Software Business
Executive Report

December 20, 2007

Global Demand for Human Productivity Impacts Software Companies
By Vladimir L Pavlov, Chairman and Chief Strategy Officer of the International Software and Productivity Engineering Institute

“Moore's Law did not Double the Productivity for Human Beings”

Over the last decades, computers’ productivity was sky-rocketing, as well as computers’ penetration into our society. On the same time, the productivity growth rate for people was more than modest. This misbalance was constantly increasing and has been accumulated. There is a demand in the society to harmonize this disproportion, which practically means a need for human productivity growth. Successful companies are meeting the competitive demands of the global economy by driving productivity increase for their employees, clients, and partners. Less successful companies are not just failing to catch up, they are actually falling further and further behind.

Where does your company stand in this race for survival? The first step would be to benchmark the current productivity of an employee in your company against the average productivity of employees in Global-500 companies. Fill in the right column in Table 1.

Of course, it’s good if your company is above the average, not so good if below it. But the real key number is not shown in this matrix. The number you should really care about is a yearly productivity growth rate. The real benchmark for success is the one that shows how fast productivity is growing within Global-500 companies. The number to remember, the goal to shoot for and, if possible, to exceed, is the following: During the last two years the average productivity growth rate in Global-500 companies was 29% (see Picture 1).

1 Year-over-year productivity growth in Global-500 companies

If your company has an ambition to get into the Global-500 list, your employees’ productivity must grow faster than the productivity of world business leaders. If your productivity growth is slower, not only will you never reach that goal, but the distance between your company and theirs will constantly increase.

Where Will the Growth Originate?

Human productivity is not only about the numbers, not just the revenue and profit generated per employee. It is also about the meaningful values created by people, the “real” wealth, the intellectual capital each person generates; down to, and especially including the people who support those at higher levels.

A few years ago a Fortune-100 high-tech company deployed an ERP system. They soon discovered managers were spending too much time entering information into the system, so they decided to make administrative assistants responsible for that piece of the work. This doubled the workload for admins, delaying their other activities. Of course, if administrative assistants are late with their assignments, the entire business stops; so, the company doubled the number of administrative assistants. They hired a few hundred new people, just to read managers’ letters and enter orders into the ERP system.

Some might think this was a good thing: they created new jobs. But what kind of jobs? Do we really want to pay people for cutting and pasting? That’s computers’ work.

The key reason for computers’ existence is to help people get rid of routine, and help us dedicate our time to things only people can do. In the future, humans will focus on the three key tasks:

• Making decisions;
• Innovating;
• Expressing themselves emotionally and artistically.

All the rest will be “outsourced” to computers.

This is not an idealistic vision of human workers floating on clouds, dreaming up poetic images. It defines the key direction for computing to evolve and helps identify the most potent strategies for growth. It is a pragmatic, down-to-earth way to increase corporate profitability and success. It helps us understand productivity not only as “profit, generated by an employee” (quantitative level), but also as “new human value, created by an employee” (qualitative level).

The Eco-System

These qualitative values are strikingly clear if we view the work of a software development company in the context of its eco-system, and of the different productivity growth indicators that must be considered:

Picture 2 Successful productivity growth strategy should consider all elements of an eco-system

• What is the productivity within our company? How much profit is generated by an employee? What is our year-over-year productivity growth rate? Are we growing fast enough? What should we do to grow faster than our competitors?
• What is the productivity of our clients? How much profit is generated now by an average employee of an average company from the list of our clients? How does our software enable them to grow their productivity? How does our software help our clients increase their productivity faster than their competitors?
• What is the productivity of our partner/resellers? How much profit is generated now by an average employee of an average company from the list of our partners? How does our partnership program enable them to grow their productivity? How does our partnership help them increase their productivity faster than their competitors?

A successful productivity strategy for a software development company must consider all of these three aspects and provide clear answers to the listed questions. For each of the three aspects, there are only two basic approaches to increase the productivity on quantitative level: increase an outcome and decrease spending. The Picture 1 demonstrates that profit, generated by an average employee of a Global-500 company, is growing faster, than revenue, generated by this employee. It means successful companies employ both of these approaches. So should you.

How to Make It Happen?

