The 6 Days of X-asperation: Day 1 – Questions to Ask Every Vendor!

Yes folks! the doctor just keeps on giving! In addition to the specific questions on Spend Analysis, e-RFX and e-Auctions, Decision Optimization, Contract Management, e-Procurement, and e-Payment functionality that you should ask your prospective vendor before you even think about making any commitments, as x-emplified during the 12 Days of X-emplification, there are also some general questions that you should be asking each and every software vendor you are approaching for an e-Sourcing or e-Procurement Solution. In this post, I’m going to outline what they are and why they are important. Then, in the next five posts, I’m going to outline the full answers that you want to hear from your vendor. (And that’s why this is the X-asperation series, because if most vendors weren’t exasperated after the first series, you can count on them being exasperated after this one. But that’s a good thing! Do you really want technology that hasn’t been updated since 1999?)

Feel free to thank me, because I know for a fact there’s quite a few vendors out there that aren’t going to thank me for yet another set of questions that they, unfortunately, don’t always have good answers for. (Let’s put it this way, after this series, I’ll be even more relieved that there just isn’t enough money in waste management in the part of the world I call home to attract a certain breed of waste manager.)

1. What do I have to do to get a good handle on how to make effective use of this technology, and for an organization of my size, how long is it going to take?

Chances are that whatever you need to do, you’re not the first company to need to get it done, or the first company to set about to do it. As such, even your best estimates are going to be just that – estimates. They might be close. They might be way off. But if the vendor has a sizable customer base, cares about it’s customers, and works with them, then it will have a good idea of how long it’s really going to take to implement the technology from end to end – in terms of software implementation, data population and cleansing, and project management.

Furthermore, even though most projects should be doable in a matter of weeks, the reality is that many e-Sourcing and e-Procurement systems actually take 3, 6, or even 12 months (or more) to implement because the buying organization isn’t (fully) prepared. Remember, the vendor can only get the work done in an efficient time-frame if you know where your data is (and have negotiated the required access with IT), your processes mapped, and the people on hand with the knowledge to quickly answer data and process questions as they arise during the implementation. If the vendor is any good, the vendor will understand exactly what they will need from you to implement the system in the time-frame they quote and, more importantly, they’ll be able to tell you exactly what you need to do to get there. (If they can’t tell you precisely what data and processes you need, and how to find that data or implement the processes you need, keep looking. You don’t want another expensive piece of software nobody uses. You want a solution, and that solution needs to include the requisite services, training, and knowledge transfer.)

2a. How much functionality is my organization realistically going to be using in 12 months?

In this space, one of two things ultimately occurs, either an uninformed buyer asks for pie-in-the-sky functionality because they read some BS propaganda somewhere that said they absolutely need it, or, more often than not, some uninformed or FUD spreading salesperson tells them they absolutely need it (and that only the company they represent can offer it). The fact of the matter is, you usually don’t need more than the basics during an initial implementation (as long as the key features addressed in the early posts in this series are there) to be productive and get a good initial ROI from the system. (You’ll eventually want the more advanced features, but you won’t be ready for them right away, and implementing them too early can sometimes do more harm than good!)

Furthermore, how many tools are there with more than a few dozen features where you regularly use all the features? You’re probably familiar with Word. Word 2000 has hundreds of features. The same holds true for Word 2003. Word 2007, like every version before it, added over a hundred features. How many have you used, ever? And, more importantly, how many do you use regularly? A small fraction, on both counts. It’s not how many features the tool has, but how many features you really need. Therefore, it’s also important to ask:

2b. How much functionality do I really need?

Chances are, not as much as you think. (As my X-emplification series attempted to point out – most of the time it boils down to a small set of key features.) Map your processes and pains and then, with the help of an independent consultant if necessary, map these to basic system and software functions. What falls out is what you need, what’s left, you probably don’t – or at least you don’t need it right away. More importantly, make sure the vendor answers:

2c. And how does this functionality solve my #1 pain today, which is X?

If you have a major pain point, like maverick spend, lack of spend visibility, or a paperwork nightmare due to compounding compliance and regulatory requirements in Europe that are driving you batty, make sure the vendor is able to clearly explain how their tool will solve that problem, how your buyers will use the tool on a daily basis to do the work they need to do, and how long it will take them to perform these common tasks that they need to do everyday. If the tool isn’t able to do what your buyers need it to do, when they need to do it, and do it significantly faster than they can do it manually, then it’s likely not the right tool for you.

3. How much training is my team going to require to effectively use the software? How long is it going to take them to absorb this training?

An enterprise software tool isn’t e-mail, word processing, or web searching. It’s not something you can expect the average user to figure out on her own, at least not in any reasonable time frame. Nor can you expect them to grok it from reading a manual. Let’s face it … supreme court opinions and the resulting in-depth analyses by legal scholars are children’s literature when compared to the average technical manual. If you want your people to be productive on the tool, they need to learn the tool, and for that they are going to need training. If the vendor has well-designed multi-media self-study courses, then your buyers will be able to do a lot on their own, but they’ll still need questions answered and demos that show them how to use the tool to do tasks specific to their organization. There’ll always be a traditional training requirement. Furthermore, the more features they have to learn, the longer you should expect that training to take. If a vendor representative is selling you a full suite and says training will take a day, he’s clueless or the suite doesn’t do anything. This will sometimes be a judgment call, but a good general rule of thumb is that for each major piece of functionality (or module), you should expect somewhere between half a day and a couple of days for a sufficient mastery of the basics. (Longer if the system is not user friendly.)

