Missing your target? Successful implementations begin at procurement

Companies are racing to implement new technology projects in an effort to modernize and streamline their supply chains. With cloud-technology now being touted as a fast and efficient way to deploy new technology, the temptation to “join the crowd” has never been greater.

But, 2020 research from the Boston Consulting Group found the odds of a successful digital transformation were somewhat less than ideal. BCG’s research found that only 30% of transformations met or exceeded their target value and resulted in sustainable change. Another 44% created some value but did not meet their targets and resulted in only limited long-term change. A final 26% created limited value (less than 50% of the target) and produced no sustainable change.

Separately, a Consortium for Information and Software Quality report in 2020 found the cost of unsuccessful IT/software projects exceeded $260 billion. Operational software failures surpassed $1.56 trillion.

The failure that never ends

“The last thing your customer wants is an implementation to come back and haunt you,” explained Spencer Kraemer, director of purchasing at Citizen’s Property Insurance.

Kraemer noted that failed implementations are often fraught with a number of problems, including:

• You’re asking the software-as-a-service (SaaS) vendor to do more customizations than configurations

• You’re using the vendor’s contract template

• The contract is based on time and materials, not implementation

• There was no demo of the solution, of the team that did the demo is different than the team doing the install

• The statement of work (SOW) says the vendor will “help,” “assist,” or “endeavor” to complete the implementation

“There are ways to mitigate your risk and I believe the way to start is at the beginning, at procurement,” Kraemer said.

Citizen’s Property Insurance is a state-backed non-profit organization based in Florida. The company was created in 2002 to offer Florida residents that traditional general property insurance companies refused to cover an option.

Jessica Chapman, assistant director of purchasing, and Stephen Guth, vice president of enterprise services, joined Kraemer on a panel at ISM World in Dallas this month to discuss how to make software implementations smoother and more successful.

Success begins at procurement

The answer, they all said, was setting the proper stage for success during the procurement stage.

Chapman said companies often don’t use a competitive solicitation process to secure the vendor.

“If done right, solicitation can lead to a better outcome than you could do without one,” she said.

Guth said the SOW is important and a step that many companies skip. Set expectations in the SOW, he noted, including the background and purpose of the project, as well as defining the scope of work. The scope should include:

• Project requirements

• Deliverables and milestones

• Project outline and timeline

• Roles and responsibilities of both the vendor and customer

• Resource plan

Also include assumptions, dependencies and “out of scope” work, Guth added. Vendors like to claim out of scope when issues arise, resulting in more cost and delays for the implementation. A change management process is also critical, Guth said, to allow for changes to the project and who will pay for those changes.

Tie final payment to acceptance

Finally, lay out the payment schedule in the SOW. Guth advised adding a payment “hold back” of 10% to 20%, and approving final payment dependent on “your inspection acceptance” rather than on delivery. This ensures the project is operational.

Chapman pointed out the importance of references, not just of current clients of the vendor, but also of those that are no longer customers.

“You want to hear how the vendor handled un-implementation” and whether they helped the customer transition to a new vendor, she said.

Kraemer suggested hosting a pre-bid question and answer session with interested companies. This would cover objectives, expected outcomes and responsibilities of each party. Once the initial interest is narrowed down to vendors, he said to hold an ask-me-anything session prior to receiving the actual bids.

“We do it after we short-lift clients. They ask and we answer any and all questions,” he said, noting that doing so prior to a product demo helps the prospective vendors better focus their demos and helps them understand what you want in a vendor.

It’s about “closing gaps in understanding,” Kraemer said.

Another tip is to produce a “reverse demo.” To do this, Kraemer said you should film your current process, highlighting things you like in the process and those you do not like.

Involve the right people from the start

All three panelists mentioned the importance of getting the right people involved in the process from the start. Include the right subject-matter experts and plan their individual involvement, Kraemer said.

The same goes for the vendor.

“Make sure you are dealing with the same team during the procurement process as you will be during the implementation,” Kraemer said.

The other area that leads to cost overruns is in the cost of the contract. Guth said many vendors want to charge by the hour so as changes are made or delays arise (some of which may be due to the vendor pulling staff away for other projects), the cost of the contract goes up. He said you should push for a fixed price contract for the implementation, putting the onus on the vendor to complete the work correctly and on time.

Also be aware if the vendor says your IT department doesn’t need to be involved. Guth said if that is the case, “don’t believe them.”

Finally, Kraemer said you should also have a BATNI in place. A BATNI is a “best alternative to a non-performing implementation.” In this case, what happens if the chosen vendor is unable or unwilling to complete the work? Having a BATNI, as well as a detailed strategy in place (placed in the statement of work) to deal with such a situation can be a savior.

Dispute resolution and the ability to scale the scope of the project up or down should also be covered in the initial contract, the panelists said.

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