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Selecting the Right Vendor/Partner for Finance Department Software
Robert D. Kugel, SVP & Research Director, Ventana Research
© 2014 Ventana Research2 © 2014 Ventana Research
Building a Solid Business Case for Software
InvestmentProformatech 2014 Workshop
Robert D. Kugel – SVP and Research Director
© 2014 Ventana Research3 © 2014 Ventana Research3
I’m here because
I want to…
Introductions
© 2014 Ventana Research4 © 2014 Ventana Research4
Learn from Each Other
© 2014 Ventana Research5 © 2014 Ventana Research5
Measure What Matters
Throughout the ‘80s, Morgan Stanley economist Stephen Roach asserted that technology investments were irrational: the service and financial sectors had the greatest investment in IT yet the lowest productivity gains. In the early 1990s, he extended that to the US economy generally. In hindsight, it’s clear that the analysis was correct but the conclusion was wrong.
• “Productivity” (people input/ efficiency) was not the right metric.
• Returns on IT investment often require a learning curve.
• Non-cash returns are difficult to quantify.
© 2014 Ventana Research6 © 2014 Ventana Research6
Performance Management Works
“For the past decade a group of economists…focused on three commonly accepted management techniques—setting targets, rewarding performance and measuring results—and studied the performance of more than 10,000 organizations in 20 countries in the light of how well they implement these techniques… Good management is indeed tightly linked to improved corporate performance, measured in terms of productivity, profitability, growth and survival.”
The Economist 18 January 2014
© 2014 Ventana Research7 © 2014 Ventana Research7
Why Companies Decide to Invest
Making a successful business case requires:• Executive sponsorship• Clear value statement• Better value than
competing investments
It helps if it:• Promotes efficiency• Addresses risk and
regulation• Reduces costs
Source: Ventana Research Next Generation Finance Analytics Benchmark
Business Considerations for Investments
(Most or Second Most Important)Executive
sponsorship
Understanding of potential value
Budget required for investment
Shortensactivities and tasks
Audit and regulatory compliance needs
Reducing total cost of ownership (TCO)
Aligns with investment priority
67%
66%
62%
56%
54%
47%
45%
© 2014 Ventana Research8 © 2014 Ventana Research8
Why Companies Decide Not to Invest
It’s all about making a strong case:• Low priority, no budget or
resources all reflect a failure to make a strong enough case.• Lack of awareness –
insufficient depth in making the business case.
Other factors (fewer than one-third citing):• TCO too high, too much
training, too long to deploy• No suitable software (20%)
Source: Ventana Research Finance Analytics Benchmark
Barriers to Investing in Analytics(Six Most Frequently Mentioned)
Lack of resources
No budget
Business case not strong enough
Low priority
Lack of awareness
No executive support
47%
45%
44%
43%
40%
32%
© 2014 Ventana Research9 © 2014 Ventana Research9
Agenda
Before You Get Started
Defining the Project Requirements
Create the Business Plan
Craft the Elevator Pitch
Which Vendor or Partner?
Wrap Up
© 2014 Ventana Research10 © 2014 Ventana Research10
What do you want to do?
© 2014 Ventana Research11 © 2014 Ventana Research11
Analyze the Situation
What are the objectives?• What do you want to accomplish?
• What does your organization want to accomplish?
• What do the executives want to accomplish?
What issues will the project address?• Productivity issues (get better value from skilled people)
• Time issues (not just cost – deadlines and decision loops)
• Quality issues
• Effectiveness issues
• Transparency or visibility
• Responsiveness
• Risk or compliance
• Cost issues (cut payments)
How important are each of these? To whom?
Before You Get Started
© 2014 Ventana Research12 © 2014 Ventana Research12
Change Management
Rather than paving over existing cow paths, technology investments often enable new business methods. What if management doesn’t want to change?
Before You Get Started
© 2014 Ventana Research13 © 2014 Ventana Research13
Analyze the Situation
Who must be involved in creating the business case?
Do you know what’s possible? Do the executives know what’s possible? Can you explain what’s possible to executives?
Do you have executive sponsorship? (Really?)
Do you have a process for identifying the gaps between the current and end states? Do you have a process for deciding how to eliminate the gaps?
How important is this initiative to those that must approve it? How do you make it more important to everyone involved?
Do you have a budget? (Really?)
