about working for SightLines. I’ve gotten a lot of answers, but none have been “yes.”  Darn smart kid!

The conversation started me thinking about the current states of software and how this might actually reflect the state of the economy overall, not just in this downturn but in long term fundamental changes in the economy.

Software is in harvest mode, just about everywhere you look. What is harvest mode? When products reach the end of the life cycle they are kept around because they still have some value and market cache. We don’t continue to invest in them because the investment will no longer pay off. So we simply harvest whatever revenues we can while keeping a very close eye on costs.

In the software world, there are actually companies that buy older products and continue to harvest maintenance fees for years, especially true in the software for busines verticals. A friend of mine who works in a local steel service center owns one of these. The company purchased the software 20 years ago to help them manage inventory, processing and scrap. Then about 8 years ago the company that wrote the software sold off to a harvester. They now have a single person who supports the code base, but the product is no longer actively sold. There are after all only so many steel service centers in the world.

But what we are seeing today is something completely different. We have non-vertical, on-premise ERP/CRM software that is being harvested by the company that orginally wrote it, in the case of SAP, or by the companies that purchased it, in the case of Oracle or Sage. One way or the other, it seems that all 3 companies have come to the conclusion that it is useless to invest money in their now graying software products.

SAP’s steady decline went by another hurdle this past weekend when the current CEO left unexpectedly and two guys were promoted into the top spot. You can read extensive apologies here. Oracle has almost 100 acquisitions under it’s belt, making it a software harvester extraordinaire. Sage also has a host of harvest products. In fact in the on-premise space if you aren’t being harvested, you are a harvester.

On the plus side, harvesting means that your on-premise system will continue to run and be supported, more or less, by someone for the foreseeable future. On the down side, this means that you will continue to pay a lot of maintenance fees for the foreseeable future with little if any new features/functions. You have software on life support, basically, and that is both costly and a sorry state of affairs.

Why this is happening is difficult to say because the reasons are nearly as numerous as the underlying products. Sage for example still has some products that are not real time, but instead rely on batch processing. You would think it makes sense for companies using something like this to look around for something new, more useful and modern. There must be two reasons that they are not interested in changing: The newer software does not offer enough value to pay for the investment and trouble to change; the company is no longer making the income it once did and therefore has little to spend and little faith in the future. There’s some truth in both of these, but taken together they really pack a punch.

Think about a company that wholesales/distributes dental supplies, a b2b business. There was a time when the population in their area was surging and dental offices popped up like flowers. They became a strong regional player with a one or a few competitors, and all of them did well. But over the past few years business has changed substantially. First there are fewer new practices opening in their region, and the ones that are there have begun finding better values online. They can deliver next day, but it actually costs them more to hire a driver, a cost that he must pass through to customers, than it costs an internet distributor to send next day air. Huge efficiencies have happened in their market, and all have squeezed their margins.

What does a company in this space do to compete? They could also sell online, but they don’t have the expertise in materials management nor the capital to bring to bear to run an enormous, national brand warehouse. So, like the software companies, they go into lockdown, or harvest mode. They continue to service their region, keeping a very close  eye on costs, but they are unable to afford huge new investments in the business. Including software. So they keep on with their old system and eventually they will run out of reasons to exist altogether. Meanwhile, dentists squeezed by better oral care buy used, re-conditioned chairs instead of new ones. These are also available on the Internet.

In short, the Internet has thrown a wrench into the works of many mainline companies and as a result they have turned off new investments in technology. When I go over my NetSuite client list I can see a lot of companies that we implemented the software service for but only 2 of the more than 90 companies are mainline wholesales/distributors . Interestingly, one of my first clients was an Arizona company called Lifestyle and Leisure Creations, a wholesaler of massage equipment and supplies who sold out to a larger competitor.

