Article

Why Midsize Software Houses Eat Digitalisation Projects for Breakfast

By: Alistair de Villiers, 18. July 2021

Drawing on extensive digitalisation and project management experience in banking, CEO of Noria Digitalisation, Alistair De Villiers, explains why he believes the Davids of the industry provide more value for money than the Goliaths.

I’m pushing 40, made a career in banking and harvested experience from the boardroom and the C-level suite. I have gained international experience, managed a business area with close to 100 employees and been involved in large-scale digital transformations. Been there, done that. Check.

After successfully leading one the biggest digitalisation projects in one of Norway’s largest banks, I know digital is where it happens. So, in 2018, I took a big leap over to consulting to use what I’ve learned to help other market players in the financial sector harvest the fruits of digitalisation. But not to the software and consulting giants. Instead, I decided on a medium sized software house. Why? Because midsize software houses eat digitalisation projects for breakfast.

What I learned spending millions on digitalisation projects

Large software companies usually offer standard off-the-shelf solutions. They tell you it’s plug and play, but it’s not. It requires investment to make it work, and when it works, you’re left with a very rigid and costly standard solution. Besides integration and implementation costs, software licensing fees are often significant, and you’re left with a range of features you don’t need; there is usually an enormous mismatch between the extensive suite of software they offer and what users actually use. Not least, you make yourself highly dependent on their specific solution with limited opportunities to customise it to your particular needs. Personally, I’d give that a miss.

Traditional strategy houses, on the other hand, will come with sharp research and people. Indeed, they’re world-class when it comes to strategic thinking. But in my experience, you’ll often end up spending too much time in the blue sky, thinking, brainstorming and ideating. I’ve burned the clock and wasted countless hours because I’ve ended up using only a small portion of the ideas that came up during the first week or two. Additionally, traditional strategy houses don’t really spend time on developing the backlog you need for your solution, and I’ve personally experienced them handing off implementation to another department. This means a new team, more time spent on on-boarding and often increased project scope. Going down this path, you may, as I have in the past, end up with a fragmented solution.

Then you have global professional services firms. In my opinion, their sheer size creates silos and value chains so big that makes project execution difficult. They have great consultants, delivering fine presentations and facilitating necessary discussions on front-end design and customer journeys, and they have excellent IT competence offshore. But bridging the gap between these two is difficult when delivering end-to-end digitalisation projects – it requires thorough planning. Ideally, you need multidisciplinary teams with an equal focus on architecture and engineering on-site, where everyone involved adequately understand what is built and what the customer actually needs.

Global outsourcing firms can scale up the headcount fast and give low prices by the hour. But your project needs to be incredibly detailed to make it work. In my opinion, they’re more about quantity than quality. Rather than carefully bringing in the right people to work on the project over some time, you’ll have many people thrown at the project. And good solutions aren’t usually made by big teams. Amazon’s Jeff Bezos famously instituted his two-pizza rule, where every internal team should be small enough that it can be fed with two pizzas, for a reason. He knew that more people are often equal to more communication, more bureaucracy and more chaos – and less productivity. This is the Ringelmann effect in practice: individual members of a group become less productive as the size of the group increases.

The benefits of being an underdog

Then there’s the midsize software houses, the Davids of the industry. They eat digitalisation projects for breakfast. Why? Because of their size. They’re not too big to have developed any significant silos, and they’re small enough to be flexible. They can be closer to the client and will work harder to outdo their competitors. They have better communication and faster decision-making capabilities. Just look at how smaller FinTech start-ups have proved themselves to be a considerable threat to incumbents.

The Goliaths of the industry have all delivered good projects. No doubt. But I firmly believe a smaller team enables you to do it faster, get more bang for your buck and make some serious progress in your digitalisation efforts. Colour me partial, but that’s my humble opinion.