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Can't Get No Satisfaction

Can't Get No Satisfaction

Market research firm Inform went out late last year to ask Australian organisations how they rated the suppliers, retailers and dealers which provided their computer systems. It uncovered a market in flux. It found that over the coming two years the buyers were planning to shift more of their purchasing dollars towards suppliers at the expense of the dealers and the retailers. The growing exodus from physical purchasing towards online purchasing underpins this trend. Almost a third of the 227 respondents said that they planned to buy their IT supplies over the Internet by 2002. Vale the middleman.

The Internet alone, however, cannot be blamed for the predicted demise of the middlemen. Nor should suppliers pat themselves on the back too soon. Inform also uncovered a good deal of dissatisfaction about the service and quality of products available both direct from the supplier and through the retailers or dealer channels. CIOs are shopping around, looking for better service, improved delivery, more reliable products, and for suppliers that understand the user's business and offer lower prices.

The Internet clearly delivers an alternative, which users are willing to try. However, even then, suppliers selling online had better be able to meet user needs or risk losing their loyalty. One issue which needs close attention is order fulfilment.

When Inform asked survey respondents what the single most important thing was that resellers could do to make their customers' lives easier, most of them replied "deliver on time". Suppliers didn't fare much better, with that being the second main grouse from customers buying direct from suppliers. Nonetheless, topping that was the call for much improved customer service from the manufacturers or suppliers.

What the customer wants won't be that much different in the online world; suppliers selling online will not be able to hide behind any excuses that it was the distributor's or the dealer's fault.

CIO magazine has cast around among a number of big technology buyers to discover how they believe IT supply could lift its game, offering them anonymity in return for their full and frank disclosure. The picture these large users paint is not flattering to the IT sector, which is depicted as money-grubbing and dishonest.

The Whole Truth and Nothing But . . .

The CIO of an Australian energy marketer believes that dishonesty is now endemic to the sector" My biggest beef - in fact, I had a go at a service provider yesterday about it - is honesty. It's not that they don't tell us the truth, they just don't tell the whole truth. I am bombarded with people telling us what they can do for us. Well don't tell me what you can do for us, tell me how you differentiate yourself from everyone else.

They have to do that to make it worthwhile changing things around here. Any [alteration], even though it might have a benefit, has a lot of change and costs associated with it. If they say that a product can do something, then they should do it and not try to shonk it.

What triggers the problem, he believes, is that companies believe it is relatively simple to translate the experience they have in one niche to experience in another. He believes this is not the case, and that too often suppliers stretch themselves too thinly.

I like to use this concept, he says. Most service agents or product people have developed a special expertise. Picture a flat surface and then make a peak out of plasticine on it - that is the peak of their skill, their niche. Once they get to that peak, they look over the flat plain around them and see there's another peak and they say: ‘Well, that's not far off'. So they smear the plasticine over to the next peak. What happens? The plasticine gets shallow and it breaks. At the same time, if they upskill, they reduce the peak. They lose the initial skill and they still can't do the other thing properly immediately, he says.

Quite often this emerges when a technology suddenly comes into vogue.

Take customer relationship management. If you look at the major suppliers, they started with one specialty: in sales order processing or call centres or help desk, or field sales assistance. Then they see CRM come along and say: ‘We can do call centres so we can do help desks'.

He demands that would-be CRM suppliers who cold call him detail their bloodlines, explaining the fields they are truly skilled in and which areas are new to them. He claims a decent success rate in getting honest answers, and for those who fail to come clean he has a simple response. I don't talk to them again. If they are honest and say: ‘Look, this product isn't as good as we'd like it to be', if the concepts and strategy are interesting, I might still talk to them, he says.

Dishonesty or economy of truth is not new to the IT sector, he claims, but it is exacerbated by the race to the online economy. The speed at which e-commerce is developing means that as soon as companies have a concept they have a product. There are more people doing it and it's getting faster.

