The seven deadly sins of selecting business systems

The IT industry has a bad reputation based on the failure rate of its projects. The seeds of project failure are often sown in the selection stage. By avoiding the ‘sins’ highlighted in this white paper you can minimise your chance of becoming another casualty…

By Derek Rippingale of Professional Advantage

Selecting a new business system is something most mid-sized Australian businesses do every five to seven years. The decision to select a new system can represent either an opportunity or a threat.

It’s an opportunity if the right system is selected - one that can improve decision-making, customer service and decrease costs. The wrong selection however, threatens business with increased costs, damaged staff morale, loss of customers, and thwarted decision- making. This report provides you with an industry insider’s perspective on the seven deadly sins that people commonly commit. The information is straightforward and commonsense but nevertheless is often ignored. Follow it and you will potentially save yourself money, time and pain.

Deadly Sin #1: Wrong People Involved
Possibly the main factor in any successful system is involving the right people with the right knowledge and skills (other factors are implementing and having the right technology).

Whether the selection process was successful or not will not be judged immediately after going live but rather a year or more after that. Throughout that entire period it's critical to have the right people with the right authority, knowledge and skills. Several of the most critical roles are;

Executive Sponsor: The first thing required is senior executive, preferably CEO, sponsorship of the selection process and project. This visibility heightens the approval of the project and the involvement of the necessary people in the organisation. The sponsor’s assistance will be vital to clear the inevitable internal roadblocks organisations raise in response to change. If an executive sponsor with clout is not available then give the project a miss!

Project Manager: Ideally the project manager will manage both the selection and implementation process. This ensures maximum ownership of the outcome. The success of this role is not so much determined by what the project manager knows but by what the people they bring together know.

The right person will have a combination of good organisation, business and people skills. Technology skills should be considered a bonus.

Selection Team Member: Often selection teams pass over the actual workers or do not reflect the broad areas involved. This is a red flag as often a system will be selected that meets the requirements of the organisation the managers think they run as opposed to the “real” one. It is critical that people who actually do the work be involved.

System Owner: This is probably the most underrated role in terms of importance. The System Owner is the person who has the responsibility for the ongoing smooth and effective   operation of the system. This person needs to have a good knowledge of the business and the system and above all be passionate about its objectives. They will keep users and management confidence by addressing issues in a timely fashion, monitoring the system use to ensure practices are in line with defined processes and that people have the right training. They will work with the vendor to ensure that escalated problems are resolved in a timely manner. A competent system owner is worth every cent they are paid!

Deadly Sin #2: Unclear Problems
When faced with a problem there is a human tendency to jump into solving it before spending the necessary time to clearly define the problem. The IT industry has often taken advantage of this by touting, or at the very least implying, that technology is a general panacea for business problems. More time is thus spent looking at software solutions than at the business problems. It’s no surprise then, that organisations seduced by “solutions looking for problems” end up disappointed with the return on their “investment”. In fact most core business problems that technology can impact are process or people related, not technology related. As such all areas need careful examination otherwise the defined solution will be incomplete at best.

Deadly Sin #3: Fuzzy Benefits
Having established that you have a set of business problems which technology will be an enabler to solving, you need to clearly document the benefits (the age of decision makers lightly making IT investments went with the demise of dot-coms). Systems should not be exempt from ROI analysis any more than any other type of capital expenditure. Quantifying benefits wherever possible can be hard work but using the 3 simple questions of “So what?”, “How much?” and “Bottom line?” will help you to develop a business case based on hard numbers as opposed to intangibles and motherhood statements. You will probably need to ask these questions repeatedly to identify each specific tangible benefit. This is important not only in improving the chances of obtaining the right budget and approval but also because it helps guide the implementation effort. The purpose of establishing a benefit is not about making an accurate prediction in itself. It is to clearly establish goals or targets that will drive the implementation of the new technology.

Deadly Sin #4: Buying Mainly on Price
The saying “quality is remembered long after price is forgotten” could not be truer for buying systems. Remember, the objective is to create benefits for the business by s electing the right system rather than to save on upfront costs but buy the wrong system. Whether a system is the highest or lowest in price should rank down the list of considerations. The key is not what you pay for it but the net return you receive from its implementation. However if you do not have those benefits clearly established then you are likely to be unduly influenced by price and will potentially suffer accordingly. That said, obviously price has to represent good value.  Here are a few guidelines for evaluating what the real price is.

1. Five Year Cost of Ownership:
This should include software, services, maintenance and related infrastructure, costs like servers, operating system licences etc. You should also factor in costs for regular training and upgrades.

2. Cheap Software:
Be particularly wary of “cheap” software particularly from Tier 1 vendors, as they often sting with implementation costs.

3. Low Rates:
Don’t be seduced by a lower rate per hour as it’s the rate x the hours taken that takes money out of your bank account. Ensure you get guarantees as to the experience of the person you are getting.

