There are some surprises in an extensive study commissioned by Unit4 and undertaken by DJS research with the remit to: "Understand the views of knowledge workers using enterprise applications and decision makers implementing enterprise applications. How are digital transformation strategies changing?" Overall, the results represent a snapshot in time that is a mixed bag. In this first discussion, we focus on what buyers believe, comparing that to what we are seeing in our interactions with customers.
In a second story, we'll focus on the future and how buyers are looking to that future. Before continuing, the detailed report provides a wealth of information about geographical differences. This is important because, among other things, it helps flesh out an understanding of how a multi-country firm approaches change. In some geographies, change is considered 'normal' while in others, it is anything but normal.
By way of preamble, we see customers taking many different positions. It's often hard to determine whether patterns are emerging and that should not be surprising given how the COVID-19 pandemic impacted industry segments. We see customers who have plans on hold, those who have shut the spending wallet altogether, those who are undertaking purposeful modernization, and those who believe only a full reinvention of their technology landscape will support the future.
Since Unit4 is positioning itself as a cloud-first company, it should be no surprise that the survey is skewed heavily in that direction. However, resistance to cloud-based technologies comes as a surprise, especially in the context of the COVID-19 pandemic. Our conversations with customers have often exposed operational weakness or rigidity that makes responding to changing conditions anywhere between difficult to impossible.
The executive summary leads with company comments on the impact of COVID-19 as follows:
- They have become more agile in their planning (49%)
- Acknowledge the pace of innovation (42%) has increased
- 35% say it has sped up their investment in moving to the cloud and 24% are more comfortable failing fast.
In the accompanying notes, the researchers suggest that:
- Mid-market decision makers are more likely to feel COVID-19 has stalled their investment in moving to the cloud (24%) versus those in enterprise organizations (8%) – potentially suggesting that mid-market organizations are already investing in the cloud.
- Mid-market decision makers in the US are more likely to feel they are comfortable failing fast (50%) compared to mid-market European decision makers (18%).
Some of these conclusions are difficult to interpret. For instance, in talking about agility, I am surprised the 'more agile' number is as low as 49% given that globally, we're dealing with the mother of all burning fires. From everything I've seen and heard, it's not a case of 'become more agile' and more a case of 'we're dead if we aren't more agile.' Similarly, I am surprised that only 42% acknowledge the pace of innovation has increased. Every conversation I have with decision makers is bound by one thing: deliver demonstrable business value. That doesn't come from reworking an ERP, HR or CRM system but more often it comes from the edge such as commerce applications that have to be cloud native.
I am perplexed by the suggestion that "mid-market organizations are already investing in the cloud." If I am thinking Office365, where Microsoft is pushing hard for cloud subscriptions then sure, I get it. But then if I take Oracle NetSuite as the mid-market bellwether, that company, which operates at global scale, only counts 22,000 customers. On the other hand Salesforce revised its forecast upwards. That should not surprise anyone, given Salesforce is promoting the solving of customer experience issues. Less surprising is the disparity over 'failing fast' since the US's business culture is different from that in Europe.
more impressive is the division among those who think they will be fully cloud based over the next three years. This runs as follows:
- 20% see it as occurring by the end of 2020
- 24% within the next 12 months, and
- 25% say within the next two years.
Regional differences are eyecatching with 60% of decision makers in the US in mid-market organizations feeling they will be fully cloud-based in the next 12 months compared to only 38% of DM's in mid-market organizations in Europe. The extent to which these findings are aspirational as opposed to reality remains to be seen.
In thinking about flexibility to rapidly integrate new functionality, the survey found that
Decision makers in the C-suite want flexibility to integrate new functionality rapidly above all else (58%) as do those in Singapore (69%) and those considering a new vendor (61%). Mid-market DM’s are more likely to find the following more attractive than DM’s in enterprise organizations: Reduced infrastructure costs (41% compared to 38%), Less requirement to follow linear vendor updates (26% compared to 21%), Better collaboration within organization (42% copmared to 35%).
In conversations we have, the ability to integrate across functional siloes is often seen as an imperative because integration helps to solve how people work remotely. The C-suite undoubtedly gets it. The question is whether the Li and L2 operational people understand that same imperative. Again and in conversations, the answer is mixed with significant numbers of LOB leaders reluctant to make changes that might impact their ability to hold power in their corner of the enterprise. This is where the need for purposeful executive sponsorship matters. Without that sponsorship, those who resist will derail projects.
Surprising to me are the results suggesting that freedom to access systems from anywhere is the most important requirement. Only 17% made that choice while 13% chose automation to simplify and speed up workflows, processes and tasks. While the survey doesn't offer color on these numbers, we can surmise that since the survey was aimed at knowledge workers, many of those shifted to remote working prior to when the survey was undertaken.
On the question of outcomes, a full 86% believe that the cloud offers greater flexibility for delivering enterprise applications. Again this should not surprise although there is always an element within such answers of self-fulfillment given the belief of what cloud might deliver in the pre-sales situation. However, among the customers we've spoken to, this type of answer figures large with customers insisting on fast track implementations.
An important finding is that respondents think the on-premises vendors are not capable of reacting to change. From the detailed report:
In addition to this, just under three quarters (71%) feel traditional vendors do not understand how to operate in the cloud. Two thirds feel COVID-19 has made their organization reluctant to make any decisions about enterprise application investments highlighting that Unit4 still need to overcome uncertainty about the future.
We see this set of related problems on a day to day basis. The survey talks about uncertainty for the future. We see it a bit differently. A reluctance to make decisions is acceptable for a period, but decisions have to be made sooner or later. While the early days of the pandemic put everything that was not in flight on hold, the evidence we see today is that customers who are in the relucant group fall into two distinct camps. First are those who look at the cloud and ask: what's new here? Second, are those that know they must move for one reason or another but have been on the same platform for so long that making a change represents a frightening top to bottom change with commensurate costs for which a business case is hard to come by.
However, an emerging trend that we see among customers is the desire to get away from applications that suck significant amounts out of their overall applications budget. That suggests the Tier 2 vendors are more likely to be considered than was the case a year ago. The base argument centers around cost to acquire and operate where Tier 2 vendors can make a massive, positive impact. We have examples, some of which we hope to surface shortly. In short, the myth that your provider of 30 years is the only one that can support you the next 30 years is going away.