If yours is a software development company, it is particularly important to increase the productivity of your engineers. Because today the programmers’ productivity is such a competitive value, new software development methodologies appear almost as often as new programming languages appeared 20 years ago. Agile Unified Process (AUP), Design-Driven Development (D3), Dynamic Systems Development Method (DSDM), Test-Driven Development (TDD), etc. More and more new software development methodologies, approaches and philosophies become available every quarter. This great diversity is an indication that software engineering is not mature yet, its evolution is rapid and constant and we will see even more changes soon. Let’s keep in mind that the key source of productivity growth is not in computers – it is in us, in humans. To maintain a successful posture, you have to identify key software engineering trends and make sure your approach is aligned with them. Productivity improvement in the upcoming decades will be achieved by optimizing the workflows for the first element in the pair “human + computer” and enabling engineers to unleash their true creative potential. It will have less to do with computers and more to do with human nature, with psychology. For example:

eXtreme Programming is an agile software development methodology that contains a lot of best practices helping software engineers organize their work. One of the most known XP practices is “pair programming” – you allocate two programmers for assignments that would normally require only one person. They share one computer. From a “traditional” point of view, “pair programming” creates unnecessary redundancy and inefficiently utilizes resources. But from a practical point of view it helps to increase the quality of the code, reducing the changes and bug-fixes required later, and shortens the development cycle. This productivity improvement is achieved without any automation or sophisticated algorithms – it is about people, not about computers – even though it is about writing code.

Another example is from our methodology called INTSPEI P-Modeling Framework. (http://www.intspei.com/Products/PMFramework.aspx). It includes an extensive series of best practices to help software engineers optimize their workflows. One of those techniques is called “speechless modeling.” When your analysts and designers conduct a modeling session to define an architecture for your future software, you do not allow them to use regular human languages such as English or Russian. They can only use UML or some other modeling language to communicate their ideas. From a “traditional” point of view, Speechless Modeling creates communication problems and is an inefficient use of resources. But from a practical point of view it’s faster, it creates a significant increase in the quality of the architecture, requiring fewer changes and rework later, and it shortens the overall development cycle. Here again, this productivity improvement is achieved without automation or algorithms – it is about people, not about computers – even though it is about defining architecture for computer programs.

These examples illustrate the simplicity and power of the overall trend: the key changes in existing software development methodologies, the key improvements which will have the biggest impact on engineers’ productivity – will be in optimizing workflows for tasks that only humans can do, tasks that require no automation. So, consider this trend while defining a productivity growth strategy for your company, and make your engineers adopt a human-centered semantics-based software development methodology.

Summary

Every good business communication concludes with a call to action. Here is mine to you:

• Benchmark your company against 29% - the productivity growth rate within Global-500 list;
• Beat the 29% by using the framework I’ve just described.

Merry Christmas and let your productivity double next year!

Vladimir L Pavlov is the Chairman and Chief Strategy Officer of the International Software and Productivity Engineering Institute. He is a recognized expert in software development. Vladimir has previously served as Director and/or CTO for several leading high-tech companies in the United States, Ukraine, Russia and Poland, including Intel and Microsoft.

Vladimir founded the International Software and Productivity Engineering Institute in order to launch new software development methodologies resulting from the award-winning research he has conducted since 2001. For more information about the International Software and Productivity Engineering Institute, visit http://www.intspei.com. For more information about Vladimir L Pavlov, visit http://www.vlpavlov.com

No sales professional in their right mind would sabotage their own sales intentionally. Nevertheless, self-sabotage – the act of undermining one’s own credibility and alienating the very customers and prospects we count on for our livelihoods – occurs with dismaying frequency.

The many ways in which salespeople sabotage their own efforts range from obvious mistakes, such as blaming customers when their own products and services do not deliver as promised, to very subtle insults hidden in the things that we say to customers. On the self-sabotage spectrum, it’s easy to recognize the obvious “I should have known better” mistakes that damage relationships with customers. The far more common and harmful situations occur when our words and actions insidiously erode the customer’s trust and personal credibility that we work so hard to establish.

In this article, I’ll focus on how to solve two sources of self-sabotage that cause salespeople to shoot themselves in the foot: “dangling insults,” and the “old brain.”

The Dangling Insult

We would never insult a customer by suggesting he is incompetent or imply to an executive that she is negligent. The very idea is inconceivable, yet it’s a common occurrence and salespeople unknowingly insult prospects and customers every day.

Here is a typical example. A salesperson introduces their solution by saying, “We save companies like yours from wasting hundreds of thousands of dollars in lost…” It sounds innocuous on the surface. Statements like this are standard sales-speak and are often true, but they also contain dangling insults. After all, if you tell a customer that she is wasting hundreds of thousands of dollars, aren’t you also suggesting that she hasn’t been doing her job very well?

