In Ch. 3 of this buyer’s guide, we turned business problems and use cases into a comprehensive business case that will compel diverse stakeholders to buy into your vision and strategy. In this chapter, we’ll provide best practices for finding a trusted technology partner to help make it a reality.
Before we dig into the core content of this chapter, it’s important for you to be aware of a shift that’s recently taken place in the dynamics of cloud software.
Essential Context: How New Cloud Software Vendor Norms Benefit You
If you have never purchased software, or the last time you were involved in the process was for an on-premise system, I’m happy to report that circumstances have changed in the past few years (to you the customer’s benefit).
Cloud computing has pivoted the software industry away from perpetual licenses with annual maintenance fees to annual software subscriptions. Under this new model, customers' financial and legal obligations only last one year before they’re given the opportunity to renew or walk away. This licensing shift provides two benefits.
First, it limits your organization’s financial and effort exposure to one year, aligning with the notion of agility so you can tackle individual or smaller use cases with speed and reduced exposure. It’s a lot easier to take a chance on a new vendor if you’re only committing to one year, versus the iron clad multi-year agreements of yesteryear.
Second, this new subscription model aligns your technology vendor to your annual objectives. If the vendor doesn’t perform, cancel the subscription at renewal time. If the vendor performs, then you renew the contract for another year and the clock starts again.
Under this model it is far easier to start making progress with a quick win pilot while limiting your organization’s exposure. This should unleash groups to work with speed, create momentum for growth, and ultimately lead to more successful digital transformations.
How to Find the Best Cloud Software Vendor Partner
With your business case and leadership support secure, you need a trusted partner to help turn your vision and strategy into reality. In this chapter, we’ll run through key aspects like:
- What vendor selection criteria should be on your short list?
- What resources should you consult in your vendor research?
- What are the latest best practices for cloud software vendor evaluation?
5 Essential Cloud Vendor Selection Criteria
Utilizing the members of your working group, as well as key stakeholders you engaged in your internal research, solicit criteria that are most important to them for a software vendor and solution for this business area.
Here is a starter list of criteria categories your team can customize to your unique needs:
- Critical Capabilities: Focusing on features and functionality is a relic of the days of static on-premise software. In today’s cloud software environment, it is more important to ensure your chosen vendor is capable and eager to meet your needs, versus whether they can “check every box” today. The reasons for this are two-fold. First, because cloud vendors add new capabilities to their software frequently. And second, because just like the software, your business needs will change over time too. So don’t fall into the trap of just looking for features that will mimic how you’re working today. Revisit the vision section of your business case, and determine what critical capabilities align with how you want to work.
- Total Cost of Ownership: Cost needs to be looked at as a holistic measure. Don’t simply see a lower license price and ignore significant annual maintenance fees. Expect vendors to offer one year contracts, and consider it a red flag if they don’t.
- Implementation and Service: Your experience with this vendor doesn’t end when you sign the purchase order. Achieving your vision and strategy depend just as much (if not more) on a vendor’s implementation and customer service expertise. Take this time to explore what kind of support you expect. How does this vendor work with customers to achieve their goals, and what kind of additional support would they provide if you’re unsatisfied? Will you be okay with support only by phone, email, ticket system? What resources do you expect the vendor to offer in terms of training, events, best practices consulting, and go-live support? How long are you willing to wait to resolve an outstanding issue?
- Innovation and Flexibility: Without innovation, companies become more vulnerable, less efficient, and lose competitive ground. Will this vendor encourage your company to adopt best practices and suggest innovative new solutions to address your business problems? Is the software easy-to-use and does it have a modern user interface? Without software that is constantly improving and flexible to your needs, it may not deliver the productivity gains that are needed every year for you to stay competitive.
- Vendor Fit: How stable is this company? Do they have strong references within your industry? And, to borrow from the classic candidate hiring criteria, sometimes you just know that a vendor will be someone you’d work well with. Don’t ignore this instinct, as you’ll (hopefully) be engaging with this company and team members for years to come.
