White Paper

Selecting Business Software: A ten step process

Published on

August 25, 2018

By

by

Sheri Blaho

Ten Steps to Software Selection Success or RFPs Should Have Died with DOS

Implementing software is a huge investment for any firm. A purchase can represent as much as 5% of a firm’s annual total revenue. If you are a 10-million-dollar firm, you could spend as much as $500,000 for a large implementation of software managing critical business functions. This would include the value of the time your team invests during the selection and implementation process. For an investment of this magnitude, it makes sense to get the real answers... early. The acquisition of business application software for any major system in a company is a major investment of time and resources. Given that most firms stay with a software for an average of 7 years, picking the right software AND the right business partner for implementation and post implementation support is critical.

You are going to live with your decision for a long time. The traditional, lengthy RFP process for software evaluation does not help you find the best software and it certainly does not help you identify the best business partner to help you through implementation. In fact, RFPs only create an administrative nightmare for you and frustration for your potential vendors. Over the years, more and more vendors are electing to decline bids or participate in the “old school” RFP. Why? Simply because they recognize that RFPs bring limited value to the process, they don’t ask the right questions, and they block communication. The RFP process limits the valuable “one on one engagement” between your staff and vendor candidates, the time that is critical to gaining a full understanding of your unique business needs. RFPs frequently ignore the critical business processes that give you your competitive edge. RFPs focus on costs rather than value.

Additionally, RFPs leave the “grading” in the hands on the vendor rather than the hands of the team members who will be using the software. Most vendors score themselves favorably, hoping that the product absolutely works or (on the scary side) they have a work-around that should be acceptable.

So what should you be doing instead? This 10 step process is a much more logical method that allows you to see clearly if the software has the precise functions that you need and lets you engage with the consulting team that will be partnering with you through your implementation. Software is just a tool…nothing more. While having the correct tool is critical, it is equally important that the implementation team possess the skills needed to help you leverage the tool to achieve your ultimate objectives. That cannot be assessed in an RFP, or even during a demo. An interview process is necessary to assess the skills of the vendor and the transition from simply a vendor to a business partner.

You will get to your short list of vendors quickly by being candid and honest. It is okay to tell your vendors who you are and what you are thinking. In fact, it will save you time and money by being forthcoming and transparent. There is an old adage in sales, “There are two winners in every deal. The one who wins the contract and the one that got out first.” You and your vendor have the SAME GOAL, which is to move forward only if it make sense. You need to share critical basic information about your firm, your time frames and your budget. Let’s walk through these ten steps before you begin your next evaluation:

  • Build a Blueprint of Your Envisioned Solution
  • Summarize Your Demographics
  • Define Your Red Lights
  • Issue Intent to Purchase Letter
  • Build Your Scorecard
  • Interview Green Light Vendors Only
  • Elimination Round Two
  • Demo Time
  • Vendor Selection
  • Conference Room Pilot – Proof of Concept

1. Build a Blueprint of your Envisioned Solution

You will not be able to convey required needs to any vendor if you have not clearly defined what success is. The blueprint process will be the most internally challenging process of this entire project. A typical blueprint will go through the following steps:

  • Discovery: Through interviews with leadership you will better understand the vision your organization is striving to attain.  Additionally, you should document the current progress toward your defined objectives.
  • Diagnosis: During diagnosis you should observe your organization at work.  The observation of your specific processes will allow you to document any gaps, bottlenecks or ineffectiveness.  The needs of your staff should be noted and compared to the objectives of management for proper alignment.
  • Design: The optimum solution may include not only new systems allowing process automation but also realignment of personnel and skill sets, and/or creation of new or modification of current processes.  The design should combine the best cost to benefit ratio with the least amount of risk in achieving your objectives. Many firms engage a consulting group to assist with this first step.

2. Summarize Your Company Demographics

This information should be the easiest step, as most of this is readily available on your website or company brochures. Sharing your revenue will not encourage the software vendor to charge more, but will help them determine if you are in their market-space (refer to exhibit A). If you are too large or too small, they will short-list themselves.

  • A brief (one paragraph) synopsis about your firm
  • Employee Count
  • Revenue
  • Locations (number, states, countries)
  • Anticipated Growth (organically or acquisition)
  • All software in place today (installed locally or cloud based)
  • What you anticipate will remain

3. Red Lights (part one of your Scorecard)

This portion of the process is one of the two most daunting tasks that your team will face as you enter into the evaluation process. Each department involved should be polled to determine what they consider their Top 5 “must haves” with the new software. The list could be quite long depending on the number of departments or critical functional areas. These will then need to be reduced to factual questions only. Exclude “perception” measurements such as “it must be user friendly” or “the software will need to scale” or “a flexible reporting tool.” These types of questions will be of great value at your Scorecard time, so retain them for later.

Examples of Red Lights might include:

  • Must be browser based software
  • Must include API’s for integration points
  • Implementation vendor must be onsite for testing and go-live
  • Implementation vendor must have at least 3 industry references

Some of the Red Lights might be extremely specific, especially if they drive operations or sales, such as:

  • Customer Portal must exist allowing all clients to review status of all open orders
  • Online expense report submission must include multi-level approval steps

This list should be reduced to five to ten items that you know are ABSOLUTES. You will need to make it clear to the vendor that they need not participate if these requirements cannot be met. To that end, make sure this list is reasonable and these are truly your absolutes.

