Tips for Selecting Software Vendors

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IT Management eBook

Contents… Tips for Selecting Software Vendors

This content was adapted from Internet.com’s Server Watch, Datamation, and CIO Update Web sites. Contributors: Kenneth Hess, Eric Spiegel, Dan Cobb, and John Lakey.

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The Frugal Side of Commercial Software

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Surviving the Software Selection Process

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Managing the RFP Process Wisely

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Simplifying the Vendor Selection Process

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Managing Vendor Demonstrations

Tips for Selecting Software Vendors

The Frugal Side of Commercial Software By Kenneth Hess

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t’s true that commercial software limits you to fewer choices and is less customizable than open source software, and it increases the chances for vendor lockin and licensing restrictions. However, those negatives pale when one examines the “pro” column. On the positive side, you’ll likely never stand in the unemployment line because you chose the likes of Oracle, HP, IBM, or Microsoft for your software. The peace of mind that your software vendor backs your company with its integrity, support, and reputation is worth more than any amount of freedom or good feelings you’ll glean from using something free of charge, free of support, and free of any recourse should something go wrong. Before you get your knickers in a twist about what appears to be an about-face for me on the subject of saving money, using open source software, and generally thumbing my nose at commercial software vendors, remember: Being frugal is more than just being cheap, it’s being smart. The purpose of business is to make a profit, and you can’t do that if your productivity suffers due to buggy software. Put another way: When your business stability is at risk, are you really going to accept that risk to save a few bucks?

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Innovation The critics of commercial software raise some interesting points concerning innovation. It’s often said that commercial software isn’t as innovative as its open source counterparts. I assume this is because paid developers are somehow restricted from being clever or imaginative. The paycheck they receive must be a left-brain dampener, and the only programmers who enjoy a creative spark are the exalted and righteous volunteer hackers. Commercial ventures seek innovation, too, but they have a product to produce, programmers to pay, and customers to support. There isn’t an egregious lack of innovation but rather a calculated amount of it. When it comes to innovation in the commercial software space, how many pieces of software can you name that are both commercial and absolute best-of-breed in a category? How about Microsoft Office, Adobe Photoshop, Oracle databases, HP OpenView, IBM WebSphere, and Microsoft Windows? Innovation is alive and well in the commercial software biosphere.

Tips for Selecting Software Vendors, an Internet.com IT Management eBook. © 2010, Internet.com, a division of QuinStreet, Inc.

Tips for Selecting Software Vendors

Support

• What is the value of this software to my business?

Support is the most cited reason for choosing commercial software over a free alternative. Whether that support is ever used or not doesn’t matter; it’s there if you need it. Business owners like to feel that there’s a big fluffy pillow at the bottom of the staircase should their software decide to take a tumble. In the minds of those in C-level positions the pillow provides a soft landing and a safe haven should something go wrong. There’s no fluffy pillow in a hacker’s basement for a corporation to land on.

• Will using this software make the business more productive?

Commercial software gives the business owner a responsible party on which to blame his woes. It’s much harder to sue a group of 17-year-old developers in East Mongotania for lost revenue when you suffer a technology meltdown and can’t use your data warehouse. Corporations look for safety, indemnity, and warranty when venturing into business productivity territory. Price is perhaps the most deceitful aspect of any product or service. You’ll never know how much a piece of software will cost you by the price tag alone. Free isn’t always free, and expensive might be cheaper over time. When considering price, ask yourself the following questions:

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• What are my support options and their costs? • What is the service-level agreement (SLA) for problems that arise? • What recourse do I have in the event of a failure, loss of data, or productivity?

When you purchase commercial software, support is rarely included in the purchase price. When you buy a copy of Microsoft Windows you are purchasing a license to use the software, and it includes no support. The advantage to that software is that it is standard, well tested, easy to use and backed by one of the best software companies on the planet. At $200 per copy, it’s a bargain because you couldn’t afford to reproduce it, nor can you replicate its functionality with anything freely available. Whether you buy, build, or borrow software for your company, you must select that which is frugal. The frugal choice is the one that makes financial sense for you and your customers, while also providing a comfortable level of safety and reassurance.

