How to Buy from a Software Supplier
Tuesday October 6, 2009
The software industry, including maintenance services, are set to be the strongest sector of the information technology market with spending predicted to hit $229 billion dollars by 2010. Therefore in such a saturated, competitive and strong market how do you find the right supplier for you and your business? Each supplier has their own set of USPs, accreditations, partnerships, products and services to try and stand out from the rest of the pack. So the questions you may ask during the procurement process are: who is right for the business and understands our requirements? Have they had experience in the sector backed up with a proven track record? Who else do they work with? These questions are just the tip of the iceberg when making such a big business commitment. The following guide has been put together to help you through the process and point out what to look for in a supplier.
Software development is inherently risky and so it is important that your supplier, whether of a package or bespoke software, uses rigorous project management techniques and follows a good quality management system to reduce risk. A formal process which imposes control for the Project Manager is far safer than say a more creative approach adopted by smaller companies - it is essential that a partner is sourced who is large enough to apply engineering disciplines to a project because the majority of effort (and therefore risk) will be around the technical software development. The process utilised should be tried and tested and have accolades against it by delivering successfully.
Even if you expect to buy a package the best practice is to formally document your requirements and then evaluate all candidate products against them. This gives you a much brighter spotlight to interrogate each supplier - make sure they don't offer bland platitudes but have to specifically itemise which parts of your requirements their product doesn't satisfy out of the box.
The actual technology used to write the software should be modern, not necessarily the latest, and should be widely adopted so it is easily supported if the company who originally designed the software happen to disappear for any reason. The first and perhaps most important decision is whether you want proprietary software from makers such as Microsoft or Oracle or open source software. A lot depends on your existing IT Strategy, any in house skills, the application you want to run and your budget.
Enterprise size or smaller but business critical systems should be developed using well known technologies to ensure their longevity, upgradeability, security and reliability. There's no point having a whiz bang new system to run your business if the only person your supplier can find with the skills leaves their employment.
Security & Data Protection
The weakest point in any security system is the people, and IT systems are no exception. Therefore the management processes and controls you impose on your own staff should be mirrored by the vendor of any software you buy. What's the point of investing in heavyweight security to protect your network and valuable business data if the supplier is happy putting it all on unencrypted laptops left in their staff's cars? After recent high profile cases the legal obligations for data protection are likely to be significantly tightened over the next few years. Would you want your business to be the subject of "data loss" headlines?
As it becomes more common to buy so called 'Software as a Service' (SaaS) whereby the supplier gives you login access to a web-based hosted solution, they take control of your precious data. What would happen if the supplier went bust? Could you get the data back from a liquidator? You could severely hamper your business so make sure you have a mechanism to regularly take backups. You could also breach the Data Protection Act unless you ask about where the data is stored and how it is handled and protected.
Reassurance by a proven reference-able track record can speak volumes in helping with the decision making process. Knowing that a supplier has past experience of delivering similar projects on time and on budget, backed up with supporting testimonials from their clients will settle your nerves knowing that you are going into a partnership with a tried and trusted, but also highly experienced development company. We all know that suppliers will only offer you referees who are likely to say good things, so delve deep to really test their mettle: make sure with the referees that the supplier followed the same process and used the same technologies as they are offering you. Ask about their experience of the quality of the software, ease of use and total cost of ownership (see below).
To work in conjunction with your supplier rather than battling with them continuously will inevitably be more beneficial to the project. Finding a company to collaborate with you rather than imposing a solution on you will mean you are delivered what you need.
Whether the solution required can be obtained from a package or if it needs to be written from ground up, they both have the common need for the software to satisfy your business's requirements to provide a solution that exactly matches your needs and delivers competitive advantage based on the business processes, within the allotted budget.
You should be nervous about investing a large amount into just any company, especially if a) you haven't worked with them before and b) if this is the first major project of this type for your business.
Software, especially bespoke applications, does not come cheap and therefore you need to be assured that your money is safe i.e. is the supplier financially stable and established. Most suppliers operate transparently so it should be possible to obtain all the potential vendors' financial reports from at least the past 3 years. If they don't then you must ask yourself what are they trying to hide? Carry out whatever credit checks you would on any key business partner or customer.
It's not always the case that the most economically advantageous solution is necessarily the best for your business. Budget is always a major consideration but so should be quality. It is easy to go out and source the cheapest solution but over time this could end up costing more and more. If the solution is business critical then downtime will cost the business dearly and the cost of fixing it or enhancing it to meet changing needs may be much higher. Always measure the total cost of ownership not the up front cost.
As with most things the phrase "you get what you pay for" can be associated with software and business systems projects.
Finally - Intellectual Property Rights
The final point is more associated with bespoke systems rather than off the shelf software. It is imperative that you negotiate a formal contract that hands over the ownership of the Intellectual Property Rights to the system and that you obtain the copyright to the source code as this is more beneficial to you than any escrow agreement. Any reputable supplier should be willing to give you what you pay for after all.
It is painful how often the media contains stories of software disputes arising due to the lack of a formal contract and assumptions having been made by both sides over who owns the software.
A package or product supplier is very unlikely to surrender their intellectual property rights or source code due to their need to sell it to many customers. Instead, ask your trusted lawyer about an escrow agreement for the source code, but remember to consider the data as well if the software isn't on a computer that is under your direct control.
Buying and sourcing software from a supplier doesn't have to be as daunting a task as it can appear, or one that ends up wasting time and money. Preparation is the key; if time is spent at the beginning researching all the exact requirements that the system must perform then this will aid you in talks with suppliers, as they will know precisely what you are looking for. It may be worth using a professional procurement consultant to help you.
Finding a supplier that fully understands your business and requirements and one you can envisage developing in to a long standing business relationship will also make the process and communications a lot smoother; ideally you can view them as an extension to your business.