Technology suppliers tell lies and exaggerate. If you find this claim offensive read no further. Just a cursory search will reveal past and present litigation where buyers of information technology feel they have been deceived by some of the world’s largest, best known suppliers. It’s easy to lie about the capabilities of technology, particularly when validating claims means having to travel an awful long way down the road of using the technology in anger. Is that brand new, shiny, Enterprise Resource Planning system really going to hold up when five thousand people are using it? The answer is often not known in advance, despite stress testing and other contrived tests.
In fact the buying of information technology suffers from a very exaggerated information asymmetry. Like the second hand car salesman, the technology supplier knows an awful lot more about what is being sold than the buyer. Economists use the term ‘adverse selection’ for this well known problem, and normally the buyer’s risk is mitigated somewhat through devices such as warranties and the like. Unfortunately the procurement of fifty million dollars of information technology is poorly served by some form of warranty. Reputations are at stake, and maybe the business itself, if things don’t work. Technology suppliers know this, and will often exploit the fact that high level sponsorship of a troubled project usually means that the sponsor will effectively issue blank cheques to avoid the ‘egg-on-the-face’ syndrome.
So it should come as some sort of relief for executives who are truly interested in reducing technology selection risk, to discover that the cloud is one way of doing just that. I say ‘truly interested’ simply because many executives just want the latest designer technology brands on their resumes. The dominant model offered on the cloud is known as Software-as-a-Service, or SaaS for the initiated. This means that full functionality applications are available through the web browser, without the need to install any software or buy hardware. To a large extent this means no risk – or at least greatly reduced risk. The buyer is able to try a cloud based service with almost no up-front investment. Of course it isn’t totally risk free. How a service will behave when thousands of users are accessing it, still requires some form of stress testing. It is also the case that future developments in a SaaS application are largely unknown – as is the case with the traditional approach of buying the software.
Most commentators on cloud applications focus on issues such as reduced cost, very fast implementation and mobility, but the most important issue in my opinion, is reduced risk – provided things have been kicked around somewhat before a commitment is made.
Ultimately we would all like to be able to move from one SaaS to another without any major headaches. To this end we can expect suppliers to add special ‘data formats’ and other means of lock-in so that moving is not all that easy. But one step at a time – the cloud makes it much harder for the snake-oil salesmen to tell lies, and for any weaknesses to be identified before large investments have to be made.