Shaun Snapp on The Criminal Nature of Consulting Firm Software Selection

Executive Summary

  • Consulting companies nearly always rig software selections so that the vendor they make money from wins.
  • As this is fraud on the part of the consulting firm, it is by its nature criminal.

Introduction

IT consulting is normally all about sales and billing hours. The best way to maximize billing hours is to get clients to implement the most complicated and expensive applications. To do this, consulting companies pretend to be independent software vendors, which ultimately leads them to be selected.

Rigging RFPs

An RFP is how requirements are documented to know what is needed when evaluating different vendors. However, as explained in the book How to Rig an RFP to Maximize Billing Hours consulting companies normally do not allow customers to select from vendors that are the best match for the requirements. This is because it would be detrimental to billing hours. Therefore, the RFP must be rigged so that the software selection results in the “right answer,” the right answer is implementing the software that the consulting company has resources it can bill for. This is known in the industry and considered entirely normal. The consulting company engages in fraud when they declare to their client that they will help them select the best vendor for their requirements. What they mean is they will select the best vendor for the consulting company.

Conclusion

IT consulting is filled with misrepresentations that should qualify as fraud. Many IT consulting companies engage in behavior that should be subject to not only civil but to criminal implications. Software selection fraud is just one of the many areas by which IT consulting firms routinely defraud their clients. The consulting companies do a double disservice to their clients because even after they leave, the customer is stuck with software which was normally selected only because of the needs of the consulting company. Consulting companies walk out of clients all the time, and perpetuate the same fraudulent tactics on their next clients. Having worked in IT consulting for decades and with many different firms (as an employee, as a sub-contractor, as just another consultant reporting directly to the end client) there is not one of the consulting companies that we would trust to do a software selection. IT consulting companies are dedicated to doing what they can to get the most out of the software selection for themselves while leaving the least benefit for their clients.

Accessing Honest Information on SAP

  • Want Honest Information About SAP?

    We can help you independently verify the information provided by major consulting companies and answer your SAP questions. Our work together can remain confidential too.

    This article is free, we do not answer questions for free. Filling out this form is for those that have a budget. If that describes you, just fill out the form below and we'll be in touch asap.

Shaun Snapp on IT Consulting Exaggeration and Criminal Behavior

Executive Summary

  • Consulting companies nearly always greatly exaggerate their capabilities to customers.
  • Consulting companies routinely engage in behavior which is criminal as it violates fraud statutes.

Introduction

IT consulting is normally all about sales and billing hours. Having worked on IT projects for many years, it has been extremely rare to find projects where the capabilities of the consulting company have not been greatly exaggerated by the partner level resources.

Fraud Versus Puffery

Fraud is when one misrepresents a product or service. One this is sold, and something else entirely, of lower value, is delivered. For IT consulting companies it is common to lie about the following areas.

  1. A Unique Methodology: Nearly all consulting companies state that they offer a special or unique methodology for implementation. We reviewed many consulting methodologies in the article The Real Story on IT Implementation Methodologies. Our observation was that there was nothing special about any of them and that they were primarily designed to sell IT projects.
  2. Special Resources: Exaggerating the training and expertise of resources is extremely common in IT consulting. Resources often have skills listed for which they have only a passing exposure. At one consulting company resources that had performed demos, altered their resumes to state that they had participated in full implementations for customers they had only prepared a demo. Sometimes the exaggerated skills are added by the resource themselves, and sometimes they are added by the consulting company.
  3. Pretending Public Information is Specific to a Consulting Company: IT consulting companies will often overstate the degree to which they have contributed to their area versus how much they have taken material available from published books and articles.
  4. Timelines: It is highly common for consulting companies to exaggerate the speed at which they can implement software.

Conclusion

IT consulting is filled with misrepresentations that should qualify as fraud. Many IT consulting companies engage in behavior that should be subject to not only civil but to criminal implications. Furthermore, IT consulting companies use these same fraudulent tactics and patterns against US government agencies.

Accessing Honest Information on SAP

  • Want Honest Information About SAP?

    We can help you independently verify the information provided by major consulting companies and answer your SAP questions. Our work together can remain confidential too.

    This article is free, we do not answer questions for free. Filling out this form is for those that have a budget. If that describes you, just fill out the form below and we'll be in touch asap.

Shaun Snapp on Criminal Inflation of Revenue Prior to IPO

Executive Summary

  • It is common for software vendors to inflate their revenues and profits just prior to an IPO.
  • Learn why in many cases this can qualify as criminal intent.

Introduction

When software vendors are about to make an initial public offering, they will in many cases cook the books to make the revenues look as good as possible. The crime to be committed is fraud.

How Do Companies Artificially Inflate Revenues and Profits?

There are many tricks to revenue inflation.

  1. Push Off Expenses: It is very common for companies to push expenses until after the IPO. This makes the company look more profitable than it is. They do this knowing that they will incur those expenses later. Furthermore, some of those expenses may be necessary to be incurred pre-IPO, and pushing them after the IPO can have negative implications for operations.
  2. Bring Forward Deals: Deals can be brought forward, depriving post-IPO timeline of those deals. This is quite common.
  3. Push Harder for Short Term Bad Deals: Software companies can lower their standards of sale, which will increase sales…in the short term, but which will reduce the long-term viability of the implementations.
  4. Push the Sale Force Harder: This also has the consequence of increasing short-term sales before the IPO, but can cause long-term damage to sales as more experience salespeople leave post IPO, making it more difficult for the company to meet its long-term sales increases.
  5. Not Pay Out Sales Compensation that Was Agreed To: The incentives to bait and switch on sales compensation pre-IPO can be tempting. The reason being that salespeople take a high percentage of their income in bonus. And bonus plan can be altered while the salesperson is working, which is different than what was agreed to in the sales compensation plan originally. In extreme cases salespeople with a large amount of money due can be fired, to keep from paying bonuses, keeping more cash in the company, and again inflating actual revenues.

