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Cost Is Always Important… But...
One of the big applause lines at Enterprise Connect 2015 in Orlando last month came at the end of an exchange between Cisco's collaboration chief, Rowan Trollope, and my colleague Fred Knight. Trollope made a comment playing down the importance of cost in enterprises' decision-making about next-gen tools. "That's because you're the guy getting the check, not the guy writing the check," Fred said.
Everybody knows cost is important, but there are nuances to the discussion. On No Jitter last week, J.R. Simmons, a consultant who's done sessions on pricing and licensing for us, writes about TCO and, like any good consultant, he talks about the importance of cost. However, he makes a point: When his clients make decision matrices and assign percentage values to the various factors, cost is never all-important.
"Even our public sector clients, tasked with being custodians of public funds, are loathe to put more than 15 to 20% of the total decision weight into the cost category," J.R. writes. "A cost analysis is still included, but in many cases, the evaluation team first narrows the submissions based on all other factors before the costs are even revealed or discussed. The universal belief is that the right choice is far more important than the cost savings of a bad choice."
It seems to me that the big factor competing with cost, and driving some of the new trends, is agility -- the ability to move quickly and put new technology in place to drive business benefits. I've been hearing that song for years, but this past Enterprise Connect was the first time I really heard significant numbers of end users singing it. They told us that the need to move quickly was becoming an imperative for them in response to demands from their business units.
Here's a data point: In an Enterprise Connect webinar this week, Zeus Kerravala of ZK Research presented data from his practice, indicating that the average time for enterprises to provision new services is four months. That actually sounded pretty optimistic to me. When it comes to rolling out new premises-based platforms at any scale, I'm confident it's still considerably higher.
You could even say that "agility" is behind the adoption of freemium applications and services among enterprise users. The "free" part is nice, but what's critical about it is that it makes adoption easy and fast -- if you're spending little or none of the company's money, you generally don't need to ask anyone's permission, and you're not fronting the company any money of your own. From the user's perspective, it's low risk and therefore quick. From the enterprise's perspective, freemium may not be low risk, but by the time IT learns about the "investment" in freemium, it's too late.
J.R. suggests that the real decision factor shouldn't be TCO, but CBA: cost-benefit analysis. In fact, he writes, "most decisions are not rendered on the basis of the pure mathematics of the lowest TCO or even the most favorable CBA numbers. More so than ever before, clients are inclined to use risk, previous experiences, references, and the level of confidence in the vendor as primary factors."
The old saying used to be, "You can't get fired for buying IBM." Then it became, "You can't get fired for buying Cisco." Those decisions were rarely about TCO. You were usually paying a premium for the "safe" vendor -- safe for your career, but also generally safe for your enterprise, since what you were in the market for was a reliable system that provided a baseline service that had to work. In such an environment, agility wasn't as critical as it's become; reliability was.
Nowadays, there's not even an obvious "safe" choice for what exactly you should be buying, let alone from whom. An accurate TCO calculation can give you a reliable, objective way to compare solutions. But you've still got to make sure it's the right solution.
So sure, it's still advisable to keep a hand on your wallet if you hear a vendor tell you that cost isn't important. But it's also true that there are other important factors -- and now more than ever, those other factors, and their importance to the enterprise as a whole, seem to be in transition.