How to Understand the Capture of IT Departments by Large Vendors

Executive Summary

  • The largest software vendors are able to turn IT departments against the interests of their own employers.
  • This article covers how are they able to do it.

Introduction

This article asks the question of how large vendors can so take control of the decision-making of the IT departments at various companies. One vendor is known to specialize in taking control over a company’s IT decisions, and in an area that is mostly the subject of a media blackout, this was brought up by a Gartner analyst.

However, the truth is that all the major vendors are adept at manipulating the IT departments within companies to buy their products, even when there are better alternatives in the marketplace. Having worked inside of a large software vendor and large consulting companies myself (typically in a technical support capacity) on proposals, I can say that providing honest information about one’s products is the opposite objective of the process.

Let us delve into how a phrase that reflects subordination to the vendor is presented as a virtuous item.

The Shop Concept

Most companies are “SAP shops” or “IBM shops” and show extreme loyalty to major vendors. Loyalty should be translated in this instance to choosing products that are a bad match for the business requirements.

In a regulatory environment, which is similar to IT departments as they are in a way to regulate the purchases from various vendors, the phenomena of selling out your interests for the interests of outside parties is called being captured. There is quite a bit of research into capture. Wikipedia has the following definition of capture:

“In economics, regulatory capture occurs when a state regulatory agency created to act in the public interest instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure, as it can act as an encouragement for large firms to produce negative externalities. The agencies are called “captured agencies.”

Through receiving consideration, sometimes in the form of job offers, or ego stroking or financial contributions, the individual making decisions is corrupted. Regulatory capture is more blatant than the capture that occurs between large vendors and IT departments. Large vendors are not able to make direct financial contributions to companies to influence policy, and while there is some job movement between IT departments and the large vendors, it is nowhere near as prevalent as it has become in the various regulatory bodies where the senior positions are literally a revolving door between the regulatory body and the companies they regulate.

The largest vendors like SAP, Oracle, Microsoft and IBM, one way or another, have so captured the interests of IT, that at sometimes it appears as if the IT department works for these vendors, rather than for their employer. This is actually a subtle form of corruption, is the ultimate objective of any account manager for a major software vendor (that is to get the IT decision makers to be more loyal to the software company they buy products from than the company that actually pays their salary) and is part of the reason that large enterprise software vendors have little incentive to innovate.

Vendor Capture of IT Departments

The topic of software vendor capture of IT departments is much less investigated or researched. However, it is essential to understand how capture works in regulatory bodies as the behavior is substantially similar.

The interesting question is large software vendors can accomplish this goal. Here are a few of the ways they achieve this goal. The quotation below is one of the few that can be found on the internet for what is a significant problem. It’s uncommon for this to be discussed.

“The purchase of software, consultants, and IT services to those NOT most qualified, but to those that provide the manager with tickets to games, vacations trips, potential new job opportunities, and other ‘loop holes’ in corporate policy. This can cost companies millions of dollars down the road on failed integration projects, extra contractors, and unneeded services and software.  I never thought much about this as a young developer, but as I advanced higher into the ranks as a senior developer, I would be invited to attend manager meetings for ‘technical support’.  Here I would see Directors spinning products that were total crap and way over-priced.”DoodleKit.com

Buying off the decision-making inside of IT organizations has an interesting precedent in an ongoing legal case. However, in this case, it was a consulting company, Deloitte, which clearly wined and dine and eventually hired an internal project auditor for Marin County, a mere two months after he approved $3 million in consulting charges for what ended up being deficient work. This topic is covered in this article.

Pushing Lying to New Heights

In some cases, the methods used by vendors and consulting companies are straight up corruption. However, the slick salesmanship within large vendors and large consulting companies, is, in effect to help companies make poor decisions that are against their interests. These companies would not employ so many salespeople who so commonly lie unless it was understood that they would be using this skill of lying against prospects and current customers. This extreme form of lying is evident from any of the quarterly calls from the major vendors, where the executives like Mark Hurd or Bill McDermott lie on a regular basis and are sort of the special forces of liars. That is they produce a level of lying that is the ultimate goal of many of the sales reps within these companies aspires to.

What Happened to IT Departments?

IT departments at this point share similarities with the health care system. They are highly inefficient, highly bureaucratized, and more about its narrow interests than serving the customer (in this case the business).

A perfect example of capture is this video from Florida Crystals at an SAP ASUG conference where the CIO is lying about his project with S/4HANA. The CIO here declares an impossible migration to S/4HANA of 3-4 weeks. How did the vendor, SAP, in this case, motivate this CIO to lie is such an obviously falsifiable way? The Florida Crystals case study is covered in detail here. and was one of the many case studies used at part of Brightwork’s research into the implementation history of S/4HANA.  

Why IT departments have become so insular is an interesting question, however, if we look at for instance the marketing department at companies, they are quite frequently wholly unconcerned with how their policies affect operations. That is marketing sees its role to excite demand as much as possible, the accuracy of the information provided usually is not a concern. Therefore insensitivity between departments is indeed nothing new. IT departments have reached a state where they are unconcerned as to whether the business derives value from the applications they support. IT departments cause a major drag on economic efficiency because they tend to steer enterprise software selection decisions away from applications with high functionality that meet the business need, to high maintenance applications that meet IT needs.

The Battle Between Business and IT

The inflexibility on a host of issues, including IT offering up the same old lagging edge applications from large vendors that sub-optimize the business has helped deepen the discord between the business and IT. The business often views IT as not having an interest in providing them with solutions which help the business meet their objectives, and as an independent consulting who often is hired by IT and works with the business, I have to say this view is quite often accurate. Many IT departments show utter disdain for the business, implementing software in a way that has little regard for how the business benefits, something which has quite a bit in common with how IBM tends to implement software.

I have been at companies repeatedly when the IT resources that the IT director loves so much turn out to be incomprehensible to the business. I have seen many instances where the IT resource provides convoluted and false answers (often to protect software weaknesses or flaws) and the IT director supports the IT resource in essence “snowing” the business resource. For the IT director unintelligible resources who play fast and loose with the truth help get the business resource to “go away.”

Conclusion

The IT departments at quite a few companies have become captured by one or more large vendors. These IT departments are not rendering objective decision support related to what are the best applications acquire, but are providing biased and self-interested advice that meets the objectives of the IT department in some way. Many IT organizations have lost the plot, that they are designed to provide applications which allow the business to gain maximum leverage from technology. Too many IT departments have forgotten their purpose and have stopped caring about their customer.

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References

http://en.wikipedia.org/wiki/Regulatory_capture

http://doodlekit.com/blog/entry/55860/top-10-reasons-why-corporate-it-sucks