Part of the problem I see here is that this CIO is blaming what's ultimately nothing more than a word with a vague definition. The term "cloud" is thrown around so much lately and it can mean any number of things. So for him to say he's suspicious of "the cloud" doesn't really make anymore sense then being suspicious of, for example, "Web 2.0 software," -- whatever that might mean. Take two separate companies supposedly offering an entry into "the cloud" and you'll see two very different technologies and products.

However, what I do take home from this story is that any software or hardware vendor -- regardless of what they're selling -- needs to have their s*** together before selling it. Whoever this vendor was, they obviously didn't have their act together. They made outrageous promises about what Pulte Homes would be able to accomplish by using their products, and such promises were clearly overblown, and certainly hyped up using all the latest industry buzzwords. And it also sounds like they had a dishonest pricing model, something else that must be addressed.

Regardless, I think that's a good point that the companies offering up "cloud services" need to have a good set of case studies and references before making such claims (including what their version of the "cloud" means, and what it can and cannot do). Until then, they better start a little more slowly before suggesting that huge Fortune-500-sized companies can simply unload their entire IT operations onto these servers dubbed "the cloud," because they obviously aren't ready for prime time.

Fortunately, these stories could soon be a thing of the past. Vendor lock-in is fading fast against the rise of commodity computing. And these days, there are already plenty of proven resources companies can use to build their own clouds ... with out the risk of vendors carrying shotguns.

Pulte CIO Has License Agreement Horror Story

Mr. Batt's problems with this provider have nothing to do with the technology or delivery mechanism. They are all related to unfavorable terms in the agreement.

There is more risk with new technology, but it's the buyer's responsibility to make sure the terms contain appropriate remedies.

A few thoughts:

If you google "pulte crm" you will get some insight on the "unnamed vendor" (not that the list of who we'd have just guessed was that long...).

I'm also somewhat fuzzy on the terms of the contract Batt signed; it sounds very one-sided on Siebel's - I mean the "unnamed vendor's" - part. The article implies from the first payment/second payment info and the utilization reference that he was playing a flat fee for a variable on-demand service. Huh? If there was bottom minimal fee for the application (not uncommon to cover operational expenses and other costs) with variable pricing above that bottom utilization tier (which is a fair assumption based on contracts I've see), it is unreasonable to ask for that minimum payment to be lowered. Will (or should) any vendor lower your license fees because you only have a 2% utilization on your server for their product?

Were there no SLAs, contract termination clauses or other adjustment conditions based on non-performance, utilization levels or other conditions? There are termination fees in server leases to accomidate changes in business needs. I can (for a small fee) terminate my server leases early if my anticipated need for them evaporates. Maybe the company will renegotiate to reduce my rates so as to not have the contract terminate; but I can't object if they want to stick to the terms of the contract they signed with me in good faith.

My gut is telling me that the fault doesn't lie exclusively (or maybe even mostly) on the vendor's fault in this case; and maybe because they article only tells part of the story. If the customer agrees to a contract that doesn't conform to their needs, how far does the vendor need to go to fix the customer's lack of contract negotiating skills and lack of requirement definition to prevent being vilified?

Like this never happened with on-premise CRM solutions. I also wonder how much of the problem is due to the lack of a sound architecture of Batt's legacy apps. This is just another "I failed therefore the cloud sucks" story. Moving on!

Would help the rest of us who are on the same road to see vendor names when the "they" are reported.

Please have the guts top mention in full the NAME of the vendor. Your articles would do a BETTER service to the IT community.

This nation is now so afraid of its own shadow from frivolous lawsuits that NO ONE dares to say it like it IS. A real shame.

My analysis:
The CIO made some rash decisions (probably from improperly assessing the business, technical and commercial risks), negotiated a poor contract and then failed to show the resolve and leadership to meet the business goals.

Why is Pulte blaming "The Cloud" if they've allowed such a CIO to keep his job?

yes, a good contract protects the buyer. But what about small to mid-sized clients?

If your license fee is under $20,000 a year, there is no way a vendor is going to give you anything but a standard contract (written on their terms).

SAAS computing can reduce the cost of acquisition by an order of magnitude - even making the sale in a self-service model. This leaves the client even ever more without a paddle.

How can these buyers be protected? Do we need some sort of union/ standards body to outline the minimal terms that should be expected?

"unconventional Business & IT Consultant" - the story is not about the vendor, it really doe snot matter. It is not a singular event, but the story of a CIO that no longer trusts a technology delivery direction. I for one think he failed in his job by not being clear about the terms in the contract, and instead believed the hype he heard over the contract he signed. That was foolish.