Before You Get Started
© 2014 Ventana Research14 © 2014 Ventana Research14
s
Defining Project Requirements
© 2014 Ventana Research15 © 2014 Ventana Research15
Brainstorm Options
There can be (and often are) multiple approaches to reaching the objective(s).
All software projects have people, services, time, information (data) and technology components.
Use a framework for defining resources required, end states and the value of the investment to ensure clarity consistency and completeness.
Define any constraints.
Project Requirements
© 2014 Ventana Research16 © 2014 Ventana Research16
Who is the Executive Sponsor?
• Aim high.• Trade off: seniority
vs. commitment.• Understand how
their objectives align with the project’s objectives.
• Can you have more than one sponsor?
• Can you succeed without one?
Project Requirements
© 2014 Ventana Research17 © 2014 Ventana Research17
Framework Example
Initially, lay out the scope of the options at a simplified, high level to ensure clarity
Option Description Objectives People Services Technology Data
A
B
C
D
E
Resources Required
Project Requirements
© 2014 Ventana Research18 © 2014 Ventana Research18
Prioritizing the options requires a decision framework. Which elements do you want to include and how will you weigh them?
Set Option Priorities
Business
ImpactCost
Time
Risk
Scope
Project Requirements
© 2014 Ventana Research19 © 2014 Ventana Research19
Consider IT Constraints
What IT constraints (if any) must be observed? • Existing software • Preferred vendors• Hardware/software issues that can affect feasibility
Point solution (best-in-class) or suite?• Does the suite do the job?• Keep it simple or is there a bigger picture down the road?
Which implementation partners?• The best software poorly implemented is far worse than a
runner up that is installed and configured competently.
On-premises or The Cloud?
Project Requirements
© 2014 Ventana Research20 © 2014 Ventana Research20
Consider Skills Constraints
• What IT skills are required for each option?
• Familiarity with specific databases, programming languages, etc.
• What Finance IT skills are required for each option?
• What analytical skills are required for each option?
• What user skills are required for each option?
• If training is required, who will do the training and who will be trained? For how long? At what cost?
Project Requirements
© 2014 Ventana Research21 © 2014 Ventana Research21
Security and the Cloud
How secure is the Cloud?
vs.
How secure is on-premises?
Project Requirements
On Premises
The Cloud
© 2014 Ventana Research22 © 2014 Ventana Research22
Determine the source and location of the data and information you need for the business case:
Identify Data Sources
ERP
CRM
FDWCase
Studies Industry
Studies
Quantitative Sources Qualitative Sources
Analyst Report
s
Industry
Studies
Websites
3rd Party Data
Case Studies
Project Requirements
© 2014 Ventana Research23 © 2014 Ventana Research23
Who Cares?
Identify each individual that will have input into the decision. Determine their motivations, concerns, hot hot buttons, etc.
Make certain that they all have a reason to care about your project.
Project Requirements
© 2014 Ventana Research24 © 2014 Ventana Research24
The Business Case
© 2014 Ventana Research25 © 2014 Ventana Research25
What’s Inside A Business Case
The Basic
Table of Contents:
1. Executive Summary2. Problem Statement3. Situation Analysis 4. Solution Options
5. Project Description (s)
6. Cost-Benefit Analysis7. Recommendations
© 2014 Ventana Research26 © 2014 Ventana Research26
The Executive Summary
• Be brief (500-1000 words) – it’s a summary of a technology project, not building the Panama Canal.
• First sentence: We propose to [do what] so that [the company, division, department] can [achieve what] in order to [solve what problem].
• Review the current situation in terms of the issues you plan to address and how those issues affect the organization.
• Summarize the solution options you’ve laid out in the business case.
• Sum up your primary recommendation and the main reasons for it.
The Business Case
© 2014 Ventana Research27 © 2014 Ventana Research27
The Problem Statement
“A clear description of an issue facing a group or company.”
The Business Case
• State the issue(s)
• Elaborate on the consequences
• Explain the urgency
• Sum up the steps needed to address the problem
© 2014 Ventana Research28 © 2014 Ventana Research28
Situation Analysis
A situation analysis builds on the problem statement. It should be a concise but thorough analysis of: • The main and related issues• The likely consequences of not addressing the issues• The key benefits of addressing the issues• The reasons for urgent action
The Business Case
Consequences:
• Higher costs• Slower/later• Greater risks/
uncertainty• Less informed• Lower quality
Benefits:
• Cheaper/profitable
• Faster/sooner• Safer• Smarter• Higher quality
Impacts:
• Strategic
• Competitive
• Organization
• Financial• Reputation
© 2014 Ventana Research29 © 2014 Ventana Research29
Solution Options
How many options? (What’s your strategy?)
