- SAP investments tend to have negative ROI in companies where they over-invest in SAP.
- We cover the issue of mixed allegiances of IT departments.
The conclusion of our research in this area is that IT departments are insensitive to this exact thing. That IT departments, particularly those that buy a great deal of SAP and Oracle have sold out the interest of business users for their own interests. This is covered in detail in the article From IT to the Business: Go Jump Off a Bridge.
The Common Problems with Agency Outside of IT
The claim we are making sounds very controversial. However, selling out the interests of the individuals you are supposed to represent is quite common outside of IT. Let us discuss two very prominent areas where this occurs.
- The US Political System: It is challenging to look at the voting record of US politicians and see it as anything more than representing the interests of financial contributors. No one would think that their representatives in government look out for the voters. Voting is how the political system is made to look legitimate. The entire concept of representing the interests of the overall population (the vast majority of which are not financial donors) is no longer really a feasible hypothesis by those that are both honest and know how the US political system works.
- Financial Advisors: In the area of financial advising, it is far more common for the financial advisor to look to maximize their income and to sell out the interests of their clients. Financial firms that provide financial advisors often provide higher compensation to move lower quality financial products. And only around 10% of financial advisors are “fiduciaries.” That is only 10% of financial advisors sign a fiduciary statement that they will put their client’s financial interests above their own.
This issue with financial advisors is explained in the following quotation.
“If you’re looking for a financial adviser to give you advice on saving for retirement, you’d probably want one that looks out for your best interests. But finding such an adviser may be more difficult than you’d expect. Some advisers are just as concerned—maybe even more concerned—about their own financial interests.
Those that look out for your best interests are known as fiduciaries. Such advisers invest your savings, say, in low-cost funds for a fixed fee instead of comparable funds that charge more in commissions. They promise there won’t be any hidden fees that surprise you later. And if your adviser has any conflicts of interest that could sway his judgment about which investments are best for you, he’s required to tell you.
Savers also have the option of turning to commission-based advisers who may not be fiduciaries. These advisers are only required to make investments on your behalf that are “suitable” for your needs. That means that while the investments your adviser chooses could be appropriate for your financial goals, you could end up paying him more money in commissions and other fees than if you had hired a fiduciary.”
So why should IT departments be immune from agency issues? Virtually no one will write on this topic, because they need to flatter IT decision-makers to gain business from them.
The financial advising industry has repeatedly fought against law requiring financial advisors to be fiduciaries. The reason is quite simple. Financials firms want to continue to make the most money off of those they advise, which means putting them into investment vehicles that primarily benefit the financial advisor.
Are IT Departments Fiduciaries?
The concept of a fiduciary is that the entity places the interest of a party above their own interests. However, this argument would be very difficult to make for IT departments that we have worked with. Furthermore, SAP has sold so many non-functional or semi-functional applications and databases to IT departments, that whose interests the IT departments represent is a very natural and quite logical question to ask.
Our Advise to IT Departments
We maintain probably the largest store of information on SAP products for what works, what does not work, and so on. We disclose this to clients.
What might be surprising to readers is that even after we tell clients that they are buying a problematic or failed item, they go ahead and do it anyway. It is strange, but they don’t seem to care. It is as if they have a certain amount of SAP they need to buy, and they are going to buy it.
One of the significant observations from these interactions is that IT departments do such a tiny amount of research before they buy.
Testing The Hypothesis of IT Department Indifference to Facts Which Contradict their Favored Vendor
Brightwork Research and Analysis specializes in research that fact checks SAP and Oracle. However, when we reach out to IT directors to connect, our acceptance rate is low. Less than 10%. Our acceptance rate from sales managers at vendors that compete with SAP or Oracle is around 30%. (I change the text a bit for the sales managers to focus on competitive intelligence).
This is reinforced by the following quotation from Rolf Paulsen.
“This matches my experiences in the statutory health insurance. IT departments built their kingdoms over years and SAP connections are an important corner stone. Questioning SAP weakens their position and even might disclose their failure to get familiar with state of the art software technology.”
