Calculating Digital Capital and what it means to traditional ERP vendors

Posted on July 13, 2010

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In the just released white paper titled “Transparency in Government Procurement” Karen Evans the former CIO for the U.S. Federal Government under the Bush Administration hit the proverbial nail on the head when she made the statement that “products” (re technology), does “not replace skill sets,” and that “vendors have to change their business models” focusing on the critical areas of “quality of service and reliability of data.”

Evans went on to suggest that this “change” is “different from selling an Oracle data base,” even if it is within the realms of a virtualized or “cloud computing” architecture, and that computing in the clouds is really just “optimizing the use of infrastructure” and is therefore a commodity versus being an actual service.

Note: to obtain your complimentary copy of the Transparency in Government Procurement white paper, simply activate your free subscription to the new Essential Connections Blog through the following LINK.

This is an interesting perspective in that what Evans has introduced relates very closely to what has been referred to as Digital Capital.

In fact, in his July 12th, 2010 Huffington Post article “Digital Capital and Cloud Computing’s Asymmetric Risks,” DK Matai’s reference to and definition of Digital Capital may very well represent the unbridgeable chasm between traditional ERP vendors such as Oracle and SAP, and the emerging world of virtual computing.

Matai provides an interesting lens through which to view what he termed as “the chief characteristic of Digital Capital,”  which according to the founder of the global risk specialist firm mi2g, “adds value when it is innovative, dynamic and flowing.”  According to Matai, “when we buy most new products, services and solutions — tangible or intangible — what we are paying for in terms of utility, design and functionality, is primarily a manifestation of Digital Capital — a type of concentrated human intellectual creativity.”  These unique attributes and qualities that render human-like personality Matai emphasized, “makes Digital Capital fundamentally irreplaceable.”

The question is simply this . . . within the confining framework of traditional ERP-centric applications, in which adaptation and adoption are predominantly the responsibility of the user interacting with a somewhat static application platform, is an Oracle’s or an SAP’s Digital Capital virtually non-existent?

One might be inclined to think so, as both the erstwhile and emerging SaaS vendors, whose applications have been specifically designed to adapt to the way in which the user operates in the real world means that while perhaps not replacing skill sets, these solutions enhance user capabilities at a practical, every day level.  This to me is the epitome of the definition of true Digital Capital.

In short, and perhaps recalling the comments made by Ariba CMO Tim Minahan who’s suggestion that Oracle’s and SAP’s entry into the SaaS world is a “bipolar attempt at cloud computing,” the unique attributes associated with Digital Capital is noticeably absent from the models under which these traditional ERP vendors operate.

This is one of the reasons why the features, functions and benefits comparison between products is largely irrelevant.

Think about it for a moment, what value does a functional bell and whistle have if as reported in a November 2009 article by Leon Smith, only 14% of the companies who have an ERP-centric application expressed confidence that 60% of spend was being channeled through their eProcurement system?!

In other words, technological functionality means very little if it isn’t being utilized consistently and productively by an ever widening customer base.

In the context of Matai’s reference to “human intellectual creativity” and Evans’ differentiation between the vendors selling a commodity versus those delivering an actual service, this means that in today’s virtual world of cloud computing the key is the intellectual creativity which “carries unique attributes and qualities that render human-like personality.”  In other words, does the solution reflect and therefore serve as an extension of the real-world front line activities of the users it is designed to assist?!

Based on my on-going research, these important attributes appear to be uniquely indigenous to the new breed of SaaS vendors.

The problem as I see it, is that many of these new Titans of the SaaS world are often times lured into a product comparative analysis which causes the prospective client to view the offering in perhaps the familiar yet largely ineffective context of the traditional ERP vendor’s application model.

This is the reason why SaaS vendors shoud pay heed to Evans’ reference to the important “differences” in terms of “selling an Oracle data base” versus playing to their strengths which is the collaborative, human intellectual creativity behind their virtual solutions.

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