4. How much is this software REALLY going to cost me in the first year and each subsequent year?

Let’s face it, especially where a few traditional behind-the-firewall vendors are concerned (and the ones that offer you 50% + discounts in particular), the software cost is never the full cost of the system. In fact, with some vendors, it’s not even close!

In the traditional on-premise model, or the ASP hosting model (which should not be confused with true multi-tenant on-demand), the vendor quotes you a cost of a license to use the software for a fixed term, but that’s all the quote includes. When you go to buy, that’s when you find out that there’s also an installation fee (on-premise) and / or initialization fee (hosted ASP) to install the software and get it ready for daily use, which doesn’t include the initialization services fee where they load your data, users, etc. And let’s not forget about the yearly maintenance fee. And of course, when you need to install the first update, there’ll be an update fee to install the patches for you. And we all know that the training costs are never included.

If you’re lucky, it stops there. If you’re not, you find out that you were sold the “basic” version, but the functionality you really need is in the “professional” version or “enterprise” version and that you have to upgrade and pay a rather substantial upgrade fee, as well as a higher maintenance fee on the back-end. Then there’ll be a need for data conversion and enrichment services, which will cost extra. And of course, there’ll be more training, at additional training day rates.

But even if the basic version is enough, you might find out that you need bigger, better, faster, hardware – which can come with a hefty price tag. After you get the system implemented, you might realize there’s too much work for you to do to ready all of your projects on the new system and that you need to bring in some services professionals to augment your team. And so on.

A 100K system can end up costing you 1M* (or more) over the course of the first two years and your expected ROI of 10 can vanish seemingly overnight! If you don’t get the most honest answer of all to this question, stop the process with the vendor here and now. No matter how good the system might be, it’s not a solution if it costs you money. (After all, if it’s just labor savings, somewhere in the world there’s people in a developing country who’ll still work for pennies on the dollar. And they won’t ask for a 1M software system – which they probably aren’t educated enough to use anyway.) If you do think you are getting an honest answer, and all they are apparently charging you for is licensing and some standard services, then you should still make good and sure that they’ll incorporate explicit provisions in the contract that indicates that all of the services and updates needed to make the system work, are included in the license or maintenance costs – and not separately priced. Otherwise, you might find that the vendor changes its tune six months down the road.

*I’m not saying you shouldn’t pay 1M (or more) for a good e-Sourcing or e-Procurement suite, but that you need to make sure the ROI is there. If you’ve done your baseline and benchmarking and expect the solution to save you 5M to 10M over the timeframe where you spend 1M, then it’s a good deal. But if you do your baseline and benchmarking and the 1M system is only going to save you 2M, tops, I’d think twice about buying it. (Also, you’re likely only going to get this level of savings if it includes real spend analysis, real strategic sourcing decision optimization, or true end-to-end procurement cycle integration.)

5. You say you care about your customers and that you are going to provide great service. Prove it!

You should be able to choose from half a dozen references. The vendor should have a process to make sure all bugs are immediately logged, investigated, and incorporated into a release cycle. There should be a methodology to develop work-arounds or temporary patches if the functionality is critical. You should be allowed to go to the next conference or user meeting before you buy. The vendor should be more than willing to share the knowledge you need to answer each of these questions fully, completely and, if you missed any of these important questions, willing to point out what those questions are and why they feel that you need to ask the questions – without answering the questions for you. You want a vendor who’s willing to let you do your own research, confident that there’s a very good chance that you’ll come back to them.

6. Can I take it for a test drive or a short term lease?

The reality is that you don’t want to be dropping a huge bundle of dough on an integrated solution on just a hope and a prayer. It’s best to spend some time with a very modest commitment of dollars and resources to test drive the product in the context of your projects and your needs. Get a flavor for what it can do, and how much it can save you. You can always dive in and buy the whole kit-n-kaboodle later. (The vendor’s not going to say “sorry, you can’t buy any more – we’re sold out”. It’s software, not limited edition collector plates.)

Furthermore, until you’re able to baseline not only how well you’re doing now, but benchmark how much the proposed solution could realistically reduce the baseline over time, you won’t be able to figure out if the ROI is really there or not. And that’s what it’s all about, isn’t it?

7. Can I buy it or implement it in pieces?

Finally, even if you do decide that enterprise suite E is the solution for you, you still want to be able to roll it out in manageable phases or chunks. Your users aren’t going to be able to lean an extensive suite overnight, so even if the vendor was true multi-tenant on-demand and could get it up and running, with your users and key data, in a matter of days, it wouldn’t help you.

So come back tomorrow as we put the e-RFX & e-Auction vendors through the wringer again by diving into the questions above!