selecting the right vendor/partner for finance department software and building a solid business...

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


Learn from Each Other


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.


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


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%


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%


Agenda

Before You Get Started

Defining the Project Requirements

Create the Business Plan

Craft the Elevator Pitch

Which Vendor or Partner?

Wrap Up


What do you want to do?


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?



Change Management

Rather than paving over existing cow paths, technology investments often enable new business methods. What if management doesn’t want to change?



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?)



s

Defining Project Requirements


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


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?



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



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



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?



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?



Security and the Cloud

How secure is the Cloud?

vs.

How secure is on-premises?


On Premises

The Cloud


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



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.



The Business Case


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


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


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


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


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


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


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


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


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


Which Vendor?


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


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


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%


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

selecting the right vendor/partner for finance department software and building a solid business...

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