Mark and "unconventional";

Think about your requests for a momemt. Mr. Kontzer did not interview the vendor so the article would have been titled from the customer's point of view.

The purpose of the article was not a post-mortum on what went wrong and the lessons learned but more of a "think about what you're doing" and "beware the hype".

It would have been (IMHO) irresponsible to name vendor in this article. What would your reaction be if a customer (who **may** have brought their problems on themselves) were allowed to trash your reputation in an industry forum without you having the opportunity to respond? I suspect you may consider a "frivolous lawsuit".

Besides, would you exclude a vendor from consideration because of what this one person said? If so, I hope I never do business with you.

Michael Geiser, your comment begs the question of why Mr. Kontzer didn't contact Seibel for their side of the story.

Even if the vendor's response was no comment, he could have then named them and indicated that they had no comment without risk of a lawsuit, frivolous or otherwise.

Leaving them out conspicuously weakens the whole thrust of the article as both Mark and "unconventional" have noted.

- Mr. Howard. I tend to agree with you to a limited extent about your “story of a CIO that no longer trusts a technology delivery direction”. But had this CIO been more informed and competent in selecting IT vendors for a project of this magnitude he probably would have been in a much more comfortable position. But then again that is why there are Consultants like me to help guide them through the labyrinth of IT product acquisitions and IT contract negotiations

- Mr. Tyson: Your comment clearly demonstrate your ability to understand what is “between lines” You agreed that Mr. Kontzer articles has no real value to the IT community at large, because as you said “weakens the whole thrust of the article” in response to my point when I said to Mr. Kontzer “Please have the guts top mention in full the NAME of the vendor. Your articles would do a BETTER service to the IT community”, I commend you.

- Mr. Geiser: I am not sure whether you are familiar with a universal concept called “Listening from both side of the story before taking any decision or putting the blame on one”. The main reason why so many businesses get mugged like Pulte by “vendors” like the one in question is that all these failures are not well publicized or incompletely done. As a US Consultant with also extensive International experience I came across an unbelievable number of Large to medium business you have been literally ripped off by $million$ even tens of $million$ by these CRM vendors, only to have their project delayed by months even years and budget overspent by $million$ and sadly some of them scrapping the whole task because they were getting nowhere. I do have a list and summary of all those failures well documented. As to “you hope I never do business with you”. I can assure you that those you did saved millions and were saved from wasteful situation identical to where Putle CIO is in now.

An unconventional Business and IT Consultant -- You are absolutely right; there is too broad of a range of technology a CIO may have to evaluate in order to fully equip their organization with the tools needed to have an effective business process. I also consult on these matters, and am now working with an organization to evaluate and select an ERP system for the future. They are not able to do that in house; but I would expect them to also have an ability to really ask the tough questions, like "how will that be delivered on time, and what happens if it does not?". I also tell my clients they can ask any question; and should do so. But I know a lot are ones I need to ask of them and the vendors in view.

I am sure you do a great job with your clients.

Thanks to all who've posted here for reading and taking the time to further the dialog on this topic. This is what makes the blog format so valuable. Now let me provide some light on things.

First of all, I'm sure you all understand that behind this post are relationships--most notably Mr. Batt's with his vendor and mine with Mr. Batt. Both of these relationships are very important, and neither Mr. Batt nor I want to do anything to burn bridges unnecessarily. Mr. Batt asked me not to mention the vendor by name, and I agreed (as I did after our first conversation last year). Identifying the vendor at this point would a) further jeopardize Mr. Batt's relationship with his vendor, and thus increase the odds for more potential struggles, and b) make it a lot less likely that I would have his trust as an interviewer in the future.

In my view, the name of the vendor is not important. And given that, as Michael Geiser points out, you can use Google to reach some educated conclusions, explicitly naming the vendor serves limited purpose.

The point here was to translate the story of one CIO's experience with "the cloud," and to underscore how much risk there is in what is a pretty nascent market. I realize "cloud" is a nebulous term that can mean many things. I also am aware that this situation probably could have been avoided--whether it can be blamed on the vendor's business practices or Mr. Batt's decision making is debatable. To his credit--and I failed to include this in my post--Mr. Batt is well aware that he may have jumped too quickly into something he didn't fully understand. He acknowledged that in this case, he was the pioneer who "took the arrows", and he wishes he wouldn't have. That will come through stronger when I highlight Mr. Batt's comments in my upcoming feature.

