Successful implementations begin with a strong relationship between customer and software vendor. Negotiating that relationship is complex because some purchase decisions, such as user licenses, are negotiated upfront, even though they don't become operative until months later.
Barry Wilderman, longtime industry analyst and currently VP of Business Strategy at Lawson Software, assembled six tips to help you frame a purchase discussion with software vendors. The list isn't comprehensive, but provides a great start to help you understand downstream implications of decisions often made early in the purchase process. I've lightly edited Barry's tips:
- Software license fees: A negotiated fee often involves a certain cost/named user. It is important to understand the relative usage by named user (e.g., the heads-down transaction user, the decision maker/reporting user, the self-service user) and the value that each user will deliver to the company deploying the system. An understanding of value, when the value will be delivered, and a comparison to total cost of ownership are all critical to making the right decision about software fees.
- Implementation fees: Expect to pay one to four times the cost of the software in implementation fees. And, even if you buy third-party professional services, a best practice is to have the ERP vendor as a subcontractor (at least 20 percent).
- Maintenance fees: This represents a significant charge – often about 20 percent of your original software charges. Make sure you are getting the kind of support you need.
- Upgrades: How often do these upgrades occur? (A good rule of thumb is every three to four years.) What has been the history of upgrades over the past five to 10 years? Relative to the cost of going live with the software, how expensive were the upgrades to implement?
- New modules: If the software vendor invents something, is it part of your maintenance agreement, or is it a new product for sale? Ask the vendor to show you all the new modules implemented in the past five years.
- Post go-live sales, services and care: What are your expectations after you go-live? Do you want the vendor to have a keen understanding of your original pains and goals? Will they know enough about you to really help?
Conducting appropriate background research will keep you from becoming a naive software buyer. Although understanding your own requirements is fundamental, knowing how to approach software vendors will definitely save you time, money, and aggravation later in your project.
Get the vendor relationship right, and your implementation has a far better chance of success.
[Dysfunctional relationship image via Brenda & Eddie's.]