Today we’ll touch upon the inevitable love of Russian entrepreneurs for support of industrial-grade ERP systems by their own IT staff.
This syndrome, however, is characteristic of business administrators from all former Soviet Union countries.
So, what is the motivation of our business captains behind this passion to maintain an industrial-grade ERP system using such obsolete approach?
Answers below are sorted by frequencies of mention:
- cost of support. Seemingly lower;
- control over the process. Seemingly better;
- security – in the broad sense. Seemingly higher.
Let’s discuss these items.
1. The cost
Check out the idea: to save money on maintenance of Porsche Cayenne
we’ll hire a man from Tajikistan (Tajik workers in Russia are perceived somewhat like Mexicans in the U.S. – TN) and lodge him in the garage.
Let him service our car at a cheap price. He would be also able to refill cartridges build a sauna, while the car is out. Still better than to sit idle, right? Efficiency in action!
A full-scale ERP system is bit more complicated than a Cayenne.
Just a little bit.
It’s not that we’re comparing your IT staff to illiterate migrate workers. It well may be that Beer Trading Co. employs top level programmers.
It really happens.
But let’s get back to the Cayenne parallel. Even if your Tajik guy is a gifted mechanic and used to fix old Russian cars in his village, the result won’t differ much.
He still won’t be able to service the Cayenne without proper equipment, diagnostic electronics, extended education and regular practice.
And if you can arrange all that for him (let’s say, you’ve got limitless time and limitless money), then what will you have as a result?
Right, a Porsche car-care center.
In reality, however harsh it is, you’ll get a dead car, which will cost you 14 villages to bring back to life.
Customer’s in-house programmers are not motivated to achieve results – their fixed salary does not imply it. That’s why instead of having a well-thought, well-planned, and streamlined process of modifications, they invariably stick to Hindu code, kludges, hardcoding, and further down the list of deadly sins of programmers.
That’s why the implemented ERP system, regardless of whether it had initially been perfect or not, can only deteriorate, if maintained in-house: the level of entropy will only rise.
Deterioration speed depends on circumstances, but the result is invariable – a system that is slow, glitchy, the one that unpredictably hangs up and can’t be modified with reasonable effort.
And a business, that now depends on a couple of people of arguable expertise and work ethics. The ones who are, actually, to blame for the present state of the ERP system.
Now, compare the initial cost of implementation of the now ruined system with a pennyworth of savings on qualified maintenance.
So, having talented programmers among the Beer Trading Co. staff is not enough.
For many years we (among other at least somewhat major software vendors) have been improving mechanisms of control and assessment of work quality, training, motivation, career advancement, coding standards, goal setting and doing various other things to ensure that we have a reliable Cayenne at a minimal cost as the output.
We’ve been doing it many years.
Every single day, so that today is better than yesterday.
Smart people with tons of professional experience who learned it the hard way have been doing it every day, and I can’t tell you that we get things done perfectly and easily all the time.
And what about you, are you ready to devote your life to this?
What professional or career advancement can the most brilliant programmer at Beer Trading Co. count on?
Just think of it for a minute.
Now, do you have an explanation for their work ethic, work quality, loyalty and personnel turnover?
It happens that when it comes to post-implementstion service, a business owner says: well, they (the programmers) have been working for me for 15 years. We’re like family now. And I don’t have a reason to let them go.
Our answer is: if your ‘native’ programmers are worth it, we’ll gladly hire them. And they’re not – then why feed the unworthy?
Of course, if the company shareholders all agree to support a mini welfare program – it’s their money and their right. But then find them any other job, not related to damaging the operational ERP system.
There’s a German saying that ‘sooner or later every car becomes an Opel’. Every industry-grade ERP system that was maintained in-house sooner or later becomes an in-house piece of software.
2. The control over the ‘process’
Suppose, a company manager gives direct orders to his staff programmers, thus intending to keep abreast of the situation. This extraordinary administrator’s vague requirements are not easy to clarify – it becomes obvious that they’re full of nonsense at the moment they’re being drafted.
So in the end, the ‘control’ comes down to ‘I do as I wish’, ‘who’s in charge here’, ‘do as you’re told and cut the crap’, ‘what am I paying you for’ and other highlights of the national art of management (meaning ‘I’m the boss, and you’re an idiot’).
Using such boss’s absolute incompetence in the domain, the in-house programmers make a fool out of him with extra cynicism and pleasure.
It’s clear that this ‘deep customization’ of the Porsche Cayenne organized in such way can only catalyze the finale that we talked about in the previous chapter.
3. The security
In the context of a physical access to database servers – they are located at a remote data center that the Ultima partner staff know nothing about. These servers may well be located abroad.
In this sense, there is no difference in security of access to the database between outsourced and in-house programmers.
In the context of an unauthorized remote access to data – we dare to hope that our long-term experience in regard to control and security in this area by far exceeds almost anything that can be done in-house.
The level of security may be increased past reasonable pro rate with the customer paranoid delusion. And their financial solvency as well: paranoia is a rather expensive hobby.
That’s in the context of logic and hardware.