Conclusion

Software vendors employ a variety of tactics to inflate revenues and profits prior to an IPO. Some of the tactics are unethical, but others are illegal and fall into the category of investment fraud, and are therefore criminal in nature.

Accessing Honest Information on SAP

  • Want Honest Information About SAP?

    We can help you independently verify the information provided by major consulting companies and answer your SAP questions. Our work together can remain confidential too.

    This article is free, we do not answer questions for free. Filling out this form is for those that have a budget. If that describes you, just fill out the form below and we'll be in touch asap.

Shaun Snapp on Criminal Behavior of Software Vendors

Executive Summary

  • It is common for software to provide false information to customers.
  • Learn why in many cases this can qualify as criminal intent.

Introduction

Software vendors normally present themselves as providing information about their software. However, many software vendors lie so extensively about their applications that is provides an entirely false impression as to what the software can do. The crime to be committed is fraud.

It is curious how infrequently the term fraud is used in software, but it should be used quite frequently. If a company that manufacturers refrigerators lie about what the refrigerator can do, that is very easily called fraud. But because software tends to be more esoteric, it is infrequent for the term fraud to be used, even when it fraud and therefore criminal. In analyzing statements by vendors we repeatedly find false statements contained in marketing documentation. It is considered very normal in the software industry to mislead customers, and in the past when we have supported sales efforts when we have pushed back on false statements, we have often been accused of doing things that would “lose the account.” In the head of a sales pursuit entirely false statements are justified on the basis of attaining the sale. The truth or falsehood of a statement often falls to the wayside.

Conclusion

The false statements made by many software vendors qualify as fraud and therefore is in fact criminal. Yet it is virtually unheard of for criminal investigations to be opened against software vendors by the government. Even in cases where customers have been completely lied to, the most the software vendor will face is a civil suit and no criminal implications.

Software vendors operate in an unregulated market. Many vendors feel, and are accurate in feeling, that they are immune from the repercussions of providing false information to customers. This is because we do not define fraudulent information as criminal if it is part of the process of selling software.

Accessing Honest Information on SAP

  • Want Honest Information About SAP?

    We can help you independently verify the information provided by major consulting companies and answer your SAP questions. Our work together can remain confidential too.

    This article is free, we do not answer questions for free. Filling out this form is for those that have a budget. If that describes you, just fill out the form below and we'll be in touch asap.

How SAP and Oracle Cheat the Commercial Software Model

Executive Summary

  • SAP and Oracle do not follow the established rules of enterprise software.
  • Both of these vendors use monopoly power to block out other vendors.

Introduction

Many people like to pretend that SAP and Oracle operate under the generally accepted rules of the “free market” enterprise software segment, but this is far from the case. SAP and Oracle practice most extreme form of commercial software tactics and behaviors, pushing up against the legal rules, and far beyond what is generally considered ethical. With open source software anyone can use the software, and in most cases, it is free to use. Commercial software charges a license fee to use the software. However, SAP and Oracle aren’t regular commercial software vendors. This is because a typical commercial software vendor would sell its software for a license fee, but allow its software to be used with any other software. This is the logical basis for allowing commercial software in the first place.

Why is Commerical Software Allowed?

Commercial software is allowed as it is intended to compensate the software development entity for their investment. The intent of commercial software licenses was never to allow larger and vendors with more resources to “block out” other vendors from environments where they predominate. However, SAP and Oracle develop exclusionary products that reduce interoperability and use a variety of legal and account control tactics all designed to push the purchases of the company to SAP and Oracle.

Why Does SAP Make Integration so Difficult?

SAP has routinely made integrating other applications to SAP far more difficult than it needed to be, and encouraged the large consulting companies to talk down non-SAP software in favor of SAP software. (An easy task as SAP consulting partners make so much money on SAP consulting.)

Oracle’s Monopolistic Acquisitions

Oracle has used aggressive acquisitions to control the purchases of their customers. SAP has used the centrality of its ERP system to limit choice on the part of customers, while Oracle has done the same thing, but using its control over databases. SAP introduced S/4HANA, which was the successor to their most popular ERP application, and which had for decades worked with a variety of databases, and made the new version exclusive to SAP’s HANA database. SAP has created a number of technical arguments as to why this was better for customers and why it was necessary (a subject we cover in depth in the article How HANA is Used to Block out Other DB Vendors).

We have analyzed these in detail and concluded none of them are true.

Conclusion

SAP and Oracle use the commercial software model, but they do not follow the rules of commercial software. They follow a model where the commercial software is used to extract monopoly rents from customers.

Accessing Honest Information on SAP

  • Want Honest Information About SAP?

    We can help you independently verify the information provided by major consulting companies and answer your SAP questions. Our work together can remain confidential too.

    This article is free, we do not answer questions for free. Filling out this form is for those that have a budget. If that describes you, just fill out the form below and we'll be in touch asap.

The Importance of Seeing Your Employer as an Opponent

 What This Article Covers

  • Keeping Employees Controlled
  • Union Strike Funds
  • Seeing Employers as the Opponent

Introduction

When commenting on a previous article, Ahmed Azim made the following observation about why people resist unions.

“Here’s the thing Shaun Snapp. Most people prefer a steady paycheck until something better comes along or they get laid off because the company is downsizing quietly. Something better never comes along because usually the skill sets in declining companies are obsolete. So people simply live in daily anxiety and develop 6 varieties of ulcer clinging to a false sense of safety. It’s a bad way to live life. People age very badly and turn into miserable posers.

