Five Common Pitfalls in Buying Software

The process of software system selection is fraught with difficulties; and there are many examples of failed projects. The cost of a mistake extends far beyond the price tag on the software itself. There are, however, some common errors of which asset managers should be aware. Some of the key gaps in many selection processes are:

1. Assessing provider's cultural fit

You must develop as open and honest a relationship with the supplier as is possible. Firms should always consider compromise on functionality for a stronger cultural fit. The functional fit is an important but not overriding factor.

2. Ensuring the ability to support market needs (not just new sales)

This should become a long-term commitment. The solution will need to continue to develop and provide the buyers with the necessary agility to keep track, or even ahead, of the market. The provider must show that it has a roadmap of how it will continue to enhance its solution. Buyers should ensure this roadmap is aligned with their own business plans. They should also assess the suppliers track record and capability to deliver these plans.

3. Customer due diligence

Customer due diligence should be a multi-threaded process. Due diligence should not merely include a reference site visit to a firm selected with the supplier's agreement. Other activities should include informal client references and gathering as many views as possible from involved stakeholders.

4. Understand the true cost of ownership

Firms often pride themselves on negotiating the best price for a service, but the reality is that the best price for a service is the price that delivers value for both the supplier and the buyer. Buyers who extract the maximum discount will often receive inferior service as time passes. As a result, such buyers will often have to 'pay' in other ways to offset this discount. If the project is not delivering a profit to the supplier, the supplier will treat the client accordingly. Price is also not merely the cost of a license or standard service. Implementation and internal costs, including upgrades, need to be fully understood and realistically assessed.

5. Research available resources

It is vital to determine the pools of expertise that are available to support a system selection project. If resources are scarce and this is a fast growing vendor or market, you will almost certainly face one or all of the factors below:

increased costs of resources
high resource turnover and lack of continuity
low quality of resource (usually where fixed price deals constrain ability to maintain skilled resources)

This is not a comprehensive list of criteria for selection and should be used in conjunction with the more established measures. System selection will never be an exact science. Nevertheless, if you consider these five common pitfalls, you will certainly mitigate the risk.