There is a lot of negativism around software. The HBR May 2003 article “IT does not matter” has been dissected and debated to death. Noted industry luminaries talk about how IT has matured and there is no need for new innovation. The economy has been depressed for so long; even in recovery there are no visible signs of major IT spend or hiring. Worse, the drive towards lowest cost and cheapest labor (i.e. “Offshoring/ Outsourcing phenomena”) has engendered more pessimism. Large technology companies are struggling; is there hope for small companies. People speculate about what is the next big thing “after IT.” Such sentiments are expressed by some of the most sophisticated analysts and technologists.

Setting aside hyperbole, I am amazed at this level of pessimism and negativity. The technology industry is still in its infancy. Granted some of the “plumbing technologies” have matured. Open standards are being adopted. Best practices are coming into play. But enterprise software is still in its infancy from an application and adoption perspective.
Having spent a “lifetime” as a Technology Executive with F100 corporations and currently interacting with several F500 CIOs I can speak with some assurance. Most IT (operations) are highly inefficient, error prone, expensive and poorly managed. Capital utilization (hardware assets) hovers around 15-18 percent. Shelf-ware problem is endemic. And operational efficiency is pitiable due to poor productivity, ad hoc processes and reliance on so-called “knowledge workers.” And then it is virtually impossible to predict costs, schedules and no visibility into performance and cost (allocations).

CIOs are struggling with increased scrutiny from the CEO, CFO and the board. It is true that IT is a key enabler of business and absolutely critical for companies’ survival and differentiation, in several industries. But IT is also a key stumbling block for business process innovation or M&A and so on. The reality is that most organizations having invested hundreds of millions of dollars on systems and software, are struggling with complexity, heterogeneity and a mix of point solutions that don’t interact, hobbled by legacy and organizational constraints.

Perhaps there may be no need for new products (innovation) but innovation is critical to address some major challenges. Let me highlight some areas where our industry needs to focus:

Usability: One can buy an American, Japanese or German car and pretty much start driving. I am not talking just about UI but the entire user experience. Ability to start using without much (read: expensive) training.

Interoperability: Again a pitiful record. Customers don’t want expensive EAI infrastructures to add to the mess. One buys a USB compatible device, connects to the PC and start using. That is the bar software should strive for.

Pricing: The expectation the customer should pay (perpetual) license upfront is an affront. Imagine your telephone company asking you to a huge fee for unlimited calls well into the future. Pricing based on usage and more importantly on performance (tangible ROI) should be the way to go.

Shelfware: Customers are screaming for help: to realize some returns from huge investments. They need serious help.

Cost of Ownership: When there is a full accounting of the total cost of ownership: initial deployment, recurring costs, capital costs relating to hardware and software stacks, labor and services, most systems can’t be cost-justified. Stove-piped, silo-ed implementations need to be standardized and rearchitected into a (managed) services infrastructure. The challenge is how to do this transformation in a non-intrusive, incremental fashion delivering tangible ROI along the way.

Software as Service: Our industry is notorious to slap services costs on top of a license that cost 3-4 times the license itself! Software applications should be architected to be consumed as services (I don’t mean people services, here obviously). Customers should be able to come in, pick and choose valid services, understand the pricing and how they will be offered, and when they get a bill, understand the details. This has serious applicability for BPO and Outsourcing in general.

Analytics: The mess left behind years of bad and poor software and implementations can’t be fixed soon. However, there is still value in those legacy, monolithic systems with tons of valuable data. Help them collect and act on information to support their changing business needs.

A key data point: Global IT Spend = 1.2T breaks down into (Utilities - 53B; Systems - 469B; Processes and People - 650B). Most technology companies so far have focused on Utilities and Systems. Several issues I identified relate to “Processes & People.” And you see the market opportunity in helping transform bulk of (inefficient) People and Processes into standard-based “systems” that are reliable, predictable, efficient and adaptable.

The technologies are there, but we have not even scratched the surface in the adoption, utilization and realization of the full value from existing products. There is a major transformation going on in how software will be procured, consumed and priced. Let’s apply our creative energies, and innovations towards these goals and the future should be very bright.

Venkat Raju is the CEO of Centrata, a provider of IT service delivery solutions for the Fortune 500. He is an entrepreneur of repute, and has been a transformational CEO for companies like VerticalNet. Raju holds a Bachelors degree from the Indian Institute of Science and has attended the Boston University Graduate School in Management and Business Administration.