That’s why I like what the Koreans did. They’re fighting back. Good for them.” 

Keeping Employees Controlled

The intent is to get people to spend up to their level of income with a relatively small savings level. That way you can’t resist. You have seen me debate SAP resources and you have no doubt noted the zombielike conformity to whatever SAP says.

Part of me makes we wonder how much of this conformity is because they have high spending driven by status attainment purchases. Nice houses, fancy cars, maybe kids in college. If a person is financially strapped, they can’t say what they think. And they are required to conform.

Union Strike Funds

Unions draw money from their members, and part of what they do is create a strike fund. That means the workers can strike and still have basic expenses covered.

This is the reality of the relationship with your employer. The lower the union participation, the more the companies filter the money to the top 10% and even the top 1% of the country’s earners.

With low union participation, the top few percentage points take all of the productivity gains and place them in their pocket. 

Seeing Employers as the Opponent

All of this requires workers to see their employers as their opponent. And employees have been conditioned into thinking their employer is their buddy. Moreover, that HR is someone they can confide in, when in fact HR is an intelligence gathering entity for owners. With the Harvey Weinstein affair, it showed how HR was more than happy to side with a serial sexual harasser/rapist in order to protect “the company.” You can find HR people to defend any type of behavior because they see it as their job to do so.

The amount of propaganda within each of these companies is amazing. Its role is in part of try to get the employee to turn their brain off and give up their interests in favor of the interests of the company.

The Importance of Unions and Oracle

 Executive Summary

  • South Korean workers have been trying to unionize against Oracle.
  • This gets into the broader question around labor unions and how labor unions can be viewed as a precondition for a participatory government

Introduction

This article was written in response to the story about the Oracle’s workers in Korea forming a union and going on strike.

“Most of the 1,000 employees have not had a pay raise since they joined the company in 2009. A section director who joined the company in 2009 earns just W2.3 million a month, while a worker who was hired later makes W4 million a month” (US$1=W1,075).

Kim said this prompted some workers to quit and try to rejoin the company to get better pay. On top of that, Oracle has been downsizing since last year, shifting its focus from servers to the cloud, which resulted in the loss of around 200 jobs. More than 100 claim that they were shown the door against their will.

Oracle said the downsizing came at the orders of headquarters and it is “negotiating possible wage hikes” with workers.

The strike exposes the ugly underbelly of what it is like to work for a foreign company that was once praised for its modern approach and strict adherence to the nine-to-five workday. In reality, workers often find themselves anxious for their jobs and little better off than cyber-serfs.

One IT industry source said, “Most foreign IT companies have key operations like R&D based overseas and only the marketing operations are based in Korea. As a result, poor results or a shift in the main area of business results in downsizing and layoff pressures.” – Chosen

This brings up the question of whether Oracle can afford to pay higher wages. My initial comment was the following:

“The problem is I don’t know where Oracle is supposed to get the money to pay these Korean workers as a decent wage. Larry Ellison only has a net worth of $57 billion. Safra Catz has a net worth of 1/2 billion. If we look at Oracle’s margin on support, which is 93%+, there is just no money there.”

Labor Unions Lead to Communism?

Secondly, as any good US Republican will tell you, labor unions lead directly to communism. For instance, labor unions are what lead to the decline of the Soviet Union….except,

Soviet Labor Unions?

…..they weren’t. If you tried to organize in the Soviet Union, you ended up with a one-way ticket to Siberia. The Soviet Union was not only increadibly anti-union, The Soviet Union was renown for its forced labor camps, which dotted the Soviet Union.

The Soviet gulag system was mind-boggling. Each dot on this map was a Soviet Gulag. Malnutrition was an endemic part of the Gulag system. In many cases the workers died in the camps. 

Does this look like an environment that is conducive to labor unions?

“Forced labor was used extensively in the Soviet Union as a means of controlling Soviet citizens and foreigners.[1] Forced labor also provided manpower for government projects and for reconstruction after the war. It began before the Gulag and Kolkhoz systems were established, although, through these institutions, its scope and severity were increased. The conditions that accompanied forced labor were often harsh and could be deadly.” – Wikipedia

The US History with Unions

The historical time when the US economy performed the best was when the US had the highest labor participation. Higher wages drive an economy forward as it puts money into the hands of people who spend far more than they save. US workers have not seen their wages increase since 1973 in real terms (not inflation adjusted), and not coincidentally union participation has dramatically declined since 1958. There is a direct negative correlation between union participation and the percentage income going to the top 10% of the country.

See the following graphic.

People think education is the key to higher incomes. It is for one person versus another person (that is as a differentiation device) but not in the aggregate.

Real wage growth has declined in lockstep with labor unions. This is because wages are as much about leverage as about productivity. Under slavery, the slave is paid nothing. This is true even though the slave may be quite productive. It is the change in the political status of a slave (that is they may not be owned under the law of the land) that allows them to receive compensation.

This issue of stagnant wages has been true even as the percentage of the population investing in education and obtaining degrees has increased. Nearly all the gains in productivity since 1973 have gone in compensation to the top 1%.

To people like Ellison and Safra Catz.

This is the graphic that Larry Ellison and Safra Catz and the rest of the super rich do not want you to see. Unless as a worker you have leverage against employers, there will take every single bit of productivity gains, every single benefit from all scientific advancements, and place is into their bank accounts instead of paying out wages. 

And the decline is wages is why the percentage of GDP that goes the wages continues to decline: 

Notice the decline from 50% of income going to labor to 43%. Why are all the people getting educated — so that labor can receive an ever-declining percentage of national income?

