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Pricing: haggle or not haggle? Fix bid versus open offer

December 20, 2012

An important consideration on any software investment (hopefully not the most important) is the price. The price of anything is how much someone else is willing to pay. What we are willing to pay is based on what we expect to obtain. After we have ensured that each bid provides the features and functionality we need, the next question is, can we reduce the price?

Publishers and resellers are always very inclined to provide motivation to acquire a new customer. This motivation usually takes the form of a discount on both the applications and services. However, one should be watchful for excessive discounts. Keep in mind that these investments are intended to last a long time (normally no less than 5 years, but usually an average of 10) and software firms may expect to find ways to make up for extreme discount in future services or applications.

One way to mitigate is to request a long term fixed bid. In order to have a successful implementation based on a fix bid you need to have a very detailed project plan, which should be reviewed before agreement very carefully. This will ensure that all requirements are covered and that there are not any miscommunications in the process. Fix bids are usually higher priced than regular bids, as the consulting firm usually needs to make provisions for unexpected situations. But in some cases it may be worth to pay the overprice in order to limit or eliminate future expenditures.

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Getting References

December 6, 2012

One important task in selecting software that is often overlooked is requesting references.  As obvious as it seems to write, obtaining and reviewing reference must be done before the purchase.  Another important part of working with references is to follow-up with conversations with those that have used the software. Call or visit to discover pitfalls, how the software is being used, issues that were faced and how they were resolved.

It is important to request references within the same industry or that have at least the same type of operation.  Often in ERP applications for example, the software is generic enough that it can be configured to function a number vertical industries.  Select references that are closely related to discover what kinds of

Of course, the references that will be provided will be of successful implementations and customers that are happy with the services of a company. However, a good point to keep an eye on is the number of references and the time it takes to obtain them.

Another good source is to talk to the software publisher, if there is any. The publisher will not normally provide negative feedback to a prospective customer, however it may indicate that there are additional resources available or recommend other resources.

An additional source of references would contacts in your industry, Internet search engines and industry associations.

As the master cabinetmakers say, “Measure twice, cut once.”  It’s good advice for selecting software as well.

Next Time: Pricing; Haggle or Not??

Emotional Buying

November 28, 2012

We have seen cases where the implementation of a new system is based on many other factors that are not related to a real need within the organization:

–          Recommendations from others (friends, accountants, consultants) for something that works in an environment completely different that the one at hand

–          Imposition from a central office or headquarters

–          Problems with consulting firm or support group that provides assistance with current application(s)

–          Implementation made by a manager or management group that has been dismissed from the company (it was “their” solution)

Making a decision on a long term investment such as an ERP software solution needs to be carefully evaluated and related directly to business issues. An emotional decision can be very costly in the long run.

The demo process and the ROI

November 15, 2012

The demo process is a pivotal part of the purchase of a software solution. It is the time when not only the application is shown to the potential end user, but it is the time when the proposing consulting company understands many of the intricacies of the prospect’s business. One important recommendation during this process is not to withhold information provided to the potential consulting firm. If necessary, have a confidentiality agreement signed, if the concern is to share vital information for the business. We have encountered a number of times that things that do not seem too relevant develop into complete show stoppers during the implementation phase. And if a process is a vital process for a business, it should be fully demoed before the purchase. Therefore its disclosure is a central piece to the future success of the project.

I could not stress enough in this point again the importance of having the consulting team of the proposing company present during the demonstration process. We all know that, as in any industry, you can encounter sales representatives that are looking after the prospect’s benefit and others that are looking after meeting their quotas. Unfortunately we have seen more than one case when there are a lot of promises made that, when the implementation time comes, can not be delivered because the application does not have the functionality built within it. And then, for vital business processes, this turns into a separate project, which will take its own time, resources and cost. Not a good position to be in at all.

The return on investment (ROI) part of the buying process is an important consideration. In many instances, it can be easy to calculate. However be aware that in many others it will be a complicated process, mainly due to the inaccuracy of the parameters to be measured. How do you easily measure the availability of support on site easily? Or the familiarity of a specific firm with your industry?

Correct Expectations: Time required – staff qualifications – availability

October 31, 2012

During the evaluation process of a new solution, there is one side of the equation that almost never gets reviewed The potential to bring an implementation process to a halt: the requirements for the client company. In the excitement of getting issues resolved there is usually an expectation that, as soon as the solution is implemented, everything is going to be ok. And even if this is obviously the situation at the end of the road, there are going to be a number of steps to get there. And these steps will require the commitment and involvement of both management and staff within the client company.