Tips for Selecting Software Vendors, an Internet.com IT Management eBook. © 2010, Internet.com, a division of QuinStreet, Inc.

Tips for Selecting Software Vendors

Surviving the Software Selection Process By Eric Spiegel

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ecisions, decisions! Cruising down the cereal aisle at the local grocery store, I am overwhelmed by the numerous eye-catching boxes. Although the frosted covered sugar flakes look quite tasty, I can envision my family doctor shaking her head in disgust at my upcoming annual physical. Maybe I should consider a generic brand of corn flakes, minus the tasty sugar and flashy packaging. But even though I would pay more for the top-selling brand of corn flakes, I would feel more confident in the quality. Too many choices leads to cereal aisle stress. And if that gets to me, you can only imagine the pressure a CIO feels when tasked to select a multi-milliondollar enterprise software package. CIOs need a proven, steadfast process for sifting through the hundreds of choices available for each enterprise software market segment. Whether you are evaluating CRM or RFID solutions, the same basic selection process applies. There are a series of steps for ensuring a result that will survive the intense, long-term scrutiny this level of investment will certainly attract.

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Where do you begin? PN Narayanan, senior project management team leader with the Delaware Department of Technology and Information, is a key member of the ERP Financials selection team. He says there is an imperative precursor to starting the selection process. ‘’It is important to reengineer the business process prior to making a selection,’’ he explains. Narayanan found in his experience that instead of customizing software to fit the process, there is a greater benefit in reengineering the legacy process. Once the business process is reworked and solidified, make sure you have committed executive sponsors who have no false expectations of a quick selection. We are talking months, not weeks. Then put together a team of subject matter experts (SMEs), technical experts, and a project manager. If your resources are limited or you lack the expertise internally, consider hiring a consulting firm that specializes in selecting this type of software.

Tips for Selecting Software Vendors, an Internet.com IT Management eBook. © 2010, Internet.com, a division of QuinStreet, Inc.

Tips for Selecting Software Vendors

What is Driving the Change? Find out what is driving the need for this new software. Does the legacy system to be replaced have performance issues? Are there business requirements that are too costly to implement in the current system? Ask your target user audience and IT staff to rank the importance of relevant requirements. Narayanan knows all too well the importance of obtaining user insights. ‘’Our business users’ experience with a prior implementation showed them the importance of minimizing the customization work to reduce the rollout complexity,’’ says Narayanan. ‘’In response, we developed a ‘customization’ weighted criteria that was applied to each functional requirement. We then could compare the average level of customization of each product.’’ Rick Morani, president of HMG Technologies, Inc. in Columbia, Md., says you have to strike the right balance when coming up with selection criteria.

‘’Absolutely be sure that your process involves a Request for Information (RFI) phase to sift through the noise and get to a top five that would be involved in the more detailed Request for Proposal (RFP) phase,’’ says Morani. Just bear in mind that you have a limited amount of time to review each response, so don’t overdo it. Make the final selections for the presentation stage based on your weighted criteria. If you are short on time, another option is to purchase industry research from an analyst firm like Gartner and limit your RFP selections to those ISV’s that best fit your requirements.

Weeding Through the Vendors Schedule times for each ISV finalist to deliver their standard demo. This may require a series of demonstrations depending on how many modules are being considered. Prepare a list of questions that will help you identify technical and business concerns. Try not to get too far off track during these demos because you want to see all the basic, out-of-the-box functionality in the allotted time.

‘’Avoid a great technology solution that doesn’t meet the needs of the business, or a feature-rich solution that isn’t technically up to snuff,’’ says Morani.

There will be time for drilling down into your concerns after seeing all the presentations.

Your team can create a comprehensive weighted criteria formula to help weed out the ISV’s that won’t fit your needs. Criteria should strike a balance between the panache that accompanies a leading-edge start-up, versus the tried-and-true brand names, such as SAP or Oracle PeopleSoft.