Will the government report out this statistic, or will they instead focus on the unemployment rate? Ask yourself, have you ever seen this graphic before?

The Answer Resides in Education….or Labor Unions?

Education increases income for the individual who attains the education that differentiates them, but education does not increase the net leverage of the population vis-a-vis the employers. Unions increase the net leverage of not only those workers in unions but also for non-union workers, as the political lobbying to change legislation to better the lives of workers (such as overtime pay, pregnancy leave, safety regulations) overflow into the non-union bucket of workers.

All of this is along the backdrop of people fawning over the Royal Wedding. Game of Thrones has tried to educate even people who have not studied history about royalty. Once can head on over to Saudi Arabia to see what actual royalty looks like (where 1500 members of the House of Saud own 70% of that nation’s wealth and 20% of the population lives in poverty).

But the general population is still not getting the memo. The British Royalty is “quaint” because they no longer hold power and are no longer able to either chop off your head or use your children as cannon fodder in some war to be fought for the glory of “King and Country.” The old British Royalty enjoyed acting as a parasite on its subjects. Mistreated in the extreme by the feudal system, and yet the offspring of these abused people now revere the modern UK royal family. This behavior generalizes. If you talk to most people, they oppose labor unions. You know, because they are for communists. But they show appreciation for Larry Ellison’s wealth and for UK Royal Family weddings.

This would be the definition of stupidity.

Lazy People Gravitate Towards Unions?

When discussing this topic on LinkedIn a person who is quite bright observed the following:

“Unions do have a dark side too. In Spain were a refuge for those who did not want to work and loved sabotaging projects.”

As a proponent of unions, you might expect I would disagree with this proposal. However, I don’t. Furthermore, I think there is an obvious mechanism at play for this claim.

Psychologically, the less capable a person is, the more they seek the protection of a larger group. This is not exclusive to unions, but to large organizations. One reason large organizations are not a good fit for me is they are filled with people who desire to parasitize my work and my effort in order to maintain their standard of living. We have a specific name for this exploitation, which is the word “management.”

I produce a large amount of research output, analysis, etc.. If I worked for Deloitte or SAP, people that talk a lot, but are unproductive would seek to ride me like a hobby horse. In fact, that happens every time I subcontract to a large multinational. It happens when people who I have not talked to for 13 years, and want free competitive intelligence on SAP, introduce themselves to me as an “old friend.” All these companies are filled with lazy, and intellectually middling people trying to take credit for my work and for the work of others. I consider that lazy. Actually more lazy than someone snoozing on the job in a factory someplace.

Lazy People All Over!

So my proposal is that lazy people are all over the place. They are in labor unions, they are in the government, they are in large companies.

Lazy people are the default and will always exist. However, it is far easier to not be lazy if you are paid well. Some people are lazy because they are paid very poorly. For example, if you look at people that work at Wal Mart and are paid $10 per hour. What is their motivation to work exactly?

If that was my pay I wouldn’t. Would I be lazy at $10 per hour? Absolutely. Does getting paid $10 per hour get you excited about going to work? I thought not.

The Hypocrisy of People on the Top Accusing People at the Bottom of Being Lazy

The problem of accusing people of laziness is that many people doing the accusing are far better paid than those that are accused of being lazy. Second, laziness is endemic even in high paid professions. However, it is covered up because those people have positions in the hierarchy where exploitation of others is part of the job description and claim the work of other people as their own.

Labor Unions as a Precondition for a Participatory Government

We don’t have a mechanism for replacing what unions bring to the table. Secondly, without labor unions feeding the political apparatus with donations, the political apparatus promptly turns to industry sources and then turns against the population. The US is currently declining in anti-trust enforcement, in environmental protection, in labor protections, in universal schooling, because as per usual companies and the super rich don’t care about any of those things. At the time I am writing this we have a new scandal where the head of the US Environmental Protection Agency buried a report about grave water pollution because industry does not like those types of things published.

  • Unions support more participatory governments (I hesitate to use the word democratic, as none of them are). Unions decrease income inequality and the concentration of power. These are critical factors and I think necessary things to have in order to have the types of societies that we want to live in. What do the worst countries to live all have in common? They have very little power exercised by labor in their political systems. Countries like the US that used to have higher labor participation are now worse in all the dimensions that apply to human well-being and happiness than we were in the past. It is time to wake up to this fact, and to the underlying factors.
  • What country has done extremely well in protecting its manufacturing competence from being taken out of the country and hence reducing wages? Germany, with powerful unions that did not allow it. See the following description of the different paths taken by US manufacturing policy versus German manufacturing policy.

Labor Unions Helping Influence Manufacturing Policy

“But it’s worth noting that one high-wage advanced manufacturing nation has seen its workers thrive in the past 40 years: Germany. Like American multinationals, all the iconic German manufacturers—Daimler, Siemens, BASF, and others—have factories scattered across the globe. Unlike the American multinationals, however, they have kept their most remunerative and highest-value-added production jobs at home. Nineteen percent of the German workforce is employed in manufacturing, well above the 8 percent of the American workforce. German industrial workers’ wages and benefits are about one-third higher than Americans’. While the U.S. runs the world’s largest trade deficit, Germany runs a surplus second only to China’s and occasionally surpasses it.

