Will IT vendors soon disappear? The reasons why

In recent years, the digitalization of the economy and society has progressed, and the market scale of the IT industry continues to expand accordingly. Recently, new technologies such as the cloud managed by the Internet, big data that analyzes a large amount of data and grasps trends, AI (artificial intelligence), and 5G have appeared one after another. In addition, the need for companies to convert to DX is now common sense.

In this way, there is no doubt that the IT industry market will continue to grow without slowing down. The trend toward digitalization of society as a whole is expected to continue in the future, requiring further evolution of IT technology and services. There are various companies that support this IT industry.

One is an IT vendor (also called Sier) who designs and builds systems that support the IT industry. There are also cloud service companies and software package companies that develop IT systems themselves as packages. Now, I will explain the current situation of these IT service companies and what direction they will go in the future.

When companies reach a certain scale, they begin to introduce IT systems in search of efficiency. From a small-scale accounting system, the scale will grow to a system with various purposes such as sales management and customer management. The software itself has evolved significantly in recent years. Some are packaged software, while others are inexpensive and use cloud systems.
There is also a method called “scratch” that builds a system from scratch so that it fits perfectly with the business system and needs of the company. It is the IT vendor who can assemble this “scratch”. The scope of work of IT vendors is classified as follows.

① System development
(2) Communication infrastructure
③ WEB system
④Mechanical system
(5) Consulting, etc.

However, the introduction of these IT systems is accompanied by failures at a considerable rate. The amount of IT orders varies from millions to tens of millions and hundreds of millions, so the cost is not stupid. In general, the cost is calculated from the “man-hours” such as the number of people and days required for system production, but it depends on the IT vendor’s opinion. Moreover, depending on the content of the development, it may take from half a year to several years, which takes time and money. However, there are many systems that are just “bubbles in the water” that cannot be used once they are completed. In some cases, this has led to lawsuits, and can have a significant negative impact on corporate management.

So why do IT solution implementations fail in this way? That is, the ordering company does not know how to use the IT vendor, and the receiving IT vendor does not understand the needs of the company. These two factors often lead to IT implementation failures.
Let’s start with the business side of things. It would be a different story if there were employees with knowledge and experience in introducing IT solutions in the company, but most small and medium-sized companies do not have experience in introducing IT solutions. I’m sorry. It’s a case-by-case basis, so it’s difficult to judge whether it’s good or bad, but let me explain the general points to note based on my experience.

Let’s take a look at an example of a company’s failed implementation. When I joined this company as a consultant, I attended a presentation by a major IT vendor and received an explanation about the introduction of the core system together with the client company. About 10 people from the IT vendor side visited the company, and the presentation started with their past achievements and high industry share rate. While listening to the explanation, the president of the customer side showed interest, and the atmosphere became that they would decide on this IT vendor. However, I was the only one who wanted to oppose the introduction of this company’s system. That’s because my experience so far has given me some reasons to oppose it. Big IT vendors usually have very good business models. One of our achievements is that we received a request from a company to create a program for an expensive IT solution and completed it. But it doesn’t end there. We copy the completed system, adjust it so that it can be sold to the general public, and sell it as a secondary package software. General-purpose package software is lined up, ranging from hundreds of thousands of yen to hundreds of millions of yen.
From the next project, you can use this package software and customize it according to your needs. If you customize it, there will be a charge again. In this way, it is a system that makes sales with steps like alchemy.
However, I am not posing a problem for this business model. The problem arises after that.
Rapidly growing and successful IT vendors have always struggled with a shortage of skilled system engineers and sales people who are familiar with IT solutions. Under such circumstances, if it is a scratch from scratch that involves a large amount of money, the IT vendor will assign excellent personnel, but if it seems that customization of package software will be enough, we decided that it would be fine to assign inexperienced personnel. increase.
As I mentioned earlier, companies are not good at making clear orders about where and how they want package software to be modified. It is easy to fall into discussions between people who have little knowledge and experience with each other. In order to protect themselves from such ambiguous orders, IT vendors create a document called a “requirements definition document.”
This document is a summary of the corrections we have received from the company’s order.
This is a natural process for business, but the requirement definition document has an underlying purpose of protecting the IT vendor as a kind of contract. Companies make various requests about what kind of program they want, but due to lack of specialized knowledge, the content of the request tends to be vague. The IT vendor puts this into a requirement definition document as an order from the company, and completes it as instructed. When you try to actually operate the completed program, you will inevitably have complaints such as “difficult to use” and “lack of functions”. This is where the first requirements definition document comes into play.
The IT vendor insists that they have created the requirements according to the requirements definition document. Problems and dissatisfaction that occur after that will be “another issue” that is not in the requirements definition document. Companies will have no choice but to put up with difficult-to-use programs or place additional orders as new projects. If you make an additional order there, it will be a new order and a large amount of cost will be incurred. In this way, the requirements definition document becomes insurance for the IT vendor.