That’s probably a strategy that  a lot of businesses need to be looking at. Purchasing competitors, especially at current discounted prices, can be a useful way to expand your customer list and restore some pricing strength. But you still need to gain greater efficiencies and the best way to do that is to think about investing in better technology. If you have a growing company across a large geography, you need to see where you are everyday and at every location. It’s not good enough to just throw together results manually at the end of the month. This is how on-demand software as a service can really help. Your entire company can work off a single account of the software, giving you real time results from all branches, warehouses, etc. And you don’t have to add the very expensive computing infrastructure that used to be necessary.

Again, looking over our client list, I see a dozen brand owners. These are wholesale/distributors who have gone an extra step and now are also manufacturing the products they distribute, using third parties in most cases. Brand ownership is one way of averting the steady decline of growth death spiral.

If your margins are getting hit hard and you’re thinking growth through aquisition or  brand ownership is the only way to continue the company, then you have to consider on-demand software. Like you, it operates unbounded by geography. And while on-premise software continues to struggle, NetSuite’s SaaS ERP/CRM grows and takes their customers.

Talking about baseball, my recent travels took me to St. Louis where my gracious hosts were so kind as to take me to the area know as The Hill, a predominantly Italian area of the city. We had a great meal at one of the many local eateries, but the highlight for me was the passing of a ball yard where former major leaguers Joe Garagiola and Yogi Berra once played. That was kind of cool. The whole neighborhood was very nice, even on a snowy winter night.

Good-bye to Curtis Granderson. The Tigers traded the best Tiger to the Yankees, which I am sure makes my friend and baseball nemisis Paul Greenberg happy. Best to Curtis, I for one always loved his defense.  New York Yankess, ugh. Don’t get me started. I always like the way that they pronounced ‘Yahnkeeees’ in “Last of the Mohicans.”

I also actually saw it rain in California. I have probably spent a whole year of my life, a week or weeks at a time, in CA, and cannot remember it raining. This trip in rained everyday and hard. Fremont was flooded, and the storms only added to the overall picture of a California under deep stress. The cab drivers, the waiters, the client and the folks at the hotel all talked about the local and national economy. For once I did not hear any snarky remarks when I mentioned that I was from Michigan. That was in itself a revelation.

But don’t get me wrong, I am not celebrating the hurt the West Coast is currently undergoing, or anyone else’s for that matter, including our own here in the Upper Hand. To the contrary, I am a little nervous because so goes California so goes the country. It is such a big part of our economic engine that when I hear about the commercial real estate vacancy rate I have to wonder how long before we’ll see a real and regular pick-up in activity. In my darker moments I wonder if we are not heading into the 2nd dip of this recession. We will eventually pull out of this, but will we be any smarter? Does the political class, all of them, realize that we have now run out of other people’s money? I’m not sure.

At any rate, we have been fortunate to continue our NetSuite consultancy into the New Year with several new clients. Helping these companies start to use NetSuite made me wonder how companies operate across wide geographies without a tool like NetSuite. How do you keep far flung sales people, warehouses, support staff on message, working with purpose, productive, connected? We have so many different modes of communication now that we often take for granted how difficult it is to create an effective team and get everyone moving in the same direction. It takes more than IM or cell phones, or smart phones. If you are operating virtually, meaning that you have employees that do not come into a central office everyday, then you really should think about an online place where the company can meet, where everyone can add their efforts to the team and understand their contribution. You need to connect everyone to headquarters. How?

Well, I hear the IRS calling my name, telling me that I need to get everything over to the accountant. Best to all of you in this New Year, and I hope we all pull out of this in one piece.

I’ll start by asking what  can you expect if you travel around the world looking for a tasty chicken dinner?

In Vietnam you can buy a live chicken, rest is up to you.
In China you can buy a chicken that’s been killed, you pluck and eviscerate and cook.
In Paris your chicken has been plucked, you eviscerate and cook.
In Des Moines the chicken has been plucked and eviscerated, you cook.
In New York the chicken arrives on your table plated, garnished and sauced

Now it may not seem like the world of software and the world of chickens have a lot in common, dear reader, but don’t give up yet. There is a point that I want to make here. A recent conversation with the Enterprise Irregulars around the difficulty of moving ERP systems forward with the business brought some interesting ideas to the fore. It all got started with an article by the now famous, in these parts, Thomas Wailgum in CIO about a study partly commissioned by CIO and Enterprise analyst IDC concerning this very question. Wailgum’s title says it all “ERP’s Paralysis Problem and the Repercussions for Businesses Everywhere.” The repercussions, as you might have guessed, are not good.

