TechnologyOne's war on IT consultants

Technology One executive chairman Adrian DiMarco has strong views about Australia’s IT industry and he isn't afraid to stick it to the multinationals.

“Consulting companies are a blight on our industry,” declares TechnologyOne boss Adrian DiMarco. It's a bold statement but one DiMarco stands by as he steers one of Australia's largest publicly listed software companies on to the cloud.

IT outsourcing is a bugbear for DiMarco and he isn't afraid to stick it to the multinationals, as we found out in an interview at TechnologyOne’s annual Evolve conference on the Gold Coast last month.

With 25 years in the industry under his belt, it was a gnawing, persistent frustration with the status quo that proved to be the catalyst for Di Marco to set up TechnologyOne in 1987.

With 1600 enterprise clients attending this year's Evolve conference, Di Marco has successfully managed to build something big out of his frustration with the multinational outsourcing companies.

“I used to work for multinational technology companies and as a young person I really used to want to work for them, I found it very attractive and I expected they’d be very attractive and cutting edge," he explains.

The reality was quite different: “I worked for them for years and found the opposite, just how bad and inefficient they were," DiMarco says.

“I really didn’t like what I was working with, the software we were using and stuff and I thought we can do it much better here in Australia. The idea was to build enterprise software.”

Moving to the cloud

Having built that enterprise software company DiMarco now sees TechnologyOne’s future lying in cloud services and stresses the importance of learning from the industry’s leaders.

“We looked at companies like Google, Salesforce, Facebook and Dropbox. These companies are the undisputed leaders in the cloud.

“One thing that we noticed was that you can’t get Google, Salesforce, Facebook from a hosted provider; you can’t get it from IBM or Accenture.

“The leaders in the cloud build it themselves so they are deeply committed to it, they run the software for their customers and they invest millions of dollars each year in making the experience better.

“It is clearly what the cloud was always meant to be.”

DiMarco though sees problems ahead as vendors look to rebrand their products and warns businesses need to be careful about cloud services.

“It is the next big goldrush in the IT industry. IT companies, particularly service companies have over the last few years seen revenues decline so in order to find new sources of growth they are all targeting the cloud.”

Accountability and the cloud

The lesson DiMarco learned in the early days of cloud computing was that accountability is paramount when you’re trusting services to other providers.

“We had early customers that went to the cloud; we said ‘look, it’s a great idea and we think it’s the future’. They wanted to go with hosting providers and we thought it was a sensible decision and we saw a train smash, it was a train smash of epic proportions.

“They were running data centres overseas in Europe that had latency issues, performance issues and the customers were paying money after money after money. The customer was getting a terrible performance and there was no accountability. We couldn’t fix it because we had lost control over the customers.”

This lack of accountability is one of the reason why so many IT projects fail, DiMarco believes, citing the notorious Queensland Health payroll project.

“Queensland Health again used this fragmented model; the party that built the software, which is SAP, used a third party which was IBM to implement it which meant no accountablity.

"That would never have happened If SAP had signed the contract, if SAP had implemented the software, which they won’t do, they would have known the risks that were being taken and they would have stopped that project and fixed it up.

 That’s the difference between our model and the competitors' model.

“They take no responsibility, they implement these systems, they charge a fee-for-service and they have open ended contracts -- that’s how they get to be $100 billion -- and do you know who suffers? It’s the customers.”

Shifting away from consultants

DiMarco sees governments moving away from the consultant driven model that’s proved so disappointing for agencies like Queensland Health which creates opportunities for TechnologyOne and other Australian companies.

“For the last 15 years we’ve not been able to sell software to the state government. It’s just changing, we’re getting in there now, but it was a terrible problem for us.”

The shift from big consultants is a view endorsed by Sugar CRM co-founder Clint Oram who described how the software business is changing when he spoke to Decoding the New Economy last week.

Oram sees the software market challenging established giants like SAP, Oracle and Microsoft; “in the past it was ‘here’s my software, goodbye and good luck. Maybe we’ll see you next year".

“If you look at those names, the competitors we see on a day-to-day basis, several of them are very much challenged in making the shift from perpetual software licensing, Oram says.

"It’s been a challenge that I don’t think all of them will work their way through, their business models are too entrenched. Software companies really have to stay focused on continuous innovation to their customers.”

DiMarco agrees with this view, citing the constant investment cloud computing companies make in their products as being one of the advantages in the business model.

Building the Australian software industry

For Australia to succeed in the software industry, DiMarco believes the nation has to encourage and celebrate the industry’s successes.

“It’s about getting people to believe in Australian software. I think the Aussie tech industry needs a lot more successes we can point to,” DiMarco observes.

“I think that will create enthusiasm, excitement and a hub for the rest of the community to get around. We gotta get some big scale companies with some high visibility and get them successful.”

As for TechnologyOne's future, international expansion beckons, with DiMarco saying that spreading its wings overseas offers the best long-term prospects.

TechnologyOne recently announced a UK management team as part of its push into the British local government market. Hopefully DiMarco’s UK management team won’t have to deal with too many IT consultants as they give the multinationals a run for their money.

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