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Selecting the Right Vendor/Partner for Finance Department Software and Building a Solid Business Case for It


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When it comes to buying software, the Office of Finance has multiple options in a broad range of categories covering every aspect of financial management. Today’s applications can substantially improve the performance of Finance. Yet, the software selection process is complicated and the stakes are high. Too often, companies find they made the wrong choice or put off making a decision because there are too many lingering questions. This workshop focuses on the “how-to” aspects of software selection. After surveying the landscape of Office of Finance software the session will cover:

* The basic questions you need to answer about the project
* Understanding the what’s possible with today’s software
* Identifying the most appropriate vendors and implementation partners.
* Building an effective business case for the investment

Speaker: Robert D. Kugel, SVP & Research Director, Ventana Research Robert D. Kugel, SVP & Research Director, Ventana Research

Published in Business
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  • 1. Selecting the Right Vendor/Partner for Finance Department Software Robert D. Kugel, SVP & Research Director, Ventana Research
  • 2. © 2014 Ventana Research2 © 2014 Ventana Research Building a Solid Business Case for Software Investment Proformatech 2014 Workshop Robert D. Kugel – SVP and Research Director
  • 3. © 2014 Ventana Research3 © 2014 Ventana Research3 I’m here because I want to… Introductions
  • 4. © 2014 Ventana Research4 © 2014 Ventana Research4 Learn from Each Other
  • 5. © 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.
  • 6. © 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
  • 7. © 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) 67% 66% 62% 56% 54% 47% 45% Executive… Understanding of… Budget required… Shortens… Audit and regulatory… Reducing total cost… Aligns with…
  • 8. © 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) 47% 45% 44% 43% 40% 32% Lack of resources No budget Business case not strong enough Low priority Lack of awareness No executive support
  • 9. © 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
  • 10. © 2014 Ventana Research10 © 2014 Ventana Research10 What do you want to do?
  • 11. © 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
  • 12. © 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
  • 13. © 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
  • 14. © 2014 Ventana Research14 © 2014 Ventana Research14 s Defining Project Requirements
  • 15. © 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
  • 16. © 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
  • 17. © 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
  • 18. © 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 Impact Cost Time Risk Scope Project Requirements
  • 19. © 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
  • 20. © 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
  • 21. © 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
  • 22. © 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 FDW Case Studies Industry Studies Quantitative Sources Qualitative Sources Analyst Reports Industry Studies Websites 3rd Party Data Case Studies Project Requirements
  • 23. © 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
  • 24. © 2014 Ventana Research24 © 2014 Ventana Research24 The Business Case
  • 25. © 2014 Ventana Research25 © 2014 Ventana Research25 What’s Inside A Business Case
  • 26. © 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
  • 27. © 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
  • 28. © 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
  • 29. © 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
  • 30. © 2014 Ventana Research30 © 2014 Ventana Research30 Define Project and its Requirements RISKS Technology Timeline 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
  • 31. © 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
  • 32. © 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
  • 33. © 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
  • 34. © 2014 Ventana Research34 © 2014 Ventana Research34 Which Vendor?
  • 35. © 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
  • 36. © 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
  • 37. © 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 64% 52% 46% 46% 43% 38% 26% Usability Software meets business needs Functionality Capabilities of software for business Manageability Ease of administration and security Reliability Architectural fit, performance,… TCO/ROI Software meets cost and benefit… Adaptability Customization, development and… Validation of vendor References, viability, commitment
  • 38. © 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
  • 39. © 2014 Ventana Research39 © 2014 Ventana Research Building a Solid Business Case for Software Investment Proformatech 2014 Workshop Robert D. Kugel – SVP and Research Director
  • 40. Selecting the Right Vendor/Partner for Finance Department Software Thank You For Attending