What's most important from a journalism perspective is this: It is highly unusual for CIOs to share much on the record in the way of dissatisfaction. So when I get a CIO who's willing to speak his mind so long as I don't reveal whom he's speaking his mind about, I agree enthusiastically. Consider the alternatives: I can either not share his valuable experiences, or I can violate his trust and ensure that I don't get such stories to share. Neither of those options is palatable in my opinion.

I hope this helps everyone understand the nature of this post. Remember, this is a blog, not a hardcore news forum. Information is presented in a much more casual format than a formal journalistic piece. In this case, I was sharing a bit of reporting before making it part of the more traditional story because I thought it was interesting. And clearly, based on the response, I was right.

Again, thanks to all for keeping me honest.

Cloud computing and virtualisation are two pieces of technology repositioning approaches that are high on promise, vague on business benefits and appalling on delivery.

Cloud computing is just what Larry Ellison says it is, networks, computers, software and databases, made vague, fuzzy and sloppy.

Virtualisation is the promise of being able to do more with less. But just because you can virtualise an IBM mainframe, a SUN SMP, a HP and a DELL rack on your dual core laptop, doesn't mean you have all this power on your laptop, in fact, when you have a whole heap of context switching going on it eats resources, which many technicians seem to have overlooked, unfamiliar as they most are with how systems really work.

At the end of the day the vendors can offer what they want, but it's bad technical advice that gets these viral trends implanted into the corporate environment.

Sadly, the fault lies on both sides of this deal. Many of the "Cloud Vendors" are themselves trying to figure out how to market the Cloud and how to manage it. And many are looking out for themselves first and customers need to be aware that vendors are not necessarly looking at each contract for the long term. It is a buyers beware market place.

A Google search of "pulte crm" reveals who the vendor is.

There are numerous angles on this story.

First of all, does this relationship qualify as "Cloud Computing". One of the primary ingredients to the Cloud is usage based pricing and/or scalability (up and down). Pulte was locked into a long term contract, therefore, this deal does not fit the cloud definition.

Actually, it sounds more like a mini-outsourcing deal. Outsourcing has historically had these problems with flexibility. In the end, the vendor has simple motivations/objectives: increase revenue and increase profitability. Pulte's request was completely counter to those objectives, not to mention the contract.

Pulte has to take PRIMARY responsibility for this mess. Within Pulte, the CIO takes the biggest hit, but the size of the hit depends on Pulte Vendor Management's and Pulte's Legal involvement (and policies). The CIO may not have even been involved in the contracdt negotiations (unlikely, but possible).

However, the vendor should also take a hit here (and, actually, they ARE taking a hit by being named in this comment string). A vendor has to demonstrate a modicum of flexibility and reasonableness. I am certain that the vendors advertising says they want to "partner" with their clients. If word gets around (as it has here) that the vendor is not reasonable when business factors change significantly, their reputation will suffer.

Someone mentioned hearing the vendor's side of the story. That is a VERY valid point. Do we have enough of the facts to pass judgement?

We have a similar story with an ERP solution. We are in the building components business. They have a great sales presentation and the initial limited test installation went fine. When we added the other three companies that are part of our group into the equation, the final installation costs were over 10 times the quote, the vendor told us our servers, firewalls, routers and other equipment needed to be replaced (not in the original quote though our existing infrastructure exceeded the requirements quoted). After we upgraded the backup servers, the whole system crashed.

We finally walked away and said "see you in court." After explaining it in detail to their counsel, they apparently decided not to see what a jury thought but we have untold number of man hours and lots of dollars in an unproven product.

Hi Tony,

In this case, Pulte's horrors have as much to do with choosing their CRM vendor as it does with cloud computing. Remember, it was a melt-down by the CRM provider that brought AT&T Wireless down, back in the days before the merger with Cingular. One of the things that companies really need to do is thoroughly investigate the proposed cloud vendor before signing on.

Another thing they need to do is think twice before sending any mission critical applications to the cloud. Not only might you find yourself being held hostage by an uncooperative vendor, but you could find yourself with even bigger problems due to security and compliance failings.

With a few potential exceptions (Salesforce.com claims to be an exception) the cloud really isn't ready for prime time. The offerings aren't there, the security is problematic, compliance is probably impossible. And you could find your money being drained for services you aren't actually getting.

Wayne Rash
eWEEK

Tony,

As a former journalist and former CIO, I have to say I'm a bit dissapointed in this article. First, as many have suggested, the name of the vendor would have added considerably to the value of the piece, as would their response to the comments made by Batt. The key to good journalism is to present both sides and let the reader decide where the truth lies. As it stands this is just a one sided rant. Yes, Googling Pulte CRM gives you the name of the vendor, but not their side of the story.

