Software Selection Consulting

During the recession there was a lot of talk about companies trying to "right size" their organization.  Just like the Goldilocks fairy tale, they did not want to have an organization that was too big, nor too small - but one that was "just right."

The same analogy can be used with software systems. Over the years we have found that many companies buy software that is just too much for them. This causes the following problems:

• High cost to license, implement, and maintain the software
• Difficult to implement and maintain
• Functional overkill - users do not use all capabilities of the software

On the other hand, we have also seen companies that are running on software that is just too small for them and that does not offer the functionality required to properly utilize technology to their advantage. Many are smaller companies that are quickly growing and need to take the next step in their system evolution. 

To help companies find the right software, we have created the SoftResources Software Tier Chart. This chart will help you find a solution that will be the right size for your organization. By getting the right sized solution, you can make sure that you don't spend too much (or too little) for the software, or have too much complexity (or not enough sophistication) for your needs. This will help you find a software solution that is "just right!"

Posted By: Spencer Arnesen

Business must be picking up for software vendors because they are actually turning down RFPs! I know it’s hard to believe, but it’s true. Just 18 months ago vendors were calling us wondering if we had any leads that they might be a fit for and now, those same vendors are turning down opportunities in favor of those that they have been pre-qualified to go after. What does this mean?

Simply put, most mid-market vendors actually like a pre-qualification screening with a potential client. Here are some of the reasons why:

• It cuts down significantly on the cost of the sale. Did you know that a vendor can spend as much as $100,000 in time, resources, travel, etc. just to close a sale? If you think about how many leads they are pursuing in a year, that adds up to big dollars! Saving a vendor those big dollars in the sales process could have an impact on savings for your contract.
• The vendor likes the opportunity to get to know your company. Cultural match is a major factor in the success of a new system. It makes sense that the client and vendor want to know if they are compatible. This also helps to eliminate “gotchas” for both the vendor and the client. “Gotchas” are those pesky little requirements that are forgotten in the bigger picture during the selection process.
• When the vendor believes they have a chance of success, they work harder to exceed expectations. This is true in all aspects of service, if a company believes they can earn your business with great customer service, they generally will work harder to provide that service.

You might be wondering, “What does a vendor pre-qualification entail?” That’s a great question – and could be answered in several different ways depending on your organization. Let’s take, for example, a manufacturing company. In most cases, there are not a lot of stringent rules regulating software selection. That means the company can create requirements documents, interview vendors, read vendor literature and case studies, request web demos, talk to current and former clients, etc. before any formal request for software purchase is made. This allows companies to talk to many vendors and narrow the field before the formal software evaluation process. It also allows vendors to determine if this is a good opportunity to pursue.

On the other hand, a municipality or government agency may have some very strict regulations about how the vendors are engaged, notified of the opportunity, etc. In those cases, it is very important to structure the RFP in such a way that the vendors understand the needs of the organization, the struggles with the current system, and have a good foundation of requirements in which to base a decision to participate. We find that being very clear about the expectations up front helps the vendors make good choices about responding.

If you take the time to do some initial research, have some initial discussion, and pre-qualify vendors, you are more likely to identify vendors that are a good fit and are willing to respond to your software selection process. In the long run, everyone ends up saving time and money in the process.
 

Posted By: Cherish Cruz

Over the past decade, there has been a lot of software vendor consolidation in the market. Oracle acquired PeopleSoft and JD Edwards (and just released Fusion which was developed in-house); Microsoft acquired Great Plains, Navision, Solomon, and Axapta; Lawson acquired Intentia; Sage acquired Accpac; Epicor and Infor have acquired a number of different products, and this is just for ERP software. If you add in all of the vertical market solutions that were acquired including HR/Payroll, Reporting, etc. understanding what the vendors are offering can be challenging!

To further the confusion, some software vendors hide the fact that they have different products on their website. They tout an integrated solution, but fail to mention that this "integrated" solution came from multiple product acquisitions. Recently we went to a major software vendor's demo with a client. (The vendor will remain nameless) They demonstrated their software using a demo script. As we moved through the script, we noticed that they were including functionality from 4 different software products - 2 of which were acquisitions made within six months of the demos. They did not mention that they were separate software solutions that would need to be integrated.

In another recent case, we had 2 products from the same software vendor on the short list. Even though owned by the same vendor, the products both had the functionality that could work for this client. This made for an interesting demo process as there were significant differences between the products, even though the user interface appeared similar on the surface.

Make sure that when you talk to software vendors that own multiple software products, that you ask them specifically what product they are referring to and how long the software vendor has owned the product. It is also very helpful to ask them the geneology of that product. Did they build it in-house? Was it acquired recently? What other software vendors have owned this software? What are the future plans for development of that product? Make sure you get beyond the market hype that the vendors push out and truly understand the specific software product you are evaluating.