Now that your team has reviewed each finalist’s proposal and has seen the product in action, request a custom demo. This is where you can rake the vendor over the coals. Well, let’s keep it professional. But in all seriousness, this is your team’s chance to explore the nooks and crannies of the product.

Just as my family doctor wouldn’t like the sugar-coated cereal selection, your CEO won’t be happy with software that is all frosting.

Give each vendor the same amount of time to build the customizations, but have someone from your team shadow them as they make the changes. Make sure there are no smoke and mirrors in play, and gauge how much configuration versus actual programming is necessary to meet your requirements.

To whittle down your list of hundreds to a manageable list of three or four vendors, Morani stresses the need to follow the traditional means of separating the potential winners from the pack.

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In addition, set technical benchmarks that the vendor must prove, such as numbers of transactions per minute in the case of high-volume processing.

Tips for Selecting Software Vendors, an Internet.com IT Management eBook. © 2010, Internet.com, a division of QuinStreet, Inc.

Tips for Selecting Software Vendors

Now comes the hard part. Compile the ratings of each product, by feature, and come to an empirical final ranking. Then you must compare each vendor’s qualifications, which should be well vetted by this point. How stable are they financially? Is there an impending acquisition? Were the references provided impeccable?

‘’Don’t forget that your package system is usually just a part of your total picture,’’ says Morani. ‘’You still have to think about system interfaces, addressing changing requirements and reporting requirements.’’ This includes potential legacy data conversion and new hardware requirements. But in reality, your journey is just beginning. You have a long implementation road ahead. So take a well deserved break and reward yourself with a nice big bowl of frosted covered sugar flakes.

Set up meetings with each vendor to provide them a chance to respond to all your concerns. As your journey comes to an end with the selection of a vendor, be careful not to overlook the items that hang on the periphery of these projects.

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Tips for Selecting Software Vendors, an Internet.com IT Management eBook. © 2010, Internet.com, a division of QuinStreet, Inc.

Tips for Selecting Software Vendors

Managing the RFP Process Wisely By Dan Cobb

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very CIO I know is always on the lookout for better and more efficient ways to select and manage vendors for staffing and project engagements.

One of the key elements in this decision-making process is the judicious use of RFPs. I say “judicious” because if the RFP (request for proposals) is done properly, it will generate responses that allow you to select vendors who provide the greatest value. As noted in a research brief developed by the National Association of State Chief Information Officers, which represents government CIOs and National Association of State Procurement Officers, “’[b]est value’ is a term of art in procurement circles that is different from ‘best or lowest price.’”

It may be easier said than done to create an effective RFP, however. The first question to ask is when an RFP is the right way to select your vendors. What follows are some brief criteria to apply and benefits to be gained:

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• Your objective in using an RFP should be to clarify your needs, outline the parameters that help the vendor develop a suitable plan and provide a mechanism for the vendor to frame the approach, describe relevant experience, and develop an estimate that is reasonable and within your budget. • Done properly, the RFP process will result in higher quality, more consistent responses that can be evaluated and compared more easily, on an “apples-toapples” basis.

“While ‘best price’ is simply that — the best or lowest price for which a product or service may be purchased — ‘best value’ encompasses the benefits in total… and typically means ‘the expected outcome of an acquisition that… provides the greatest overall benefit in response to the requirement.’”

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• An RFP makes sense when there is a defined end product and the investment in the process is appropriate for the benefit to be gained. Going through the process can be difficult and costly in terms of resources required for planning, development, and evaluation, and you should weigh these resource costs against what you hope to gain through the use of an RFP.

• If not done properly, it can waste your time and that of your colleagues (not to mention that of the well-qualified vendors who may become frustrated by the process and opt out of future opportunities to do business with your organization). • The RFP also helps build relationships with well qualified vendors, leading to longer term and more successful dealings that will be beneficial to your organization and maximize your investment.

Tips for Selecting Software Vendors, an Internet.com IT Management eBook. © 2010, Internet.com, a division of QuinStreet, Inc.

