Custom agile development: It’s not just the big boys

A small (250-person) IT development shop, Tiempo Development, provides an interesting example of several trends affecting IT buyers. The firm is specialized in agile application development, and it does a lot of work in mobile, cloud and analytics.

What’s Interesting #1: It’s not just vendors anymore

What’s interesting about Tiempo is that although they grew their company by providing application development services to software vendors, IT buyers are now 30% of their business—and the fastest growing segment of their market. As these enterprise customers turn to technology to differentiate their business and services, they find that somewhat by definition the capabilities bundled into off-the-shelf software, by virtue of being readily available, are not unique differentiators. Payments and analytics in healthcare and financial services are their typical sweet spots currently. Tiempo isn’t usually building an actual ERP system from scratch—though its CEO, Cliff Shertz, says that sometimes, for retailers, it has. By adhering to common platforms and standards, these companies are feeling safe with the customized software that can be required to deliver their unique capabilities to their customers. These companies are not becoming software vendors, but by contracting for customized software, they are acting more like Tiempo’s original software vendor customers.

What’s Interesting #2: It’s not just the big boys

Tiempo’s IT buyer niche at this point isn’t global-scale multinational companies, but solidly in the midmarket, with a target of $50 million to $1 billion in annual revenue. That’s right, it’s not just the big players in the business identifying and implementing unique differentiators to leverage disruptive technologies and separate themselves in the market. In turn, it’s not just the big IT buyers developing, or having developed, custom IT solutions that provide unique value to their customers.

Traditionally, system integrators and value-added resellers to the midmarket built a good business by customizing proprietary, off-the-shelf software packages for their customers. That customization was most often to bridge the gap between the organization’s quirks and the standardly available capabilities of the software.  In the new trend, software is being designed to emphasize and codify those quirks as unique aspects and capabilities of the company’s products and delivery—even for companies with under $100 million in revenue.

What’s Interesting #3: These IT buyers aren’t IT buyers

Tiempo says it works closely with IT executives and departments, of course, but the firm first approaches and is brought in by line-of-business executives (or CEOs), more than by IT execs. Attempting software sales to the CEO—and often succeeding in the case of smaller organizations—is one of the oldest tricks in the technology sales book. But these are custom application developers, even at the midmarket level, being brought in more by the line of business than by the IT department. What’s more, they are usually brought in after the software capabilities have been specified and, often, development has already been attempted, and—ouch!—failed, in-house.

Tiempo’s business is a sign of the times in more ways as well. Its four development centers are based (very) near shore in Mexico, where they’ve found engineers not only share common time zones with the US, but also have a better understanding of the cultural environment and have the visas to visit their US customers whenever required.

Full Circle?

Those for whom cloud looks like an updated form of timesharing, and thin clients look like dumb terminals, will recognize this pull to customization. After all, how many companies are now frozen into a dated ERP application because they’ve customized it to death? But there’s a reason that pendulums swing back, or in today’s helter-skelter technology world, collide and sway back in multiple directions simultaneously. Or perhaps more aptly, swirl round in an upward spiral. Custom agile development can get organizations to offer unique capabilities quicker than ever before. Where is custom development best applied, and how is it best managed for the long haul?

At the Buyer’s Lens we will look at these key trends:

  • IT buyers building their business differentiation in technology,
  • such differentiation becoming pervasive and commonplace in various forms,
  • IT decision-making reaching further beyond the IT department than ever previously, and
  • managing enterprises to differentiated and deffensible positions with the long-term technology agility to navigate continuing market changes.

Is SAP in the same cloud boat as IBM?

SAP could be in the same cloud computing boat as IBM, struggling to increase their cloud computing revenue while their traditional business declines. The game is afoot to grow SAP’s cloud-based business before the demand diminishes for legacy systems.

Getting a handle on innovation

Enterprise executives only get a handle on disruptive technology by considering and understanding both changes in IT implementation and, more importantly, the resulting changes in their business and industry.

NewsGator acquires Sitrion, pushes ahead in innovation sector

NewsGator, the work management company that extends the capabilities of Microsoft Sharepoint, has announced the acquisition of Sitrion, a company that creates a social communication layer on top of SAP processes. Sitrion was founded in Germany, but has offices in Atlanta, as well. I had a chance to catch up with NewsGator’s CEO, Daniel Kraft, who shared the news with me, Monday.

Sitrion’s technology is based on the idea that people do not to be ‘processed’, so even if their company wants to use business process software — Like SAP — to implement and control business policies, workers would rather operate in a social context, where they can — for example — clarify their companies expense reporting policies conversationally. That conversation can be stored — based on Sitrion’s implementation — right next to the data in SAP associated with an expense report. This can shorten the approval process, since the information can be used by others further along in the process.

Kraft pointed out that this is part of Sitrion’s motto, ‘we simplify work’, since ultimately, companies can proactively improve policies based on analysis of patterns in the data. For example, a company might decide that the business expense approval process can be waived for expense reports under $2000, following an analysis showing the effort isn’t worth the effort, and simplifying work for everyone.

I also spoke with Kraft about last week’s announcement: NewsGator’s continued emphasis of innovation management in their updated Social Sites for Innovation. I recently made the case that strategy is the place that companies need to start their push to engage more people more deeply into strategic thinking:

Stowe Boyd, Metaphors Matter: Talking about how we talk about organizations

[…] the nature of strategy changes in a time of great change, when the future is difficult to foresee. The role of leadership changes with it, as well. Instead of concocting a strategic vision and pushing it out to the organization through cultural and managerial channels — the deliberate style of strategy — leadership must shift to distributed, action-based strategic learning about what is actually happening in the market: emergent strategy. This, as Henry Mintzberg observed, does not mean chaos, but unintended order.

