Sunday, December 17, 2006

That Giant Crunching Noise

Vinnie is a guy I met on a comment section on a blog. Wow, could I have said that five years ago? But let's continue. Here's a nice one from his blog on how Utility IT is being squeezed to nothing. In Vin's definition, Utility IT is:

...any Infrastructure product introduced over 18 months ago, and any Software or Services offerings introduced over 3 years ago. Most vendor investments in these products should have been recouped.

This sounds good to me. Furthermore, what I dig about Vinnie analysis is that he has real numbers for specific vendors on what they need to do to get their house in order. Specifically:

So if you are Oracle, think about annual maintenance at single digit rates, not 22%. CIOs, from their own offshoring experiences, know what Oracle has saved from growing its staff by thousands of employees in low cost markets like India.

If you are SAP as you seek large mySAP upgrade fees, be prepared to price your core FI/CO, MM, SD functionality at $ 300 a production user. You recouped that investment a long time ago. If not, you are encouraging CIOs to look closer at BPO offerings which offer less maintenance/upgrades hassle and a lot lower TCO.

If you are EDS or Accenture, learn to make money at $ 75 an hour, not $ 200 as you try to sell "transformational" outsourcing.

If you are IBM and serious about On-Demand make it reflect Utility economics and service levels

If you are Sun, explain why you deserve a premium over Linux pricing

If you are Gartner, discount your research pricing on Utility spend by 75% and move to pay for results if you can help crunch the Utility spend.

Rock on. Let's put the T back in IT.

1 comment:

Vinnie Mirchandani said...

thanks for the mention - I wrote that 18th months ago and has been the manifasto for my blog. Does not make me popular with the vendors, but there is no reason you cannot make good money at continually lowered pricing. Intel has done it for years, and margins of Indian outsourcing firms are twice as good as those of US firms...with the savings we cna spend on green stuff you promote, innovations I want to see funded etc...