Posted By: Spencer Arnesen

One of the most overlooked steps in the software selection process is the selection of the right implementation partner. We have written extensively regarding this topic on this website and in other posts, but I wanted to demonstrate this by talking about the experiences of a few of our recent clients:

• The first client is a large multi-national non-profit organization with operations in over 100 countries. They ended up selecting Oracle Peoplesoft as their ERP solution. The next step was to select an implementation partner. During the software demos, Oracle brought a partner to the demo that specialized in non-profits. But there are over 100 PeopleSoft implementation partners. Through our research, we found a number of them had experience in the non-profit arena, and were able to eliminate the list down to 3 that had the requisite experience for this project. After bringing the finalists in-house (including Oracle's implementation team), the client went with one of the other options that were not originally proposed by Oracle. That vendor had a better price/experience match to the client's needs. Had they just moved forward with Oracle's original proposal, they would not have been able to negotiate a better deal with a more experienced partner.
• The second client we want to highlight is a manufacturing company in Europe. They were a worldwide organization that were implementing in multiple countries. While a mid-market organization, they needed to find a reseller/implementer that would be able to handle a worldwide implementation, but at an economical cost. This requirement actually had an impact on the software vendors that were recommended for the short list. Even though some vendors could handle the functionality required, they did not have proper implementation resources available. So, the implementation partner evaluation had a direct effect on the short list vendors selected.
• The third client is a domestic non-profit client. For this project, we were considering a couple of the Microsoft Dynamics solutions. By evaluating various Value Added Resellers (VAR's) we were able to find a VAR that had experience implementing in over 100 similar organizations. This meant that they had the experience to efficiently implement the software, and understood the client's needs even before they walked in the door. This is a particularly important consideration as there are thousands of Microsoft VARs to select from.

Implementation partner selection is a key part of the software evaluation process that should not be overlooked. Not only can you find an implementation partner with experience in your industry, but you can create a competitive situation that will reduce the billing rates and the overall cost of the implementation. Because most software vendors do not really care about making sure that you have the right implementation partner, you need to understand that you do have the right to evaluate and select the implementation partner that is a good fit for your situation. 

Posted By: Spencer Arnesen

One of the first steps you need to take as you begin the software selection process is putting together your requirements document. You need to know what you are looking for so you can recognize when you have found it. The requirements document has a very large impact on the success of your project.

The problem is that many people have not done a software selection in a while and don't know what they should include in their requirements document. This is particularly true of organizations that are going through an RFP or Request for Proposal process. The RFP process really puts constraints on the software vendors, so you need to make sure your requirements document will invite the software vendors to respond, but still allow you to see the information you need in order to make an informed decision.

Some organizations choose to use templates of RFP's from other organizations or buy lists of functionality they can use as a template. This can be a good way to get ideas, but you have to be very careful. We recently watched 2 entities take this approach to putting together their requirements document. Both entities ended up with a requirements document that spanned into the hundreds of pages. We were fascinated to see some of the requirements. One of the entities included a manufacturing requirement (even though they were a government entity), the other one included a requirement for double-byte (chinese) language characters (even though they were solely a US entity). Why did they include these requirements? Because when they asked their employees to check off the requirements they needed, they did not really understand what the requirement meant so they just checked the box just in case. 

The problem is that both of those requirements would eliminate software vendors that would otherwise be an excellent fit for these organizations. Putting together the right requirements document is key to your success. Click here for more tips on putting together your requirements document. 

Posted By: Spencer Arnesen

As the calendar draws to a close on another year, we like to take a few minutes to reflect. It is hard to believe that SoftResources has been doing software evaluation work for more than 15 years now. We have seen many changes including the advent of client/server, the internet, and now cloud based computing. As an analyst it is very fun to watch these changes and help our clients take advantage of new technology to improve their processes and business. We are excited to see the changes that software will take us over the next 15 years! 

We are so grateful to all of the clients that we have worked with over the years - the number has now grown to 600+ and we keep adding clients every month! Large or small, we consider our clients more than just merely clients - we consider them friends.

We would also be remiss if we did not thank the software vendors for working with us. While some consultants may view the software vendors in an adversarial manner, we enjoy an excellent relationship with vendors. They are key to the success of our client's projects.

While we had one of our best years in 2010, we are looking forward to growth in 2011!

Have a wonderful Holiday Season and a Happy New Year!

Posted By: Spencer Arnesen

As we sat in a recent staff meeting I listened to one of our consultants who had just returned from facilitating software demonstrations for a client in the food distribution industry. She mentioned that after the demo of one particular vendor, they determined that the software did not meet their needs.

What is unusual about this case is that prior to engaging our services, this client had participated in a software demonstration by this same vendor and they thought this software was at the top of their list! The difference – they used a custom demo script that detailed the critical business processes and requirements and forced the vendor to show how they would solve the client’s requirements, not just the canned presentation they normally give.

During the first visit the software vendor was not required to follow any script and had free rein to show what they wanted. The showed only the strengths of their software and reports which were very appealing to our client who was producing these reports manually. However, during the scripted software demonstration they found that these reports had no drill down capability as compared to other vendors that were being considered.

