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Vivisimo: Organizations Need a Search Strategy

Vivisimo, a company benefiting from the missteps of better known search vendors, has a new theme for its Fall sales push. Jerome Pesenti, chief scientist for Vivisimo, delivered a lecture called “Thinking Outside the (Search) Box”. The company issued a news release about the need for an organization to have an enterprise search strategy in order to prove the return on investment for a search system. What is remarkable is that–like Eric Schmidt’s opinions about how other companies should innovate here–scientists are providing consulting guidance. MBAs, accountants, and lawyers have long been the business gurus to whom challenged organizations turned for illumination. Now, a Ph.D. in math or a hard science provides the foundation for giving advice and counsel. Personally I think that scientists have a great deal to offer many of today’s befuddled executives. You will want to download the presentation here. You will have to register. I think that the company will use the names to follow up for marketing purposes, but no one has contacted me since I registered as Ben Kent, a name based on the names of beloved pets.

Is Vivisimo’s ROI Number Right?

For me the key point in the Vivisimo guidance is, and I am paraphrasing so your take may be different from mine, is that an organization needs to consider user needs when embarking on an enterprise search procurement. Mr. Pesenti reveals that the Vivisimo Velocity system saved Modine Manufacturing saved an estimated $3.5 million with a search strategy and the Vivisimo search system. You can learn more about Modine here. The company has about $1.8 billion in revenue in 2008, and it may punch through the $2.0 billion barrier in 2009. I know that savings are important, but when I calculated the percent of revenue the ROI yielded I got a small number. The payoff from search seems modest, but the $3.5 million is “large” in terms of the actual license fee and the estimated ROI. My thought is that if a mission critical system yields less than one percent return on investment, I would ask these questions:

• How much did the search system cost fully loaded; that is, staff time, consultants, license fees, and engineering?
• What’s the on going cost of maintaining and enhancing a search system; that is, when I project costs outwards for two years, a reasonable life for enterprise software in a fast moving application space, what is that cost?
• How can I get my money back? What I want as a non-scientific consultant and corporate executive is a “hard” number directly tied to revenue or significant savings? If I am running a $2.0 billion per year company, I need a number that does more than twiddle the least significant digits. I need hundreds of millions to keep my shareholder happy and my country club membership.

Enterprise search vendors continue to wrestle with the ROI (MBA speak for proving that spending X returns Y cash) for content processing. Philosophically search makes good business sense. In most organizations, an employee can’t do “work” unless he or she can find electronic mail, locate an invoice, or unearth the contract for a customer who balks at paying his bill. One measure of the ROI of search is Sue Feldman’s and her colleagues’ approach. Ms. Feldman, a pretty sharp thinker, focuses on time; that is, an employee who requires 10 minutes to locate a document rooting through paper folders costs the company 10 minutes worth of salary. Replace the paper with a search system from one of the hundreds of vendors selling information retrieval, and you can chop that 10 minutes down to one minute, maybe less.

This is the land of search costs. What’s your return on investment when you wade into this muck?

Problems with ROI for Utility Functions

The problem with any method of calculating ROI for a non-fungible service that incurs on going costs is that accounting systems don’t capture the costs. In the US government, costs are scattered hither and yon and not too many government executives work very hard to pull “total costs” together. In my experience, corporate cost analysis is somewhat similar. When I look at the costs reported by Amazon, I have a tough time figuring out how Mr. Bezos spends so little to build such a big online and search system. The costs are opaque to me, but I suppose MBA mavens can figure out what he spends.

The problem search, content processing, and text analytics vendors can’t solve is the value of investments  in these complex information retrieval technologies. Even in tightly controlled, narrowly defined deployments of search systems, costs are tough to capture. Consider the investment special operations groups make in search systems. The cost is usually reported in a budget as the license fee, plus maintenance, and some hardware. The actual cost is unknown. Here’s why? How do you capture the staff cost for fixing a glitch in a system when the system must absolutely be online. That extraordinary cost disappears into a consulting or engineering budget. In some organizations, an engineer works overtime and bills the 16 hours to a project or maybe a broad category called “overtime”. Magnify this across a year of operations for a troubled search system and those costs exist but are often disassociated from the search system. Here’s why. The search system kills a network device due to a usage spike. The search system’s network infrastructure may be outsourced and the engineer records the time as “network troubleshooting.” The link to the search system is lost; therefore, the cost is not accrued to the search system.

In one search deployment, the first year operation cost was about $300,000. By the seventh year, the costs rose to $23.0 million. What’s the ROI on this installation? No one wants to gather the numbers and explain these costs. The standard operating procedure among vendors and licensees is to chop up the costs and push them under the rug.

Can this happen to you? If you have a search system, you have this type of cost issue. Poke around a bit. Let me know what you find. The well publicized problems of some search vendors are often expressed as user dissatisfaction. The root cause of the problem is that the organization does not have enough money to address the ills of the system. One university has three duplicative systems. Each purchased to solve the problem of the incumbent system. Know what? The costs are kept scattered in order to hide the mind numbing amount that the organization spends on search each year.

