Switching cost, in a consumer sense, is defined as:
“The negative costs that a consumer incurs as a result of changing suppliers, brands or products. Although most prevalent switching costs are monetary in nature, there are also psychological, effort- and time-based switching costs.”
Also prevalent in the enterprise, it’s the cost of moving from an old system for a new system – more broadly, technology, content and data migration, operationalizing, change management and training costs to move people from system x to system y. Put together, the new system is expected to provide a positive net present value in an acceptable time period, or the new program and investment often becomes difficult to justify.
That’s the argument most organizations are publicly sensitive of when making investment decisions.
There’s another one though that runs counter to this. Meaning, the more the cost of the system to be replaced, the more difficult it is to get the owners of the system to agree to a replacement. And that’s due to Displacement Politics.
Unlike the public line in the previous case, this is the undercurrent that’s often in play.
Part of the reason Jack is a Sr. Director and not a Director is because the systems and business programs he owns needs a $24.23 million dollar budget. And with that budget and responsibility came a head count of 104. Lose the need for the budget (i.e the expensive systems and its support structure) and a domino effect ensures. Rapidly, the corner office, title, stature and salary levels risk going south.
Displacement Politics dictates that you keep the high costs in place to protect your position. And its amazing how folks will justify the need for keeping the older system in place with the most creative arguments (“functionality is too radical”, “platform challenges”, “security holes”, “Too busy; SAP upgrade coming” etc.).
It’s important to note that this is not really the system owners’ doing, in totality. The reality in many cases is that HR policy is often set up this way. And so it ends up being a conflict of emotions. Do the right thing or complicate your progression. Tough choices, really. To be fair, there are those that realize that getting behind programs that drive revenue and reduce cost and risk, pays off. And from a management perspective, seasoned CXOs see this emotional tussle coming from a mile away and take adequate measure early.
This is certainly not limited to social software enabled programs. Scores of excellent post have been written by the likes of Vinnie Mirchandani and Dennis Howlett about the ballooning costs of software maintenance, yet tepid efforts to get off the spending treadmill by customers. There’s a buyer element to this issue, just a much as it’s a vendor created conundrum.
But in the context of this blog, as sponsors and champions of social and collaborative programs powered by enterprise social software, be very sensitive to how much weight you put on arguments such as “this is far cheaper than SharePoint” or “SaaS based collaboration lowers CAPX” arguments in the first few slides of your presentation deck. Get the right stakeholders on your side and a solid case for performance acceleration straightened out (the R element of ROI) with as much gusto as you have for the cost reduction argument. And make sure you have the support of a wide range of business and IT stakeholders on the matter of improving their business units performance outcomes.
That’s when there’s any hope of minimizing the under current effects of Displacement Politics because the focus is more on benefits and outcomes for the better part of the discussion.
So understand and account for the nature of your organizations Displacement Politics, early on.
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