Another recent example was with a nonprofit client. During the software demonstrations the scripted demo allowed our client to see how user defined fields were set up with each software vendor. One vendor had a limited number of user defined fields, and they were not all searchable. Another vendor said that they offered user defined fields, but in order to create them there were a number of steps involved that made the use of these fields very difficult.

In each of these instances without the custom software demo script process, our clients would have missed key problem areas that were important to the decision making process. While software will never meet 100% of your requirements, as you follow the process for selecting software, including scripted demos, you will be able to get the information you need to make an informed software decision.
 

Posted By: Spencer Arnesen

A client recently called and asked if we could give him budget numbers for software and implementation costs that he could present to his Executive Committee. Based on our experience working with similar clients and some initial research we had already performed on vendors he should consider, we provided him with a range of costs. This experience reminded me once again of an article we wrote - How to Budget for Enterprise Software.

Whether you are looking at implementing on-premise or through a Software as a Service (SaaS or cloud computing) model, the main point to remember is that you will not know the actual cost of the software and implementation until the software has been successfully implemented. That is because there are too many variables and unknowns, and even known(s) that will change as you proceed through the exercise of selecting software. For example the number of users may change as you do a detailed evaluation of who will actually be using the system, or additional modifications may be necessary to round out the functionality for your needs. Implementation costs will still be required, even if you select a SaaS solution. It’s not that the vendors can’t tell you what their software costs, but every organization has different needs and will require a different level of effort to properly implement the software.

Preparing a software budget is an iterative process. You begin with a preliminary budget which will be progressively refined as you advance through software selection to a short list budget, then a vendor’s proposed budget, then a negotiated budget, and then implementation. The most important step you can take in preparing a software budget is to develop a budget template that will capture the information that will reflect back to you estimated software and implementation costs. Some of these line items should be software license, database license, hardware, hosting fees, implementation services, training, annual maintenance, and internal costs, to name a few.

Variables to keep in mind that will impact your software budget include such things as the type of software you are selecting, the number and type of modules, the number of users, the amount of legacy data to be converted, your in-house resources vs. outsourced resources, the amount of configuration or customization required, the negotiated contract, business processes, implementation management, etc.

Putting together a preliminary budget that is realistic for planning purposes is very attainable, just make sure you understand that the budget will need to be modified as you move through the selection process. Also, make sure that you look at estimated cost over a 5 year period rather than just the first year. Maintenance and hosting costs can really add up as you evaluate the long-term costs of a solution.
 

Posted By: Spencer Arnesen

The last key decision criteria is Total Cost of Ownership. If you go through a competitive software evaluation project, you should get discounts no matter what software you buy, but you should be aware of other costs that need to be taken in consideration. There are three main out of pocket costs to consider as you evaluate software and a fourth if you are looking at Software as a Service solutions. These include:

• Software License – This is the license cost of the software. Typically based on a per module/user count. This will be the initial cost of the software license and should be discounted for the initial purchase.
• Software Implementation – This is the cost to implement the software you select. You can typically estimate this as a ratio to the software cost. For example most of the mid-market software vendors implement in a 1:1 ratio. This means that for every dollar you spend on the software license, you will spend a dollar on implementation. For the higher end vendors this cost can be higher.
• Software Maintenance – You will be paying an annual maintenance fee which ranges from 16% - 25% of the license fee. This is an annual recurring fee that entitles you to upgrades and some level of support.
• For Software as a Service solutions you will not be paying an initial license cost, but you will be paying a monthly per user fee. This is more of a lease or rental agreement and frees your organization from having to implement and maintain the software in-house. While you will be paying less up-front, your long term costs are typically larger. Many of these vendors are selling licenses for $50 - $150/user/month. You will still need to include implementation costs.

There are other internal costs that can also be considered. These costs include hardware, customizations, training, IT staff, etc. These costs should be factored when considering implementation of a software solution.

The main thing to remember is that you need to look at cost for at least 5 years. Many vendors like to discount heavily up front, but then will charge you full rates on the maintenance, which may increase cost significantly in years 2-5. If you are considering a Software as a Service solution, make sure that you factor the monthly cost over a 5 year period and compare that to your other options.

If you would like more information regarding cost that you can expect for your specific situation, feel free to email or give us a call at (425) 216-4030. We would be happy to give you some free advice to consider as you evaluate your options!

Posted By: Spencer Arnesen

While in general a software decision should be an objective process, you still need to follow your heart as you evaluate software vendors. Organizational Compatibility is the subjective decision criteria.

You will get an intuitive feeling as you work with the software vendors during the software selection process. Some vendors will be an excellent match for your organization and you will feel very comfortable working with them. Other vendors may look like a perfect fit on paper, but as you go through the demo and due diligence process, things may not feel right.

Follow your instincts! Remember, the software vendor/implementation partner you select will be a partner with you in a long-term relationship for many years to come. Think of it as a marriage relationship. You are essentially dating during the software evaluation process, you are engaged when you get to contract negotiations, and then after the contracts are signed you are married. Make sure you develop a great relationship during the software selection process that will last for many years to come. 
 

Posted By: Spencer Arnesen