Can these organizations formulate a strategy and generate an ROI? Maybe. But in my many years of working with search and related systems, I find that very few people want to know about the total direct and indirect costs associated with a search system.

Ignorance Is Bliss and Often Billable Time

Let me give you an example. In June 2008, I received a call from a very slick New York consultant. Her firm had been retained to license a next generation search and retrieval system to replace an aging system from a well known vendor. My paying customer told me that the company had budgeted $300,000 for the new system and wanted to know if that sounded right. I replied that I needed the following data:

• Volume and type of content in initial index pass
• Rate of change and average document size for documents for the past year
• Inventory of use cases the search system was to produce
• Details of in house engineering budgets for the last three years and outsourcing costs for the same period
• Prioritized checklist of features for the new system at start up and at the end of year one
• Details of the organization’s infrastructure and data center resources plus costs for the current year and next two fiscal years.

She interrupted me and said, “We don’t have those data. They don’t exist. Will the $300,000 be sufficient?”

I told her, “Your guess will be as good as mine. Good bye.” She recorded the “research”, billed the client, and procured a search system that undoubtedly annoyed somewhere between 50 and 75 percent of its users. Another day in the world of New York consulting ended.

Why Costs Go Awry

Let me keep this short and basic. These are the reasons search costs can do what consultants call “hockey stick”. The idea is that the costs take off and keep rising. In the lingo of economists, costs you can’t control are “bad”.

• Vendors upgrade their systems which often kill or have unexpected dependencies that cause problems. Fixing these problems costs money and no one knows how much time and money are required to resolve the problem. In some cases, there may be no fix, so there is the time and cost of rolling back the system to a known good state and living with the “old” system.
• Spikes occur and overload the existing resources. To get the system up and running the choices are start: buy more hardware which is pretty tough when budgets are tight and time is short; turn off system features which annoys users; limit the amount of content processed which annoys users; buy a new system that “scales” or at least you think it scales; or mix and match these options
• The one person who knows the system on your staff quits. You then get to either pay the vendor who will eagerly sell you an engineer at four to six times the vendor’s cost or you call my son at Adhere Solutions and pay him to fix your system. He’s a better deal than the vendor, but he won’t work for free. He takes after me in that regard.
• Your hardware dies. Search systems when not properly resourced can thrash the moving gizmos in a server or data center. As a result, gizmos fail usually at a critical moment; for example, responding to a legal discovery notice, running payroll, or trying to generate quarterly financials for the Securities and Exchange Commission. You get to pay a lot of money for triage. Let me repeat: a lot of money for help on a weekend.

I can expand this list, but you don’t want to know these costs. I assure you that scientists, MBAs, lawyers, and accountants don’t want to “know” these costs either.

Search can chew through money pretty quickly. Customization is expensive. Tuning a system to meet the Star Trek fantasies of some people on a procurement team is infinitely expensive. Not knowing much about the costs of search is into the realm of aleph expensive.

Cost analyses for search are usually rubbish. Martin White and I are working on explaining some of these management issues. Maybe we will publish our thoughts. Martin and I have flipped rocks in the cost swamp for more years than I care to admit. Interesting things reside under these rocks. Corporate types and math superstars don’t go into the swamps. Flipping rocks is off these Jedi knights’ radar.

Net Net

I think one of the reasons that Google is generating upwards of $400 a million in enterprise search and related services sales is that the company offers a search toaster. Traditional vendors selling the digital equivalent of a plastic kit for an aircraft carrier drive customers to Google. Any one who has tried to call Google knows that its approach to sales is — well — Googley. But customers persist and buy the cheerful yellow search toasters by the truck load. The reason is that you pay a single fee, plug in the search toaster, and you have a search system. You can extend it, teach it to roll over, and even slap wings on it and fly it to the land of business intelligence. But those are extras. You can pay a consultant to create an extra and thus manage the costs with a single point agreement. If the contractor doesn’t deliver, you can sue the contractor. The search toaster does keep making toast.

The reason is that you pay a single fee, plug in the search toaster, and you have a search system. You can extend it, teach it to roll over, and even slap wings on it and fly it to the land of business intelligence. But those are extras. You can pay a consultant, such as  to create an extra and thus manage the costs with a single point agreement. at four to six You can call my son at Adhere Solutions and pay him to make the Google He’s a better deal than enterprise search vendors, but he won’t work for free. He takes after me in that regard. It is important to know that as the Google Appliance is customized, the search toaster does keep making toast. Executives like when they buy something and get results in days, not months.

My thought is that companies engaged in search procurements do want to know what their search system should do. Then that list is reviewed and the crazy stuff deleted. The basics become the focus. The contracts are narrowly defined. The lawyers should be standing by to sue vendors who slow dance and step on the customer’s toes.

That’s the real ROI. Make the vendor deliver to a set of tight specifications. Fuzzy equals cost overrun. Skip the ROI. Just control costs and make the users happy.

Stephen Arnold, August 4, 2008

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