RSS feedsKey questions savvy buyers ask
While businesses may buy many of the same software applications, their needs
and objectives can be very different. Carefully consider before you make your
software investment.
What does your business need the software for?
Companies require software to address many business demands and it is critical
for you to understand why your company is making this investment (see box).
What functions do the products we are buying perform, and does this
functionality address our required business objectives?
Based on the example below, if you were to purchase an order management software
program without also buying a web store application, your business problem would
only be partially solved because your IT systems would not be able to handle the
increased number of orders coming through your new ordering system and call
centre. Without enabling online purchasing in addition to order management, you
would lose the opportunity to capitalise on the forecasted demand opportunity.
Example
Imagine your company sells an average of 60,000 exercise DVDs a day by taking
orders through your call centre, but the company is experiencing 20,000 dropped
calls per day due to capacity issues. Additionally, you have predicted that you
will receive orders for 120,000 DVD units per day. Based on $15 net profit per
DVD, you realise that you’re missing out on a revenue opportunity equal to
$900,000 per day. You realise you have two opportunities to sell more DVDs. The
first is increasing the efficiency of your order management process.
Previously, you had not invested in this area and have very limited automated processes. You determine that an order management software product will increase a customer service representative’s order-taking efficiency by 25% per day, and if you had a website that enabled customers to purchase your DVDs online, you could capture the overflow orders not taken through the call centre. You realise these improvements will also keep your competitors at bay, while making it easy for customers to buy from you.
Your business objective: Facilitate your company’s ability to take more orders per day and generate more revenue.
This edited excerpt is from Oracle’s software investment guide. View the guide at oracle.com
1. How much software do we need to purchase? A rule of thumb is to review an average of three years of data before making this decision. For example, if you’re licensing a product that is priced by named users, you’ll want to determine the average number of persons in the service department who would use the software.
2. Assume the number of people in Year 1 is 200, in Year 2 is 300, and in Year 3 is 275. This would mean your three-year average is 259 users. This gives you a baseline to start, but should be regarded more as a minimum. For the past 2 years, your usage has been between 275 and 300 people, and therefore purchasing licenses for 259 users would leave you under-licensed.
3. While it’s not a good idea to purchase more software than you need, you do need to buy enough. Make sure you do an adequate assessment of your company’s usage requirements.
Does your current system stack up?
The best companies, and their CFOs, recognise the importance of ready access to the right information to drive the right choices between different variables.
To help determine whether your finance function is moving toward a strategic approach, take a moment and decide whether your system does the following:
- Accelerates closing processes through automation, workflow, and collaboration
- Improves business analysis and decision support by providing historical and forward-looking views, including benchmarks
- Deploys performance management tools that analyse the company and its resources
- Maximises cash flow through improved billing, receivables, collections,
payments, and treasury managementIncreases effectiveness of compliance efforts
through comprehensive auditing, deeper reporting, and management of internal
controls (Sarbanes-Oxley)
This is an excerpt from SAP’s white papers. Visit sap.com/solutions/business-suite/erp
Cut through supplier waffle
In high volume businesses, it is critical to effectively assess current and future needs alongside the software architecture and supporting technologies.
This is particularly important in large businesses because of the inherent
lack of flexibility.
However, sometimes life is not so simple. Vendors often hide behind the defence
of ‘how long is a piece of string?’ when challenged on the capacity for and cost
of scalability.
Businesses should therefore push for clear evidence from vendors on the
capability of technology,
and establish service level agreements to this effect from the outset. To this
end, performance management is also a key area to consider.
Once a system is in place it is important that businesses have an effective way of distributing reports among employees and the ability to monitor technology functionality.
Gary Turner, product marketing director for Microsoft Dynamics. For more go to microsoft.com/dynamics
Think long term on shortfalls
You should do the following:
- List each business issue associated with a shortfall in the current system and the people it impacts.
- Make an estimate of the current annual costs associated with this business issue.
- Make an estimate of the potential savings or benefits derived from replacing your current application.
- Costs can be calculated by estimating the time and cost of staff time spent
working round that issue, or direct costs of using external suppliers or
temporary staff to solve a problem.
This is part of Coda’s software evaluation guide. Visit coda.com for more details
