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The New Economy must truly be dead.

In the New Economy, I’ve been told by experts, the customer is king. If it were alive, how would you explain Larry Ellison?

Even notorious industry bad boy Computer Associates thinks good customer relations are important, and is promoting a new image as a kinder, gentler software company.

But then there’s Ellison, who, at Oracle AppsWorld, told his customers … his customers! … that they should customize their companies to his software. Customizing the software is wrong. Complementing it with third-party software is wrong. Building applications in-house? Don’t you dare! That would get in the way of your company’s primary mission according to Oracle: Software integration.

The right thing to do? Adapt your business to the predefined processes Oracle has thought up for you, and run your business on nothing but Oracle software, of course.

This attitude would be predictable coming from a communist, but Ellison’s a rich guy. So what is he thinking of? He’s telling us to trust a central planner (Oracle) to anticipate everything we need, and to figure that if he didn’t anticipate it you don’t really need it.

That’s a centrally planned information economy. Memo to Larry Ellison: Centrally planned economies don’t work, and it takes a long time to recover from the failed effort of trying to make them work. If you don’t believe me, take a look at the Russian economy.

Ellison’s mandate is bad for his customers for two entirely different reasons, both related to the fall of world communism.

The first: Ellison ignores the complexity built into every real company — the same complexity that causes all centrally planned economies to fail. Market-based economies don’t out-compete centrally planned ones because they’re more efficient. They’re actually inefficient in some ways, encouraging redundant effort (we call it “competition”). What makes market-based economies superior to centrally planned ones is their ability to recognize and fine-tune the satisfaction of demand.

So while an ERP vendor’s information-economy central planners can recognize and satisfy the big-ticket items like supply chain management and financial reporting, your IS organization is more likely to recognize and satisfy requirements that are closer to home, like (for example) your real estate management department’s need for an investment management system.

Nor does it stop there. Your IS organization also consists of central planners. They’re unlikely to recognize and satisfy (to take another example) your marketing department’s need for a system to schedule use of your company’s trade-show booths. That’s what personal databases, electronic spreadsheets, and Jane, who’s “good with this stuff,” are for.

Unmet need isn’t the only problem, either. There’s also the clothing-size issue: Just because a suit is well-made doesn’t mean it looks good on you. It also has to fit.

Oracle’s process designs are, I’m sure, neither better nor worse than any other carefully plotted swim-lane diagrams (the standard way to graphically describe a process design). It’s just that they almost certainly don’t all line up with your current processes, so taking Ellison’s advice means process re-engineering on a massive scale. The good news is that the process designs themselves are done. The bad news is that the good news only covers about 10% of the total effort of changing every process in your company.

Ellison isn’t completely wrong, of course. Many ERP implementations are unnecessarily complicated because of that’s-how-we-do-things-around-here thinking. It’s quite true that many companies don’t give their ERP vendor’s shrink-wrap processes a fair hearing.

But imagine your meeting with the CEO, COO, and CFO where you explain the benefit of standardizing on nothing but Oracle’s software and processes: “Sure, we’ll have to change how every bit of work in the company is done, but in return we’ll save on the cost of Oracle upgrades! Not only that, but we’ll operate exactly like every one of our competitors. Think of the benefit to our customers — they’ll be able to switch among all of us at virtually no cost!”

Good luck finding your next CIO position.

The whole thing is silly. If every company took Ellison’s advice, then every company would follow identical processes throughout — those envisioned by their ERP vendor, and only those envisioned by their ERP vendor. Taken to its logical conclusion, the result would be that every company in a particular industry would be identical to all others.

Hmmm. Maybe he is a commie after all.

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|In: Industry Commentary|Last Updated:

Johnny Carson, in the Carnac routine he lovingly borrowed from the late, great, Ernie Kovacs, gave the answer first. The question was in a closed envelope that had been “kept in a hermetically sealed mayonnaise jar on Funk and Wagnall’s doorstep.”

In best Carnac/Kovacs fashion, the answer is, “Little, brittle, and fiddle.” But you have to wait for the question while we take care of some unfinished business.

Awhile back, as evidence of my bipartisanship when taking cheap shots at politicos, I promised to never mention Zippergate without also mentioning Iran Scam. I should have left it at that.

It turns out the particular infraction I reported — selling drugs to Americans to finance the Nicaraguan Contras — was a story reported and then retracted by the San Jose Mercury News, not a finding of Walsh’s official investigation. So from here on in, I’ll be bipartisan by referencing Iran Scam’s arms-for-hostages deal and gleeful destruction of evidence. My thanks to the readers who pointed this out.

Why bring up politics yet again? Because, to paraphrase another Carson-ism, this is one of those theme issues that only InfoWorld can do with such panache. The theme? IT and the Bush administration.

As I said, the answer is, “Little, brittle, and fiddle.” It’s a three part question. Part 1: What impact will the Bush administration have on the IT industry? The answer: “Little.” Bush will mostly let industry evolve on its own.

The biggest IT impact will be increased telecom costs. Why? Michael Powell, the FCC’s new head, has already announced he’s going to be the ultimate deregulator. In particular, he does not plan to review mergers and acquisitions, so business and bigness will increasingly converge (probably into the Texan noun “bidness”.)

You’ll hear merger proponents argue the need to remain competitive, and that increased economies of scale will reduce costs for consumers. The reality: Fewer competitors means less competition, leading to higher prices, not lower ones.

The big open issue is the FBI’s proposed Internet surveillance system, Carnivore. The Bush administration might view it as Big Government (bad), or National Security (good). My guess: Bush Sr. headed the CIA, Cheney headed up Defense, so National Security wins and Carnivore is a go.

Time for Part 2. The answer is, “Brittle.” The question: What will the economy be like?

This won’t be Bush’s fault. It also isn’t Alan Greenspan’s fault, nor can we tag anyone named Clinton with it either.

The last boom was fueled by access to capital, not sustainable demand for goods and services, so capacity increased far in excess of real economic growth. Inflated equity financed the difference. The mechanisms were indirect, but nonetheless real — irrationally high stock prices drove unwarranted business expansion. Now the balloon has returned to earth.

Retail space increased at three times the rate of economic growth; the story for manufacturing capacity and warehouse space is similar. With stock prices returning to normal, the imaginary wealth that drove anticipations of continued high spending is gone. And there’s nothing to replace it on the horizon.

So for the next several years, the economy will be brittle, and there’s very little that Bush, Greenspan, or anyone else can do about it. There’s the proposed tax cut, of course, but its impact will be marginal at best. Why? For every new dollar made available for consumer spending, there’s one less dollar spent to pay off the Federal debt. That leads to less government spending on programs that would also directly boost the economy, or increased federal debt that requires more taxes to pay off.

Which leaves Part 3. The answer: “Fiddle.” The question: What impact will this administration have on the information technology used by the federal government itself?

So far, there’s no evidence Bush himself even thinks about the question. Between the sputtering economy and proposed tax cut there won’t be much left to reform and rationalize the government’s IT infrastructure anyway. So don’t expect much in the way of large-scale IT programs during this administration. The possible exception is the military’s infrastructure. Given who Bush has on its team, Defense IT could get a shot in the arm — most likely through application of commercial technology, though, as opposed to the advanced research projects sponsored by the defense community in years past. It’s too bad, too. After all, another advanced research project created the Internet.

On the whole, though, expect the Bush team to fiddle with IT to the extent possible given very limited resources and a president who’s attention will be elsewhere.

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