First,the premise, more exactly, is that ERP systems can prevent companies from seizing business opportunities because the systems are lumbering giants not given to flexibility, agility, growth and change. This leads us to conclude that the deeper the functionality of the ERP system the greater the difficulty of meeting business opportunity challenges. ERP in other words suffers from the New York Chicken problem: Once it’s served there is no turning back. You can’t change the recipe or cooking method at that point.

It’s an interesting thought. I am not sure that it is 100% on the mark, but having worked with Oracle ERP software for nine years I can attest from personal experience that there is more than a grain of truth here. Brain Sommer has a good post about some of the real sticking points in ERP systems that make changes and additions so difficult. This one stuck out:

5) Code block insanity – Just because your accounting modules can support a 30 segment code block doesn’t mean most companies should use this. Moreover, what views a company will want in its code block will change over time. Unfortunately, most financial software products (and all the feeder systems that supply accounting transactions to them) make changes to the code block akin to a complete re-install of the software. Nothing brings rigidity to ERP like the code block.

I’ll take the thought one step further – why do we have a code block, this huge accounting nightmare that attempts to pump all possible corporate knowledge about what the company sold and purchased into the general ledger from the subledgers where the transactions take place? When they began to create software for financial transactions they had only a general ledger, so to see as much data as they possibly could they tagged all the transactions in ht GL. Business software became accounting centric, and remains so even after real time relational systems came on board with multiple subledgers that can report out vast quantities of detailed information. Why do you have to update the GL with sales data when it exists in such fabulous detail in your CRM/Order Management system?

So what does a large enterprise do? They run Oracle, SAP, or something similar. Does the enterprise just forgoe new opportunities? I can’t imagine that , especially since the people who run large enterprises normally come out of sales and sales is where most of the new opportunities get their start. These folks are not going to be patient for long. Eventually the line of business, lob, will go ahead and start to do whatever they have to to tackle new business, even, in many cases, if that means writing custom software.

Now, developing custom software may not seem like such an odd pursuit to you and you would be correct – if it was the 1980s or earlier. But when so many large enterprises went to systems like SAP and Oracle they lost their development teams. That was the cost justification of the new ERPs. In the bad old days all large companies employed large teams of developers who built their custom business apps from the ground up on what came to be know derisively as legacy platforms, from IBM, Burroughs, etc. Coding custom software is like the chicken in Vietnam or China. Well, at least now you have more refined tools and platforms, so we will say it is more like China.

Well, apparently the wheel has turned again. Large Enterprises are again back to the custom software job enthusiastically and doing it with the aid of all the modern IT tools, platforms and business models – outsourcing, offshoring, onshoring, LAMP stack, Cloud, Free Open Source Software, you name it. They are coding software at a pretty good clip evidently, again in an effort to meet business opportunities.

Being on the cloud and developed in the SaaS, software as a service, model may help some of the newer entrants to the Enterprise software market avoid the New York chicken problem because the cloud can give a company greater access to partner software add-ons. But that is not a given. They must still walk a tightrope between offering a robust application that includes most basic needs while giving the Enterprise with more complex requirements a path to customize those requirements using the applications itself. Every NetSuite implementation, to be perfectly honest about it, requires a fair amount of explanation of what is not possible. You can run a lot of business processes in the system with no further customization and coding should be rare, but to have a system that truly represents your business today and your meets future opportunities, you will need to customize a quite a bit and code a little. It’s not an easy tightrope to walk obviously, and the balance struck is a subjective proposition.

However, I would also submit that every buyer contemplating the decision to move to one of these new enterprise systems should have a hard discussion about how much they want to customize and code, and how to do it in a way that prevents them from falling into the New York chicken problem themselves. For my part, I suggest that clients hold off on any customization except the most absolutely vital, and wait to add code completely, until you are live for six months. You will be surprised by how much your requirements will change once you know and understand the system.