I think the same is true with innovation: it’s no longer something managed by an innovation group in the R&D labs, but instead has to become a distributed activity happening across the board, deeply embedded culturally. And that is greatly helped by having social tools which are tailored to support the specific activities related to innovative thinking. Those activities include idea creation and sharing, gathering feedback on ideas, and then moving ideas into reality by active and direct execution. This again is the strategic learning mentioned above, and the core of what is going on in Social Sites for Innovation.

This needs also to be measured and displayed in an open way, so that progress can be monitored and those projects and performers that are making the greatest headway can be identified, and the ideas that aren’t working can be quickly pruned, and lessons learned. This is the motivation for Social Sites for Innovation’s various dashboards and analytic tools.

In the conversation with Kraft I offered this insight as to why the acquisition of Sitrion lines up with NewsGator’s basic value proposition. In both cases, the technology is organized around the proposition of helping people rapidly improve how work gets done by letting them socially work through obstacles to improve operations and remove barriers to delivering value.

Innovation in business models is an immensely important area, and NewsGator is providing tools that help companies get there.

Welcome to the Buyer’s Lens

This newest channel for GigaOM Research considers the disruptive technologies covered by our other channels—but more expressly from the technology buyer’s point of view.

To bring our research into focus for enterprises, we will tag and profile the most relevant of our research reports from our technology-specific channels (cloud, mobility, social business, etc.), and we will repost some of the most on-point commentary from their blogs. Any decision maker looking at a particular technology will want to dig into all of GigaOM’s related coverage, but we will provide a portal into that research with additional perspective.

The Buyer’s Lens will also provide original content on the management and strategy implications of new technologies for buyer organizations. We will tap our network of 200+ analysts and conduct primary research for this blog, as well as for more in-depth reports. What are the best practices for forecasting and communicating tech-driven change? Understanding strategy and business implications? Assuring C-level buy in? How about IT integration and service partnerships? Different approaches to tech governance? Vendor and technology evaluations? We’ll look at this and more.

As the curator of the Buyer’s Lens, I have invited other GigaOM curators to share relevant insights and angles from their coverage areas. I will feature some of our analysts whose coverage especially pertains to the issues of this blog, and in these inaugural weeks I’ll shine a spotlight on some of their recent work. You can also expect interviews with, and guest blogs from, selected analysts.

For easy tracking of our coverage, please sign up for the Buyer’s Lens newsletter.

If you are an enterprise executive with an interesting story or insight to share, I invite you to contact me directly and we could schedule an interview or a guest blog. If you are a vendor with a tip or suggestion as to an innovative enterprise or implementation, I’d love to hear it. If there’s a knotty issue managing and communicating technology change for which any of you would like to see coverage, drop me a line and let me know.

And please feel welcomed.

Paying for Netflix

Netflix CEO Reed Hastings tip-toed carefully through the mine field of his company’s relationship with ISPs during his third-quarter earnings call on Monday.

2 things the government should regulate in the cloud.

While these types of laws are easy to sell outside of the US, we have a tendency to lean toward less government invasiveness in the US. However, considering that the government was invasive in this case, many are calling for the government to regulate itself.

As goes IBM, so goes the enterprise

IBM posted disappointing news for financial analysts and shareholders last week, with a decline in revenue of 4% to $23.72 billion while profit rose 6% from a year earlier to $4.04 billion. This precipitated a shakeup as CEO Gina Rometty reassigned James Bramante — who was until last week running the growth markets group, a role she placed him in when she became CEO the company a year ago, but which fell 9% from last year — and placed Bruno Di Leo back in charge of the  group, which he started in 2008 and grew for several years. She also sounded the alarm bell:

“In the third-quarter we continued to expand operating margins and increased earnings per share, but fell short on revenue. Where we had identified high growth opportunities and pursued them aggressively — cloud, mobile, business analytics, and security — we continued to show strong growth. This underscores our strategy to continuously transform the company to high value,” said Ginni Rometty, IBM chairman, president and chief executive officer.

From my perspective, IBM is a bellwether for the tech sector as a whole, and there is no way to soft pedal the bad news in the tea leaves. They are confronted by the same problems as HP, but Rometty at least has not announced the tailing off of IBM’s remote work policies (see HP’s Meg Whitman follows Marissa Mayer’s lead: All Hands On Deck). Hardware sales are down 17%, especially in proprietary servers running IBM’s version of Unix, as well as a decline in IBM’s enormous services consulting business, which declined 4%.

The few bright spots in IBM’s P&L are those areas that reflect the rapid transition to the next generation of computing: mobile, cloud, analytics, security, and social workforce solutions.

Revenues from social workforce solutions increased 14%, an indication of the fact that social has gone mainstream, and companies are upping their investments.

Notably IBM’s WebSphere solutions business is flat — an indication that it may be reaching the point of decline, but the Rational Software — tools for developers — increased 12%.

IBM is like a mirror that shows what’s going on in the enterprise: companies are investing in mobile and cloud, deleveraging away from proprietary, ‘vanity’ servers in house, and investing in social tools, analytics, and security that meet the needs of a drastically changing workforce. It remains to see if IBM can deleverage its investments in the old technology paradigms and reorient its business lines and operations to get out ahead of this transition.

At the end of her first year, I’d say that Rometty has already opened her second envelope, and blamed the newest disastrous results on Bramante. Earlier in the year she opened the first envelope, and blamed the company’s troubles on the legacies of the past. The third and last note is all she has left, the one that reads “Prepare three envelopes.”