Now let’s consider the context of a so called ‘human factor’.
Is there anybody who might in fact be interested in the contents of your database?
What competitive advantage will the Camomile company have, if it learns that the Daisy company sold 318 buns and 516 rolls in May, 2014?
The Camomile company can guess the estimates for these numbers anyway, otherwise they wouldn’t be competitors. And they can get details in a 5-minute phone call to your mutual suppliers of flour and poppy seeds.
Whereas the publicly held RosBreadTrade corporation publishes these data itself in its audited reports. And it’s OK; it didn’t go bankrupt because of this disclosure and it did not even care.
We’ve been in this business for a rather long while, but never got a satisfactory answer to this question. Paranoia is not a very intellectual hobby.
Now what about a ‘trade secret’?
Come on, guys, what kind of trade secrets you may have?
Coca-Cola has a trade secret – the ingredients of their hideous drink.
But it’s stored in a vault, not in their ERP system.
Apple has trade secrets – the design of their next iPhone or whatever piece of plastic they’re manufacturing next. Though its blueprints and technical data cannot be found in the Apple ERP system. However, the Jobs’ heirs will gladly tell you the quantity of iPhones sold and the profits they made. They will even pour you a drink at their annual report presentation.
As you have certainly guessed by now, your ERP system won’t have neither the name of your patron from the Department of Economic Affairs, nor the phone number of your local police officer, who might help with security issues. Whereas tender terms and results are officially published anyway.
So, even if the impossible happens – all (!) of your corporate database information is stolen, the vitally important information won’t be leaked. Since it has never been there.
However, there still may be some information in the corporate database, which is unwise to make public.
E.g. – personnel salaries. Otherwise your office will turn into a giant thermonuclear jar with spiders: ‘So why is he getting paid more than me? I’ve worked here a year longer and all…’
An Ultima partner staff member, who installs ERP systems for a number of companies, has a lot less interest in a certain piece of information in a certain database of a certain customer (and a worse understanding of its value).
The staff programmers, on the other hand, are quite a different story. Since they are a part of the organization and involved in their co-workers’ social life, they do know well, what information is of interest and to whom.
Who among competitors (and not only competitors) may wish to buy information? And what can they use to blackmail their own company?
For an Ultima partner staff member, the Vector company turnover is just a line among other ten thousand lines in the partners registry.
Whereas for Vasya the programmer, who is a dear friend of Olya the accountant, it means a billion rubles of additional VAT – for the shareholders, and a Criminal Rule – for the CEO and the chief accountant.
In the end, another really tricky question from our homegrown titans of risk management.
What if tomorrow, they say, your Ultima company bites the dust? Or your partner does? Or ‘you all’ will just go somewhere else, like to America?
Our answer to our honored titans is this.
Even if tomorrow ‘our Ultima’ bites the dust (whatever it means), there still will be left:
a) a fully operational ERP system that you work with.
b) former staff members of Ultima and/or our partner, who provided maintenance services. Along with their knowledge, skills, and willingness to exchange their work for currency notes currently in circulation in this country. Moreover, they will desperately need to perform that exchange – everyone wants to eat.
As for the geographic location of ‘us all’ – i.e. its possible change to America or Australia, these days GPS coordinates of a particular programmer don’t matter.
A significant number of Ultima employees already live and work in countries with habitability a lot better, than in our Nigeria with snow. It’s the 21st century out there, right?
And here’s a counter-question to the titans of risk management: what if both of your irreplaceable staff programmers decide to go to America, then what? What if it’s not ‘both’, but the one and only?
Or what if he or she dies? Physically. What will you do then? Halt your business for half a year?
In the end, a quote from our expert colleague: Georgy Gens, owner of Lanit, said in his interview to Vedomosti on March 10, 2015:
Now that there is an objective to reduce costs, insourcing is perceived as one of the forms of reducing costs – money stays inside the company instead of leaving it.'
'There is a strong probability that this will increase costs rather than reduce them. The idea of insourcing companies saving money is wishful thinking. You practically can’t find a more efficient company than a commercial business. Insourcing has no competitive environment, no diversification of orders among various industries. If you buy services from your own company, you have no choice but to accept them and pay your employees. And if something goes wrong, you’ll have to invest 10 more rubles on every ruble you spent, so it won’t be lost.'
'But isn’t it more simple to control your own employees?'
'Some managers really believe that it’s risky to give the job to an outside company, because they won’t be able to control everything and manage execution of work. But you have to access risks correctly. What happens, if a manager of an internal company or a key person leaves? It’s going to be a problem. However, if a project manager of an outside company leaves, they will find another one, and the customer won’t have to worry. It’s going to be a hurdle, but not a nightmare, or a nightmare, but not yours. You have a lot more levers of influence over an outside company. If a contractor does something wrong, you may just not pay. But if it’s an inside contractor, you always pay. There are a lot more unsuccessful internal projects than those that are done by outside contractors.'
So, my fair readers, we haven’t convinced you?
Ok then, good luck with your in-house maintenance.
You are definitely going to need it.