Dangling insults are unintentional. Salespeople are unaware of the negative impact because they are built into their mindsets and the conventional sales training they may have received. The salesperson thinks he is delivering a compelling message and connecting to the customer’s pain. But to the customer, it can sound like the salesperson is interjecting or ending sentences with, “…you idiot, sir.”

At times, you can tell when customers hear a dangling insult because they react physically. They lean back in their chairs, cross their arms, and scowl. They often react verbally, by saying something like: “We’re not losing anywhere near that much money.”

Most of the time the reaction isn’t that obvious and most salespeople don’t realize that they have insulted their customer. As a result, they misinterpret the customer’s reactions and can’t properly address them. In fact, salespeople’s natural response patterns often make matters worse.

The Old Brain

The manner in which salespeople react to their customers’ responses can open the path to open and honest communication, or become a primary instrument of self-sabotage. There are two parts of the brain that are particularly problematic in sales situations: the brain stem and the limbic system, which scientists define as the ”old brain.” The brain stem or “reptilian brain” controls our involuntary actions while the limbic system generates basic emotions, such as fear and aggression. The old brain is not big on interpretation and analysis. It reacts to situations with lightning speed in six ways: attack, submit, flee, reproduce, nurture, or be nurtured.

So how does the old brain affect sales conversations? Continuing the example above, when a customer says, “We’re not losing anywhere near that much money,” a salesperson might counter with, “I’m sorry, but I think you misunderstood…” This implies it is the customer who just doesn’t get it and often triggers an even more irritated retort. The salesperson is unconsciously engaged in self-protection at the expense of the customer, who will often protect their self-esteem and strike back in turn.

I’ve often seen salespeople unwittingly play the critical parent with customers. Very early in a customer meeting and in the intent of “creating interest,” the salesperson will say something like, “You probably don’t realize how much time and money the many IT related activities cost companies like yours each year.” What do customers hear? Many of them hear a parent or superior insinuating that they don’t know their own business.

Stopping Self-Sabotage

How can we stop sabotaging our efforts? The first step is awareness. We cannot solve a problem until we recognize it. The second step is to stop behaving like a salesperson and begin to behave more like someone keeping our customer’s best interest in mind.

A good example would be that of a doctor diagnosing a patient’s health. During a “diagnostic conversation,” the full extent of the patient’s problem is explored, measured, evaluated, and communicated. Likewise, if you examine your customer’s situation, the focus should be on the physical symptoms of the problems they are experiencing, which is their reality. The goal is to raise your customers’ awareness and understanding of the problems they are experiencing and what it is costing them to currently manage the services you would provide. Then they will more easily make connection to the value of your solution.

The doctor will use established diagnostic processes that direct the order of questions and measurements. Their questions are about observations of physical indicators or symptoms that tie the diagnosis to their patient’s reality. It helps their patients get comfortable with the recommendation. The same communication style helps customers more clearly understand their problem, gives them a way to process critical information.

When we are in the diagnostic mode, we are dealing directly with our customers’ reality. That is, we are working with situations they have experienced in the past, are currently experiencing, or those they believe they will be exposed to in the future. In fact, our customers may not be aware that these elements or symptoms could represent significant problems that should be addressed. Through diagnosis we can help bring clarity to problems and a way to make quality business decisions.

1. Uncover the reality of the customer’s situation (Do these symptoms exist?)
2. Quantify the impact of the problem (How bad is it?)
3. Create the “Incentive to Change” (Is it serious enough to take action?)

To increase your diagnostic capabilities through support materials, consider these three steps:

1. Include diagnostic tools in your marketing communications to help your customer develop clarity around the issues you address. Consider a “Seven Early Warning Signals” brochure to help customers recognize the absence of the value your solution can provide.
2. To create more qualified prospects through your website, guide your customer through an initial diagnosis that will help them recognize the inefficiencies of their current approach.
3. Make sure product training teaches your salespeople the symptoms of problems your solution is meant to solve and how to quantify the impact of those problems on your customer’s business.

Like a doctor, a quality diagnosis builds exceptional levels of trust and credibility and a patient who is ready to take action. In business it means greater differentiation and clarity, customers that respect and trust us, and more sales with profitable results.

I’m not suggesting that all of this is easily accomplished. Success will come as a result of awareness, application, and practice. Of course, it will all be much easier if we stop sabotaging our own efforts.

Jeff Thull is a leading-edge strategist and valued advisor for executive teams of major companies worldwide. As President and CEO of Prime Resource Group, he has designed and implemented business transformation and professional development programs for companies like Shell Global Solutions, 3M, Microsoft, Siemens, Citicorp, IBM, Raymond James, and Georgia-Pacific, as well as many fast track, start-up companies. He has gained the reputation for being a thought leader in the arena of sales and marketing strategies for companies involved in complex sales.  

