Selecting a new software system can be a time-consuming, politicized, and expensive endeavor. And since it's not something most small- and medium-size manufacturers often do, it's also an unfamiliar process with not a lot of comfort zone.
After clarifying your business priorities and requirements, the first step is whittling down your field of vendors from five to 10 candidates to a short list of three to five. That means clarifying what functionality you really want and then determining how well available software meets those needs, without being swayed by what vendors would like to sell you.
"You buy a system once every six to 10 years, but these guys are selling systems every day of the week," says Bob Anderson, vice president of small and midsize applications at Gartner Inc. in Stamford, Conn. "They know how to sell to you better than you know how to buy from them."
The entire process of selecting back-office software can take six months, Anderson says, with the internal needs assessment lasting two to four months, vendor analysis taking four to six weeks, and final negotiations comprising four to five weeks.
With that in mind, here are some tips for managing the process of creating a vendor short list. (Click here to access useful online resources.)
Determine your high-level needs
Before contacting a single vendor, create a scorecard against which you will evaluate the field of vendors, says John Lakey, manager of the Acquity Group, a business and technology consultancy headquartered in Chicago. Potential categories include business requirements, technology requirements, total cost of ownership, usability, and the financial health of the vendor.
"We recommend setting up this criteriathese criteria before diving into the details of what particular vendors offer so you have an unbiased format," Lakey says. For instance, if you're looking for a new human resources system, and some of the vendors offer that as part of an entire ERP package, you don't want to consider a bundled system before all members of the selection team have defined what the company's requirements really are.
Your list of requirements should match up with pre-defined critical success factors (CSF) -- those things you must do well in order to be successful as a business, adds Michael Burns, president of 180 Systems Ltd., a business consultancy in Toronto. "If a requirement can't be mapped directly to a CSF, then it's not critical."
When creating this list of requirements, you also have to consider the future, Anderson adds. He suggests creating a map of your current business processes and how they're supported by your current systems, which helps you visualize what you have and what you'd like to extend or add.
When establishing your requirements, don't forget the psycho-demographic aspect, Anderson warns; that is, how is the chemistry between your company and the vendor? Things to consider include how engaged the vendor is during the selection process, how long it's been providing SMB-specific solutions into your industry, and its sales turnover, which can determine whether the person who closes the deal with you will still be there in two years time.
Other considerations include the vendor's customer base, as well as its developer and implementer qualifications, Burns adds.
Define a handful of make-or-break requirements
It's critical to weight the importance of the requirements you've listed on a scale of one to five so you know which are the most critical. The fact is, 80% to 85% of your requirements will be met by just about all the vendors you contact, Lakey says. It's the other 15% that you want to drill into and be sure the vendor is capable of supporting fully.
These top-priority requirements are often dictated by how your particular firm or industry operates. For instance, a pharmaceuticals firm searching for a document management system will have specific regulatory requirements specified by the Food & Drug Administration, and different vendors will have various approaches to comply.
Your list of critical requirements should not be a long one, Anderson warns. "It should be limited to things you absolutely require to be addressed in the system," he says. They might be industry-specific distinctions that dictate not just whether a system can accomplish a given task but how it does so -- for instance, how many screens have to be navigated to complete a particular task.
Don't reveal which requirements are most critical to you, Burns suggests. That way, you'll get the most honest responses from the vendors.
Build the right team
Engaging the right people is crucial to building your list of requirements. "It's critical to involve personnel from all business units that the system will hit," Anderson says. And make sure you've assigned a strong team member from all relevant departments. "It's important to have people on the project team who really understand the processes within that business unit, not just someone who's expendable," Anderson says.
Don't forget to consider the requests of top suppliers or customers. "If you're a company where 50% or more of your business is to one buyer, it wouldn't be a bad idea to find out what they would like to see improved relative to customer-facing aspects of the business processes involved," Anderson says.
Keep the field wide
When identifying potential vendors, don't limit yourself to vendors you know. Burns suggests collecting buyers' guides from the Web, attending trade shows, looking at trade journal articles and advertisements, as well as contacting your accountant, consultants, colleagues, and industry associations.
Particularly if integration is an issue, it's important to evaluate vendors of your existing systems. However, don't automatically put them on your short list; evaluate them as you would any other vendor, Burns says.
Don't take "yes" for an answer
When creating your RFP, Burns suggests asking vendors to respond not with a yes or no but with a number between one and seven. "When they say yes, that can mean anything," Burns says. You can get more specific through a numbering system, where a "6" might indicate that a feature is available in the current release of the software, a "5" that it will be available in six months, and a "1" that it would require a major modification or workaround.
Combining your weighted requirements with these weighted responses will give you a way of scoring vendors to determine which makes your short list, he says.
Don't skip reference checks
You might be tempted to skip the reference check process, assuming you'll get only positive responses. However, according to Burns, "forty percent of the time, the reference is not a positive one," he says. "It's amazing how little vendors know about their customers." Burns offers a checklist of questions to ask each reference and advises that you tell each one a little about yourself before asking any questions so that they have a level of comfort with you.
Hold off on the demos
Don't spend time on system demonstrations until you've narrowed your list to a handful of finalists. You can even take a two-pronged approach, Burns suggests, where the first demo is done over the Internet and the second one is more in-depth. In all, you should attend no more than four demonstrations, and limit each to two to three hours, he says. Ask demo attendees to identify major strengths and weaknesses, he says.
By the time of the second demo, you should build a script or a set of use cases for each vendor to follow so the demo doesn't get off track. "Otherwise, they'll go down a path that shows their software in its best light, and that may not be the light that best satisfies your requirements," Lakey says.
Because demos can be lengthy -- up to eight hours, according to Lakey -- you want to be sure the time commitment is worthwhile.
Another way to keep vendors on track is to promise them they'll be able to show you all the whiz-bang, sizzly features they want, once they're determined to be a finalist. "Ask them to keep it in their back pocket until later," Anderson says.
Contacting the losers
It's good policy to contact the vendors that fall off the short list. However, wait until the list is definitely finalized before making that contact.
You don't want to completely cut the tie until that point, because if you decide to reengage a vendor, they may not take you seriously if you've cut them loose, Lakey says.
"You never know what firm you're going to need in the future," he says.