This is really something taught in news writing 101.

Tony,

This had nothing to do with the viability of "Cloud Computing". (BTW - this term wasn't even really being used at the time. It was just SaaS or On-Demand). The success rate of SaaS based projects (especially in the CRM world) is still much higher than that of premise based solutions.

It did have everything to do with Pulte buying into the long term vision the vendor was selling. Making a software decision based on future / planned features is NO different in the SaaS / Cloud computing world than it is in the Premise based world ... It more often than not ends up in failed projects.

Oracle is not a leader in Cloud Computing.

The clear lesson here is that when CIO's choose to use an emerging technology there is less risk in going with a leader.

Vendor selection is a core IT skill set and in this case the horror story is choosing Oracle.

Love the article. It has made my day. Because:
What goes around, comes around.

1. Obviously, this is an inexperienced CIO.

2. Don't even ask about how Pulte sells their homes and spins stories to their potential buyers, only to build up a neighborhood partially and spin off the remaining land to a different builder with different homes and standards.

The home buyer thinks they're getting a home in a certain neighborhood quality, and then homes of lesser standard are sold through the remaining open lots when Pulte sells off the remaining open land.

This article has proven to me that there is a God, and karma does exist.

Thank you.

I read both the article and associate comments with interest. Based on what is presented in the article, the author would have us believe the "unnamend CRM vendor" should have fallen on their contractual sword due to the client experiencing problems within the client's own infrastructure. How is that the vendor's fault? There's no mention of the CRM product NOT having performed per the limits of the contract.

Mr. Batt failed in two areas. First, he failed to properly negotiate a contract that was in his company's own best interests. While we don't know the particular details of the contract, we're lead to believe there was no "exit" clause for his company, which was a clear failure on his part. Lack of negotiating prowess is NOT the vendor's fault nor is it their issue.

Secondly, presuming the CRM product had a seemingly adequate external interface and those interface standards were published and available to Mr. Batt's technical team, they should have been more diligent in their research and they should have established a pilot or testbed program for evaluating the interconnections and data transfers between the CRM product and Pulte's various in-house applications / systems. To connect your company's primary operational applications and systems to an outside source without some form of operational testing first, then to go live, is absolutely uncalled for and in most institutions these days would be career suicide.

For a CIO of a company of that size to waste company resources and over a year's worth of time in this manner is completely unwarranted and inexcusable for this level of senior business leadership. I've seen people lose their jobs for having screwed up a lot less than he has.

This article is simply providing a venue for him to lay blame somewhere else besides where it truly belongs--with Mr. Batt. The vendor is not to blame, based on the information provided. As for the Pulte technical team, at the very least the either let their senior IT leader down or misled him along the way as to the circumstances surrounding the CRM product. The senior project manager involved should also take blame for the interconnection related problems identified in the article.

The take away lesson here should be for companies to do the same level of research, due diligence, and testing with cloud environments as they would their own in-house systems. Perhaps even more so due to the ever increasing complexities the external environments add to the equation.

Cloud computing is a business model that will definitely get more widespread acceptance, though slowly. It is not just unethical business practices alone that could suck an unwary customer into a cloud-computing-quagmire. What about Information Security & Business Continuity. The cost of losing data or data not available when needed can work out to astronomical figures, if the due diligence process is not comprehensively completed by the buyer, before signing the agreement.

Most Cloud computing businesses don't have external audits of their business and technology processes. Some say they have SAS 70 reports, but then SAS 70 audit doesn't capture Business Continuity preparedness.

The devil is in the details, call it Cloud computing or Clear in-house computing. Let the customer insist for the details. And let the seller put the compliance in place transparently.

Let both parties have a close look at standards like ISO 27001 (Information Security), ISO 20000 (ITSM), BS 25999 (Business Continuity), BS 31100 (Risk Management) and related standards. These standards are not the be-all and end-all of proof that a seller is very trust-worthy, but then you have some clear evidence to look at. Somewhere you have to lay your trust, if you don't want to trust the seller himself for what he says and assures.

Well, when it comes to trusting on Cloud computing sellers, lay faith on the small players who have all the compliance in place and sign up a strong SLA. For large IT business houses, Cloud computing need not be a bread-winner and they can afford to fail even by an unfriendly approach to customers' problems.

Yeah, I doubt if the CIO had really done his homework sincerely before signing on the dotted lines in the agreement with the seller. His suspicion on "Web 2.0 software" cannot give him any solace either, as the market is too huge consisting of sincere and capable players, besides fly-by-night operators or the sheer incompetent ones. You don't gain by doubting a concept, when you haven't done the due diligence yourself of the concept-seller.

