Understanding the trade-offs of various software selection project approaches

Depending on my client’s priorities and appetite as it relates to timeline, budget and risk in the selection process, I recommend one of the following five approaches to software selection for the most important business applications (e.g., ERP, claims platform, loan origination):

1. Standard software selection (10 to 12 weeks) – The most comprehensive and recommended option, with the longest timeline and budget, consists of thorough market research evaluating 15+ vendors and then selection of three vendors as finalists for detailed software demonstrations. This “by the book” approach provides the greatest chance of success that the right product will be selected for your organization because it evaluates the full market of products and conducts demonstrations with three vendors allowing for adequate comparison.

2. Rapid selection (6 to 8 weeks) – This is a truncated version of a standard selection, typically shortened by arriving at your vendor shortlist based on your selection team’s experience vs. comprehensive market research. Software demonstrations often only include two vendors instead of three. In certain niche industries (such as apparel and process manufacturing), there are only a few vendors that specialize in meeting the unique vertical requirements –making the vendor shortlist selection go much quicker. It is important to note that this approach adds risk to the selection process by not surveying the full market of software products, including the potential to miss new entrants that take advantage of emerging technologies such as SaaS or mobility.

3. Fit analysis (6 to 8 weeks) – This approach focuses only on one vendor’s product (could be a later version of current software or new software vendor) rather than a full selection. Project activities concentrate on identifying key functional gaps, business risks, detailed costs to fill gaps, and if that single solution is right for your company. This approach provides a much more detailed evaluation of potential software gaps that may not typically be uncovered during a standard software selection process. However, this approach introduces risk by only focusing on one vendor, so the confidence in the vendor for the fit analysis needs to be high because you may be forced to go back to the starting line if the analysis shows that the vendor cannot meet your needs.

4. Proof-of-concept (varies depending on scope) – The final approach includes any combination of options 1-3 above to arrive at a final vendor, but then goes further to mitigate risk by implementing a paid “prototype” that allows you to evaluate the software in your business environment. Often, you will run through one or two business scenarios (e.g., order-to-cash process) in front of the business functional leads to evaluate how the system will perform. This approach provides greater confidence in the software being able to meet your business requirements and also provides an opportunity to evaluate the performance of the team that will be implementing the software (i.e., software vendor’s professional services team or a system integration partner).

5. Build vs. buy (10 to 12 weeks) – The “build” approach is the least likely option and should only be considered when your business model is unique/differentiating in the marketplace to a point that commercial off-the-shelf or packaged software may not be cost-effective to customize to your organization’s needs. The decision to build or buy packaged software will be based on the business requirements, investment and ROI, and impact to the IT strategy and operating model (given that IT will need to have the capabilities to build and support custom software). If a “buy” decision is made, then one of the software selection approaches referenced above would be a logical next step.

Clearly, the trade-offs of risk, timeline, investment and how deep you analyze if the software is right for your organization need to be considered during the selection process. Once the software approach has been chosen, the selection project sponsor should be able to clearly articulate the pros and cons of the chosen approach to the business. In my next series of blog posts, I will review the key steps that are required activities within each of these approaches, such as reviewing the business strategy, defining the key business requirements, and putting together a balanced scorecard evaluation framework.