This is the reality of introducing IT solutions. The reason I opposed the aforementioned IT vendor was that there were many visitors from the IT vendor side at the time of the presentation. When a large number of people come, the company tends to think that “they are putting effort into it”, but in reality, the roles are just divided, and there is a high possibility that there is no coordinator. If you have a facilitator, that person should be able to do all the talking, you don’t have to bring 10 people with you.
Also, talking about market share and achievements at the beginning shows that you are not confident about the content, and in fact, the content of the presentation seemed to correspond to that. That’s why I opposed it. However, this company did not listen to my advice and decided to hire an IT vendor.
After that, as I expected, I heard that this IT vendor’s software was not introduced, and the cost of about 200 million yen was wasted. Since then, the company’s performance has been declining. In order to avoid failures in IT solutions, it is desirable to appoint a consultant who understands the company’s needs and issues, understands the characteristics and programs of the IT vendor, and skillfully connects the two. is not so easy to find.
There are increasing calls to reduce costs through the introduction of IT, but this is only possible if you can make full use of IT. What kind of choice you make here and how well you introduce IT will make the difference.

There are companies that sell packaged software.
As mentioned earlier, creating from scratch is expensive and has a high risk of failure. While “scratch” is created for each company’s unique needs, packaged software is created to meet the common challenges and needs of companies. It is cheaper than Scratch.
That said, even if it’s at the level of accounting software, it can cost hundreds of millions of yen to introduce a core system class package. Most software packages can be customized to meet your needs.
However, customization is charged separately, which is ridiculously expensive. I often hear people say that they bought packaged software at a low price, but after customizing it, it was incredibly expensive.

This is an example from when I was an executive at an advertising company. For the first two years after starting my business, I asked a tax accountant to fill in the accounting software. After that, as the company’s sales grew to several hundred million yen, it was decided to hire someone in charge of accounting and select accounting software. The sales pitcher here is a listed company that is a major accounting software company. Even though I was involved in management at the time, I was a novice when it came to accounting software. Therefore, the decision to introduce this software was made by President Matter. The salesman’s persuasive presentation paid off, and I decided to purchase a package of accounting software handled by this company. I remember that the purchase price was 4 million yen, and the running fee was several tens of thousands of yen per month. Adding the recruitment of accounting personnel, the total cost increased by 300,000 yen per month. Normally, this should have been the solution. However, it was later discovered that this accounting software was not suitable for their business. Also, the software is quite sophisticated and difficult to use, and I began to see accounting departments confused. In the end, it took nearly two years for this accounting software to function reasonably well. Belatedly, I thought this was bad, so I consulted with an acquaintance of a system company. I bought the accounting software you recommended, tried it out, and in no time my problems were solved. In the end, I decided to abolish the original accounting software and terminated the running contract with that company. This was a misjudgment on the part of the president and us officers, and I feel sorry for the accounting department. After this incident, I began to pay more attention to sales pitches of outside companies.

In this way, compared to “scratch”, the hurdles for introduction are lower, but package software also has its own risks.

In recent years, cloud services for enterprises have rapidly spread, perhaps as a breakthrough.

Advertisements for these cloud software, such as attendance management, MA tools, personnel management, etc., have become more visible on TV, taxi advertisements, etc.

“Cloud” means “cloud”, but it is collectively managed by a server placed in a strictly controlled system center somewhere outside the company, and it is used by running software in the cloud. The installation location is not disclosed at all. All software can be used over the Internet, so it can be used not only inside the company but also outside the office on laptops, tablets, smartphones, etc. The cost performance is high, but like the package software, it was not made for our company, so the usability of the software is not necessarily good.
In particular, companies that cannot afford the cost often introduce this cloud service, and since cloud services are full of individual functions, it is necessary to introduce multiple ones. Then the following problems arise.

(1) I don’t know what kind of cloud service to introduce.
(2) Operations become complicated because multiple cloud services are disjointed.
(3) Is it possible to link these cloud services together?

Let me give you an example. This is fairly recent. The company that we decided to support the formulation of management strategy was using a certain company’s cloud-based customer management (CRM = customer relationship management) software. It is a type that charges according to the number of users, and the usage fee is 10,000 yen per person. Since I had applied for 40 people, it would be 400,000 yen a month, or about 5 million yen a year. The reason for introducing this software is the same as my experience, and he said that he was satisfied with the presentation and sales pitch and signed the contract. However, CRM requires a certain amount of know-how, and it was premature with the skills of the employees at this company. A CRM is just a tool, and if you can’t use it, it’s worthless. Apparently, it was explained that the sales could be expected to increase dramatically if it was introduced, but when I actually tried it, it was not easy to handle. I promptly proposed to this company to cancel their customer management software and instructed them on customer management methods using simple email software, which resulted in a successful cost reduction.

In this way, even cloud services have disadvantages. As a result of introducing cloud services, there are many companies that have become “lost treasures” and end up spending money without being able to use them effectively.