The acquisition of enterprise level software or simply software for a specific use in one’s organization is much more than dropping the Amex card at Best Buy. It never ceases to amaze me how such enormous, even jugular, purchases are handled at a very cursory level. More consideration is spent on the price and the contact than on the relationship. That is like spending more time negotiating the price of the car than choosing the car!
I am not sure where the problem lies, whether software companies have commoditized their product offering so the only differentiating factor is the price or the buyer is simply not connected with what they are getting involved with. Organizations really need to slow down on their technology acquisitions and realize what they are doing is forming a relationship with the vendor.
A relationship is a connection between two parties; they can take many different forms and are unpredictable in their duration. However, the vendor purchaser relationship, especially of enterprise technology, should be viewed as a major undertaking. From the purchaser’s perspective, they are entrusting the vendor with vital elements of their operation both now and into the future. Therefore, there should be many many more questions other than price. The vendor, who is in the business of building the technology, must realize that they must stay attuned to their customer’s needs and therefore not only follow the trends but strive to be ahead of the curve.
Organizations who fail to under take a process of due diligence when acquiring technology are really compromising the competitive advantage of their organization both now and into the future. Keep in mind, price and contracts are static. How the vendor works at the relationship will go on long after the contact is signed and monies paid.
Ideally organizations should connect with 3-5 vendors who produce the type of products/functionality they are interested in. Then, as discussed last week, have a list of requirements graded 1-5, must have to a nice-to-have. At this point, the firm should look at the top 2-3 vendors and begin the due diligence process.
The due diligence process should quickly reveal whether the technology vendor is focused on their products of today and if they have vision of tomorrow, or even if they will make it to tomorrow. Remember the market leader today could be the market laggard of tomorrow. Following are a list of some major things the purchaser should rank vendors by:
The company’s economic viability now and into the short term; this is readily accessible with credit reports or public filings if they are a public company. What are the plans of the future of the company (product diversification, internationalization, etc)?
What are the skills, experience and composition of the vendor’s staff? What is the staff turnover and why?
What is the vendor’s current technology base? What are their plans for adopting new technology platforms?
How many new releases, not upgrades or bug fixes, the vendor produces per year? Who determines what goes into the future release? Is new functionality confirmed by a consensus or a regulatory board?
Is the vendor certified with the tools or processes they are using (ISO, Microsoft, SAP, etc)?
What is the timeliness on which the vendor will respond to a warranty issue? How are warranty issues reported?
Is the vendor’s customer service available when my business is open?
Does the vendor provide project management to get the technology up and running at my facility? If so, what type of training/certification does the project management team require before they are able to go out in the field? Does the vendor offer configuration services to ensure that the technology will work properly in my organization?
The type of questions one could ask could go ad infinitum, however, it is imperative to get a good understanding of who your technology provider is and will they be around to provide you solutions into the future. Before either side begins to think of the contract, they must understand if their aspirations and dreams are in alignment anything less is a recipe for a costly disaster.
Remember negotiating a contract is easy; cutting a check is easier – trying to get broken technology fixed – will cripple your organization one way or another!