No organization buys enterprise software for the sake of owning it. It’s all about the return on investment or ROI. The software is bought to realize benefits that flow from use. There are four categories of benefits:
Increases in things like revenue, profit, growth, efficiency, speed, compliance.
Reductions in things like costs, time, complaints, attrition, complexity.
Improvements to things like productivity, processes, quality, reliability.
Creation of things like strategy, alignments, new products, new processes.
(This list of benefits is from the work of David A Fields of the Ascendant Consortium. Disclosure: I have paid for and taken one of David’s training courses.)
By definition, the best-fit software is the product that maximizes the benefits above and delivers the highest possible return compared to other potential software products. Best-fit does not mean perfect; it means the best of the available products.
If you picked stocks based on what friends tell you and miscellaneous reading on the Web, you would be gambling because you hadn’t done your homework. You would almost certainly lose money. On the other hand, if you researched multiple companies and picked stocks that closely matched your strategy and risk tolerance, you would be investing in a portfolio capable of realizing your needs.
Likewise, if an organization is about to spend millions to purchase, implement and maintain software, and plans to use it for years, is it worth gambling? Doesn’t it make sense to make the effort up front to maximize the return on that investment? If you do the work up front, you reduce the risk of unwanted surprises during implementation. You can be rewarded with exceptional returns because the software is precisely matched to organizational needs. The chart below shows the difference in ROI between failures, typical and best-fit software implementations.
The outright failure. Here the software never makes it into full production. All it does is to drain resources from the organization until it is eventually abandoned.
The typical project. Takes longer than planned to implement and costs more than expected. All caused by surprises along the way. It might not be an outright failure, but certainly is not the promised success. Not bad enough to dump, but definitely not the expected ROI.
Best-fit software. Implementation is faster than expected, and often costs less than planned. When in production, the software meets or exceeds the expected ROI.
Notice the huge difference in ROI between typical (2) and best-fit (3) software. That is the benefit of selecting best-fit software. The closer the software is to the core of the business, the more this matters to the bottom line. For example, ERP is the heart of any business that uses it, and that is why ERP disasters can be so dangerous. In the worst case, they can lead to bankruptcy as happened with FoxMeyer Drugs. For the same reason, a poor CRM selection can be very damaging.
When starting a software selection project, organizations usually have a good high-level idea of what they want. What they don’t have is a detailed idea of their needs simply because they have not yet investigated the problem. There are three steps that must be taken to select best-fit software:
Develop a comprehensive list of requirements that adequately covers the problem space. Rate those requirements for importance to the organization.
Perform the gap analysis on potential software products, and measure how well they match the requirements. The better the match, the greater the probability of meeting or exceeding the ROI. If no products are a close enough match to the requirements, this can mean:
Changing the evaluation scope
Looking at other products, typically more expensive
Combinations of different products
Select the best fitting product, and then audit the vendor’s RFP or RFI for accuracy. Vendors are sometimes “over-optimistic” in their responses, and the audit catches those before making the purchase.
Something learned early in my career: “When the brains don’t do the work, it’s the hands and feet that do.” To get the desired ROI, do the work up front to select the best-fit software for your particular needs. Measure the match with your requirements, and verify it is adequate. Implementation will be a lot smoother because there are no hidden surprises. Compared to buying software that is good enough, the best-fit software will turbo-charge the ROI because it is precisely matched to organizational needs.
Chris Doig graduated from the University of Cape Town, South Africa with a bachelor of electrical engineering degree. While at university, he founded Cirrus Technology to supply information technology products to the corporate market. The focus at Cirrus was helping companies buy the best IT products for their particular needs. Cirrus also developed custom software for the South African 7-Eleven franchise holder and other corporate clients.
In the 1990s, Chris immigrated to the United States and worked at several companies in technical and IT management roles: Seagate, Biogen, Netflix, Boeing, Bechtel SAIC, Discovery Communications and several startups. At all of these companies he repeatedly saw software being purchased with an immature selection process. Invariably this software would take longer to implement than planned and cost more than budgeted. To make matters worse, the software seldom met expectations.
Having struggled with software selection himself, Chris founded Wayferry, a consulting company that helps organizations acquire enterprise software. He is also the author of Rethinking Enterprise Software Selection: Stop buying square pegs for round holes. While ERP projects account for much of Wayferry's work, other types of enterprise software acquisitions include CRM, HRIS, help desk, call center software, clinical trials management systems and so on. For Chris, the ultimate satisfaction is when clients report meeting or even exceeding expectations with their new software.
The opinions expressed in this blog are those of Chris Doig and do not necessarily represent those of IDG Communications Inc. or its parent, subsidiary or affiliated companies.