The Executive’s Playbook for Software Selection and Vendor Negotiation

Over the previous three articles, we’ve shifted our focus from planning a high-level, organizational wide roadmap to zooming in on specific projects. While the roadmap outlines the entire transformation, each project represents one leg of this journey. On a project level, we have the Project Management Plan (PMP) detailing how we will manage various aspects of the particular project. The Project Charter outlines the vision for the project and the specific business success criteria, acting as a rudder that steers the project to success.

Next, we will need to develop a detailed project timeline and establish a budget, but before we can do that, we must first make strategic decisions concerning the selection of vendors and specific software. This article will assist you in evaluating and selecting the right software and vendors for your organization, ensuring that you have the right tools to support your new processes and business objectives.

In our last article, we explored the process of assessing and assigning roles to team members on a specific project. This includes the selection of external vendors and consultants, which we will cover in more detail here. These partnerships are essential for executing the changes required to achieve the vision detailed in the Project Charter and for implementing the systems necessary to support these changes.

Maintaining Your Priorities Amidst the Vendor Selection Process

Before we dive in, it is important to emphasize that your top priority should always be to achieve the vision outlined in your project charter, and to implement the business changes that will fulfill that vision. It is easy to fall into a technology-first mentality and focus on implementing technology, especially when you begin to involve external vendors and system implementors. However, you must stay focused on the business changes and outcomes first and view the technology as an enabler for those changes.

Another important distinction is that your company is implementing the technology, not the technology specialists you may hire. As such, you must be ready to accept the responsibility for the outcome of the implementation. Although others may be more familiar with the technology, nobody is more qualified to own the outcomes of the implementation than you.

The reason that distinction is so important is because the vendors’ first priority is to get hired and implement their technology. As we stated above, your first priority is to relentlessly pursue your organizational vision. No matter how well-qualified your vendor partners are, they cannot understand the unique needs and nuances of your company as well as you do. You must drive the collaboration with vendors to ensure their solutions align with your specific business goals and requirements.

Reframing the Vendor Relationship: An Extension of Your Project Team

In our previous article, we discussed how to assess and assign the project team, which encompasses several types of vendors pivotal to your transformation. It’s essential to view these vendors not just as external entities, but as core team members. As the team leader, it is your responsibility to build the team, and you must not allow consulting vendors to take that responsibility from you. This is why you must evaluate the vendor and each consultant they provide before assigning them roles on your team.

The time during which you are assessing potential vendors is the best time to establish your leadership and define their roles on the team. Top leaders rely on many advisors, leveraging their expertise in areas where the leader may not be as knowledgeable. However, successful leaders recognize it is their responsibility to make the decisions regarding their team. Don’t cede that responsibility to vendors, no matter how skilled they may be.

The project’s timeline and budget heavily depend on your vendors’ availability and capacity, along with the cost of the systems you plan to implement. Therefore, it is critical to make these decisions prior to drafting the project plan, which we will cover in next week’s article. Additionally, identifying the right vendors and negotiating contracts before beginning the project will ensure that you have a clear understanding of your budget, timelines, and any external dependencies on your project plan, allowing for smoother execution and saving you time and money in the long run.

3 Types of Consultants and When to Use Them

There are three potential consulting categories from which you may choose vendors to help with your project: Staff Augmentation, Business Consultants, and IT Consultants. Each category has its own strengths and weaknesses, and your choice will depend on the specific needs of your project. Here are some considerations when selecting vendors in each category:

Staff Augmentation

In the second step of assembling a high-performing team for your DX project, an assessment of your existing teams was conducted to identify any gaps in specific project roles. Staff augmentation can be a viable strategy to fill those gaps with individual contributors for your project.

This strategy is most often used to fill a specific skillset like Business Analyst, Project Manager, Project Administrator, Data Migration Engineer, and sometimes even various software development roles including quality analyst engineer. These roles can be filled by independent contractors or by using a staff augmentation firm.

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Business Consultants

Various kinds of business consultants exist, yet for digital transformation projects, the most commonly sought-after are business process consultants, process improvement consultants, and management or strategy consultants. These consultants can offer a high level of expertise in identifying, improving and automating business processes.

Additionally, these business consultants possess the skills to help project teams create more efficient and effective processes that enable them to achieve their transformation goals. Their knowledge can prove to be invaluable when implementing new technologies or making other significant changes to the organization.

