Friday, October 31, 2008

Enterprise Software Purchasing

This new post from ZDNet proves enlightening on the subject of enterprise software purchase. The author of the post, Michael Krigsman, quotes Barry Wilderman, VP of Business Strategy at Lawson Software, regarding points to cover with software vendors. Krigsman summary of these points, that you may also find useful, are:

  1. Software license fees: A negotiated fee often involves a certain cost/named user. It is important to understand the relative usage by named user (e.g., the heads-down transaction user, the decision maker/reporting user, the self-service user) and the value that each user will deliver to the company deploying the system. An understanding of value, when the value will be delivered, and a comparison to total cost of ownership are all critical to making the right decision about software fees.
  2. Implementation fees: Expect to pay one to four times the cost of the software in implementation fees. And, even if you buy third-party professional services, a best practice is to have the ERP vendor as a subcontractor (at least 20 percent).
  3. Maintenance fees: This represents a significant charge – often about 20 percent of your original software charges. Make sure you are getting the kind of support you need.
  4. Upgrades: How often do these upgrades occur? (A good rule of thumb is every three to four years.) What has been the history of upgrades over the past five to 10 years? Relative to the cost of going live with the software, how expensive were the upgrades to implement?
  5. New modules: If the software vendor invents something, is it part of your maintenance agreement, or is it a new product for sale? Ask the vendor to show you all the new modules implemented in the past five years.
  6. Post go-live sales, services and care: What are your expectations after you go-live? Do you want the vendor to have a keen understanding of your original pains and goals? Will they know enough about you to really help?

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