When evaluating potential enterprise technologies for organizations, it can be easy to focus on that tangible milestone and those tangible milestones are important to considerer within your software evaluations are the intangible aspects of the software in order to effectively choose the decide on the best fit for you.
Here at Third Stage, one of the services we provide to our clients is software evaluation. We help clients agnostically assess and select what types of technologies are most likely to best support their digital strategy and overall roadmap for the future. When we're going through the process, we of course look at things like RFP responses, product demos, functional capabilities, the total cost of ownership, and potential benefits.
Oftentimes, what gets overlooked are those intangibles that are hard to measure, but are significant as you determine what is the best fit for your organization. In this blog, I outline the most important intangibles that you should be considering as part of your software evaluation process.
Let’s dive in...
The first thing we are going to look at is cultural fit. To begin, you can ask yourself this question:
How well does the software you're considering or the technology you're considering, align with your organization and with your culture?
I'll start with an example to help you better understand. There's a lot of organizations out there, we fondly refer to them as cowboy organizations, entrepreneurial, value flexibility, that want to retain a certain amount of independence. Typically, this type of company has a very reactive, highly skilled work ethic that can be hard to scale.
They want to be set apart from others, it’s part of what makes them different. This authenticity and passion are why their customers love them and why they pay for their services or products.
When this type of organization selects a software solution, identifying the right cultural fit is critical to ensure success. For example, if they select a more rigid system, like SAP S/4HANA and Oracle's NetSuite. That right there creating a cultural conflict, as they have a culture of entrepreneurial flexibility, but are attempting to introduce a technology that doesn’t embody these values.
On the flip side, an organization that values standardization, scale and efficiency, and common operating models and invests in a best of breed or a custom development type of solution that is very flexible, it create cultural conflict.
In the end, it’s important to consider those intangible aspects of the software to make sure that the technologies align with the present and future company culture.
Now, like cultural fit, we also want to evaluate organizational fit. Again, this is another category that's very hard to quantify or score. I have good news though, for those that are qualified and do this for a living, it can be a bit easier to see. When we talk about organizational fit, we mean what types of technology are going to fit best within the skills and competencies within the organization.
Even if the goal is to change current skills and competencies, you certainly don't want to introduce a new technology where you don't have the skills today, and you don't plan to have the skills in the future. It is important to have the right skill alignment and organizational alignment between the technologies and workforce.
For example, a proprietary technology that requires a certain custom skillset in having a baseline knowledge of programming language. If your IT department does not have that proprietary skillset, and you have no plans to go out and acquire a new headcount or hire new people to support that technology, you've created a misalignment. Introducing software that doesn't align with the organization will likely cause barriers in user adoption and produce a very high risk of implementation failure.
Similarly, a lot of organizations we work with are Microsoft shops. They love Microsoft products and use legacy Microsoft ERP systems. They also use Office, Microsoft Teams, and SharePoint. As you can imagine, there's a certain internal competency around Microsoft. When you have this level of saturation and comfort selecting a system that runs counter to, or a lot different from Microsoft, creates an organizational misalignment issue. These are things you always want to consider.
The next intangible you want to have is a clear vision of what it is you're trying to accomplish as an organization as part of your overall digital strategy and roadmap. If your goal and objective is to standardize business processes and create a common process operating model, then you want to probably go out and find a single ERP system that is a bit more structured and standardized than it is flexible.
If on the other hand, going back to the first intangible I mentioned, you're an entrepreneurial, flexible organization, and you want to retain that sort of environment and operational model, then you don't want to go out and buy a rigid single ERP system that's hard to change and hard to customize.
In the example of the standardized company, they probably would not want to go look at, say a Microsoft Dynamics 365 or even Oracle ERP Cloud. Those are two of the more flexible products in the marketplace that can drive a certain amount of standardization, but they are generally stronger when it comes to flexibility in changing the software to fit the business rather than driving or enforcing any sort of standardized business operating model.
Now on the cost front, it's very easy to quantify software license cost or subscription cost if you're operating in Cloud technology. Understanding modules and user accounts will help identify hidden escalators and kickers within your SaaS or your Cloud contract. It is critical to be aware of the overall `total cost of ownership instead of just evaluating software cost.
In fact, those hidden costs generally run three to four times what the actual software investment is. Every dollar spent on software subscriptions or licenses generally constitutes $3 - $4 for each dollar spent on other things. That is going to be things like your implementation cost, infrastructure and hardware upgrades, data migration, organizational change management, and anything to do with risk mitigation and planning, those sorts of things.
Considering internal costs like project team resources that will need to be backfilled presumably. Pulling people out of their day-to-day operations will create a gap that will require hiring some temporary resources, that's another cost you need to factor in. These aspects you can measure and quantify, but most organizations don't. They just look at the software and don't understand how to calculate unseen costs.
For example, I mentioned SAP S/4HANA. There's a proprietary language that SAP is built on that requires a very specific skill set that can be more expensive than an open-source system that's built on Python. Those are going to be two different hidden costs as it relates to the IT technical skillsets and capabilities required to support those products.
This is just another aspect that highlights the importance of comparing intangible or hidden costs compared.
Now, the final thing you want to consider is the overall vendor product roadmap-.
Those are just a few questions to ask potential vendor partners during the product roadmap analysis. This step is essential, especially in today's day and age, because the technology is changing so quickly. So many new systems are built for the Cloud now, are rewrites of systems that were on premise in the past.
At the same time, understand that there's a difference between the product functionality today vs. future capabilities that vendors may try to sell within the product roadmap conversation. Just because it's on the product roadmap doesn't mean it's going to happen ever necessarily. It also doesn't mean it's going to happen quickly. Having a very clear understanding through an agnostic evaluation process that illuminates future plans for the product while identifying current state strengths and weaknesses will be the key to success.
I hope this has given you some things that think about as it relates to intangibles of software evaluation and selection. To help you with your software evaluation and your overall digital transformation journey, I encourage you to download our 2021 Digital Transformation Report, which we publish every year. It includes independent rankings and reviews of different enterprise technologies, as well as general digital transformation best practices.
If you have any questions regarding these intangible enterprise software evaluations, please don’t hesitate to reach out to me directly. I am happy to be an informal sounding board as you move through your digital transformation journey.