IT Consultants

Most commonly, implementation or system integration consultants will be used to provide expertise for a specific software system. Other IT consultants will include IT strategy, Enterprise Architecture, software design and development, data management and engineering, quality assurance and testing, and IT security consultants.

Best Practices for Hiring Vendors and Consultants

When weighing your vendor options, our recommendation is that you identify the skillsets you need and then try to consolidate as many of those skills as you can through a single consulting vendor. This streamlines vendor management and can allow for negotiations of a beneficial arrangement when utilizing multiple consultants from the same firm.

Be forewarned, however, as this consolidation can prove to be difficult. Although there are many consulting companies that claim to provide all the roles you may need, there are very few that do it well. Many specialize in one or two specific areas and simply attempt to add the other areas of expertise when they can.

You never want to sacrifice quality for convenience, especially when it involves the significant investment your digital transformation project represents. This is why we generally advise our clients against employing product-based consultants for general purposes. While they may have great system implementation consultants, it is unlikely they will have qualified business consultants or general IT consultants.

It is generally best practice to hire business consultants early in the strategic planning process to leverage their expertise in conducting an enterprise process review and planning your transformational journey. On the other hand, it is best to engage system implementation consultants much later in the process. This approach ensures that system selection and solutioning are informed by a complete understanding of your project’s requirements and objectives to avoid the trap of a technology-first mentality.

Key Considerations for Vendor Selection

Regardless of the vendor type you’re choosing, there are universal factors that need to be considered.

Shared Vision: Make sure your vendor of choice shares your vision for the project. They should understand the project’s goals and objectives, as well as how their role fits into the bigger picture. This alignment is essential to ensure that everyone is working towards the same end goal.

Business-First Mentality: Along with the shared vision, the vendors must bring the same business-first mentality. This is another reason we always advise our clients against product-based consultants until the software selection has taken place. Consultants who prioritize the technology over your business needs can result in misalignment on project goals and may even prevent the project from fulfilling its business objectives.

History of Success: Before hiring a vendor, do some research into their history of successful implementations. Talk to their past clients, read up on reviews, and request case studies or references. This will give you a better understanding of their capabilities and can help you make an informed decision.

Hand-Picked Consultants: As we mentioned above, you are responsible for who is sitting on your project team. As a result, you will want to assess and select each consultant that the vendor provides to ensure they have the qualifications, experience, and character traits needed for your project. (read this article for more information on conducting team assessments.) Don’t be afraid to ask for resumes, conduct interviews, or request changes if necessary.

Remember, the success of your project relies heavily on the strength and cohesion of your team, and that team includes external vendors. With the right team in place, you can achieve your business objectives and drive real change within your organization.

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3 Steps for Strategic Software Selection

Before you can choose a system implementation consultant, you will need to have already selected the software system(s) you will be implementing. Software selection is a critical aspect of your project and requires a great deal of research, evaluation, and a strong understanding of your requirements.

It is easy to get lost in the sea of features and fall into Shiny Object Syndrome – or SOS. Remember, your goal is not to acquire features; it’s to select a system that empowers you to execute your business strategy effectively.

Here is a high-level view of the process we recommend to ensure that the technology you invest in aligns perfectly with your business needs:

Step One: Define and Communicate Requirements

A generic set of high-level requirements for various systems – such as ERP, CRM, WMS, etc – is a good place to start, and there are many sources from which you can easily obtain them. However, you don’t want to simply settle for those generic requirements. You must take it a step further and build out a set of requirements unique to your company.

Begin with the results of your Transformation Opportunities Assessment and the details from your Enterprise Process Review. Identify the areas of your enterprise that are unique to your business and should remain unique. We call this your “secret sauce,” and it will be these areas on which you will primarily focus when selecting systems.

For example, if you have a standard procurement process, most systems should suffice, so don’t spend much time evaluating various systems’ procurement processes. However, if your integration business planning has unique requirements, focus heavily on those requirements and invest the necessary time to ensure you make the right selection for that area.

Furthermore, you must look past the current requirements and evaluate any future opportunities for growth and development. This involves focusing on areas that are new to your business even if they are not unique to your business. For instance, if you have automated supply planning but will need to automate demand planning in the future, focus on the demand planning capabilities of the various systems during your evaluations.

