"SI-X" Ways to Select a Procurement and Supply Chain Management Software Service Integrator (SI)
The world is literally and figuratively breathing easier today now that the global pandemic is finally on the wane. But, at the same time, increased product and services costs, geopolitical instability, combined with delivery delays and inflation, have created the perfect storm for every company worldwide, both large and small. Most companies are again turning to their Procurement and Supply Chain (PSCM) organizations to come to the rescue. However, in the last three years since the start of the pandemic,
most of these organizations have experienced staff shortages, and have found their systems are unable to optimize the gigabytes of data from each incident.
One island in the storm has been renewed interest in PSCM software, as part of a digital transformation, as a functional optimization upgrade, or both. While PSCM software selection is important for any enterprise, any tool’s value is directly proportional to the adoption rate of its users on both the buy and supply side of the equation. Most companies today are discovering that the new normal is so dynamic and confusing that they are relying on strategy and/or systems consultants (sometimes called SI’s) to help them with the software selection, design, implementation, and post-go-live support.
Advisory and technical services for large-scale software implementations are a large investment and thus negatively impact the PSCM software business case (if not properly budgeted for). But should companies select their PSCM systems consultants solely based on the lowest price, or are there other criteria today that are equally or more important? Moreover, what other implementation service provider features are leading-edge companies today considering?
As someone who has used, bought, sold, and consulted about PSCM software and implementation services for the largest and most complex companies in the world for almost half a century, I would like to share some of my first-hand experience and insights. In addition, your feedback is encouraged, especially since in today’s “new normal” there are no wrong answers.
Top Criteria for Selecting a Software Implementation Partner
1. Lowest Total Price or Cost
Price and cost seem like no-brainers for SI selection, but they are often misunderstood or poorly applied. Most SI buyers focus heavily on each consultant’s hourly rates or the total project turnkey price tag. However, this is like just looking at the sticker price when buying a new car. Instead, you must look at the total cost of ownership (TCO). The scope of work (SOW) defines what will be regularly charged and what will be charged if out of scope. Often, especially with cloud and newly released software, it’s almost impossible to accurately scope a project. Anything out of scope will cost extra in terms of time, resources, licenses, etc. Also, consider the SI’s productivity. They typically charge customers a full day’s rate (8 hours), although their consultants may only work a few hours a day or less. Their consultants may also be working offshore, which means they work odd hours that are hard to monitor. I always felt that the closer my consultants were in physical proximity to my staff and me, the more productive they were and the greater value in less time they delivered. In fact, I have personally experienced offshore SI resources ultimately costing me 25% to 50% more than budgeted, at least from a cost perspective.
2. Software (including ERP) Technical Experience/Certifications with the Software
SI’s are quick to highlight their consultants’ licenses, certificates, and other academic credentials. However, while this serves as proof of their technical proficiency at a specific time and place, it does not mean that they have the business knowledge and experience to apply those technical credentials. They may also not have the skillsets needed for integrating the targeted solution with the current and planned systems processes and IT ecosystem. This type of siloed vision and experience can result in expensive rework and extensive implementation delays. In my experience, I choose consultants that have at least 10 years of experience (and the required certification) unless they only fulfill an administrative or analytical role.
3. Past Relations on Other Projects with You or Your Company
Like hiring a previous coworker or employee, personal experience is a great way to at least identify a qualified SI. You or someone from your company might know an SI (or someone now working at an SI) who not only successfully implemented the software or systems you are targeting, but also delivered value in terms of business strategy, market growth potential, employee and supplier relationships, change management, communications, and value realization.
4. Customer References
Whether it was as a buyer, seller, or consultant of SI services (and unlike selecting a job candidate), I feel that most SI’s do not have strong and relevant customer references. If the SI cannot provide at least five recent customer references, you must ask yourself if you have selected the right provider. For example, they may have a long list of customer names, but are those logos for the type of implementation services you will be paying for? For example, I have seen SI’s for software implementation use references for work they did as process or change management consultants or implementing software with an ERP system or version different than mine. This results in the SI’s consultants learning on the job, which is good for their staff but not for your project.
5. Project Resource Availability and Proximity
Your SI’s resources will make or break your implementation project. I recently worked with a software company that had 95% of its consultants based in Asia while 95% of its customers were based in North America. However, when asked for the CV’s of the consultants to be deployed, they only provided those from North America. That’s not saying that their remote or remote SI resources were less capable than local or on-site ones. Rather, invariably, the more that key customer stakeholder-facing roles are offshore, the greater the probability that the customers’ project timelines will suffer due to the consultants’ working hours, holiday schedules ---even their ability to be on a conference call or web meeting. One recent example was a customer who paid over $500,000 for AP invoice automation services and $1,000,000 for software licensing but was made to wait four weeks for his SI to hold the kickoff meeting simply because their remote resources were “not available”. Therefore, it’s critical to not only review each consultant’s capabilities versus their expected role but also their proximity to the project’s core management resources---and ensure those resources and locations are locked into the contract and/or SOW.
6. Industry Analyst Reports and User Polls
Using objective third-party research and data is a good way to identify potential SI’s for your project, especially if you or your company do not have previous experience with the specific type of SI’s needed or with the software to be implemented. These analysts spend considerable time and effort delving into each SI’s specific strengths and weaknesses versus their competitors. However, not every SI’s name is included, and often only the SI’s with the largest revenue and budgets are analyzed. Many of the best SI’s are smaller or more niche players, often with more experienced resources, lower TCO, and greater delivered value. In my experience, these reports and polls should be used as a starting point for whom to issue an RFI or RFP, not for final selection.
While these six software SI selection criteria were the most important in my career, your list may be different or more situation-specific.
- What other criteria do you recommend software implementation services buyers consider?
- What criteria do you include in your SI contracts and SOW’s to ensure your SI is optimally working for you and your project?
- What lessons learned would you like to share with current and potential software implementation services buyers?
It is the journey AND the destination...good luck!