The Dark Side of the Digital Transformation and Tech Consulting Industry

Written By: Eric Kimberling
Date: April 10, 2023

I have some bad news for you, the tech industry is rigged, and even more importantly, the rigging of the tech industry is creating a lot of problems for you as an organization, leading to a lot of bad decisions. But how exactly is the tech industry rigged, and how does that affect us in our digital transformations? 

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I've been in the technology consulting industry for about 25 years now. I remember starting my career in the late 90s and thinking that this industry is rigged. It's a system that creates a lot of bad decisions, negative influence, and biased information that creates an echo chamber within the industry. It can be very hard to decipher and see your way through. Part of the reason why I started Third Stage Consulting, which is an independent, non-affiliated consulting firm, is that we don't receive commission or any sort of kickbacks from software vendors. We're not affiliated with software vendors, and we don't focus on one type of technology. I created that business model because I was so passionate about countering the fact that the industry is rigged.

As time goes on, you would think that things would change and you'd start to see some improvement in this dynamic. But the problem is, it hasn't really changed. Other than companies like Third Stage that are truly independent, which is still a rarity, you still see a lot of biased and self-serving behavior that leads to bad decisions and bad outcomes for organizations.

To understand the magnitude of these challenges, you need to look no further than the fact that most published statistics state that somewhere north of 80% or more of organizations that go through digital transformations fail in their projects. The reason isn't that the technology can't handle transformation or that organizations are incapable of change. The reasons are largely because the industry is rigged, and people don't have the behind-the-curtain look and understanding of what's happening within the technology industry.

What I want to do is lift the curtain and unveil some of the challenges and biases within the technology industry. Most importantly, I want to leave you with some tips on how to counter and overcome those biases. 

Overly Optimistic Sales Reps

Bias in the technology industry often starts with self-serving sales reps who are trying to sell software technology and services that their software vendor supports. Now, this seems understandable enough if you're a sales rep for a software vendor. If you're selling anything, you're going to do what you can to make a sale. I get that. But the challenge is when you're talking about large multi-million-dollar, and in some cases, tens or hundreds of millions of dollars being spent on digital transformation, those small misrepresentations or omissions that often happen in the sales cycle can add up to a large price tag that can create lots of problems for organizations.

Let me give you a couple of examples of what happens when a sales rep is biased and when they're focused on selling just the positives of their software. One is that you're not going to fully understand what the weaknesses of the technological solution are, which is arguably just as important as what the technology can do. You need to understand what the technology can do because if you don't have a realistic understanding of what technology can and can't do, you're not going to have a realistic view of what the right technology strategy is for your organization. It's very rare that one technology can solve all your problems. Usually, you need multiple technologies to address your transformational needs.

The second reason why this is such a big deal is that when sales reps are misleading in any sort of way, or if they're omitting key facts or key opinions about the weaknesses of their solution, it's also creating an overly optimistic view of how long it's going to take to deploy their software, how much money it's going to cost, and how much resource commitment is going to be required on your side. More often than not, sales reps are incentivized to downplay the effort, the time, the cost, the risk associated with their technology, but you as an organization need to understand what those risks are. You need to understand the real picture of what a real transformation is going to look like, not an overly optimistic view from a sales rep who might be basing a proposal or a suggested time frame on overly optimistic assumptions.

Biased System Integrators and Consultants

Now, it's not just sales reps that are biased in creating some of these problems in the industry and causing the industry to be rigged against you. Another dynamic that could arguably be even bigger than the sales rep dynamic I mentioned is industry consultants and system integrators. When you have larger system integrators and consultants that are out there peddling the company line and drinking the Kool-Aid and focusing just on the positives of whatever solution it is they support, it creates a perceived reality that the technology must be better than it really is. If you think about it, it's a brilliant way to sell software. If you get multiple people telling you the same thing, that the software is awesome and can be deployed in x amount of time, even though maybe it's not realistic, you start to believe it because you hear from so many different data sources. You talk to different consultants, you talk to system integrators who are telling you the same thing, and it starts to become truth in your mind. But the reality is those are very biased parties that are self-serving, and they have self-interest that they're pursuing as well because they want you to focus on their software and use their services that focus on that software. So, it's important to recognize that it's not just the software vendors and their sales reps that are biased. It's also the industry consultants and system integrators that implement technologies.

I would say that 95% or more of the industry in the tech space are completely aligned and affiliated with one or more software vendors, which adds to the dynamic that I'm talking about here today.

Misleading Industry Analysis

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Probably the biggest and most subtle aspect of the rigged tech industry is the influence of industry analysts who publish information and thought leadership that is highly pro-vendor and biased. For instance, Gartner's magic quadrant or Forrester research reports are largely paid for by software vendors, who are some of the biggest customers of these industry analysts. When Vendor A asks Gartner or Forrester to create a specific magic quadrant for a niche or vertical and use it to showcase how good their software is, they pay a considerable amount of money to ensure that the analyst firm publishes something that promotes their message.

While these reports are promoted as academic and independent with in-depth industry analysis, in reality, many of these reports are driven by money. Money influences what is seen in these reports. However, since these reports are published by third parties, people often trust them and develop the wrong impression that the software is better than it is, thinking they are looking at unbiased, objective information. In reality, the analyses are often sponsored or commissioned by the software vendors who want third-party validation of how great their software is.