Step Two: Create a Request for Proposal (RFP)

Once your requirements are defined – including your “secret sauce” – you can then create a Request for Proposal (RFP) and work directly with system vendors (i.e. Microsoft, Oracle, SAP, Salesforce, Infor, etc.) to provide the proposals. The RFP should:

• Clearly outline your requirements

• Provide specific contexts or use cases for vendor demonstrations

• Include a scoring matrix for evaluation

From your requirements, allow the system vendors to decide if they want to bring an implementation consultant into the process or not. Some system vendors prefer to be heavily involved in the implementation process (i.e. Epicor, Infor), while others may recommend external consultants for a smoother experience (i.e. Microsoft). Regardless, make sure you are involved and informed throughout the entire selection process.

We also recommend that you provide the business process maps created during the Enterprise Process Review, as well as several use case scenarios for the areas that are unique to your business. It will be important that all potential system vendors understand your specific requirements in the context of your business. This additional context will communicate what you want to see from the vendors during their demonstrations and help expedite the selection process.

Using this approach combined with a specific scoring matrix will allow you to evaluate and score the proposals objectively, ensuring that your final decision is based on alignment with your business needs rather than just flashy features.

Step Three: Evaluate Vendor Demonstrations

Finally, ask for specific demonstrations that simulate how well the system will enable you to conduct your business per the requirements and use cases you provided. Ensure your Business Process Owners (BPOs) and Subject Matter Experts (SMEs) attend the demonstrations with a list of their own prepared questions.

During the demonstrations, the vendors will want to showcase the features they deem most valuable or showy. It’s fine to see this type of “sizzle” demonstrated, but it is more important to see how the system performs in the areas that are most important to your business. Insist on seeing end-to-end processes, including outputs, to help you determine if the system will allow your business to operate according to your needs.

The vendor may recommend customization in certain areas. In a separate article, we touched on assessing the need for software customization, and as such we will forgo that discussion here. If it appears as though customization is needed, request that the vendor communicate directly with your technical team so that they fully understand the specifics of what will be involved. If you’re able, ask for references from the vendor’s previous customers who have undertaken a similar customization and ask them about their experience.

Strategies for Negotiating Software Pricing

Once you’re confident you’ve selected a system that will meet your business requirements and adapt to your “secret sauce,” now is the time to negotiate pricing.

First, you need to determine whether you will purchase the system directly from the system vendor or through a Value Added Reseller (VAR). Some system vendors only sell through a VAR channel (i.e. Microsoft) while others only sell directly (i.e. Epicor). Some allow both options. You should only consider using a VAR if you are required to or if they truly provide added value. In some cases, a VAR will specialize specifically in your vertical market, in which case they may be able to provide significant added value. If you purchase through a VAR, you should request at least two (preferably three) different VARs to provide proposals.

While purchasing through a VAR can provide specific industry knowledge, system vendors generally have more capability to negotiate on licensing fees, especially if they are also providing system implementation services. You can often negotiate the fees for those services as part of a package with the system licensing.

Since most licenses are billed on a per user, per month basis and many implementations take months or even years before a go-live, you will want to lean on the vendor to provide as many licenses as possible without cost until you are live. This will help you avoid spending a lot of money on licenses that are only being used for implementation purposes and do not bring any direct value to your business.

The vendor will have many years to collect revenue from your licensed users while you are getting value from the system; don’t give them more license revenue than needed during the implementation.

Securing DX Success through Vendor and Software Selection

In summary, the selection and implementation of a new software system is a crucial process that requires detailed requirements analysis, thoughtful vendor assessment, and strategic negotiations. With specific requirements built on the foundation of your Transformation Opportunities Assessment and Enterprise Process Review, you can effectively communicate your needs and expectations to vendors. Insist on end-to-end demonstrations that closely mimic real-world scenarios to ensure that the system aligns with your business goals, supports your secret sauce, and will enable a successful implementation.

The system you choose should not only meet current requirements but also have the flexibility to grow with your business. Keep in mind your long-term vision and consider areas within your Technology Roadmap that you will be implementing in the near future. Remember, the aim is not just to acquire technology, but to enable your business to operate more efficiently and effectively.

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