Enterprise software procurement
Enterprise Software Procurement
So, you are looking for new enterprise or departmental software or some other type of major system. Maybe you are looking for a new ERP system, an EHR, a 311 system, or an EDMS? Maybe you need a major hardware upgrade as a solo project or as part of a new system project?
You might have already had discussions with vendors, or possibly you even know which product you want to purchase. Perhaps you are planning to purchase the ERP from TBQ International for manufacturing because that is what everyone in your industry uses and it seems like a safe bet. Or all of your neighboring Counties use O’Riley Technologies, so you think it will work for you. Maybe you called Bill, the Public Health Director from your neighboring County and he says Navajo Software makes a great EHR product and that is a good enough recommendation for you. You just want to get the project done.
The big problem with word-of-mouth recommendations is that YOU will be the one responsible for the success or failure of the project – the people who casually advised you will have amnesia about their recommendations if the project fails.
Regardless of where you are in the process, let’s step back and start over from the beginning.
60% of Projects Fail
According to the Project Management Institute, 60% of projects fail. Based on my own observations, the success rate for municipal software projects is probably lower than 40%. Government agencies rarely publicly or even privately admit that a project failed. Spectacular, expensive failures occur in the private sector as well, and the corporate landscape is littered with the carcasses of dead software projects where managers and executives have been forced into early retirement because of outrageous multi-million dollar cost overruns or outright failures.
Projects don’t succeed or fail by accident and you want to be overseeing one of the minority of projects that actually succeed. Whatever decision you make, your organization will be bearing the fruit of or suffering the consequences of your decision for the next 15 – 20 years, or longer. Large systems become a generational legacy, especially in the public sector. Regardless of the type of system you are seeking, the approach to purchasing the system should be the same. You need a rigorous methodology that incorporates staff buy-in and proven techniques for getting the features you need to make better business decisions. That system and the vendor’s culture must mesh successfully with your organizational culture. The vendor will be your business partner for the life of the product and thirty-year-old systems are not unusual in the public sector.
Why Projects Fail
Here are some common reasons why large software projects fail:
• Top-Down management, planning, and execution.
• Failure to identify and enumerate specific business goals and objectives.
• Failure to understand current, “as is” business processes.
• Failure to comprehend and plan for the entire scope of the project.
• Weak communication and stakeholder management.
• Failure to establish end-user buy-in.
• Failure to account for organizational culture.
• RFP doesn’t match your requirements for software and services.
• Underestimating the services required to configure the product.
• Underestimating or omitting training.
• Failure to plan for implementation.
• Insufficient or poor project and stakeholder management.
• Lack of Experience.
I recently read a report written for a manufacturing organization written by a Big 4 consulting firm. The report was extolling the virtues of a top-down management approach to the company’s ERP project. The project was already over budget by $15 Million and the meter was still ticking. I suppose the consulting firm was scrambling for excuses for their disastrous management of a project that will eventually come in 300% – 500% over budget.
I couldn’t disagree more with the Big 4 firm when it comes to top-down management of large projects.
You can’t build airplanes in the air and you don’t build a pyramid starting from the top. Large software procurement and implementation projects must be built from the ground up with a strong foundation that results from giving the stakeholders who will actually be using the system a prominent seat at the table. Yes, you need strong executive support for a major software/business reengineering project, but executives may never use the system. If you don’t build a robust foundation provided by the people who actually understand the granular level of all the organizational business processes, the project will be difficult, seriously over budget, or may fail completely. Succeeding at these types of projects requires top-down, bottom-up, and inside-out management. You must examine every aspect from every angle.
Lack of Experience
Lack of experience is another major reason why large system projects fail. Large system procurement and implementation projects are events that occur only once or twice in the career of many employees in the public sector. If you are an executive in a very large public sector organization, you may have full-time professionals who specialize in software procurement and implementation projects. However, there are 3033 County governments in the United States, over 19,000 municipal governments, and nearly 14,000 independent school districts. The vast majority of these organizations cannot afford to employ experienced full-time system procurement and project specialists. If you are an executive in this real world of municipal government, what do you do?
The Role of Organizational Culture
Even when expert, internal resources are available, there may be cultural issues in organizations that can make projects involving significant change impossible. I once worked on a project for a Fortune 100 company that employed a large staff of professionals who could theoretically have performed the large migration project they were undertaking. However, their institutional culture made it impossible for them to complete the project. The ultra-stratified management structure and extreme risk aversion made the execution of such a project impossible for them to implement internally and they had to contract a small army of risk-tolerant consultants to do the work.
RFP’s From the Internet
Unfortunately, many organizations begin the process of software procurement with an RFP. Even worse, they sometimes use an RFP that was downloaded from the Internet and written for another organization with different requirements, different business processes and an entirely different organizational culture. The truth is, the same piece of software that works for your neighboring county, school or city may not work for you. There are hundreds of commercially available ERP products for municipal governments. When you factor in Utility Systems, Public Safety Systems, Records Management Systems, Tax Collections Systems, Traffic Management Systems, Public Health Systems, Code Enforcement Systems, and the like, there are thousands of products from which to choose. How do you navigate such a massive set of choices?
Following a rigorous and disciplined methodology for the software procurement and project management processes will vastly increase the probability of a successful outcome. Maybe you already have a system that works well. Below is a summary outline of the system I have used and honed since my first large software procurement in 1996. If you are experienced at software procurement and implementation projects, this information may seem to be self-evident. However, considering the number of failed municipal software projects I have seen, the message hasn’t really gotten out yet. Notice that the RFP finally comes up in Step 8.
- Draft a Project Charter
- Establish a Procurement Committee & Appoint a Project Manager
- Conduct a Business Process Review
- Identify and Document Goals, Objectives and a Preliminary Budget
- Conduct a Needs Assessment
- Analyze and document your Information Technology Infrastructure
- Document Environmental Factors and Organizational Culture
- Draft and release an RFP (Request for Proposal) or RFB (Request for Bid)
- Review Proposals and Prepare a Short List for Demonstrations
- Site Visits – Customer and Vendor HQ
- Hold Software Demonstrations & Select a Solution
- Negotiate and execute the Contract
One of the primary objectives should always be the improvement of the quality of services in your organization and you should be aware of some of the project risks and political ramifications.
I cover the entire process here. Please feel free to e-mail me if you have comments or want to discuss software procurement in your organization. If you take a sensible and cautious approach using all due diligence, your project will certainly be a success.
If you want to talk about your project, send me an e-mail at firstname.lastname@example.org.
Copyright © Jeffrey Morgan 2015, 2018