Software Projects cost vs. value.

How money predicts software and its implementation?

In many of my customer conversations, I have found that the overall conversation ends up coming to budget. Now I do not believe at all that there should be an “open checkbook” to projects, that would be bad business, but I am truly trying to understand how to weigh doing what is right vs. budget restrictions.

My career has taken me through almost every possible stage or a project. I have been the person writing test scripts all the way up to the person providing presentations to C level employees. I understand how much software costs and how much implementation costs, it is not cheap.

My first question has always been, what is the compelling event that has provoked you to even look at a new software system? The answer to this question is key to the overall strategy behind software choice and implementation methodology. Customers should make sure to understand that event and the best way to communicate that to service providers.  The technology industry is a very competitive, both in sales of software and service. So, just opening up the door to every software and service company out there will create chaos.

Understanding the overall objective (compelling event) that has provoked this new project is key to the success of the project. The service provider that comes in and spends the time to understand this event should be considered in high regard.

Because my experience is focused in providing service to customers, internally and externally I am going to focus on the service implementation provider.

Once the software has been chosen, the software company will general recommend partners for the implementation. This is generally the partners that are trusted by the software sales person, not specifically the software company. Yes, these are partners of the software company but, sales people are human and they have their own bias. Do your own research, at least a little to validate the options for different partners.

Many large enterprises use the top service providers with the most employees and have the most successes under their belt, this gives organizations some level of comfort that risk will be reduced. I would warn you against looking soley at some of those things, especially with newer technology. Many large service providers have very intimate relationships with their customers and have references that will give you the best picture of how the project went, regardless of the reality.

Some of the detailed areas you should look for in a service provider is:

·      Integrity

·      Value

·      Expertise

·      Transparency

·      Methodology

·      Cost

You will notice that the last item on my list is cost. A perfect example is any SAP S/4 project.  Many large service providers have a very hierarchical organization structure. They have different level of consultants based on their experience, see my previous blogs for the caution I put forth about some “experienced” consultants. With new technology, sometimes experienced in the legacy technology will cause more problems than solutions. Again consultants are people and some are willing to make the technology jump and others are not.

So what does any of this have to do with money. Well, large service organizations have a very clear rate card. These rate cards are again based on different level of consultants (based on experience), it does not take into account the type of event, or overall personality of the project team or any of those things. It is a published rate card based on level of consultant. Smaller service organizations tend to be more flexible in allowing for more detailed personal requirements and because they are eager for your business, they are willing to go the extra mile. This is not always true but in my experience, if you are not doing a very high dollar project, you will not get very high level resources.

The combination of both tends to be the best approach. Smaller service organization can provide very strong experts in very detailed technology skills that can play the quality role in validating the solution and value to the customer of the larger service organization.

So where are we at now, a budgetary estimate is determined and communicated to a small group of people and that will start to push the overall procurement process. In large organizations that may be request for information, request for proposal etc., in small organizations it may just be a small group of people going out and doing some online research. In either case, it is again some industry review (Gartner, Forrester, etc.) that will have you predict where to start, narrow down the field to something a bit more palatable. Well, in those reports you are going to find only the top firms, that is measured by revenue. For the reasons stated above, there has to be a different level of review for service providers.

Each organization has different processes to evaluating vendors. However, at this point I would suggest you do not look for just a vendor but you look for a partner. This should be someone who is going to do what is best for YOUR organization. Truly understand your compelling event, truly understand your goals and provide you a value proposition that meets your objectives.

As a customer, the financial group is looking for ROI – how many years will it take for us to make the money back and this is where Cost has everything to do with a project implementation. Scope ends up being limited, resources end up being limited all due to the overall cost. Cost is very important in any project however, is it everything?

If you go out and read the most common reasons for failure of a software implementation (specifically ERP) you will find those areas that are limited due to cost are the areas that cause projects to fail. So what is the solution? No budget, well that isn’t realistic. No limit on scope or resources, well that would mean no budget. So here is my answer:

1.       Understand the compelling event which should be the WHY you want to do something. This is generally things like merger or acquisition, dying platform, growth, etc. The investment has to be justified as to why you are going to want to get money, what is that why.

2.      When you put out your request (formal or informal) for proposals or information, make sure you explain this why. Take note of if their responses are tailored to that type of event.

3.      Make sure your service provider understands your scope and not simply by understanding the high level business processes but the areas that cause pain to the organization. Now, this DOES NOT MEAN going through months of discovery or months of blueprint this means understanding the pains of your organization and validating whatever solution they provide will help with those pains. (this is where the value comes into play) Make sure the service provider shares their methodology or approach do determining the scope.

4.      Change management. The internal resources (both IT and business) required for these projects need to have the ability to focus on the project. Under estimating the time these people are required will cause problems in the project. So is this really change management, well yes it is. These people will need help to understand how to see things differently, how to change and really understand the objective of your project. Choose your resources wisely, they may not be the people that have been in your organization the longest but the people who truly are able to embrace change. Change management is not just training users, it should start early in the project and really be managed in a very detailed way, again if using a service provider, make sure that they have an approach and methodology that can be measured.

5.      Start value proposition early in the project and understand that the value proposition is not a stationary document. This should be updated in each phase of the project in order to clearly not only identify possibilities for value (cost reduction or increase revenue) but to understand how to measure it. Measuring the value of a project is something that seems to be left behind when planning a project.

6.      DATA: Another point that has a high failure point of a project. People think it is simply about data migration and conversion but it is truly much more than that. Transforming your data from a legacy system to a new system can require many things that you never even thought about. You will need people who understand the legacy data enough to explain the information and people who truly understand the processes in the new system so that the information can be available in the right places. Again, this should start at the very beginning of the project and service providers should have an approach and/or methodology for how data should be handled and make sure it is measurable.

7.      Hold everyone accountable. The service provider, internal resources, external resources etc. Everyone needs to held accountable for their responsibilities. It is important to have a clear RACI to make sure everyone understands what they need to be doing and what they are held accountable for.

8.      Get the software provider to do quality checks. SAP offers a service called Value assurance (used to be called Max Attention) that will do things to make sure your overall implementation is a success including checking all of your customizations to validate they will not cause problems with the next release.

9.      Understand the software roadmap and when the next update is being released and what that release is going to entail. It is important that when you are implementing a new technology you make every effort to plan for new releases so that you do not end up in a position where updating your software will not require another very expensive project.

Overall implementing software is a huge investment to your organization, it should be seen as any other asset. When you purchase physical assets you take the time to plan for them and make sure they are maintained properly, software is no different. Value needs to be determined and measured, this is especially true for those that have to report to a board of directors. Do not cut corners in areas that you think may not be important, you will pay for it. You can either plan to pay for the appropriate resources and scope, or you can pay double when things are not planned correctly.