This article is in response to, and
supplemental to, the article on ZDNetAsia: "4
tips for buying 'big' software," by Patrick Gray - as posted
in TechRepublic on 5 May, 2010.
I've observed well over a
hundred negotiations where enterprises spent tens of millions of
dollars for highly complex software (and/or hardware). In parallel
actions I've seen thousands of small to medium-sized companies spend
enormous percentages of hard-won revenue for products they didn't
need, couldn't effectively use, and shouldn't have touched. In
virtually every case, the enterprise or company making the purchasing
has been hammered by supplier negotiating teams.
Here's a few issues
to consider BEFORE dropping all your spare bucks on big money
technology goods and/or services. Also, keep in mind, if you genuinely want to reduce the costs and risks of business technologies, you can take a wide range of simple, cost-effective actions. BUT, you have to commit to actually DOING asset management - merely talking about the game will not help you gain value.
Nobody is permitted to speak with ANY
supplier about the project - PERIOD!
Why do I bring this up? Because,
time after time, I've seen people come back from conferences or
conventions where they have "found the perfect product to solve
all our problems."
Major violators of this rule?
Technical people and management. Rein them in BEFORE they damage
your options.
Result? The supplier already knows
precisely what your project looks like; its schedule; its budget;
who will be on the internal team; and who will be part of the
decision tree.
Since the supplier has also
conveniently learned the details of ALL your requirements, their
product or service is going to somehow magically fit exactly inside
your needs analysis.
When - not if - this happens, you can kiss negotiations
goodbye - because you will have no leverage with this supplier.
Conduct, and follow, accurate analysis -
EVERY time.
If your company is typical, you
purchase new technology goods and services for nearly ALL the wrong
reasons. (Don't get all defensive on me until you read on.)
Conduct clearly defined, honest,
and complete analysis. Make sure that they are accurate and not
filled with vendor hype - as well as supporting "pet"
projects.
Pick one or more: Needs Analysis,
Cost-Benefit Analysis, Feasibility Study, Forcefield Analysis,
Business Case Analysis, Cause & Effect Analysis, Stakeholder
Analysis - ANY of these will take you further than you are already
going in terms of whether or not the acquisition or project is
genuinely necessary. (Incidentally, The Institute for Technology
Asset Management - www.TAMinstitute.org
- is the only professional organization of its kind that actually
teaches you how to conduct over 16 of these critical business
analysis.)
The key is this: Fewer than 10% of enterprises actually
conduct any serious level of structured analysis prior to beginning
the acquisition process. Of that number, fewer than half ever follow
up to ensure that the goods or services acquired actually ADHERE to
the expectations. Even more critical is the tendency, in nearly ALL
analysis, to insert personal perspectives in place of quantifiable
documentation. Result? Decision makers are coming to conclusions
that are NOT based in fact or actual business needs.
Negotiate based on what you expect to
happen, not based on supplier representative assurances.
If you do nothing that I
recommend, at LEAST do this. Every agreement that I have read in the
past 23 years has a clause somewhere that clearly states that ANY
statement or assurance given to you is null and void - the agreement
supercedes ALL verbal discussions. (You don't have to believe a
word I say. Just get up out of that chair and go read a software
license - any license to confirm my rantings.)
So? If you want any specific
issues made clear in the agreement you will have to negotiate them
in. (Trust me, suppliers do NOT appreciate it when I give this
advice. It means that they have to actually deliver the value they
claim.)
This interestingly hidden little caveat also seems to forget
to mention that the functionality of the product, as delivered, does
NOT have to match what you were told it would do. Again, if you
expect to get the value for what you purchased, you better negotiate
your specific expectations into the agreement.
The actual costs of this acquisition are
NEVER what you think.
You should already know this but
nearly ALL of us tend to forget. We get excited about the new toys
and slip off into Christmas morning... What to do?
Patrick covers this but I'll
expand - When you conduct the Cost-Benefit Analysis, step the
process out at least three to five years. Check with anyone and
everyone who has touched this product. Find out what worked out well
and...well...what didn't work out. Document it ALL as part of the
CBA - BEFORE you spend a single penny!
Check out implementation costs and
be sure to match them with the specific talent brought to bear on
the project. If you think your internal team is going to implement
better than a highly trained and experienced (think: expensive)
support team, you may be in for quite a financial surprise. But, if
you planned and budgeted for the difference in team talent, you may
find financial relief.
What about defects and patch management? Upgrades? Ongoing
support? Check into the actual details of each and every one of
these items. Look over the actual supplier contracts for the "rough"
spots. Does support cost more if your own team implements the
project? Is this product so full of defects that the supplier has a
monthly patch day scheduled for every consumer of every product? Are
there cute little items such as the "product cannot be used
more than 15 miles from the server" or implementation support
is billed out as "$180 per call"? (If you don't know
about these interesting little revenue stream inserts, you really
should spend some quality time in one of my technology asset management
courses.)
Beware the Reference Fruit Punch Shuffle!
Patrick mentions being alert to
what I would call "happy people" references. You know the
ones I mean: "I invented Windows 7." Keep in mind
that a supplier would NEVER connect you with someone who had a
nightmare failed implementation. If you rely on supplier
connections, you'll only hear from the folks who consumed the entire
cup of fruit punch.