4. Fixed Price:
A bargain, particularly if it is very low, is often not the bargain it may appear to be. All it guarantees is a fixed cost – not a system that works on time and delivers the expected benefits.

5. You’re Special:
Be wary of the “used car salesman” types that offer discounts, particularly upfront to get your business  because you are “really important” to them. The industry is going through some consolidation at present so this tactic to generate cashflow is reasonably common.

6. Scope:
Often the buyer and seller having agreed on a price in the past, find they had not spent enough time agreeing what the price included. Intelligent ways to keep costs down include:

• Buying only software you absolutely need now. Surveys show 20% or more of software ends up “shelfware”. Keep the design very focused on addressing your big issues. Avoid customisations where possible.
• Financing the software which spreads the cash flow impact.

Deadly Sin #5: Relying On Others
It is worthwhile to take on board the advice and experience of others but do not place undue reliance on it as everyone’s frame of reference will be somewhat different. Two sources of opinion that can be either helpful or unhelpful are reference sites and consultants.

• Reference Sites
  The absence of reference sites certainly is a red flag, but the fact that an organisation can produce reference sites only indicates a success percentage indeterminately greater than zero..You certainly want to talk with satisfied customers but be wary of obviously cultivated “tame” clients. To get the most value from the interview, concentrate equally on their experience regarding selection and implementation, as on their opinion of the service provider and software.  It should not be necessary to talk to more than three or four sites.
• Independent Consultants
  If you are very unsure of selecting a package, you may think of using self styled “independent consultants” – an oxymoron if ever there was one!  It’s quite unreasonable to expect that anyone with experience does not have bias and there are many ways you can be affected by a consultant’s bias without you realising it. Blatant conflicts of interest are more common than you may think!

Deadly Sin #6: Swayed by the Pitch
Question: What’s the difference between a used car salesperson and a software salesperson?
Answer: The used car salesperson knows when they’re lying. This joke may let software salespeople off the hook but certainly not you. To be forewarned is forearmed so here are a few of their favourites.

• Size Matters! Well it may or may not. It really depends how size is used. Big does not necessarily mean better, nor does small mean more personal service. The things that are attributed to size need to be verified in their own right rather than just attributed automatically. That said, the minimum size of a mid market service provider is increasing because of the resource demands of technology and what it takes to be a full service provider.
• Buy Aussie! Maybe it’s a good way to select what brand of peanut butter you buy but it’s not logical as a point of reference for buying software. As long as systems comply with local tax and reporting requirements then their country of origin is not that important. Whether the development team is 1,000km away or 10,000km away makes little difference to any mature software package i.e. developers should not need to come on site. Be careful however in buying from organisations that do not provide you with a choice of local service providers.
• Legendary Customer Service! You won’t meet a software company that does not claim this and can’t produce a few tame reference sites to back this up. To get to grips with the likely reality for you, review their customer service processes, insist on visiting with their customer service/support team and if possible go to a customer event such as a user group meeting (these should be held quarterly if they are a good service provider).
• 100% referenceable! This is a real favourite so we’ll spend a little more time debunking this. If you believe doctors never lose patients then you might believe this one. To claim this, an organisation really has to have a low opinion of your analytical ability. Given that the success of an implementation does not rest 100% on a software provider’s skill (just like a patient’s recovery is not 100% based on the doctor’s ability) then it stands to reason that s ome implementations will be unhappy ones although not primarily because of the software provider. In addition, obviously there are the unhappy ones caused by vendors. The point however, is that even assuming a service provider is perfect (which you never should) any organisation that has implemented any reasonable number of sites will have a number of detractors. To claim 100% satisfaction in the face of this reality is a clear indicator of the lack of the general reliability of any of the organisation claims.

Deadly Sin #7: Lack of Selection Process
It should not be surprising that the quality of the selection process will directly impact the correctness of the decision. System selection is a project in itself and as such should have a planned timetable. A selection process could be structured as follows:

1. Assemble selection team.
2. Perform Needs Analysis taking into account business strategy and objectives.
3. High level review of possible vendors.
4. Prepare Business Case and obtain approval.
5. Prepare Statement of Requirements for vendor response.
6. Short list three vendors.
7. Complete scenario based evaluations.
8. Select preferred vendor.
9. Complete Implementation Planning Study engagement with preferred vendor
10. Obtain final approval.

Compile a statement of requirements before you have detailed discussions with vendors. This will ensure focused discussions and enables the vendor to more effectively provide you with information. Make sure when developing a statement of requirements that you talk with the right people in your organisation and stay focused on where the potential business value lies in changing systems.

Download the full article here.

For more information
Professional Advantage
Web: www.pa.com.au/microsoft
Ph: 1800 126 499
E: microsoftinfo@pa.com.au

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