4. Intent to Purchase Letter

Develop your Intent to Purchase Letter with the following components. You can be assured that only qualified vendors will choose to participate. With a bit of internet research, you should be able to identify 10 or more vendors to whom you send this packet:

  • A brief (one paragraph) synopsis of software to be purchased
  • A description of why this project is of importance: what are the issues to be resolved?
  • Include your Demographic Sheet
  • Include your Red Lights
  • Include a description of the remaining steps in the selection process
  • Include a timeline and what you will expect of them

Ask them to contact you via email if they would like to participate or if they have questions. Yes, this is correct, there is nothing for them to fill out or submit. What you want instead is to set the stage for an open dialogue. You want them to be encouraged to ask questions, and you want to provide access to appropriate team members to insure clarity of answers.

5. Build Your Scorecard (part two)

Get back to the team to get your Scorecard finished. The old school RFPs required each vendor to answer a list of questions. This meant you had to assume that, 1) they understood the intent of the question and 2) they answered it conservatively. These are both poor assumptions. What is more important is the score your team supplies on how well their most critical needs are met. Each department can begin with their red light questions and expand on them. They should try to narrow their scorecards to 10 or 15 per department or functional area.

All submissions should be compiled into one document with the Red Light questions highlighted. Each person that participates in vendor interviews or demos should score each vendor on the areas they observed or discussed regardless of their functional responsibilities (see Addendum B).

6. Interview with Green Light Vendors only

As submissions to participate in the process begin to come in, your first “scoring” will begin. Any vendor that does not pass your Red Light questions should be set aside. You can now focus on the interview process. This is a critical step that most RFP users miss. You have to get to know the firm that is going to manage and implement the software. The success of the project revolves around their understanding of their software and more as importantly YOUR BUSINESS. Any firm that does not request time to interview your staff should be eliminated from your list. If you think their software looked like a good option, see if there is another consulting firm that represents the same product and approach them instead. Huge sirens should go off if the consulting firm just wants to show up and show off software.

You should anticipate that a good vendor will want to conduct interviews relating to all functional areas. During these interviews, the dialogue with the vendor and your staff will shed great insight into the functional breadth of the software and the skills of the consultant. They should update their Scorecards with their perceptions both during the interview and during the product demonstration.

Request that each vendor provide a summary of their findings and a cost benefit analysis.

7. Elimination Round Two

After interviews have been completed, your team should regroup to determine which of the remaining firms should be invited for a demo. It is best to keep this to two – three if you must. The reality is simple. Within the 3 software marketplaces (see addendum 1), the functional differences between software will be minimal. You can save yourself a lot of time and evaluation if you can narrow the field prior to the demo phase.

8. Demo Time

It is important that YOU TAKE CONTROL here. You want to make sure that you get the remaining answers that are on your Scorecards. This is why earlier we recommended keeping the scorecards short and focused on your most critical requirements. Otherwise your demos will turn into training sessions and you will miss information. You should provide demo outlines or scripts to the vendors so you can:

  • Keep them on point
  • Keep an apples-to-apples comparison in the products
  • Complete the scorecards

In the script, allow them a block of time to “show their sizzle.” It is important for them to show what they think is unique to their solution and sets them apart from their competition. This is an opportunity to learn new ways to address challenges you have not previously recognized or considered.

9. Vendor Selection

Request references at this point. Most vendors will not give access to their clients until they know they have “made the cut.” Not because they don’t have references, but because they do not want to impose on their clients unnecessarily. They are just being courteous to their customers. You will appreciate that when you become their client!

Vendor proposals will be presented at this point. You may find it quite difficult to compare one proposal to another. Many factors will contribute to this including pricing models: subscription based pricing as opposed to traditional one-time license purchase (aka, perpetual pricing). It may be best to look at your total investment over a 7-year period since most software remains in place this long at a minimum. This will yield a better comparison since both subscription based and perpetual based software have ongoing annual fees.

Many vendors do not charge implementation fees, preferring to spread the cost across the seven year anticipated usage of the software. Some vendors provide only turnkey solutions and do not quote services separate from software. The most important question to get from the vendor is a fixed fee proposal with a well-defined scope. Beware of any proposal that includes “estimated” service fees.

10. Conference Room Pilot – Proof of Concept

Although this may be an optional step, it could be the most crucial. If you have unique processes that may require specific software tailoring, full customizations, or changes to existing business processes, you may want to consider doing a conference room pilot. This is typically done by your selected vendor and software. The primary objective of the Pilot is to model key business processes and insure everyone understands exactly how the specific implementation will work in your organization. This will always be a paid engagement and typically costs between 10 and 20% of the total project investment. While this may not be an insignificant investment, it can be a small price to pay to have confidence that the right decision is made prior to making the full investment. If successful, the investment often pays for itself in a better software fit, a more invested internal implementation team, and a great introduction to the vendors consulting team.

Project Initiation – We are now a team

Hang on to your hat! The work is just now beginning. It is important to remember that everyone begins a project with great confidence in the outcome. During implementation, the road will be bumpy and with discouraging side trips. However, your chosen vendor should now be a trusted business partner that will be guiding you through the project. Rest assured that if you have followed this process, your firm will be able to capture the benefits that were identified and the Return on Investment management is expecting.

Addendum A

Whether you are looking for ERP, HRMS, or CRM, there are three broad categories that all publishers find to be their market-space:

Software selection cheat sheet for Accounting ERP, HRMS, or CRM

Addendum B

Sample Score Card

Software Selection Scorecard Template
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