In our last post on enterprise software buying, we discussed the process that should be followed in documenting your true software needs. In today’s post, we discuss how you use these requirements documents to identify the right potential solutions for you.

3. Identify Potential Solutions

Once you’ve documented your basic requirements, you can start identifying solutions that could meet your needs. Don’t limit yourself to vendor materials and demos. Be sure to read analyst reports and blogger reviews, check with your local associations for independent reviews, and ask colleagues about the solutions: what they do, positive experiences, and negative experiences. Get a well rounded view … don’t just check the box.

Furthermore, be sure to ask the right questions. Have a starting list before you talk to the vendor the first time. If you’re buying
RFX & e-Auction,
Spend Analysis,
Optimization,
Contract Management,
e-Procurement,
Supplier Networks & Catalogue Management,
GPOs & Marketplaces,
Market Intelligence,
Strategic Sourcing Services,
Trade Data Management,
Supply Chain Optimization, or
e-Payment, a good starting list (that you can customize to your needs based on the outputs of Step 2) can be found in the X-emplification series (PDF).

And remember to chuck the checklist when looking for potential solutions. After all:

• it’s impossible to sum up a “feature” in one sentence, or even a short paragraph,
• no piece of software can do everything,
• trade rags and analysts, despite their best of intentions, give you bad lists, and
• RFP templates are Poison Pills.

In addition, in these troubled times, be sure to spend some time investigating the stability and financial solvency of the vendor before you buy. Five years of guaranteed support for the version of the system you buy is meaningless if the vendor closes up shop in six months … which is a lot more likely than you might think in this current environment. Right now, as many as a few dozen providers in the space are having financial difficulties to some degree. Be sure to ask questions along the following lines, and carefully evaluate the responses, to get a feel for their financial status. (Tip: it wouldn’t hurt to have a behavioral psychologist on the evaluation team when you ask these questions.)

• How is your profit statement looking these days?
  Is it positive, break-even, or negative? What’s the trend over the past year, the past three years, and, if the vendor has been around that long, the past five years? And how many months of operating capital does the vendor have in the bank?
• What’s your ownership structure? (And who ultimately makes the financial calls when times get tough.)
  If it’s public, the board runs the show. If it’s private, do the founders/owners run the show, or do the VCs? If VC’s own over 50% of the company, they ultimately run the show and they will decide who to keep, what to cut, and whether the company will even stay in business if times get tough.
• What would happen if you didn’t sign any new customers for an entire year?
  Does the company have enough cash and booked revenue to maintain current staffing and service levels? Would they have to make serious cuts to support and NPD? Might straits get so dire that they’ll have to liquidate or shut down?

In our next post, we talk about the creation of total lifecycle cost models for each potential solution, which are key to helping you understand the order of magnitude of the full lifetime total ownership cost of each solution you are considering and key to helping your negotiator get you the absolute best deal.