There is one extremely important consideration for the success of a software solution implementation: without clear and specific internal procedures, there is no software solution that will take care of the internal issues that are at hand. If the organization is chaotic, the implementation process will be chaotic and the final outcome will be chaotic. This is very difficult to understand, especially for management, who has obviously operated this way for a long time and is used to this way of operating. And if management is also the owners of the business (that was created a long time ago by such and such, yada, yada, yada), then there is an emotional load that is hard to overcome. To them, the feeling is like questioning the way to raise a child. Why, if we have done that this way for years, we need to change now? Well, the answer may very well be because we want to improve our operations and in the process have more revenue, correct?

Part of the internal review process for an implementation is making sure that the staff is qualified to handle the change, that they have enough time to go though the change and that the people defined to act as project managers are deeply involved in the day to day operations of the company. Consulting firms are faced with many challenges over the implementation process, and each one of them cost the customer money one way or another:

–          Project leaders that do not know the operation in depth: they will provide erroneous or superficial information on which decisions will be made. This causes a great deal of reworking.

–          Staff that is not qualified to handle the change: this does not need a lot of discussion. The consequences are obvious.

–          Staff that is too busy to handle the change: a change on software solution will require involvement at every level of the corporation. Scheduling an activity (such a definition or testing) with a user that will not have the time to perform the tasks at hand will result in delays and reworks. The worst part is that this will make the project lose its momentum, processes get forgotten and, at the end, this will have a cost to the company.

–          Staff not committed to the change: this is an emotional issue that sometimes gets overlooked. Example: an employee that has performed the accounts payable duties for 30 years and that does not get involved nor invited to the demonstration and qualification process of the new solution. This person will feel left out, will have a terrible time letting go of old ways and old solutions and, most important, will not cooperate with the implementation process. We have even seen cases where a person will withhold important pieces of information or somehow sabotage the entire effort. This will have serious implications down the road, and have a financial impact on the project.

Give it a chance.

October 16, 2012

How to buy the correct software for your company:  Have we given what we have a chance?

One common situation we encounter is a customer checking out other software options when they are not aware of the full capabilities of the application they currently own. Inherent in the investment required to implement a software solution is it’s usage for an extended period of time. This situation often means the people that were originally involved in the selection process, purchase, implementation and initial training may no longer be present. Another problem arises when those presently utilizing the application were trained by a second, third or fourth generation of users. In this situation much information is lost in the process and is typically reduced to the use of minimal features.

Another issue often faced is using software from smaller companies. Smaller companies often have difficulty keeping up with technology and changes in industry leading to software that is less than optimal.  Reputable publishers in contrast will typically keep up with the changes in technology as well as with the improvements and new requirements of a specific industry. This is the only way an application can remain competitive.

Another reason to move to a different application is the service and support that is provided. If the solution is either an in house development or an application proprietary of a small firm, there may not be a lot of room for improvement. However, large publishers are always highly motivated to keep customers, therefore they will do everything possible to address this kind of issues. Either provide support directly to end users or refer them to reputable companies that can provide high quality support.

SaaS

September 13, 2012

How to Buy the Correct Software for your Company:Software as a Service (SaaS): the membership software

For some years now, there is a new and interesting trend of business solutions: software as a service. What this means in simple terms is that you pay a membership fee in order to use the software, normally over the internet. The software is maintained and developed by the publisher, in their own servers and computers, and they normally also house your data there and/or in a secured location.

This kind of solution offers the following advantages:

  • Your only IT concern is to have computers that can access the internet with reasonably good speed. For smaller companies, this aspect takes a huge weight off their backs, as they will no longer have to be concerned with server and application upgrades.
  • You can access your application and data wherever there is a computer that connects to the internet: for corporations with imperative mobility needs this is an obvious advantage. Sales reps groups have been probably one of the most benefited from this trend.

A couple of the objections that have been seen in the marketplace for this kind of approach are data safety and application control. On the first one, as data is now being stored in someone else’s server, there is always the feeling of lack of control over who can access that data. Obviously, reputable firms will always have in place all kinds of safety controls in order to avoid the data being “stolen” or corrupted, however they are always a better target for a hacker than a company that only keeps its own data in store.

On the topic of application control, the norm for updating and upgrading these kind of applications is that the publisher will do them. The publisher will request some users to participate in a test release and make sure to the best of their abilities that the application will perform correctly. And then, a general release date will be announced and will be performed. The end user does not have any control over this activity. Any issues that may arise will be addressed “on the go”. No opportunity to wait until the majority of the users have upgraded in order to benefit of any service packs available and avoid finding the holes on the road!