Avoiding Six-Figure Software Selection Mistakes
If your organization is in the market for new software tools – or if it’s just considering it – the processes described in this article can help you plan for its selection.
Lee Pendergraft, CRM, and Alan Blakely, Esq.
At first, the idea of selecting a software tool may appear to be an easy task. There are plenty of software sales consultants available to explain to explain the advantages and benefits of their particular products. But to make an informed decision, an organization cannot rely solely upon marketing and sales material and presentations.
While most sales consultants are truthful, an organization that relies on only a consultant’s advice may find that after a tool’s installation, its expected benefits do not appear. The tool may not be as simple to configure or as easy for non-technical staff to use as they expected. Or, the organization may find it paid for features it did not need or could not adequately implement or support.
Selection planning must begin with a needs assessment.
Constantly Evaluate Software Needs
Even if investing in new software or upgrades is not in your budget now, begin keeping track of the features and functions you need to update existing systems for better business effectiveness.
Talk with the representatives of software products already in place to find out if some of the needed features and functions might be available in those products; perhaps they are, but they are not being utilized. Periodically check your service providers’ websites and talk with them at trade shows to see if they are available to add the functions your organization needs.
Another option is to hire a consultant – one who is not wedded to selling you anything – who knows how to maximize the processes and software you already have.
These are some questions you should be asking:
- How often would the organization use the additional features in the selected software?
- Would it be more cost effective for the organization to utilize a hosting service that provides the software and simply pay them to use it during the infrequent occasions when it is necessary?
- Does the organization need all of the additional prepackaged features included in available electronic tools and will someone actually use them?
- What does the organization really need and is there less expensive software available to meet that need?
Do not purchase software before considering alternatives already available. Avoid the trap of being unprepared.
Determine the Cost and Return on Investment
To avoid one of the most common mistakes of software acquisition projects, make sure you understand all the costs of the potential acquisition and develop an accurate and comprehensive budget.
To sell the solution to senior executives, help them recognize that software is not simply a depreciating asset; be prepared to explain the business labor cost relationship. Consider software as an operating expense. An investment of approximately $100,000 costs about $2,000 per month on a 60-month lease – less than the salary and benefits for a clerical employee in most areas of the United States.
In times of business turbulence, examining return on investment for a new tool may help explain the cost of doing business in more easily understood terms. Explain the proposed investment in terms of payroll savings, considering both the current and possible future labor requirements. Do that by answering these questions:
- Is there a present or developing need to hire additional staff to keep up with the workload?
- What will that workload be in five years?
- Will technology replace the need for additional staff?
Initial cost savings combined with future cost avoidance may easily exceed the acquisition expense, fully justifying the software investment.
Involve the Right People in the Planning
How does your evaluation team make the right decision and avoid making a costly mistake? Make sure the right people are involved in the planning phase.
Internal staff professionals may be lacking the correct combination of knowledge and the necessary skill sets to correctly evaluate the needs of the business and the properties of the selected tool. Frequently, intelligent and well-meaning but overworked people take on responsibilities outside their core competencies. This often leads to misguided, mistaken, and costly software purchase decisions. More often than not, these decisions may actually result in lower productivity, unhappy employees and managers, and six-figure financial mistakes.
Some Scenarios to Avoid
Does this scenario sound familiar? After identifying a work process problem, someone asks a software sales representative to demonstrate a solution. Then, based upon the sales pitch, an immediate decision is made to purchase the software. Unfortunately, the decision is made without a complete understanding of business process-related functions and problems, and the tool turns out to be far more expensive than expected, with features that will never be used.
Or, consider these three hypothetical situations that could occur if records and information, IT, and business unit managers are not involved in the planning:
A large enterprise had been spending too much money dealing with e-mail litigation. Employees were asked to manually sort and categorize their e-mail. But due to the pressure of other business tasks, efforts eventually fell short.
So, the enterprise purchased a software product to auto index existing e-mail – expecting the results to be electronically searched and produced quickly. But, the selected software could not index e-mail created and stored by an external system or different systems in other business locations.
Because the software was selected without the knowledge of other available software capable of indexing all files across the enterprise, the organization, unfortunately, needed to obtain additional tools to supplement the first tool that singularly focused on e-mail.
Or, consider another enterprise that concluded recent litigation. The outcome was very expensive because it discovered deleted files that needed to be reconstructed. Forensic examination also identified several additional files that had been intentionally deleted and some that had been given misleading file extensions.
Subsequently, a hasty decision was made for the legal department to purchase a robust software application to perform forensic examinations when the need arose during anticipated future litigation. However, several key questions were not asked:
- After purchase, would the software sit on the shelf only to become obsolete before it was needed?
- Who would be trained to use it?
- What was the backup plan if trained employees moved on?
In the final example, counsel had done an excellent job of examining the human interface and the features of a particular software product. And, the price was affordable. However, because they were not very technically inclined, they did not determine the software’s operating requirements.
Counsel did not realize they could not run their new software without modifications to existing hardware. Nor did they know it would be necessary to purchase additional software for integration.
Consequently, after the company bought the product, it learned it was built using software for which they also needed to purchase additional licenses. (Many electronic tools use other software to run their human interface.) If a new tool is not “fully integrated” – that is, one license covers it all – it may be necessary to purchase additional individual licenses for each of the components.
So, what appeared to be a moderate expenditure to purchase the human interface, or “front end,” turned into a very large expenditure requiring the purchase of additional hidden or “back end” components. Moreover, the addition of several new tools also made it necessary to increase existing hardware capabilities – yet another unexpected expense.
As a result, the legal department had to purchase additional software licenses and hardware dedicated to running the new software. The apparent bargain suddenly became more than twice as expensive. That is because no one asked the right people these questions:
- Can the product be integrated with existing systems?
- Are there additional funds available or does the organization have IT staff with the essential knowledge and skills to configure it for compliance with existing records retention or taxonomy?
- Does the service provider include training?
Invest Adequate Staff, Time, and Effort
For the well -informed buyer, making the right choice is not actually that difficult, but the process can take much more time and effort than you expect. Avoiding costly and time-consuming mistakes requires highly focused and broadly based participation by your team of users, thereby demanding a significant level of effort on their part, too.
Editor’s Note: For more information, see Pendergraft and Blakely’s’ companion article, “Ten Steps for Evaluating and Selecting Software and Service Providers,” which appeared in the January-February 2010 issue of Information Management magazine.
Lee Pendergraft, CRM, can be contacted at firstname.lastname@example.org. Alan Blakely can be contacted at email@example.com.