Yesterday I read a post by Eric Kimberling (@erickimberling) titled "In Search of Business Value & ROI: Achieving IT Benefits Realization" (http://tinyurl.com/mmx5k4) and to be honest, it made me a little sad.
The title of the post was a little misleading. I think it should have really been titled "A Beginners Guide to Cutting your Software Vendors Margins to the Bone, Bleeding them Dry, and Hanging Them Up on the Town Wall as an Example of What Will Happen to the Next Vendor that Dares Walk Into the Company" (sorry - my capitalization may be a little off).
Here are his points, and some commentary:
1. Negotiate aggressively. The first key is to negotiate software licenses and professional services aggressively. such negotiations should focus not just on short-term costs, but also longer-term costs such as future licenses, additional modules, and long-term maintenance. This will help contain overall project costs. <http://it.toolbox.com/blogs/erp-roi/four-tips-to-manage-your-erp-software-vendor-32883>
As a manufacturer or service provider themselves customers should know that there are fixed costs to involved in every organization, and that every company needs to achieve margins in order to keep the doors open. Forcing suppliers to drop software and professional services down to where there are no margins - or even worse - below margin hurts both parties. If the company is impacted because it cannot afford to help the customer as much as they would like, then the implementation is sure to fail. There is only so much blood that you can squeeze...
2. Clearly define scope. Make sure you clearly understand what the vendor is and is not responsible for during implementation. For example, who is responsible for data migration, documenting business processes and workflows, and creating training materials? These need to be clearly defined as part of the ERP selection process. <http://it.toolbox.com/blogs/erp-roi/four-tips-to-manage-your-erp-software-vendor-32883>
It is a very good idea to delegate out responsibilities. This is also a great way for the customer to save money - especially when it comes to data migration, training users, hardware setup etc. Scope also includes the module functions that are being purchased and implemented. Keep in mind though, during the software selection process the customers will probably only see a portion of software's functionality - sometimes dictated by a rigid demonstration script provided to the supplier. There are a lot of ways to tackle a problem, and sometimes using additional functionality is available. Also, if the customer commits to taking on some of the project tasks, then if they realize that they don't have the bandwidth, then that is scope creep, and impacts the implantation plan. Agility in the implementation is sacrificed by rigidity in scope.
3. Set realistic expectations. Vendors are notorious for underestimating implementation duration and cost and often do not account for key project activities such as organizational design, communications, process simulation, etc. Organizations and their implementing vendors should agree on a realistic rather than overly optimistic implementation plan prior to signing contracts. <http://it.toolbox.com/blogs/erp-roi/four-tips-to-manage-your-erp-software-vendor-32883>
This works on both sides though. Software vendors implement their products all of the time. Customers will only implement the software once… For a quality software vendor, it is not in their best interests to make the implementation fail because of bad estimates and expectations. When an implementation plan is delivered, and the first thing that is said is "I want this delivered in less time, with the same functionality" then isn't the tail wagging the dog? I am not suggesting that the plan doesn't have a buffer, for scope creep, and unforeseen circumstances , but if you cut the plan to the bone, then customers are risking the project themselves. It may look better in the check register (initially) but the project starting off on a bad foot.
4. Maintain leverage. When a vendor has you backed into a corner, they are going to be less likely to cooperate in helping you contain costs. Keep in mind that third parties often provide cost effective maintenance and professional service alternatives, so don't be afraid to use this as leverage or as a viable option to contain costs. It is also helpful to set high expectations for implementation support and hold the vendor accountable when their actions contribute to project delays. <http://it.toolbox.com/blogs/erp-roi/four-tips-to-manage-your-erp-software-vendor-32883>
It is this suggestion that made me sad. Software vendors should not be lumped in with the fly by night Snake Oil Salesman. They have a solution that can help the customer, and for the most part believe in their product and have their best interests at heart. In this economy, bad news travels and hurts, and setting the fuse on the customer sale and running away is not a good sales technique. As a result, why does one party have to win, and the other loose, which is what Eric is suggesting, the end result of the software sale should be a Win-Win situation - the customer improved their business processes, and the vendor stays in business and continually improved the product. Strong arming and bullying is something that should be left in the school yard...
These are just a couple of thoughts that I had.... If I ramble a bit, then please forgive me ;-)