As an element of this particular common scam is the supplier
advertising budget. If the product is so great, why do you have to
spend so many tens of millions of dollars TELLING me about it? If
implementation and ongoing support are so simple, why do I
constantly hear, or read, about over budget, over time, and failed
projects?
You want references? Check with the people who have lost
tens of millions on failed projects with this product line or
supplier. THOSE folks will give you a totally different story than
the ones who had plenty to spend and plenty of talented techies to
contribute to implementation and ongoing support.
Manage the Project
Patrick's observations regarding
the implementation partners is right on track. Keep in mind that any
enterprise that has reached the "Partner" stage of a
relationship with a major software publisher has also consumed
massive quantities of that ever present fruit punch. These folks
make their livings via their relationship with the given software
publisher. If you honestly expect them to admit the product is a dog
- don't hold your breath. Instead, they'll follow the supplier
pattern of letting you pay to resolve the problem so the supplier
can wrap it into the next release - the one you'll pay to acquire.
For a major software acquisition &
implementation either use your own project manager or follow
Patrick's advice and bring in an independent PM to monitor the
project - even a spot check will be better than nothing. But, let's
take this a little further...
IT projects fail significantly
more frequently than they succeed. There are plenty of reasons for
this - some of them are even reason-able. But, as a PMP and a
faculty member teaching project management I have found that the key
to project success - or failure - all-too-often rests on the heads
of project sponsors, executive management, and the initial planning
team. THESE folks need to be visibly and aggressively on board or
the project manager might just as well be a NATO observer.
Remember that "negotiation" thing we discussed? It
also comes into play right here. Place serious penalties in the
acquisition agreement to "encourage" the implementation
company to get it done right. Wrist slapping does not belong in this
clause. If it is going to cost you $1M for the product, $2.5M for
the implementation, and $5M to correct failure - include those costs
in the failure clause. Otherwise (as clearly stated in the software
license) the software publisher needs only refund the price of the
software after it fails and they blithely walk away from your
completely devastated IT environment.
Is there more? Oh, absolutely! In fact, there are literally
hundreds of "gotchas" hidden inside every software
acquisition - whether it's a simple operating system or a major
overhaul. If you expect to gain value from business technologies, you
absolutely must learn to identify, define, and pursue that value.
Otherwise, the suppliers are in control of your money and (lack of?)
results.
Listen in as Al
Plastow discusses how software as a service is going to cost your
company more money while taking away your control over the software
you depend on. This quick audio/video excerpt was taken from a software life cycle management training
session developed by the Institute for Technology Asset Management and delivered by the Business
Technology Consumer Network.
The full SaaS subject matter discussion includes:
Loss of perpetual licenses - (You remember this one - pay once and use forever...),
Increased costs due to yearly
software “rental” - (pay them now, pay then later, pay them again, pay them more, pay their friends),
Denial of service for non
compliance - (or any other reason the provider wishes to cite),
Hardware cost hikes to accomodate changing compatibility issues - (because you will frequently not have a choice when the provider discontinues the version you are using),
Trap doors & back doors into your systems - (Because "We [the copyright holders] have a right to monitor your use.")
And more...
Software Asset Management (SAM) is one
of the core professional service areas within the over-all scope of
enterprise Technology Portfolio Management (TPM). Asset managers who are well trained in supplier-neutral methods can help put control of the business technology environment back in your hands. Virtually any
company, of any size, could reduce the costs of business technologies
by as much as 25%-30% through simple low cost changes to the business
processes governing technology spending.
It's "Al" in your head! (Now, THAT is a chilling thought...)
Want to save more money? Want to do it without buying new software, hardware, or consulting services? You do NOT have to spend money to save money! Contact us.
When it's been superceded by that
shrinkwrap or clickwrap license your employees never read. We
constantly warn professional software asset managers and their
companies to steer clear of acquiring either shrinkwrap or clickwrap
licenses for any purpose. (Let's call them SCLs.) Read on to discover
just one more reason to avoid these common software license scams.
Shrinkwrap & Clickwrap are the most
costly & onerous licenses your company can possibly buy or use.
And many of the software suppliers would dearly love it
if you accidentally locked yourself into one—or ten or more of these agreements.
Get ready to pay
more for your business software...much, MUCH, more.
Perpetual licenses are (were!?!) the
most cost effective license the average business technology consumer
can obtain. When you acquire software or copyright protected products
under a perpetual license, you have the right to use that product for
an indefinite period of time without additional payment.
No matter how big, or small, your
company you need to ensure that somebody clearly understands and
follows up on license terms and conditions. When a trained software
asset management professional helps build and monitor your software
license portfolio, you can save hundreds—even thousands—of
dollars over the life cycle of nearly every single computer.
The loss of perpetual licensing opens
an incredibly costly trend in software life cycle management—and
YOU will be the one paying the price. Sign in an read on for details
of how to avoid this software asset management disaster in the
making. It's free and you WILL discover some proven cost reduction
ideas. (Of course, if you have some incredibly pressing desire to
continue paying as much as double for software...)