To be sure, Germany’s identity is more wrapped up in manufacturing than America’s is, but that’s because of national arrangements that not just bolster manufacturing through such policies as excellent vocational education but also give workers more power. By law, all German companies with more than 1,000 employees must have equal numbers of worker and management representatives on their corporate boards. For the most part, German companies don’t get their funding from issuing stocks and bonds but rather by generating investment either internally or by borrowing from banks; the role of the shareholder is insignificant. By practicing a brand of capitalism in which employees and communities still matter, Germany has been able to subject itself to the same forces of globalization that the United States has without substantially diminishing its workers’ power and income.”

So the comment about lazy people being attracted to unions can be true, without being necessarily incompatible with my analysis of the benefits of unions to the overall population.

The Role of Labor Unions in Maintaining Civil Societies

Unions decrease income inequality and the concentration of power. These are critical factors and I think necessary things to have in order to have the types of societies that we want to live in.

What do most of the worst countries to live all have in common? They have very little power exercised by labor in their political systems. What country has done extremely well in protecting its manufacturing competence from being taken out of the country and hence reducing wages? Germany, with powerful unions that did not allow it.

So I think what you say can be true, without being necessarily incompatible with my analysis of the benefits of unions to the overall population.

Think Tanks Funded by the Super Rich

Furthermore, if one looks at most of the arguments against unions (and I am not proposing yours) but they are normally developed by the super-rich to get normal working people to vote against their interests. There is a network of think tanks in the US. They include the Hoover Institute, the Heritage Foundation, the Manhattan Institute. They produce fake research on command and are funded by big money donors. A primary objective they have is to create constructs that degrade unions. The reason for this? To stop unions so they can pay lower wages.

Red Scares and Anti-Communism as a Weapon Against Improved Wages and Working Conditions

If you look back at the red scare in the US in the 1950s and 1960s a major component of all of it, was very simply to paint people who wanted better working conditions as being in collusion with the Soviet Union. It was all fake. None of those actors were threats to national security. Furthermore, the entire narrative was inconsistent with communist countries. This is because as I said, no unions were tolerated in the Soviet Union. This was a fiction created by the super wealthy in the US. An accurate parallel would have been with the socialist European countries. But that would not have worked as the socialist European countries beat the world in virtually every human health index that one can think of.

Why the con job?

Well, labor activists needed to be painted as “unAmerican” and so the link with the Soviets was created out of whole cloth. If you demand better working conditions you must be a communist….or perhaps even worse (at that time) a homosexual. The worst being a communist homosexual…which is very unAmerican. The congressional group charged with investigating the “Red Menace” was called the…House Un-American Activities Committee

The committee was a literal witch hunt that ruined the careers and reputations of those that aligned with labor, and did so at the behest of corporate executives and corporate power.

The movie Trumbo and Guilt by Suspicion illuminates this disgusting period in US history.

Actually, Walt Disney was an informant for the FBI. Whenever Walt Disney faced a difficult employee who demanded better wages for Disney employees, Walt Disney would report that person as “subversive” and potential communist, and they would be investigated by the FBI.

I have a nice quote from Walt Disney.

“I don’t care what you do, there will always be some son of a bitch on top and some son of a bitch on the bottom.”

And of course, Walt Disney planned to be that “son of a bitch” on top.

Reference

http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/

https://www.koreatimes.co.kr/www/tech/2018/05/133_248940.html

http://english.chosun.com/site/data/html_dir/2018/05/16/2018051601559.html?outlink=linkedin

https://www.epi.org/news/union-membership-declines-inequality-rises/

https://www.pinterest.co.uk/pin/433753007842445625/

http://prospect.org/article/40-year-slump

The Real Reason Wages Have Stagnated: Our Economy is Optimized for Financialization

Productivity, Inequality, Poverty

How Marketing Infects all Media Sources

Executive Summary

  • G2Crowd as a Puppet for Software Vendors
  • Profit Maximization and Media and the Best Possible Outcomes?
  • What is the Best Way to Maximize Shareholder Value in Media
  • How Profit Maximization in Media Leads to the Propagation of Bad Information

Introduction

In a recent article where we critiqued the quality of reviews on the G2Crowd site, we discussed the problem with IT media entities that are industry-funded. In this article, we will elaborate on a subject related to marketing influence on media entities, which is at the heart of the G2Crowd story.

G2Crowd as a Puppet for Software Vendors

G2Crowd was always designed to be nothing more than a puppet for software vendors. All of their funding comes from software vendors, and G2Crowd discloses none of this to readers. G2Crowd’s only objective is to make money. People think that is just great. But is it great? And great for whom?

A comment was made that G2Crowd’s application reviews have been “gamed” as the following quotations attest.

“Any unmoderated peer review site, from TripAdvisor upwards, will inevitably be gamed by those who gain by doing so.”

But this implies that G2Crowd does not want to publish low quality and false reviews. That would imply that the G2Crowd reviews are “gamed.” But G2Crowd does want low-quality reviews if they are positive. G2Crowd could easily eliminate obviously fake reviews, but they choose not to.

So their ratings are not very difficult to game if they don’t moderate the comments. Therefore this would be like saying that one “gamed” a car wash by driving their car through the car wash and ending up with a clean car. That is not gaming a car wash, that is the design of a car wash. G2Crowd wants the highest possible ratings without seeming fake, as this is what their funders (the software vendors) want.

Profit Maximization and Media and the Best Possible Outcomes?

A major problem is a concept that profit maximization leads to good outcomes. It is amazing how often this is proposed and is accepted as an assumption, even though the negative outcomes from this are obvious.

Look at this outcome from media profit maximization. A company like G2Crowd employs virtually no content creators and no moderators. But it pulls in millions every year from vendors that use G2Crowd as a marketing automation frontend. This model ends up with a tiny elite with enormous income, meanwhile, its readers are left reading a large number of reviews written by consultants whose primary motivation is to increase the popularity of software in which they specialize. So big money for a tiny few, and false information for the many. 