Tips for Selecting Software Vendors

Developing the RFP The planning process begins with identification of stakeholders who should be involved. Although this will vary from organization to organization, it typically includes the CIO, the appropriate procurement executive, the CFO or designated financial representative, a legal department representative, and the end users of the technology. Including end users throughout the process will not only result in buy-in for the final selection, but will also provide substantive input that will generate a more comprehensive RFP. The process continues with identification and preliminary research related to potential vendors. If your company works only from approved vendor lists, this may already have been done. If your requirements cannot be met by those vendors, you will want to identify and qualify vendors who offer the proper capabilities. Once this is accomplished, you should define your specific needs. Meet with your stakeholders to gain written agreement on what you are looking for. If this step is ignored or truncated, the RFP will be too generic or undefined, and will not yield the level of response that allows you to make an informed selection. As for the actual document, not everyone can write an effective RFP. If you don’t have the internal capabilities, your options include bringing in someone who is experienced and skilled at the process, using a previously successful tool, or buying a tool or template.

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One word to the wise: if you ask a vendor to assist in writing it, don’t allow that vendor to bid on it. Your RFP should be clear and straightforward, designed to generate an “apples-to-apples” comparison in responses. Define your expected outcomes, cost expectations, delivery time frames, geographic requirements, breadth of services, and other key elements. Criteria should be outlined crisply and concisely. Many of us have seen the alternative: the loosely written RFP that doesn’t clarify needs, expectations, and deliverables. This has at least two negative consequences. First, vendors will be all over the board in responding, requiring more resource time for the evaluation process. The second and related consequence is that there will be little or no consistency in the evaluation process. Set and adhere to reasonable expectations. Allow enough time for respondents to develop a thorough, well-priced proposal, but not so much time that your project will suffer. The appropriate timeline should be dictated by the magnitude of the project. Then review and make the award within a reasonable time frame. When it’s time to evaluate responses, you’ll see the results of a properly developed RFP. If it was developed properly, evaluation criteria and relative weighting will have been built into the design. This should simplify the review process and gain you the respect (and gratitude) of your review committee.

Tips for Selecting Software Vendors, an Internet.com IT Management eBook. © 2010, Internet.com, a division of QuinStreet, Inc.

Tips for Selecting Software Vendors

Simplifying the Vendor Selection Process By John Lakey

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ontemporary companies rely on outsourcing and ISVs for success in today’s competitive marketplace, and selecting a vendor is now as important a process as developing new products. Products and services are selected for cost, requirements, overall quality, stability of the supplier, timeto-market, and traditional partnerships. The purchase approval process often involves more than one criteria and one opinion and requires the establishment of a broad-based team to manage the process.

more difficult to find a company that offers a solution that is clearly superior along all dimensions your organization would like to consider. In these situations, cost is joined by other evaluation areas such as: functionality, ease-of-use, company history and financials, and valueadded services.

A Four-Step Plan Sophisticated product and service evaluations can be accomplished in four steps:

1. Evaluating Business Needs 2. Request & Assess Offers 3. Vendor Interviews & Proof-of-

Creation of a repeatable evaluation process is critical and development of a process that works for your company is not as hard as many believe. It’s worth the time and effort and can be broken down into a four-step approach that will allow selection of the right vendor for the job.

Concepts

4. Negotiation

Step 1: Evaluating Business Needs This is where you ask the tough questions that drive the execution steps in the successive steps in the process: • What need you are looking to satisfy?

The key to a successful cost-based evaluation is that the product or service in question is an undifferentiated offering (e.g., long distance phone service). When evaluating offerings that can be differentiated, it becomes much

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• Which evaluation categories will you use? • What are your business, technical, and usability requirements? • How will you roll your evaluation into a scorecard?

Tips for Selecting Software Vendors, an Internet.com IT Management eBook. © 2010, Internet.com, a division of QuinStreet, Inc.

Tips for Selecting Software Vendors

The evaluation team should be made up of representatives from all of the key stakeholder groups. This allows for clear reporting back to stakeholders as the process proceeds and for balanced discussions. Establish a base set of scorecard categories and a base scorecard that is the default for any evaluation. A good starting set includes business requirements, technical requirements, TCO, usability, and vendor health. By turning this starting point into a reusable template, you will give the cross-functional evaluation team more faith in the process. You can then discuss deviations from the process upfront for a given evaluation, which increases the sense of transparency and is critical to generate the buy-in necessary to successfully move from evaluation and selection to implementation.

