Grab Your Partner

Dec. 21, 2004
Ask tough questions before choosing vendors, consultants and integrators.

You think you have IT challenges? Put yourself in Ed Brady's shoes. The former divisional IT manager for Lockheed Martin Corp. was hired by American Meter Co., a division of ELSTER-AMCO, to access and interpret the information it needed to make business decisions. Brady's charge, in effect, was to swap out the manufacturer's aging six-cylinder IT engine for a new V-12 powerhouse, in the form of an ERP system. That was two-and-a-half years ago, and Brady is halfway through the project. He's looking for software to run everything from production management to order entry, accounting and human resources. "It's going to be a clean sweep," says Brady, American Meter's IT director. "But we're a price-sensitive organization. We don't get a chance to do this over again." Not every company must undergo as extensive an IT overhaul as the 165-year-old American Meter Co., which makes measurement and control products for the natural gas industry. But some critical lessons for implementing new software systems apply to all manufacturers. First and foremost, industry analysts and CIOs say, success is in the blueprint. A company should have a careful plan to ensure that the new systems fit the business goals. The CIO must have a clear business mandate, a detailed understanding of the company's processes and, above all, the people skills to navigate politically charged waters. The actual technology? That's the easy part. Start Inside All too often, buyers of enterprise software packages assume the decision is purely a matter of comparing feature lists. They go straight to the vendors. But "that's the worst place to start," says Rod Johnson, vice president of customer-management strategies for AMR Research, an IT research firm. He recommends that CIOs map "as-is" processes first. A detailed understanding of the ways, both formal and informal, that people gather and share information is critical to designing a viable solution. Next, buyers should compile a wish list of specific process improvements, divided into immediate pain points and long-term goals. Is the goal to refresh infrastructure? Enable growth? Go global? When Hewlett-Packard Co. (HP), Palo Alto, Calif., began a search for supplier-collaboration software last year, the company identified delays in cycle times on purchase orders and inefficient inventory management as key pain points. Citing those metrics up front ensured a more disciplined effort, start to finish. The selection team can make or break the effort to choose the best vendor and integrator. In fact, analysts at IT research firm Gartner Group estimate more than 80% of the variables that determine the success of enterprise software implementations are related to people, not technology. A well-balanced group will represent the IT department, business units and the executive team. Consultants can help with the initial steps, too. But AMR's Johnson advises buyers that asking for the advice of a consultant up front should not limit the selection of an integrator later on. It's best to work in phases with consultants and evaluate the integrators as rigorously as the vendors. American Meter turned to IDS Scheer Inc. for a fresh perspective on its business processes and the range of available solutions. "We don't want to end up defining requirements that no software can do," Brady says. He assembled a small team for the project, consisting of himself, one person from the front office, another to represent finance and accounting, and three consultants from IDS Scheer. Building support from within is a delicate task. After all, few employees care to admit they are working inefficiently. But veteran IT shoppers take preemptive steps in the selection phase to ensure user support later on. For instance, Tim Arnold, manager of e-business strategy at home audio systems maker Bose, Framingham, Mass., consulted his sales team when the company began a search for a CRM solution two years ago: "To get them to buy in to a solution, you need their input and feedback," he says. Comparing Vendors HP had already made some progress in-house when it decided to seek an outside partner to accelerate development of its supplier-collaboration platform last year. Jeff McKibben, director of HP's worldwide e-procurement program, cast a wide net at first but quickly narrowed the list to four contenders, which HP ranked according to functionality, company viability and willingness to partner in development. In addition to using the new solution within its extensive supplier network, HP wanted to sell the collaboration solution to other manufacturers. In September 2001, HP announced Dallas-based i2 Technologies as its new partner in supplier collaboration software. Like HP, companies looking for outside partners on major implementations should evaluate vendors on the same criteria. Five suggestions are functionality, architecture, quality of the customer experience, total cost of ownership and viability: Functionality. During the evaluation process, each vendor should demo its system with the buyer's own data. If the vendor controls what is presented, the buyer won't be able to see where the product's shortcomings are. "You have to know what functionality comes out of the box and what has to be customized," warns Curtis Lockton, senior director of the industrial and manufacturing vertical at Siebel Systems. Indeed, with enough lead time, vendors can create new features that haven't been tested yet. Architecture. Architecture is critical because every vendor is starting or finishing a major shift from the client/server model to a Web-based model. Customers may experience a disruption, depending on where a vendor is in that transition. Andrew Bennett, vice president of professional services for Onyx Software, cautions buyers to look under the covers when evaluating a software packages. Everyone will say they have a sleek Web architecture today, but many of those vendors are disguising a cumbersome client-side application, and that can make integration difficult. Customer Experience. Customer references help CIOs narrow the list of suitors. But references are only reliable if buyers ask about the entire lifecycle of the engagement. Find out how the vendor responded to changes as they occurred. How did that vendor work with other vendors? In the pitch stage, everyone usually gets along fine, says Chuck Carney, managing principal of the strategy and change practice of IBM Global Solutions. "The reality is, these engagements stress business relationships. If there are boundaries between vendors, you'll start to see things pull apart." Price. Buyers often underestimate the total cost of owning a package. Licensing fees account for only 4% to 8% of the final price tag. The additional costs of implementation, services, operating and upgrading the system determine whether the investment makes sense. CIOs should inquire about the cost of related software, for example adding an i2 plug-in to an SAP AG package. And the entire business team should estimate the impact of teaching employees to do their work differently. "You're changing the way people live 40 hours a week," says Carney. "It's an emotional thing, putting those solutions in place. You almost always take a productivity hit before you start ramping back up." Viability. Finally, in today's economic climate-where once familiar names such as Dun and Bradstreet Software, Avalon and Ask Group no longer exist as independent software concerns-buyers need to make a judgment call about the long-term viability of each vendor. Consider the company vision and the strength of the management team, as well as its financial staying power. Final Decision Increasingly, vendors and integrators pitch the buyer together, to present a unified front and show a joint commitment to the project. While it's helpful to make these decisions in parallel, buyers should know that unlike vendor selection, choosing an integrator is all about people. It's common to put specific names, or at least the level of experience of the team members, into the contract. And although vendor expertise is essential, soft skills such as change management and business process reengineering are equally important.

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