Software selection: focus on results, not functionality

Many software selection processes end with a choice based on gut feeling. That needs to change, according to Criona, the agency that helps companies choose the right supply chain software. During Webinar Wednesday, founder Alan Duncan explained more: “Instead of dictating to software vendors which criteria their solution must meet, we tell them the intended outcome. Let them demonstrate how they want to achieve that.”

By Marcel te Lindert

Most companies looking for supply chain software take the same approach. This starts with compiling a longlist, followed by a request for information (RFI) and a request for proposal (RFP). This is followed by demos and discussions with the two or three last remaining software vendors, after which the best one is chosen. The latter is not so easy, states Criona founder and managing director Alan Duncan. “All the last remaining software vendors can usually deliver the functionality you are looking for.”

The result is a lengthy and careful selection and evaluation process that leaves companies feeling good. Unjustified, Duncan claims. “Because there are definitely differences between those last remaining software suppliers. Think about the knowledge and skills of the people working there. The feeling that one supplier understands the business better or has a more robust implementation plan than the other often prevails. So despite the comprehensive, rational selection process, the final decision is made based on emotion.”

More informed decision

Selecting an ERP system generally takes 12 to 18 months. Those looking for a supply chain planning solution can easily spend five to six months. The fact that the final choice is made based on gut feeling is not necessarily wrong, according to Duncan. But he doesn’t think it is necessary. “It is indeed possible to dive deeper into the software and find out even more about the technological differences. Taking a different approach makes it possible to make a more informed decision.”

That companies stick to the traditional approach is understandable. “Many supply chain professionals may only do this once or twice in their careers. Then, it is natural to blindly follow the approach you are handed. That approach is not wrong, but it does not produce the best outcome,” says Duncan. “The point is that companies deliberately keep software vendors at arm’s length. They don’t want to share too much information because that weakens their negotiating position. As a result, the selected solution often fails to deliver maximum value. Because software vendors do not know exactly what to expect, they build in extra security in the form of time and money. In other words, implementation costs more and takes longer.”

Share the desired outcome

Criona helps companies select the right software. To do so, the consultancy uses a methodology that is also suitable for the cloud applications and software-as-a-service (SaaS) contracts in vogue today. Duncan distinguishes four dimensions in that methodology: need, risk, value and lifetime. “By need, we are not referring to lists of 180 functionalities that must all be in the software, but to the desired outcome. What are the goals you want to achieve with the software? What level of flexibility or resilience do you want to have? If you share your goals with the software vendors, all those functionalities are nothing more than tools to achieve them. And software vendors will commit to those outcomes.”

The desired outcome is not the same as the business case. According to Duncan, there is no need to share it if it comes at the expense of negotiating power. “But all software vendors can contribute to the business case to some extent. They each have unique competencies, so the value they generate with their solution will differ from vendor to vendor. Incidentally, that value is not only in the contribution to the business case but also in the usability of the solution. We all know the companies that use Excel alongside their ERP and planning systems because they fail to get the intended value from those systems.”

Software vendor as a risk factor

Assessing risks is usually already part of the traditional approach. However, this is often limited to the possible risks of the software. The vendor’s potential risks are left out. “Sometimes the software is built on technology from 2009 and therefore not as modern as the cloud applications that have come onto the market since then. The supplier’s financial stability is also important: is it a listed company, or is there an investment company behind it? And what if that investment company wants to sell the software vendor?”

The final dimension is longevity. “That’s about building a long-term partnership relationship with the software vendor,” Duncan explains. “A key question is what drives the business. Is it the targets at the end of each quarter? And how much do they invest in innovation? Many SaaS contracts have a term of perhaps three or five years, but the reality is that most systems have been in operation for more than a decade. So the key is to find out to what extent the software vendor is able to support you for all that time.”

Commitment from day one

The Criona methodology has been used to build long-term partnership relationships with software vendors from day one. “These vendors know better than anyone what they are capable of. Instead of telling them what to do, we explain the intended outcome. Then let the suppliers demonstrate what contribution they can make to that,” says Duncan. “You don’t want to wait until contract negotiations to start building that partnership relationship. You want software vendors to show commitment from day one.”