Step 2: Request & Assess Offers Once you understand the requirements that your evaluation team will be working with and how you will score the vendors you are evaluating, the next step is to gather the information necessary to fill in the scorecard and to create a shortlist of vendors for interviews and, where appropriate, proof-of-concept activities. Assuming you have options, consider whether you need to send out a request for information (RFI). Do you have a solid understanding of the market? Are you dealing with a limited number of potential vendors? Are you ready to get proposals? If the answer to these questions is “yes” then you may be able to send out a request for proposal (RFP) directly to each of the potential vendors. Vendors are often more responsive to requests that have quantifiable requirements and dollar goals than to general requests for information. After you get the information you need, fill in as much of the scorecard as possible. Your goal is to see if any vendor fails to meet your “must have” requirements.

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Evaluate which vendors withdrew from consideration and why. Finally, work with the evaluation team to document who made the short list and why. Document everything so that the evaluation team has clear logic to support the short-list decision.

Step 3: Vendor Interviews & Proof-of-Concepts Once the evaluation team has a short list, it should move quickly to invite vendors in to engage in a set interview schedule. All vendors will need the agenda in advance and each member of the evaluation team should try to be present for each meeting. If the evaluation involves a process or technology, consider a proof-of-concept as a piece of the vendor interview process. There should always be a section of the evaluation scorecard that includes vendor interviews. These dog-and-pony shows are important because they will demonstrate the personality of the vendor and their level of commitment to your account.

Step 4: Negotiation After the vendor interviews end and all of the evaluation team’s questions are answered, the team can pick the finalists for negotiation. Use the scorecard to make the determination. It is generally easier to complete the scorecard with preliminary pricing, allowing you to narrow the field to the clear scorecard leaders and then to revisit the scorecard as the negotiating process continues with the few remaining vendors. Some companies like to work with the entire short-list and to get final pricing up front, which is fine, but it can take longer than narrowing the list before the evaluation team hands the recommended finalists over to purchasing. Finalized pricing will give the evaluation team the last element of the scorecard.

Tips for Selecting Software Vendors, an Internet.com IT Management eBook. © 2010, Internet.com, a division of QuinStreet, Inc.

Tips for Selecting Software Vendors

To generate the buy-in necessary for implementation, it is important for the evaluation team to present the final scorecard to the broader stakeholder group and answer any questions about the recommended vendor that may come up. Properly evaluating products and services can save time and money. Implementing a flexible and repeatable model for evaluations will give all stakeholder groups comfort that the evaluation was fair and complete, which will give the resulting projects the legitimacy they need to succeed.

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Tips for Selecting Software Vendors, an Internet.com IT Management eBook. © 2010, Internet.com, a division of QuinStreet, Inc.

Tips for Selecting Software Vendors

Managing Vendor Demonstrations By Eric Spiegel

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hould I have a steak or chicken burrito? Or maybe an enchilada. These were the thoughts going through my head as I sat in an overheated conference room watching an aimless software product demonstration. Perhaps you also found your mind wandering during a vendor presentation. We humans have naturally short attention spans (especially near lunchtime), but the real culprit is probably the result of a demonstration that is not meeting your needs. When you agree to a demonstration delivered by a selected vendor, there must be a challenge the company is trying to overcome. You are either trying to solve a business problem or an IT problem. Either way, you cannot blame a misguided or just plain lame presentation on the vendor. You must have seen some value in the product, so it is your responsibility to make sure the demo is not a waste of time.

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The true key to not letting a wayward demo happen in the first place is to be better prepared. “There are many actions you can take to get the most out of a vendor presentation,” says Cohen. “If you want to have a crisp, successful meeting, outline in advance the answers to three important questions and then a fourth action to seal the deal.” What are the objectives of meeting? What are the needs you are seeking to address? Are there any specific capabilities that you know you must have? Plan to manage the meeting to achieve your objectives.

