According to research conducted by Forrester, there are six mistakes that enterprises most commonly make when purchasing software. Jones, who specialises in research on enterprise software sourcing, pricing and licensing, explains the research was gathered largely through a team of Forrester analysts, who talked to IT enterprise managers after they have made their software selection to find out why they chose what they chose.
While misjudgements were equally spread across all vertical industries, they are more prevalent amongst small and medium enterprises. Says Jones: “Perhaps this is because large enterprises are better equipped to run an IT project, while a small company will be less willing to invest time and money to do it properly. Also, a smaller player is more likely to contract a one-man-band consultant or vendor to help them through the process. Small companies simply don’t have the same depth of experience and knowledge to help them through the project.”
Number one: Failure to understand the market
“The first mistake commonly made is to not fail to comprehend the market. For instance, if you decide you want a customer relationship management (CRM) package, but you don’t know what CRM means or what it will do for your business, you have heard of big name vendors, but you don’t know the capability of their products, or maybe you don’t know which vendors to go for.”
Jones recommends enterprises “do their homework” and work with partners that know the market deeply.
“Before making a software selection, or even drafting a request for proposal (RFP), it is a good idea to know the big vendors and up-and-coming vendors in that space. There needs to be appreciation of where innovation is coming from. If you don’t have this knowledge internally, you need to work with an expert,” he says.
There is also a tendency to make IT decisions to solve the wrong business issue. “If you don’t understand your business needs, you risk looking for one type of product when there are types of solution that address the same business issues,” he says.
The risk is that an enterprise can pick a big name vendor because it’s one they happen to know, without understanding the capabilities of the software, explains Jones. “It leads the business to go through a long-winded approach, which involves creating huge list of requirements in the RFP.”
Number two: Waste time on a complicated RFP
An overly complex and unfocused RFP creates many problems in the software selection cycle. This type of RFP becomes too general, because it asks for capabilities shared by all the vendors in the market, but doesn’t create any differentiation amongst products.
“There’s a temptation to put everything in there that a business could possibly want, instead of focusing on the important capabilities that should form the basis of evaluation. Many of these functions are desirable bells and whistles, or else, just the basic functions that come with any solution. This is also reflection on the first point: failing to understand the market,” says Jones.
Jones recommends organisations pick three or four key business issues the software needs to address. “It’s about solving business issues. It’s not about features.”
RFPs that focus on functions instead of business issues can actually lead the business to miss out on new and innovative vendors that have developed exciting solutions that could lead to business growth.
Number three: Evaluate too many vendors
The more vendors that are shortlisted, the more the project will be delayed. What’s more, if a manager is forced to look at too many vendors, the sheer volume of information to analyse becomes unwieldy. The evaluation suffers as a result.
“A detailed product evaluation of more than three vendors clouds the selection team’s judgement, and the impressions of product demos fade,” says Jones. “Meanwhile there is a pressing business need for a solution, so you should avoid wasting time selecting the best product. You need to pick a good vendor and get on with it, rather than paralysis through analysis.”
Jones suggests the selection team talks to peers, conducts research and looks for case studies with customers that are relevant to their industry. “Also, they should look beyond capabilities to the cultural fit of the vendor,” he says.
The Forrester Wave is another analysis tool that can help the team to shortlist and evaluate vendors. The Forrester Wave helps a selection team to define the evaluation criteria, and to collect and collate responses from the vendors.
Number four: Let vendors control the evaluation process
“Vendors are trained to control the sales process,” says Jones. “There are many strategies they use to do this.”
The danger is the vendor can focus on their products strengths, brush over the weaknesses and, in general, take charge of the conversation. Commonly called vapourware, this tactic is when a vendor talks high level and has lots of vision, but no product.
One customary sales technique is to demonstrate an interesting function, instead of one that addresses the needs of the business. “It’s better for a company to stay in control and remain focused on the key criteria, rather than be distracted by a flashy feature,” says Jones.
Vendors will play to the politics of the situation, by identifying those that support the product, and those that don’t. “If a vendor realises one of the guys on the selection team has a prejudice, say he has had a bad experience in the past with one of their products, the vendor will try to neutralise this guy and cut him out of the selection process. Similarly, if someone on the selection team has had a positive experience, the vendor will encourage him to be an internal champion.
Finally, if the vendor knows they could lose your business, they will “give you an offer you can’t refuse”. Jones says to be suspicious of deals “that sound too good to be true” because it could be compensating for functional weaknesses of the product.
Number five: Let politics cloud the decision
The ranking criterion for solutions is an oft-overlooked but vital part of the selection process. Even for organisations that create criteria, there is a tendency to introduce new, subjective judgements into the evaluation process.
Stakeholders need unbiased support for their decision, based on objective and transparent ranking.
“As humans, we are by nature subjective. Sometimes this subjective criterion can creep into the process, like what we think of the sales guy, for instance. Instead, you need to use objective criteria, then measure and have everything supported with a formal scoring system. With IT governance, it’s increasingly important to have an audit trail that explains the IT decision.”
Forrester has a methodology that lists 100 selection criteria, gives them a score and enables the team to adjust the weighting so that the best score is the one they pick.
Number six: Leave commercial details to the end
“It’s imperative that you do price negotiation during the selection process, because if you leave it till the end you give up leverage completely,” says Jones.
“You need to mitigate licensing risks now because it may be too late when they actually arise. The best negotiating lever at a sales team’s disposal are a vendor’s competitors,” he concludes.
While many of these steps sound like common sense, Jones adds it’s surprising how many companies fall into hidden pitfalls while selecting software. “A few years ago, there were some classes of applications that were billed to be the next killer app. Companies went to prospects but didn’t drill into capabilities or compare against other solutions. They let the vendor control the sale cycle and failed to rigorously evaluate the product. What they got in practice is not what had been promised by sales reps.”
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