The myth, not sure if it is still current, that SaaS prevented customization, has largely been itself eviscerated by Netsuite’s Business Operating System and Salesforce.com’s Force.com development platforms. These systems are not only open and customizable, they also encourage customers to make the applications meet business opportunity challenges.

Only time will tell if SaaS Enterprise vendors avoid the same fate as their older brothers like SAP and Oracle, but it is a good time to ask the question. Who would have thought 10 years ago that ERP would end up costing you money?

By not only having a financial software company write a new version of their software on the force.com platform but by then entering into a joint venture with said company to market the newly combined CRM and Financial software product, Salesforce.com validates what we have been writing and saying these five years: To wit, it does not make sense for Small and Medium Enterprises, SMEs, to try themselves to patch together various applications when there are integrated products already on the market. Integrated apps, as in a suite, are an enormously beneficial idea for any company but especially for the SME who does not have the time, manpower or cash to build bridges from one app to another.

In our long experience it is only the largest enterprises that have the necessary resources to pull off the interfaces between applications, and even then it is usually not done well. And to be perfectly frank, integrated suites are not perfect either; I make no argument to the contrary. However, when you are making the decisions for your SME you do not have the luxury of considering a best-of-breed-applications-stitched-together-and-maintained-by-professional-IT-staff approach to your business. It is simply not in the cards. Even if it were you will have a hard time explaining to yourself, and any one else who might be listening, why so many organizations across the world and across so many industries have abandoned the best of breed approach for their core applications and gone to an integrated suite (Oracle, SAP, etc.).

When we talk to SMEs who currently have several key applications from various vendors running core functions in their company they normally run them in complete silos, using spreadsheets to paper over the disconnects. They have either abandoned their interfaces (we still have not met a company that uses the SF to QB interface successfully) or never even bothered with them. That’s reality.

Salesforce has evidently seen the light themselves. I will hazard the following prediction: Over time SF will sell their standalone CRM to very large companies who have large, direct sales forces, and they will sell an integrated suite to the SMEs of the world. They really have no other choice. They are being surrounded in the SME market by a ton of CRM competitors who have matched their functionality. Add to this NetSuite and SAP’s redesigned Business by Design due out any year now and SF really needs to both differentiate its products from the Zohos of the world and confront the integrated suites as they take market share in a world newly interested in cloud computing.

So bravo to Salesforce.com and the newly minted FinancialForce. It will be a presence in the market, I have no illusions about that. It also validates NetSuite’s long maintained position that an integrated suite is the key to running a better information system and finally a better enterprise.

First my wife Mary deserves a special thank you. What a great friend to have in good times and bad, and in-between times. My daughter Haley also causes me to say thanks. On to the University of Michigan and doing well there this year. Thanks to you both for making my family life so wonderful.

Thank you to our clients, all 90 of you. We have discussed, debated and at times even argued about the best way forward. All I can do is bring my experience and best practices to your IT needs and work until we have a solution we can both be proud of and we can both live with.

I thank finally the always disruptive US economy that allows and enables new ideas, and with them new companies and clients, to enter the marketplace. It never ceases to amaze me how the next phone call, discussing the next company and its products, services and business model, is always as interesting as the last. We have something here that few have been able to emulate; let’s keep the spirit of innovation and entrepreneurship alive.

Finally, a special thank you to the technology innovators. Reading through the blogosphere you can see a million opinions on the start-ups and innovators in our business. All opinions are welcome but at the end of the day we should never forget that innovation is tricky and difficult. Salesforce.com, a competitor, released a new idea last week called, of all things, ‘Chatter’, which is going to be a part of their development platform, adding social computing to CRM business processes. I realize that there is a lot of talk from every direction about it, but let’s also be thankful that there are still people willing to risk their future, their treasure and their reputation on something brand new. I say bravo to you SF.com. I frankly have no idea whether you are on the right track. But I applaud your courage.

Happy Thanksgiving everyone!