So, while it is essential to look at these industry analyst reports, it is crucial to take them with a grain of salt and understand that there is a high likelihood that money and politics drove the report's outcome.

Self Interest

Now, one of the recurring themes that I've talked a lot about in this video so far is the dynamic of self-interest. It's self-interest that's driving bias in the industry. If you step back for a moment and really depersonalize this, it's really the way the industry is built. You have software vendors who needed to get on the map by creating an ecosystem of support for their product. In other words, it's very difficult, if not impossible, to create a new software solution and just hope for the best, and hope that through word of mouth and viral marketing, that somehow that technology on its own is going to gain mainstream mass acceptance.

What vendors need to do to be really successful is they need to create an ecosystem of support. They need implementation partners and system integrators that are going to make money when you make money. So, if I'm a software vendor and I'm setting up a new shop, I'm going to go out there and list as many consultants as I can and offer to pay them X percent of revenue for any time they suggest my product to a customer. And if you think about it, that's a great win-win proposition. I can overnight create an army of people that are on my side, selling my software, making money when I make money. Regardless of whether my product is good or not, it doesn't really matter. The fact is, I'm enlisting people to help grow my business. The same goes for system integrators and other consultants, as well as industry analysts. I'm going to enlist the big-name industry analysts to put out pro-vendor types of materials to show how viable my product is and why my product should be considered alongside other big names in the industry.

So, this self-interest isn't necessarily wrong; there's nothing wrong with it. But it creates an unintended consequence, which is that we think we're getting unbiased information, but we're not.

How To Overcome Bias

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Now, I don't mean to be discouraging, and to really rain on the parade of digital transformation in the technology industry, even though it may seem like I am. I'm calling out the facts and observations of what actually happens in this industry. The good news is that if you know this and go in with your eyes wide open and understand how the industry is rigged, we can start to think about what we can do to overcome that. How can we sort through and separate the wheat from the chaff in terms of what's real, what's fact, what's objective, versus what's not?

The key here is first of all to recognize what's not fact, or at least what's heavily influenced by opinion and self-interest. Once we understand that, then we have to figure out what other data sources we can lean on that we can trust. There are a few options we have. One is when we're evaluating technology options, we want to make sure that we're really evaluating in the context of our business needs and requirements, and that we're driving the evaluation process, not letting the software vendor and their sales reps and consultants drive the sales process because they're going to want to highlight the things that are most important to them that they know will make it more likely for us to buy their software.

The other thing is to leverage independent third-party data sources. For example, we at Third Stage, because we're not affiliated with software vendors, have a database that we use that has hundreds of enterprise technology providers, and it maps quantitatively how well each of those software solutions can perform certain functionality against over 3,000 different business requirements. That objective data is something that we use in helping our clients provide objective, valid, quantifiable data that shows the strengths and weaknesses of different solutions in the marketplace. That's one example. Another example is if we can leverage an independent third party to help us through the process that knows the strengths of weaknesses, the good, the bad, the ugly of these different technology solutions in the marketplace, then that's absolutely something that we'll want to do as well.

One example of an independent agnostic firm and partner that can help us through the process is my company, which is Third Stage Consulting. We want someone like Third Stage that's independent, that has nothing to gain or lose by us making certain decisions, not only during selection but also during implementation. So, of course, when we're evaluating potential options, it makes sense that we want to have someone that's unbiased and can provide objective information. But even during implementation, we want to make sure that we're not being forced into a bigger footprint or into buying more modules of that software than we need. We also don't want to have a partner who's going to try to force-fit parts of the technology into parts of our organization where it doesn't belong.

I'll give you an example. A lot of times we have clients that will implement big ERP systems, and the system integrator along the way will try to force them to use as much of that one system as they can, which in some cases makes sense, but in other cases, it doesn't. There's going to be a better solution out there that could be a better bolt-on or a better way to address that need rather than using that one vendor software. Having an advisor that can help us in that way is going to help during the implementation.

Finally, from a risk mitigation and a quality assurance perspective, we need someone that's not afraid and has nothing to lose by telling us the reality of what risk we're facing and what trade-offs we're making as an organization.

Too often, software vendors try to paint a rosy, over-optimistic picture of their projects, while hiding or not recognizing the risks that may be percolating under the surface. Therefore, you need a partner that can draw attention to these risks, not to be the bearer of bad news, but to address them before they blow up in your face. Only by doing so can you be successful in your digital transformation.

These are just a few examples of how you can sift through the noise and get to the heart of what needs to be done objectively and unbiasedly to achieve success in your digital transformation. I hope this provides you with some general guidance and tips to be more successful in your transformation.

If you are looking to strategize an upcoming transformation or are looking at selecting an ERP system, we would love to give you some insights. Please contact me for more information eric.kimberling@thirdstage-consulting.com

Be sure to download the newly released 2023 Digital Transformation Report to garner additional industry insight and project best practices.

Kimberling Eric Blue Backgroundv2
Eric Kimberling

Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.

Author:
Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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