The Example of the Acceptance of SAP’s ABAP
The whole ABAP acceptance by IT departments shows this passivity. One does not have to use ABAP to customize SAP — in fact, many custom applications “legacy” should have never been ported to SAP. SAP is a highly inefficient system for development. Instead, these applications should have been maintained, and then integrated to SAP. These IT departments greatly damaged their companies and took on large technical debt by listening to SAP on this subject. And after they did, now SAP and their consulting firm had far more account control then if these native applications had been kept as is and integrated. IT departments also suffer from the Dunning Krueger Effect. They think they are experts in IT, but in reality, they have no research capability and they are normally divided into a Director and other management and then workers who have narrow and specific skills and are not involved in decision making.
Anyone who uses the Brightwork Research & Analysis TCO Calculators will find that SAP has the highest TCO applications in the IT industry. The reason for this is several-fold. However, one reason does not only do SAP (like virtually all vendors) follow an application data model, but SAP uses one the worst development languages that any customization can be performed with (ABAP). The ability of SAP to force a report writing language onto customers is covered in this article Why SAP Customers Followed SAP’s Advice on Coding in ABAP.
The very concept that an application vendor can choose the development language demonstrates, that IT decision-making capacity and leaders in SAP accounts are seriously either corrupted or incompetent or both. The technique used by not only SAP but many other vendors is to fake a requirements match, with the help of a corrupt consulting firm, then begin large scale custom development after it is learned that the packaged software is a weak match for requirements. This is an algorithm at this point. Yet buyers still cannot seem to figure out this simple fraud. Deloitte and Accenture and so on have been ripping off customers for decades with this same strategy.
This brings us to the quote of Christian Kaul.
It seems to me that many it departments are more like parasites feeding upon the host company instead of actual parts of the whole.
Obviously, if the IT department does not represent the interests of the company, the IT department is a major part of the problem. The argument is, and it has some validity, that in the US at least, companies provide so little in the way of job security, that the management of IT feels they are better off aligning themselves with a vendor or consulting firm. They can then find another job with that technology if they lose their job at their current employer. I have presented so many analysis to various companies telling them to not buy certain SAP applications and they went ahead bought them anyway. It is just bizarre that so many IT departments have little concern as to whether the software they purchase is even desired to be used by the business.
A following important observation is provided by Markian Jaworksy.
Definitely in large organizations IT dept. Is a business within a business. Run as a BlackBox so only those in charge have the ability to communicate the “truth” to the company at large. From experience, any leakage of “truth” is a disciplined offense. HR does not compute that rank and file could be ever so wise.
This is quite curious because I have observed IT rigging information, or presenting inaccurate information to the business in a very frequent fashion. IT departments claim great knowledge on information technology topics, but this knowledge is not apparent to me from interacting with senior members of IT departments. Far more often they seem to be swayed by vendor salespeople and they only in very rare instances fund any research function within the department. Their main interaction with research is to purchase research from Forrester or Gartner. However, the problem is that Forrester or Gartner are paid by vendors and consulting firms, and only provide information within a very narrow framework, which is profit-maximizing to these two firms as is partially covered in the article How Gartner Opposes Open Source for its Own Benefit.
What it All Means
If one takes stock of this behavior by IT departments, it almost appears as if the IT decision-makers are agents for the vendors, as if they have sold out the interests of the companies they work for to these powerful vendors. One possibility that has been brought up to us is bribery. We don’t have the evidence for this, but there are various benefits that powerful vendors like SAP can provide to IT department decision-makers. SAP has been involved in several bribery scandals in South Africa and Panama. There is no doubt that SAP has paid bribes. It is a matter of public record. However, the broader question is how widespread is bribery.
Our analysis of the decision making by IT departments for companies that use SAP is that something strange happens when SAP offers software to companies. IT departments perform very little research, are easily swayed by claims made by SAP sales reps, and disregard warnings about SAP software, even when that software is declared by us as not capable of being implemented of being extremely difficult to maintain. IT departments routinely bypass far more mature non-SAP applications, and applications which are far better fits with business requirements in favour of SAP applications.
Financial Bias Disclosure
Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.
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