What is the Best Way to Maximize Shareholder Value in Media?

That is easy. By selling your media output to the highest corporate bidder. This is the same way you maximize shareholder value in financial advisement but selling out the interests of your customer. The customer here is the reader. Therefore, one must necessarily accept that if the goal is profit maximization in media, then one must be comfortable with literally all published information being engineered to this end. This will mean thinking of how much money the publication can make, and changing the messaging in order to maximize that profit.

This means emphasizing profits over everything else, including first and foremost truth. For example, people prefer hopeful information over the unhopeful. Therefore, to maximize profits, it will mean providing hopeful information, even when that is not the correct conclusion based on the evidence. Hollywood knows all about this, changing the ending of even movies based on historical events to be more positive and helpful. Romantic movies stop once the couple has fallen in love, typically culminating in a final wedding scene. This is because a movie about actual marriage would send the suicide rate skyrocketing. And after all, you should leave the movie theater feeling good about the money you just spent. What better way than with a happy ending, who cares what happened in reality?

Truth is the first casualty of profit maximization.

How Profit Maximization in Media Leads to the Propagation of Bad Information

When it comes to providing information, it leads to giving false information. False information has a very high ROI. Truthful information has a very low ROI. Of all the research entities in enterprise software, Brightwork Research & Analysis, when accounting for normal measurements of popularity, has the worst income statement. But I think we provide the most honest information. Literally, we cannot find another site in the area that writes exactly what we think is true, regardless of not only financial implications but also without considering whether the readership will even like or find the published information offensive.

If we were to have even a single corporate sponsor, the honesty of what we cover would be greatly diminished. And we get offers all the time. Marketing departments seek out information sources to corrupt them. It starts with compliments and just a few articles emphasizing “getting the word out,” and then enlarge as more and more control seeps into the relationship. You begin to depend on the income and then they have you.

Conclusion

Marketing seeks to ruin all information sources, turning them into advertising machines and pushing as much false information through them as they can. Mail normally was for sending things that the recipient wanted. However, that was unacceptable to marketing departments, hence the creation of junk mail. Email was designed for things that people wanted to receive, but marketing automation and spam infiltrated inboxes with messages that were unwanted. LinkedIn developed the ability to share messages; my feed is now filled with mostly promotional information and shares brimming with false information, designed to drive income for the sharer.

Websites were originally designed to share truthful information, but now corporate websites are chocked filled with false information, and online media entities have been infiltrated by marketing money which substantially alters and censors their content. At one point the only thing that used to run before movies in movie theaters were movie trailers. Now advertisements very frequently run before the movie, a movie that you paid to go and see.

Marketing seeks and often does end up substantially controlling every medium.

References

https://en.wikipedia.org/wiki/Shareholder_value

https://www.forbes.com/sites/stevedenning/2017/04/27/harvard-business-review-the-pernicious-nonsense-of-maximizing-shareholder-value/#39a9835271f0

https://www.forbes.com/sites/stevedenning/2014/09/19/the-economist-blue-chips-are-addicted-to-corporate-cocaine/#6b7f15d7264f

The Evidence that Diversity Does Not Improve innovation

Executive Summary

  • It is considered politically correct and broad-minded to state that diversity improves innovation.
  • However, there is no evidence for this diversity improving innovation.

Introduction

It is sometimes proposed that diversity improves innovation. In this article, we review the academic literature to determine what it says on the topic.

The Studies

We performed a search for academic articles on this topic we found the following:

  1. Diversity & Inclusion and Innovation: A Virtuous Cycle (Vol 47 No. 1 2015 pp 1-7)
  2. Diversity of Systematic Innovation Thinking (IMP Journal, Volume 9, No 1, 2015)
  3. Board Diversity and Innovation Performance in Malaysia (Int J Business Governance and Ethics Vol 12, No 3 2017)
  4. R & D Collaborations: Is Diversity Enhancing Innovation Performance? (Technological Forecasting and Social Change, Volume 118 – May 1, 2017)
  5. Diversity is Strategy: The Effect of R&D Team Diversity on Innovation (R&D Management, Volume 47 (2) Mar 1, 2017)
  6. Driver or Inhibitor of Innovation? (Kybernetes, Volume 47, 10 – Feb 5, 2018)
  7. Does Cultural Diversity of Migrant Employees Affect Innovation (International Migration Review, Volume 48 – Sep 1, 2014)
  8. The Nexus Between Labor Diversity and Firm’s Innovation (Journal of Population Economics, Volume 27(2) – Oct 23, 2013)
  9. Workforce Composition and Innovation (Journal of Product Innovation Management, Volume 34(4) – July 1, 2017)
  10. Diversity and Innovation (Applied Economics Letters, 2016 Vol. 23, No 14, 1037 to 1041)
  11. Can Diversity Lead to Innovation? (Journal of Leadership Studies, Volume 10, Number 1, 2016)

Here are some quotes from many of the studies. A few of the studies did not seem like real research studies, but more white papers, and calls for more research.

Study: Diversity is Strategy

  • (Pro) “Diverse teams are less prone to groupthink.”
  • (Neutral) “The diversity literature offers inconsistent results regarding the relationship between gender diversity and performance outcomes.”
  • (Con) “Some scholars have reported that generate heterogeneous groups tend to exhibit increased conflict, low cohesion and increased turnover.”
  • (Pro) “On the other hand, several scholars have found that gender diversity promotes innovation, creativity, and productivity.”
  • (Pro) “Innovation studies show R&D teams gain significant personal experience from interactions amongst team members with different knowledge bases and skill sets.”
  • (Neutral) “Diversity studies have shown inconclusive results regarding the impact of educational diversity.”
  • (Neutral) “R&D team size has a significant positive effect on the likelihood of introducing radical and incremental innovation; however the quadratic effect is negative indicating that additional increases in R&D team size will reduce the probability of additional radical and incremental innovations.)
  • (Neutral) “that although larger firms tend to introduce more incremental innovations than small firms, the oversize can general monitoring costs and management problems that decrease the probability of introducing incremental and radical innovations.”