For more information contact: Prime Resource Group, support@primeresource.com, http://www.primeresource.com, 1.800.876.0378 or 763.473.7529, 3655 Plymouth Boulevard, Suite 110, Minneapolis, MN 55446

CA Inc. (NYSE:CA) and HCL Technologies (NSE: HCLTECH) have entered an agreement to establish a strategic partnership in which HCL will assume all research and product development connected with CA’s threat management security business. CA will retain all sales and marketing functions.

The goal of the strategic partnership is to grow CA’s threat management business by combining the strengths of both organizations. HCL and CA will achieve goal alignment and financial targets through revenue sharing. The annual revenue of CA’s threat management security business is in excess of U.S. $100 million.

The partnership covers all threat management products, which include anti-virus, anti-spyware, integrated threat manager (ITM), host-based intrusion prevention system (HIPS), secure content manager (SCM), internet security suite, anti-spam and firewall.

“HCL brings to the table over three decades of product engineering heritage and a track record of successful partnerships that have created value. This partnership benefits CA and HCL, and, most importantly, the customers who rely on CA’s threat management security products to protect their systems and data.” said Shiv Nadar, HCL’s chairman and chief strategy officer.

“This unique strategic partnership will enable us to profitably grow CA’s threat business, develop a more aggressive product roadmap for the benefit of our customers, and ultimately gain market share,” said Michael Christenson, CA’s chief operating officer. “We are very excited to have found a global player with the strong reputation and solid depth of experience of HCL to be our strategic partner.”

HCL will be responsible for research, engineering, architecture, technical support, technical writing, and quality assurance. All affected employees outside of European Union countries will be offered employment with HCL. Within the EU countries, CA will start the consultation process with the affected employees.

CA’s threat management products will continue to be sold exclusively under the CA brand and through several routes to market with a growing emphasis on channel partners. The partnership is expected to become operational by year-end, following the signing of a definitive agreement.

Contact http://ca.com.

Contact www.hcltech.com

Akamai’s Application Performance Solutions – enabling the Internet to be the platform for accelerating any critical enterprise application to anyone, anytime, anywhere – have been adopted for “TWX-21,” the largest multi-companies eCommerce service in Japan, provided by Hitachi, Ltd.

Akamai’s Application Performance Solutions are being leveraged by Hitachi to transfer global business-to-business (B2B) transactions via the Internet with high performance and reliability. Working together with the Hitachi “TWX-21” team, Akamai will help to support application delivery for Japanese companies conducting global business.

Akamai has been selected to improve the global performance and reliability of B2B transactions over the Internet, including in regions such as South America, and Northern and Southern Asia, which have been a problem up until today. Akamai will also globally accelerate the Hitachi

“TWX-21” Internet B2B service to support procurement and production for high-tech manufacturers. In addition, Hitachi will serve as an official distributor of Akamai services in Japan.

A large number of Japanese companies are engaged in business activities in China and other countries in the Asian region. These Japanese companies often face problems related to distribution and settlement that arise from the inability to effectively control order management and delivery management. Hitachi provides private electronic marketplace (eMP) systems for Japanese businesses through its TWX-21 multi-companies electronic commerce system, the largest class of eMP in Japan, and promotes collaboration with local partners. Also, by supplying an interface to existing eMP systems and utilizing partners' transaction search engines, Hitachi provides Japanese companies with services ranging from procurement to manufacturing and sales. Hitachi provides total support services for multi-companies commercial transaction management that includes supply chain management (SCM) and customer relationship management (CRM).

Contact www.akamai.com

Ariba, Inc. has completed the acquisition of Procuri, Inc. a privately-held provider of on-demand supply management solutions. With the acquisition, Ariba extends its position as the leading provider of spend management solutions to companies of all sizes.

“The acquisition of Procuri is a very positive step for Ariba that builds upon our successful on-demand strategy,” said Bob Calderoni, CEO, Ariba. “On-demand is the fastest growing segment in the spend management market, and Ariba is the clear leader with its share of more than 40 percent. By working to integrate Procuri’s offerings into our already robust portfolio of solutions in the months ahead, we can further extend our leadership and deliver on our promise to make spend management available and affordable to all companies.”

Originally announced on September 20, the acquisition of Procuri also provides Ariba with extensive experience in delivering on-demand solutions and strength in selling software-as-a-service that will enable Ariba to accelerate the growth of its subscription software business.

