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

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 Investment
Proformatech 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)
67%
66%
62%
56%
54%
47%
45%
Executive…
Understanding of…
Budget required…
Shortens…
Audit and regulatory…
Reducing total cost…
Aligns with…

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%)
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

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
Impact Cost
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
FDW
Case
Studies Industry
Studies
Quantitative Sources Qualitative Sources
Analyst
Reports
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 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
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

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
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

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 Investment
Proformatech 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 Case for It

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