According to Peter Cohan, founder and principal of The Second Derivative, a consulting firm that helps improve the success rates of software demos, it is common to find yourself wondering where a demo is going within the first few minutes.

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“You are there to solve a problem and, if you are about to be led down the wrong path, it is up to you to raise your hand,” says Cohan. “The vendor might look at you like ‘How dare you stop my demo before I get to the good stuff,’ but how can the vendor know what the good stuff is if he didn’t start by asking about your particular situation?”

“To be most effective, type up the answers to questions one to three and e-mail them to the vendor. Then review them before the start of the presentation,” says Cohen. “The last item is critical because without managing the meeting, the rest of the planning will be wasted.”

Tips for Selecting Software Vendors, an Internet.com IT Management eBook. © 2010, Internet.com, a division of QuinStreet, Inc.

Tips for Selecting Software Vendors

Know Your Objectives — And Theirs Cohan has coached both vendors and customers and found that they aren’t always in alignment. “The customer likes to sit back and let the vendor show what they have and then tell you whether or not they are interested. Whereas the vendor lives in the land of hope and believes if they show a lot of cool stuff, something will click and a purchase order will be forthcoming. If you let these attitudes prevail, it is totally unproductive,” he says. According to Cohan, the vendor usually has one of three objectives. The first might be to qualify the customer, which might seem like common sense to do before the demo, but it happens. It’s best to do your research beforehand and make sure you are qualified. A second vendor objective is to generate a vision for using a product that will address a customer’s needs. Don’t hesitate to ask pointed questions to poke holes in this vision and make sure it is your reality. A third is to technically prove a specific capability, to show it really does work. Although it is great that a process runs 100 times faster with the vendor’s product, does that address your fundamental need or is it a “nice to have”? On the flip side, Cohan says, the customer also has one of three objectives. First, they are just exploring possible solutions, looking for advantages and disadvantages. Second, they know exactly what is required and are reviewing multiple products to find the best fit. Or third, the customer is just window shopping to stay informed on product space. “All of these are perfectly valid objectives, but it would help create a more productive demonstration if all cards were on the table,” he says. Cohan insists the worst-case scenario is withholding information. “Customers love to play poker because holding back critical information might play into their favor in negotiations,” he says. For example, you might be considering switching database platforms. In this case it might be useful to have a theoretical discussion to understand the vendor’s product roadmap in relation to your future needs.

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Make sure the right people attend the demo, preferably both evaluators and decision-makers. However, if you are doing two rounds, it’s OK to have the evaluators in the first round and the decision-makers in second. Just make sure the vendor understands your selection process. Cohan points out that if decision makers aren’t in attendance, make sure the vendor provides the compelling material to help evaluators sell the product internally.

Make Them Cut to the Chase Once the demo begins, even after all your preparation, if you don’t see your problem being addressed in the first few slides, Cohan suggests halting the meeting and forcing the issue to the forefront. You might also find that during the product demonstration, you are being shown lots of bells and whistles, but nothing core to solving your problem. As stated earlier, you need to take control. If the vendor can’t demonstrate the features that address your needs, it is in everyone’s best interest to end the meeting and move on. When evaluating an enterprise software product, Cohan suggests keeping your expectations rooted in the real world. “Why do people buy CRM?” asks Cohan. “Because management buys into the promise of knowing everything about their customers. The failure is that salespeople don’t like to type — they like to talk.” Cohan reminds evaluators to keep an open mind because you don’t want all this planning to stifle innovation. “The vendor might actually spark an idea that enables you to accomplish something you originally thought not possible,” he says. Finally, one point that Cohan and I both wholeheartedly agree on — don’t be a jerk. You can get what you need without torturing the vendor. “Don’t perpetuate the myth that IT people are evil!” Cohan implores. If you follow these suggestions, you can start daydreaming about lunch after the demo. And if it doesn’t break any rules, be sure to let the vendor treat you.

Tips for Selecting Software Vendors, an Internet.com IT Management eBook. © 2010, Internet.com, a division of QuinStreet, Inc.