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Timing Your Business Case with the Technology Valuation Lifecycle - page 3 / 8





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Late Majority, or Conservatives, purchase technology to maintain competitive equivalence with the mainstream market by maximizing asset utilization. At this point in the lifecycle, technologies are well tested and proven their value. In addition, competitive pressures from competing providers reduce the price, as these once hot technologies have become commodities. ROA contextualizes benefits within the asset base of the company. ROI and TCO are used to support the business case, but are not the metric of focus. This segment is

even less risk-tolerant and will not invest to learn how to use technologies.

Since the


investment objective is maximizing asset utilization, the focus is on the the commodity. Laggards purchase technology, if at all, when it is deeply embedded do not factor valuation of the technology into a purchasing decision.

price and price risk of

in other products and

As a framework, the Technology Valuation Lifecycle provides a customer-driven determination of the metric of focus. The metric of focus is the primary basis for the economic buying decision, but it is not the only metric. The Early Majority will focus on the productivity impacts measured by TCO, but will also confirm competitive advantage gained as measured by ROI. The Late Majority will focus on maximizing asset utilization, but will also confirm competitive advantage as

measured by ROI and productivity improvement as measured by TCO.

The next three sections will highlight the primary inputs for valuation metrics

. It will introduce the

5 Value Drivers for ROI, the Whole Cost Model for TCO and the Competitive and Capacity Advantage for ROA.

SIDEBAR: BEA Systems – Winning the Metric Wars

As the economy softened, BEA System’s market leading Weblogic Application Server faced increased competition from major new entrants such as IBM, Sun, HP, Oracle and Sybase. Adoption of Java’s J2EE framework created significant utility and reduced risk from standardization, but also lowered barriers to entry. Open source App Servers from Apache and JBoss further accelerated the trend towards commoditization.

The valuation metric BEA had used to sell its highly differentiated Weblogic platform was ROI. It was and is their primary source of revenue. The most significant challenge came from IBM, which developed a standards-based product, engaged in significant price discounting and bundling. IBM sold on the basis that both products had equal benefits – but IBM offered a price advantage. Initial success of this strategy provoked many Industry Analysts to predict BEA would be a casualty of commoditization.

BEA crossed the metric chasm to TCO. According to BEA marketing executive (name withheld) “we recognized that our differentiation was value in use. Because of the bubble, many customers

were disregarding ROI estimates. important metric isn’t the cost of the for its users, which is best measured

When we are faced with a side-by-side comparison, the server itself, but how the server creates productivity benefits by Total Cost of Ownership.”

Combined with moves to emphasize the quality of its product, BEA has so far successfully staved off commodity competition and retained its market share.

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