Organizational conflict: background, settings, and underlying workplace issues

Organizational Analysis

Managing Conflict at Medford Enterprise Software

The company has been developing enterprise software for manufacturing companies for over 40 years, often relying on the COBOL programmers who have worked there for over two decades to complete relative simply code fixes. Specializing in Enterprise Resource Planning (ERP) systems, Customer Relationship Management (CRM) and Manufacturing Execution Systems (MES) for manufacturers, Medford has carved out a niche market for themselves. It's also been a market that is highly defensible against competitors including the large ERP vendors including Oracle and SAP who find the highly unique needs of specific segments of the manufacturing market too difficult to address in their own applications. All this changed however when Salesforce.com created the Force.com development architecture, which allows for Medford's competitors to quickly move into their markets while delivering applications on the Software-as-a-Service (SaaS) platform. Medford's engineering teams and senior management had often joked that SaaS was just a fad and a fancy name for timesharing, which are attitudes typical of IT developers who began their careers in the 1970s. Soon however their customers, many of them loyal for decades, began leaving for other software companies that were less expensive and could deliver even more feature-rich applications using SaaS platforms. Suddenly the browser was the delivery portal their customers wanted, not the cumbersome, challenging ERP system running on a mainframe. Marketing tried to make their mainframe systems sound like SaaS but customers got even angrier as they felt mislead. Senior managers demanded the Chief Technology Officer get all applications on SaaS immediately. The CTO pushed back and saying it was unproven while they continued to lose customers in droves. Marketing was neutral, while Sales was violently in favor of outsourcing development. Engineering and the CTO dug in and fought.

Part II - How was it Mediated or Arbitrated?

As Sales continued to provide examples of lost sales due to Medford not having any applications on the SaaS platform and the win/loss analysis showing that the pricing on new applications was leading to long-standing customers migrating away, the CTO and engineering continued to dig in and refuse to change. Marketing, which was the neutral third party, showed market research data showing that ERP systems would be the last to move entirely onto the SaaS platform -- yet the migration would be a very painful one for those with on-premise applications. Medford was designed with 100% in-premise software. It would be a very costly decision to completely ignore the direction of the market. It didn't help that the CTO and VP of Sales already were at odds with the speed of change that the market was experiencing. Often the most divisive arguments begin with a drastic difference in the perception of time and the implications of that perceptual difference on performance of tasks (Liu, Chen, Chen, Sheu, 2011). That is exactly what has happening with the Sales VP and the CTO. Marketing tried to explain that it would take time to complete a re-writing of the applications and the CTO was deliberately painting a picture of two years or more. The Sales VP was saying that without SaaS applications, the majority of sales would be gone in just nine months or less. Finally the GM of the Division intervened, took the marketing, win/loss and sales data and defined an aggressive development plan that involved outsourcing part of the development effort. Luckily Medford had an outsourcing division in India and also in the Ukraine which could easily handle the workload. The GM sided with marketing that unless at least a new product was out within a year, Medford would lose the bulk of their installed base that was paying maintenance on their existing applications. This installed base was 70% of total revenues for Medford on a yearly basis. For the Sales VP this was acceptable, yet he began losing sales people as commissions dropped.

Part III - What Would You Have Done?