• Two (forcing an either/or) or multiple?
• Two – do nothing/do something vs. two new paths
• Three – force preference for a mid-point choice that’s between status quo and shoot the moon?
• Four – provide a path that moves from the status quo in steps to a transformative state? Could you do it with three instead?
• Five or more – too complicated and not a good idea in most cases.
Provide a high-level description of the options with short bullet points summarizing the benefits and costs.
The Business Case
© 2014 Ventana Research30 © 2014 Ventana Research30
Define Project and its Requirements
RISKS
TechnologyTimeline
People
Costs
• Software license•Maintenance and support• Implementation• Internal support• Network• Hardware
• Time commitments• Skills• Training – initial and ongoing
• Key elements and their phases
The Business Case
© 2014 Ventana Research31 © 2014 Ventana Research31
Cost Benefit Analysis
• Defining and quantifying benefits of an investment is essential – and challenging.
$£¥€
Typical Costs• Initial costs• Implementation
costs• Ongoing costs
Typical Benefits• Direct cash • Indirect cash
benefits• General efficiency
issues• Shorter cycles• Higher quality• Reduced risk• Improved
transparency and visibility
The Business Case
© 2014 Ventana Research32 © 2014 Ventana Research32
Numbers and Calculations
• Companies usually have methodologies and templates that must be used. Understand how they work – their strengths and weaknesses.
• State your assumptions clearly. Ensure these are in line with expectations of decision-makers or make a convincing argument for your position.
• Present your analysis clearly and as concisely as possible. Make it easy to change key assumptions and see the impact on your analysis.
• Understand the fundamentals of financial analysis and challenge any internal approaches that are not fundamentally sound.
The Business Case
© 2014 Ventana Research33 © 2014 Ventana Research33
Craft Your Elevator Pitch
1. Clearly state the objective
2. Explain how it fits into the company’s strategy.
3. Communicate its key value elements, timeline, costs and payback.
4. Emphasize why it’s important and urgent for your audience to proceed.
30-60 seconds
© 2014 Ventana Research34 © 2014 Ventana Research34
Which Vendor?
© 2014 Ventana Research35 © 2014 Ventana Research35
The purpose of applying diligence to the vendor selection process is to delay as long as possible the
Oh ****!moment when you realize the software will not do what you thought it would.
Vendor Selection
© 2014 Ventana Research36 © 2014 Ventana Research36
Ventana Research Value Index
The methodology used to produce the Value Index evaluates in detail aspects of product functionality and suitability-to-task as well as the effectiveness of vendor support for the buying process and customer assurance. The Index represents the value a vendor's offers and relevant aspects of its products and services, using both a clear and accessible graphical and analytical representation in thermometer form and a precise numerical index.
Vendor Selection
© 2014 Ventana Research37 © 2014 Ventana Research37
What Finance Organizations Assess
Most important elements:• Overall suitability to task• Features/functions• Ease of administration
Least important elements:• Validation of vendor • Customization/
development• TCO/ROI
Vendor Selection
Source: Ventana Research Next Generation Finance Analytics Benchmark
UsabilitySoftware meets business
needs
FunctionalityCapabilities of software
for business
ManageabilityEase of administration
and security
ReliabilityArchitectural fit, per-formance, scalability
TCO/ROISoftware meets cost and
benefit requirements
AdaptabilityCustomization, devel-
opment and integration
Validation of vendorReferences, viability,
commitment
64%
52%
46%
46%
43%
38%
26%
© 2014 Ventana Research38 © 2014 Ventana Research38
Understand What’s Possible
• Educated consumers of anything do a better job of buying – and using – anything.
• Too often, finance organizations underutilize the capabilities of their existing systems.
• Understanding how technology affects the finance function is the job of finance organizations.
• Software rusts. Plan for obsolescence. Review finance systems’ performance at least annually.
Was state-of-the-art.
Vendor Selection
© 2014 Ventana Research39 © 2014 Ventana Research
Building a Solid Business Case for Software
InvestmentProformatech 2014 Workshop
Robert D. Kugel – SVP and Research Director
Selecting the Right Vendor/Partner for Finance Department Software
Thank You For Attending
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