According to the CIO of a construction and engineering services business, the lack of integrity among suppliers is one of her biggest problems. Companies are hyping their capabilities and pushing immature products. This leaves the CIO squeezed between what senior management expects is achievable after reading the marketing hype, and what is actually deliverable when the CIO comes to work through the products and capabilities which they actually offer.

Most CEO's expectations have been raised to a level where they cannot be met," she says. The IT sector is very good at raising expectations and then under-delivering. I thought we had got a bit more mature about that. Now we are back to the cowboy mentality, she says. And identifying a cowboy isn't that hard. "If they know less about e-business than I do, then it's a problem. Sadly, in 60 per cent of the cases, her rule of thumb uncovers a cowboy in place of a seasoned supplier.

Eyes Wide Open

According to one Melbourne CIO, though, there are some early signs that things might be improving as e-business experience develops. It must, he says, because "the issue of integrity is especially important in e-business. We have had a number of experiences where suppliers have over-promised and under-delivered. We have to be fully aware of the risks.

It was at its worst, he says, 12 months ago "when everyone was trying to get on the e-business bandwagon. There was a rush to get experience and a track record.

Did the CIO get burned? "No, but we got singed, he says. We tried to set up an e-business infrastructure with the help of one of the large consultancies and they said it would take three months. Well, it has been more like six months.

In addition, the company has had to deal with software which does not quite do what the company thought it would do. He stops short of describing software companies as having been deceptive, rather that they lacked a good understanding of their product themselves. The one exception, he says, was IBM, which provided additional support once a problem was identified.

Savvy suppliers such as IBM swiftly learn that credibility is a scarce commodity and should not be treated lightly. Credibility helps secure loyalty. For some companies, however, it really matters little what their customers think of them because they are developing a de facto monopoly. Some are taking this as carte blanche to ride roughshod over their customers, and their customers don't like it.

When it's a de facto monopoly, IT people do not have a choice, says the CIO of a large Sydney law practice. When a supplier has reached a de facto monopoly [status], then it exploits it by raising prices. This is the case in the operating systems and application suites for desktops and in the high-end databases and networking space. In fact, the only place where there isn't a monopoly is in PC hardware.

The CIO grudgingly admits that it is not something which infuriates him, but rather something that he is learning to live with. It's a recognition of reality, he says.

That reality is also being experienced by the CIO of a corporate superannuation provider based in Victoria. The CIO believes that many products and services in the IT sector are achieving commodity status and that monopolies are starting to develop in certain market segments. And as companies grow by gobbling up rivals, it pushes customers to review their internal policies based on that trigger rather than on any sound business requirement for a review. When Computer Associates or its like takes over yet another software house that has a product rivalling one already on CA's books, the customer has to work out whether the company will continue to support two platforms indefinitely.

Consolidation in the industry is driven by corporate greed for profits. That greed is also chiselling away at the service and support which users once took for granted. We are starting to lose the services and the ongoing support that used to come without asking, says the Victorian CIO. It used to be that, as part of the overall service, people would be more proactive. Now, because of the increasing monopolies, the reducing number of players and the high turnover of staff in the sector, the service levels are falling and things are being sold as commodities.

It is a natural reaction of the industry merging and growing.

Like It or Lump It

Learning to live with the situation, however, does not mean that the CIOs like it any better. Nor do they like the way in which the monopolies are thrust on Australian consumers by the market conditions in the US. For the last 10 to 30 years, this monopoly decision has been determined in the US, says the law firm CIO. Of course, the market is a composite of the micro decisions, but the real drivers are not in Australia," He warns, though, that customers are not entirely emasculated by this lack of control over the way the market is shaped. Suppliers, even when they are in a monopoly situation, should not blindly maximise the short-term return. That antagonises us and, in the longer term, must lead to their downfall. The smarter companies are less adversarial and that's to their benefit.

The adversarial de facto monopolies have a generally arrogant attitude. They say: ‘That's the way it is and if you don't like it then that's still the way it is'.

The CIO from the superannuation company says that the way it is is being manipulated by not only the marketplace but also the parent companies of the suppliers in Australia. "Everyone has the focus on sales and profits [and] quarterly reporting, which is driving services out of the equation. However, the prices being charged are not falling and the services have still to be found.