Study: Driver or Inhibitor for Innovation?

  • (Neutral) “Empirical studies who contradictory effects of functional diversity in teams. While teams with high functional diversity have a higher potential for creative and innovative ideas, they also show more conflicts and communication barriers than teams with low or medium diversity.”

Study: Does Cultural Diversity Effect Innovation?

  • (Neutral) “We argued that the impact of cultural diversity of employees on innovativeness is theoretically indeterminate due to the coexistence of a range of positive and negative influences.”

Study: The Nexus Between Labor Diversity and Firm’s Innovation

  • (Pro) “Ethnic diversity seems to facilitate firms’ patenting activity in several ways….we find that a 10% change in ethnic diversity increases the number of firms’ patent applications by approximately 2.2%.”
  • (Neutral) “Regarding the results of education and demographic diversity on innovation, their effects typically vanish when we include the full set of controls or once we instrument the diversity measure.”

Study: Workforce Composition and Innovation

  • (Pro) “Higher education diversity is also positively correlated to more incremental innovation.”
  • (Con) “Ethnic diversity, however, does not seem to be correlated to incremental innovation. This outcome could be rationalized by recent findings that suggest that ethnic diversity is more exposed to generating conflicts due to social categorization.”

Study: Board Diversity and Innovation Performance in Malaysia

  • (Pro) “The call for board composition that consists of individuals with a broad range of criteria, such as diversity of age, gender, and education level is made due to the advantages that can be offered by having a diverse group of decision makers.”

However, the study seems to think that innovation occurs in boards of directors. Boards of directors do no innovative work themselves. Therefore the study is only focused on the makeup of BODs. The question is whether diversity in the work teams increases innovation.

Study: Diversity and Innovation

  • (Con) “Ethnic diversity may have a negative effect on national innovation if a significant portion of a nation’s resources is used to manage inter-ethnic conflicts. Alesina and Ferrara (2005) explained that diversity could result in individuals giving preference to or transacting exclusively with members of their own group.”
  • (Pro) “Conversely, it is also likely that ethnic diversity can contribute towards innovation by increasing levels of creativity leading to better performance of companies.”

Study: R&D Collaborations

  • (Con) “Despite the opportunities that external collaborations offer to acquire or to access complementary and supplementary knowledge, the literature finds mixed evidence on their role in innovation performance.”

Homogeneous Examples of Innovation and a Lack of Innovation

Let us take Germany as an example.

Germany has the highest percentage of innovation and invention in the field of chemistry. Many of the most fundamental discoveries in chemistry are German and developed in a time when few non-Germans lived in Germany.

Therefore, those inventions were created by a mostly homogeneous culture.

On the other hand, there have been homogeneous cultures that had produced so little innovation that they were in the stone age when outside civilizations came into contact with them. The American Indians and Hawaiians would be good examples of this. Therefore, does this argue in favor of homogeneous cultures or against?

Conclusion

It should be noted and recognized that nearly all of the studies started with the hypothesis that diversity increases innovation.

Why?

The reason is simple. Proposing that diversity is negative for innovation is not politically correct. Therefore the hypothesis is “bounded” by what is an appealing outcome, not by what would be expected — which is hypothesis on in each direction.

However, even with this hypothesis, the only diversity dimension that could be found to improve innovation outcomes consistently is the diversity of educational background — which is normally not included as part of corporate diversity initiatives. Secondly, it brings up the question of “how much.” For example, does it increase innovation outcomes to involve trained anthropologists or people educated in animal husbandry with technologists?

The research does not describe how far afield the educational background is supposed to be.

It should also be recognized that corporations do not have any particular objective to be innovative. Their corporate charters state very clearly that their goals are increasing shareholder wealth and increasing profitability. These objectives can be met more easily and a lower cost through posing as innovative (as is common in the pharmaceutical and software industries) and engaging in anticompetitive business practices.

For example, the return on investment through political lobbying is far and away far superior to any return from investments in innovation. With a return of 76,000% on lobbying funding, there is a very weak argument to redirect those funds to innovation.

How Companies Fake their Interest in Innovation

Furthermore, there are all manner of things that could be done to increase innovation in all countries that aren’t done. One major factor that would cause a dramatic rise in innovation is to break up companies, particularly the largest companies with the most monopoly power. However, this is not even proposed. And it is not proposed because it would reduce the profits of monopolistic entities. Many of these entities use fake innovation as a cover for what are actually anti-competitive rents extracted from the economy.

Therefore, there is not only no consistent evidence that diversity outside of educational diversity leads to higher innovation, there is no evidence that corporations actually have it as a goal to be innovative.

References

Corporations Lobbying Government Reap 76,000% Return On Investment

How IDG Works to Provide Inaccurate IT Information

Executive Summary

  • Through ComputerWorld, IDC writes ridiculously inaccurate articles that are paid placements from SAP. IDC is owned by IDG is owned by a Chinese conglomerate with an overwhelming focus on advertising.
  • In this article, we cover another ComputerWorld article about SAP and verify its accuracy.

Introduction

ComputerWorld published the article What Does SAP’s Next Generation ERP Mean for Customers? on July 28, 2017.