“Procuri had great success selling to both the enterprise and the mid-market, accumulating over 300 customers with nearly 70 percent of them under $5 billion in revenue,” Calderoni continued. “Software-as-a-service is something they did from day one, and with that comes a lot of know-how about how to successfully go to market with these types of solutions. Clearly this is something we can leverage at Ariba to fuel continued growth of both our revenue and market share.”

Contact www.ariba.com

Micro Focus’ enhanced Application Provider Program will focus on the needs of companies that develop software applications for resale incorporating Micro Focus and COBOL software. It offers a number of unique benefits to help address the challenges of winning and growing customers, improving application competitiveness, and helping customers with the skills and resources needed to grow their business.

Program participants will be able to take advantage of faster access to the latest Micro Focus technologies, allowing them to enhance applications and reduce development and deployment costs. Customers will also have access to business development and marketing resources that will enable them to generate additional revenue opportunities.

"As we move forward with Project Meld, the Application Provider Program will deliver enormous value both to existing Micro Focus customers and our new Acucorp customers," said Francis Sanville, Market Development Manager at Micro Focus. "The ISV community is an important part of our business, and this enhanced program will enable them to build modern solutions that better meet their customers' needs. We are thrilled to be able to offer such a strong support structure, including events and technical training, to help our ISV customers achieve their business goals."

Other benefits realized by Application Provider Program participants include:

• Specialized commercial terms for application deployment, enabling customers to determine the right development and end-user licensing agreements to better align costs to revenues;
• Specialized pricing for in-house development and application modernization tools, enabling customers to reduce the cost of application development and maximize the value of applications;
• Product stability and reliability, ensuring that applications developed using Micro Focus remain relevant and consistent sources of revenue generation; and
• Access to high-quality technical support, ensuring accurate and timely technical counsel crucial to customers' success.

Contact www.microfocus.com

Best Practices Webinar on Effective Sales Compensation for SaaS and Subscription-based Businesses

Makana Solutions Inc., provider of on-demand solutions for sales compensation plan design, is teaming with the Wilson Group of Concord, Massachusetts, and THINKStrategies to offer a webinar on effective sales compensation for organizations with recurring revenue, including software as a service (SaaS). The January 9, 2008, webinar is offered free of charge, but space is limited, so advanced registration is required.

“The growing adoption of SaaS has expanded the number of businesses with significant subscription-based revenue streams. As a result, an increasing number of our customers are asking for best practice advice on sales compensation for subscription-based revenue,” said Elizabeth Cobb, chairman and CEO of Makana Solutions. “In this webinar, attendees will learn best practices from recognized experts in SaaS and sales compensation in time to build it into their 2008 plans.”

Webinar registration is available online at https://www1.gotomeeting.com/register/156369990.

Contact www.makanasolutions.com

Go to www.SoftwareBusinessOnline.com for more details.

January 2008

Softletter's Marketing and Selling SaaS Seminar, 2008

Atlanta , GA , January 30/31

The Premier Event for Those Who Need to Succeed in SaaS   Keynote speakers include Zach Nelson CEO, NetSuite, Peter Coffee, Director of Platform Intelligence, salesforce.com and former technical editor of eWeek and Jeff Kaplan,CEO, ThinkStrategies  

Register at: http://www.acteva.com/booking.cfm?bevaID=144862  

February 2008

February 12
World Financial Symposium
Boston, Mass.
Contact www.worldfinancialsymposiums.com

6th Annual Growth & Exit Strategies
for Software & IT Companies
February 12, 2008
Boston, MA

World Financial Symposiums (WFS) is an international organization dedicated to educating technology leaders. It organizes and promotes forums for CEOs, CFOs, corporate investors and other deal participants for the software and IT industries, with the intent to educate and encourage deal flow among industry participants.

A true symposium, WFS brings together elements of the financial and partnering community, allowing for the exchange of innovative and effective approaches and methods being used in successful corporate growth plans today.

The 6th Annual Growth & Exit Strategies for Software & IT Companies will be held in Boston, MA, February 12, 2008. Featuring a topical agenda and world-class presenters, the conference provides an outstanding opportunity to learn about creating wealth and accelerating growth.

To register, please visit www.worldfinancialsymposiums.com

Submit editorial content to Shannon Given at
   720-528-3770 X104 or shannong@infowebcom.com   

For more information on advertising contact Jessi Carter at
  800.803.9488 X124 or jessic@infowebcom.com

To be removed from this distribution list please click here
To change the status of any contact information, call 720-528-3770.