It's increasing the cost internally and it's put back on us in the organisation to manage that void, he says. Meanwhile, suppliers who used to throw it in for free are making the services available - only now at a high price as they look to increase profits. Like the CIO from the law firm, the CIO from the superannuation company believes that, were these companies to take a longer-term focus, they might reconsider their abandoning services because he believes good service promulgates customer loyalty and "as you grow, they grow"However, they continue to focus on the bottom line because of the short-term focus imposed by their masters - which, I suppose, is ultimately us, their shareholders.

The short-term focus also apparently extends to product support. According to the CIO of a large manufacturing company, where five years ago there was a more leisurely turnover of product, that is now compressing to the point where a software vendor won't support a product which is two or more years old.

One of my concerns is the number of upgrades we have to go through because a number of vendors are not supporting a two-year-old product. Five years ago, the pace of upgrades was more leisurely. Technology keeps changing under our feet [nowadays] and, although we can get some extra functionality from some of the upgrades, the payback is not always clear.

Another CIO sees this as a lack of realism on the part of suppliers. A lot of companies have gone through Y2K and GST; companies such as ours are not about to throw everything out and change to some new system which is almost vapourware.

At the manufacturing company, the CIO is also angry. Even if a company does make the upgrade, he says, the level of technical support and understanding of the products which is subsequently available from the supplier is 12 to 18 months behind what he might expect were he a customer in the US. I think the issue is one of our market size, he says" The suppliers are prepared to invest some money to train people, but not at the same rate as they would in the US.

It takes his company longer and costs it more to implement the upgrade in Australia than it might take a competitor in the US. In a global trade environment, that is an unacceptable impediment to competition. As a consequence, the CIO is forced to take advantage of his own organisation's global footprint and get more software support from its US-based offices. He has more support in his own peers' expertise than he has in the expertise of the company which spawned the product.

The CIO of a construction and engineering services company agreed that it was difficult to get quality support for e-business products and services with staff who really had a keen knowledge of their products. There is a definite skill shortage, and there is no good training. It's all ERP-style training with an ‘e' put in front of it.

It is not purely the software and services companies which are at fault, she says. Let's not let the hardware companies off the hook, because they are even further behind. I am quickly forming the view that the network companies will overtake the hardware companies. Companies like Cisco, which really understand the networking and how to wire everything up. The hardware companies are too conservative.

Do IT Our Way

There is also evidence of a lack of flexibility among the suppliers. The CIO of a Western Australian government department says that apart from suppliers' poor understanding of government departments and the way they have to work, she is sick of having to conform to their weird organisational set-up and contracts"Whether it is the government department or the IT company which has the weird organisation set-up is moot. What is unquestionable is that there exists a dysfunction between suppliers, be they manufacturers, dealers, or retailers and their customers.

What does a CIO who actually works in the IT industry think of the situation?

The CIO of a large software house claims that he is frustrated by suppliers' penchant for just closing the deal and not understanding what the customer needs"We need to get back to the time when people listened to what we needed, he says. If I go back over the 26 years of doing this, then in the mainframe era the whole idea of selling relied on crafting solutions. Somehow that changed into selling products, and in the dotcom crash we went through, people were coming up with product that people did not want or need.

What the CIO wants restored is the willingness of suppliers to spend time with a customer to find out what is required and then building a solution around that, rather than just shoehorning the product into the customer. High touch is important and it is much more important than reaching the revenue target, he says.

He believes that more online selling could ultimately improve the relationship between supplier and customer, and the understanding of the customer's needs. Companies should be harnessing the Internet to get close to the customer, and then take the time to do something with the information they get. There is lots and lots of data out there, but not much knowledge or even information, he laments. Suppliers are not taking the time to analyse and integrate the data and feed it back into the business.

This IT industry CIO believes understanding the customer's needs is important because the customer is king"It is perhaps telling, though, that after his many years' perspective from the supply side of the industry, he does not believe the customer is always right. We have the responsibility to educate them.

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