If the CIO has accepted the "outrageous promises", the blame is just on his ability to shift the stuff from the chaff. After all, you can always find even big companies doing the conmen and trickster jobs. Eternal vigilance is the price of liberty. And business too.

Sounds like this CIO executed an on-premise like contract for a proposed cloud computing app. Why is he surprised that his vendor is holding him to the terms?

The 2nd theme of the story is that the vendor made claims that they couldn't live up to. No surprise there, he picked an extremely viable company to work with, but their on demand application is years behind their major competitor in that space.

To the critics who say this is one-sided--it's a blog post, not a news article. Some of you, I expect, should know the difference, especially the former journalists among you.

I have been on both the buy and the sell sides of IT infrastructure services. While service level agreements and performance penalties sound logical, the reality is that 80% of outsourcing agreements are renegotiated after 18 months. Both sides begin outlining terms to protect themselves from internal criticism from their own firms. If you want it to work, you need to structure it as a partnership which adjusts.

YES WE ALL WANT TO KNOW WHO THE VENDOR WAS. BUT, the blame is on both sides.

The US legal system is by lawyers for lawyers. We all know CIO means "Career is Over." Hence, the tension.

Outsourcing and "the cloud" have advantages for firms with limited scale or global reach. After 30 years of domestic and global outsourcing experience on both sides of the dance, it is my experience, shared risk and reward for BOTH parties, combined with periodic adjustments based on usage and performance actually facilitates the partnership.

Forget 10 year conctacts unless ypi expect your vendor to eat the capital costs up front. NEVER start with mission critical applications. Be sure you have a CEO to CEO commitment. Make metrics rigid but apply penalties only when you are ignored. If you conract for X and use .5X understand that the other guys provisioned for the capacity you wanted them to provide.

If you expect variable cost from a cloud arrangement, plan capacity quarterly. There are also proven organizational and relationship managment arrangemets that work and some that NEVER work. Don't fall on your sword. Learn from pioneer scar tissue.

Once upon a time, the cloud was called TIME SHARE because the capital cost of hardware was the driving factor. Any CIO with a pulse should at least consider the cloud as an approach to cost variability and capacity on demand. Start from the perspective that what you really want is 100% variable cost linked to business volume. Then, figure out how close to that you can get. The larger the firm, the more internal scale economies become a factor.

The bottom line is: WAHT IS YOUR CORE BUSINESS?

What if you could focus on that and find a partner with synergistic capabilities to focus on his own. What if you could structure a deal that is a win-win or lose lose. The pivot factor is scale associated with capital outlay vs. variable cost. It s my personal opinon that the closer IT comes to 100% cost varibality with business volume the better.

In my experience, both sides try to crucify the other rather than picking a partner and jointly planning the journey.

Any one of you that has been forced to compete EVERYTHING and ended up with the Tower of Babel knows what I mean.

If anyone is considering "the cloud" as an option, I would be delighted to discuss the pros and cons. I have earned a unique perspective of what works, what dosent't work and how to align the strategic intersts of all parties OR NOT.

On the house.........

Rick Bolandz
Managing Partner
Internatinal Consultants Consortium LLC
202-833-8736
iccltd@starpower.net

I Agree with the Pulte Karma comment.

A company who regularly forces its subs into court
to lower and secure pennies on the dollar on completed work payment, as a standard business model, approaches the CRM vendor and applies the same tactic's it uses on all B2B relationships normally is news in what way????
This is how they operate daily, with everyone..
If your the Portajohn sub, you have to go to court and file a lien on a $1200 Invoice for service...

This is not news!! To them it is just business as usual.. As distasteful as it is.

Rick Bolandz seems to need more experience...or he needs to find another career.

Yes, the vendor should be accommodating regardless of what the contract says. It is good business.

After running a SaaS application as a vendor for a number of years and now as a SaaS adoption consultant, I am aware of dozens of distinct differences from site installed systems that need to be handled. SaaS is all about anticipation of those issues, building terms into contracts and understanding how to integrate in a way that prevents problems. But unfortunately, it takes a few skinned knees to get that understanding into the marketplace. Taking the ‘I can figure it out on my own’ approach while popular can be risky.

Also, I would suggest that avoidance of SaaS is not the answer either. There are too many benefits to be gained. The only real difference between SaaS issues and other types of systems issues is that there is less real life institutional knowledge in companies to mitigate risk properly.

Kim Terry
www.terrosatech.com