After you’ve identified what criteria satisfies your stakeholders, determine how important each category should be to your decision making with weighted scoring. For example, should functionality be more important than security? What about innovation versus total cost?
Top 3 Vendor Research Resources
We recommend approaching software evaluations like you are interviewing a potential employee. Look at their past. Their pedigree. Get references, ideally blind. And get to know them to assess the impact they can make in the future, how their goals align to your company’s, and culture fit (open API, fast, scalable, flexible, etc). Don’t make a bad hire, as they are more costly than doing sufficient due diligence.
- Talk to peer companies you admire to get referrals - what are they using to address your priority use cases?
- Seek out case studies from industry events and publications of how companies are addressing problems similar to your use cases.
- Since this vendor will hopefully turn into a long-term partner, look beyond the product offering and dig into the business of potential vendors.
- How long have they been in business?
- Have they always been cloud, or are they adapting from on-premise software?
- How often do they improve their products (will my ‘asset’ appreciate over time?)
- Are they publicly traded or owned by private equity?
You might notice we didn’t include analyst reports. We know these are tempting because they seem to “do the work for you” related to due diligence. However, in our experience, one size does not actually fit all, and you may miss vendors better suited for your organization’s needs. Many analyst ratings, software comparisons, and scorecards also require vendors to buy-in to be included, and therefore are unlikely to accurately reflect the market.
4 Best Practices for Cloud Software Evaluation
RFIs, RFPs, and pilots. Bake-offs, ROI/TCO calculations, demos, and feature comparison checklists. These can all be effective software evaluation tools, but not every company uses them the same way.
When making a strategic software investment, the evaluation process often varies but the objective is the same: find the best solution for my company. Here are five best practices to help you in this stage of the buying process.
- Be exclusive in who you allow to have a seat at the table, and take the time to ensure your decision makers are aligned to your vision, strategy, selection criteria, and preliminary research before putting them in front of vendor candidates. Bringing in new voices just for the evaluation stage lengthens and weakens the process due to unnecessary tangents and having to provide context again and again.
- Ask the right questions to expose the weaknesses of vendors who might appear strong on paper, but don’t match up on a real-world use case or work with the agility and speed required to realize your vision and strategy. Here are 20 questions from a cloud software veteran to get you started.
- Stick to your weighted scoring. It’s easy to be swayed by a flashy presentation or emotions during the buying process. By sticking to the weighted scoring your team agreed to while building your selection criteria, you’re more likely to pick a vendor and software that reflects your organizational priorities.
- Make them work for it. No trick questions required - we’re talking about making reasonable requests during the evaluation process to ensure the vendor has the flexibility and dedication to deserve your business. Here are two areas we think you’ll benefit from exploring:
- User experience: Software isn’t worth a dime if no one uses it. So pay close attention to the user experience and overall ease of use. Would your team members find it intuitive to navigate? Does it behave like other websites and applications your colleagues are familiar with?
- Flexibility: How easy is it to extend the software or configure new functionality? Will it require you to go back to the vendor for minor changes, or is it easy enough to do on your own? Don’t take the vendor's word for it - ask them to rename or reconfigure something during your demo.
Looking Ahead: Change Management for Cloud Software
In this chapter, you learned best practices for finding a trusted partner to help make your business case vision and strategy a reality. In the final chapter of the buyer’s guide, we’ll share our synthesized change management learnings from hundreds of successful cloud software implementations to set your organization up for success.
Tips and Key Takeaways
- Focusing on features and functionality is a relic of the days of static on-premise software. In today’s cloud software environment, it’s more important to ensure your chosen vendor is capable and eager to meet your needs, versus whether they can “check every box” today.
- Approach software evaluations like you are interviewing a potential employee. Making a bad hire is more costly than doing sufficient due diligence.
- Ask the right questions to expose the weaknesses of vendors who might appear strong on paper, but don’t match up on a real-world use case or work with the agility and speed required to realize your vision and strategy.