Sales & Marketing

Confronting Software's Blind Spot

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A survey conducted by Neochange and CIO Insight of 204 individuals in IT organizations reveals a startling view of the current state of software adoption success with enterprise end users. SandHill spoke with Chris Dowse, Co-Founder and Chief Adoption Architect of Neochange, about the survey findings around specific factors that either enable or undermine enterprise software success.

SandHill.com: Aligning IT with business goals is a top priority in businesses of all sizes and industries. The need to achieve cost optimization while also enabling employees to work more effectively has never been greater. What did your survey reveal about whether companies are achieving this goal?

Chris Dowse: The majority of organizations feel they are doing well, but the bar is pretty low. The average effective usage rate from the survey was 54 percent. Based on the prior year’s survey, “effective usage” is considered the best proxy for software value as it reflects high levels of engaged users, quality data and actionable insights. At 54 percent, this still means there is considerable upside.

SandHill.com: Fifty-four percent is not a high success rate and isn’t good news for the enterprise measuring return on investment (ROI) or for the software vendors looking to sell more products to customers. We’re entering a period of enterprise software adoption – social, mobile and analytics where the dependence on effective usage will be greater than ever before.

Chris Dowse: Yes, obviously a 54 percent effective usage rate leaves significant productivity upside on the table. The good news is that we’ve conducted this survey for the past three years, and the Q4 2010 survey was the first time that the effective usage broke the 50 percent threshold. It is true that upselling is completely dependent on success rates of product deployed, in last year’s survey the majority of buyers were open to paying for help to fix their adoption problems, so this is not just a barrier to account penetration but also a services revenue opportunity for vendors.

SandHill.com: What is the main barrier to enterprise software value?

Chris Dowse: Thirty-eight percent of the participating IT organizations ranked “application usability and feature relevancy” as the number-one factor undermining software value. This is in stark contrast to our 2009 survey where no one driver stood out. Respondents that year ranked “business management” equally with “application development and end users.” We believe the shift in ranking is likely a result of lower development spending over the past two years during the recession and the fact that we only focused on the IT organization this year. This is such a complex issue that extends from the data center through to the executive suite.

SandHill.com: What factors did the survey uncover regarding barriers to the perception of software value, which leads to lower effective usage rates?

Chris Dowse: In addition to the barriers of end-user performance and IT availability we saw a number of areas that if neglected resulted in lower effective usage rates.

Specifically the three issues that undermined success were:

  • Companies did not measure software usage and its impact
  • IT taking an order-taker role and not working software assets post deployment
  • Where communication breakdowns in the development portfolio were high

The survey also showed that the companies experiencing IT availability issues

have limited application performance-management capabilities in place. In addition, 50 percent of respondents cited environmental “churn” as having a negative impact on software value realization.

SandHill.com: What strategies can companies undertake to remove the barriers to software value?

Chris Dowse: Many respondents ranked the “lack of organizational change leadership” as a top issue that they need to address. Sixty-seven percent stated they do not commit sufficient investment to organizational change leadership. The study also showed that organizations with stronger measurement capabilities experienced higher adoption rates for their last major implementation and were more successful at meeting ROI expectations on their new IT projects.

Another top issue the survey participants stated their organizations need to address is the “inability to articulate the value of effective usage.”

The IT organization’s role regarding value assurance to the business is critical to effective usage. Our study found that IT organizations that take a leadership role regarding value assurance experience effective usage rates approximately 150 percent higher than “order-taker” IT organizations. They also experience higher success rates for their projects.

SandHill.com: So the IT organization influences the perception of software value and impacts the barriers to effective usage more than the software vendors?

Chris Dowse: Yes. In fact, more than half (54 percent) of the surveyed executives cited IT management as the party that their CEO would most likely hold directly responsible for the success or failure of an IT project. Eight percent stated that their CEO would most likely hold the IT vendor directly responsible. Without an understanding of value, this then, leads to discussions focused on price – aka maintenance revenue pressure.

SandHill.com: Yet, the effective usage rate of only 54 percent indicates IT organizations are not very effective at influencing end users and the business as to software value. How can software vendors help the IT organizations achieve this objective?

Chris Dowse: Seventy-seven percent of respondents stated they are not able to articulate the value of their IT beyond a new project business case. Vendors can improve customer satisfaction and benefit in future sales by approaching this communication challenge as an opportunity to improve business relationships with customers. Vendors need to show their customers’ IT organizations how to discuss the value of the vendor’s software and services – VMware’s cloud adoption journey is a great example of a company tacking this issue and being rewarded with growth. TSIA has research this area also and finds that reinforcing value realized tends to lead to fewer discussions around price reductions.

SandHill.com: So, a software product’s value is often like a blind spot – it’s an area about which the end user may be uninformed, and software vendors can help provide a way for users to see the value and increase their usage of the product.

Chris Dowse: At this point, the main communication sources about software impact are the complaints by squeaky wheels wanting specialized features and laggard users complaining about product complexity.

You have to keep in mind these two groups are small constituencies, but without the insights of 100% end-user performance and effective usage most organizations have no way of articulating what is really going on.

Of course there is some skepticism of vendors making assertions around value, but I was talking with a Fortune 50 company just last week and they were scratching their heads as to why their vendors were not helping them in this area – after all, usually the IT organization’s is the vendor’s champion, even with Saas taking hold.

Bottom line – you need to be able to measure usage and get the customer comfortable putting a value estimate on that usage. It is even more important post recession, as 72 percent of the survey participants reported that their organizations will focus on some form of application optimization over the next two years, trying to simultaneously reduce maintenance costs and squeeze more value from existing software investments. Also they stated that future investment decisions will be influenced peers and vendor practices moving forward and less by pay-for-play IT analysts.

The 2010 IT Adoption Insight research was led by Neochange, working with CIO Insight. The survey was conducted during the last quarter of 2010. Respondents were invited (in e-newsletters from the publishers and CIO Insight) to participate in an online survey. A total of 204 individuals completed the survey. They represented a cross-section of company sizes, respondent roles and industry verticals. The report was jointly published by the members of the IT Adoption Alliance (Datango, iRise & Knoa). Click here to download the survey report, Software Success 2010: Insight Into the Drivers and Actions for Maximizing Software’s Adoption and Value.

Chris Dowse is Co-Founder and Chief Adoption Architect of Neochange.

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