This article my ComputerWorld is a series of falsehoods that is controlled by SAP. In this article, we will review how ComputerWorld’s parent company seems to work in providing information to the IT space.

Who Writes ComputerWorld’s SAP Articles

It is most accurate to say that the article is written by SAP and dictated to ComputerWorld. Let me give an example.

If SAP were to provide me with information, and I was to publish it without checking anything, and with simply adding something like…

Then SAP said…

SAP also thinks….

With me wrapping up a conclusion based upon the quotations, and questioning nothing….then who wrote the article?

I would say SAP wrote it.

McDermott and Hasso Plattner are highly compensated to push out information that allows SAP to make the most possible money. McDermott and Plattner are highly unreliable sources, therefore everything they say must be checked from every angle.

Analyzing ComputerWorld’s SAP Articles

These articles influence people and provide them with false information, as the readers do not realize that IDG/ComputerWorld simply rents out their publication to SAP.

This article was not declared as promoted content. Only the middle portion, which are ads that are declared as promoted content.

If you look at the software produced by BuySellAds, the placement of an advertisement in the middle of the page is called a “Promoted Content” slider. But that is a standard term for a middle page ad. ComputerWorldUK uses the RevContent ad serving software. That text most likely came across in the software as the added description.

But you are speaking not per the software’s definition of promoted content, but regarding the media definition, which means ComputerWorldUK was paid to publish it.

I can’t prove that they were, but ComputerWorldUK just about always publishes uncritical SAP articles. So it certainly looks fishy.

What I have found is that trade publications like this don’t have any requirements for accuracy. They exist to promote and to profit maximize.

And this gets into who actually owns ComputerWorldUK. ComputerWorldUK is owned by a media conglomerate named IDG.

Who and What is IDG/IDC?

IDG is a conglomerate that focuses on tech media. Their website declares that they are the number one tech media company in the world. That part may or may not be true, but there is no doubt that many people get information about information technology from IDG, or more specifically its publications.

There is sometimes confusion as to whether IDG and IDC are the same company. The relationship is covered in the following quotation from Wikipedia.

“International Data Group, Inc. (IDG) is a Chinese-owned, American-based media, data and marketing services and venture capital organization. IDG evolved from International Data Corporation (IDC) which was founded in 1964 in Newtonville, Massachusetts, by Patrick Joseph McGovern. IDC provides market research and advisory services and is now a subsidiary of IDG.”

Therefore, IDC is just another of IDG’s offerings. IDC performs research. Although, after reviewing IDC comments, we question this. One of IDG’s low-quality quotations is covered in the article How to Understand Why Fiori Won’t Be Able to Survive.

Also, I have a problem with obtaining information of any kind from an entity that is owned by a Chinese company. China has no freedom of the press, and journalists are quite limited in what they can write. According to Reporters Without Borders, China ranks 176th out of 180 countries in the world in press freedom. RWB calls China the “world’s leading prison for citizen journalists.”

How IDG Works

I wrote a book that described in part how Gartner receives undeclared funding from vendors and how it impacts their media output. This is covered in the book Gartner. IDG was always in the background for me, and I never investigated them. Now it seems they own a publication like ComputerWorldUK that is simply marketing for IT entities.

So with ComputerWorldUK, the article itself is in many cases a paid placement, but then there are advertisements on the page as well.

I counted eight advertisements on the several of the article pages, which means that IDC is getting paid to have people write this article. That may not be a problem, but the article is inaccurate. So money is pushing out bad articles.

The method is obvious. Put no effort into writing the article. Repeat whatever a source tells you verbatim. Pick up money from both the vendor and then the ads.

The best way to put out the most articles with the fewest writers is to simply report whatever the vendor or other paying entity wants you to say.

IDG’s Overwhelming Focus on Advertising

It is interesting to observe this quotation from their website. Here is where they appeal to advertisers.

Who We Are

“We monitor behavior at an account-based level to identify in-market purchase intent and buying teams researching technology products and services across the globe.”

So the readers are being surveilled for purchasing cues? Is that communicated to readers whey visit the site?

“Our customers know they can rely on IDG to deliver the right buyers at scale exactly when they are most receptive to a marketer’s message, wherever they may be in the world.”

Are readers “readers” or are they, buyers? IDG seems to call their readers buyers. So their view of a person reading their content is that they are buyers?

Well, let us ask this question. If readers are simply viewed as buyers, then what is the incentive to provide accurate information. The question is pertinent because accurate information is not always promotional.

Pretending to do Research?

One of the curiosities in the IDG stable is IDC. IDC presents itself as a research entity. But how can it be a research entity if:

But how can it be a research entity if:

  1. It is owned by a Chinese company, a country which is the bottom of the barrel in terms of press freedom?
  2. If IDG distributes highly suspect information through media entities like ComputerWorldUK and CIO, etc…then how dedicated are they to publishing truthful information.

Conclusion

IDG is another one of these media conglomerates that is focused on profit maximization. And when you do that, the quality of information declines. This article should explain why we don’t pay attention to what IDG publishes, except to understand what is being written about technology, and what readers often consume.

Accessing Honest Information on SAP

  • Want Honest Information About SAP?

    We can help you independently verify the information provided by major consulting companies and answer your SAP questions. Our work together can remain confidential too.

    This article is free, we do not answer questions for free. Filling out this form is for those that have a budget. If that describes you, just fill out the form below and we'll be in touch asap.

References

[S/4HANA: What does SAP’s next generation ERP mean for customers? | Applications | Computerworld UK](http://www.computerworlduk.com/applications/s4-hana-what-does-saps-next-generation-erp-mean-for-customers-3596790/)