Software Selection: Fast Tracking and Doing it Right

(1)

Software Selection:

Fast Tracking and Doing it Right

Lawrence DelGatto

Executive VP, CIO

Radian

Philadelphia, PA

Ellen Griffith

CMA, CPIM, Principal

North Highland

(2)

Radian Overview

• The leading mortgage insurance provider in the U.S. is

embarking on a full legacy modernization

–

ERP

–

Financial service front-end systems

–

All front-end systems, including underwriting (CRM) pricing, product,

servicing and claims

• Multiple selections 50% completed

• Midflight with many completed successfully and some

(3)

Do you have these challenges?

• Knowing what to evaluate

• Not understanding vendor jargon

• Taking risks, getting it wrong

• Having too many options

• Missing the “best fit”

(4)

In our experience, 50% of software selections

face challenges and have not reached fruition

Don’t have a

defined budget

Don’t know which

vendors to

consider

Don’t have

defined scope or

requirements

Don’t know how

to approach the

selection

Don’t know whom

to include

Confused by

overlapping

products and

(5)

Concerns we

should

have

• Starting with a weak or nonexistent business case

• Selecting in isolation from others in your organization

• Not considering overlapping functionality

• Not watching impact of overlap on long-term aggregate spend

• Not considering internal architectural standards

• Discounting integration challenges

• Not engaging procurement early enough

• Not using the organization’s leveraged buying power

• Not considering other in-flight initiatives

• Not standardizing selection processes and/or not learning from past

(6)

Seven principles for successful selection

Create a coalition of business

representatives and technical specialists

Pre-align coalition members on the goals, constraints, and decision criteria for the

selection

Build a strong, well-structured business case that addresses all relevant business

outcomes

Use a structured selection process that is understood and approved by the coalition

Surface and address political elements of the selection early and openly, including how a final decision will be made

Track selection progress in a structured manner and communicate it frequently

Use “accelerator” techniques

(such as surfacing “deal-breakers” early) to manage the selection cycle

1

2

3

4

5

6

(7)

A readiness assessment and addressing the

findings is recommended

(illustrative)

Recommended Action Status

Re qu ire me nts D efi nit

ion Conduct General Workshop to detail guiding principles to further clarify future state Complete Address open items in As Is process maps _Complete SWOT analysis completed in relation to current

status Complete

Inventory concurrent projects and define

impacts on ERP system Complete

Pr oje ct Re so ur cin g

Identify internal and external resource

requirements for entirety of project 50% Secure internal resources for Phase 1 25%

Secure external resources for Phase 1 Incomplete

Continue monitoring succession plans for near- term retiring or departing participants in the

project Incomplete

Designate roles for stakeholders to participate in project events and develop plans for

backfilling staff as needed In process Secure internal resources for Phases 2 & 3 Incomplete

(8)

A readiness assessment and addressing the

(9)

(10)

•Define your business

strategy, goals and capabilities

•Determine true

drivers of benefit

•Assess whether

software would actually help and is needed

•Identify process &

people changes, in concert with

technology

•Identify time frame for

realizing benefits

•Define potential

budget range

I. Build business case and benefits framework

•Define business case

in terms of both

productivity and outcomes

•Define benefits goals

and

targets

that you

will track through rollout

•Use goals and targets

to build initial executive support

•Not framing and

quantifying the business problem

•Not involving all

impacted parties

•Giving IT the lead

selection role

•Treating the business

case solely as a means to get project approval

•Having a standardized,

approved method for measuring business benefit (including ROI, time-to-breakeven, IRR, productivity targets, and/or other measures)

Deliverables: Strategy Document, Capability Matrix, Cost Benefit Analysis

(11)

II. Define constraints and requirements

Deliverables: Weighted Critical Requirement, Vendor Evaluation Model

•Identify critical

requirements per business case

•Define technology and

business-driven criteria for the evaluation model

•Frame key constraints:

single-vendor v. best-of-breed, internal hosting v. SaaS… •Define solution architecture and standards based on the criteria •Develop functional requirements (current and potential future)

•Build detailed vendor

evaluation model

•Frame potential

solutions vis-à-vis current and planned Enterprise Architecture and overall application portfolio •Skipping / Missing functional requirements

•Not having

solution-based architecture

•Letting common

vendor features define “needs” •Treating architecture as a late-stage approval step •Ignoring constraints •Using hundreds of requirements vs. critical requirements •Consulting peer

institutions for lessons about key

requirements – what really mattered?

•Using constraints to

narrow vendor list up-front

(12)

Vendor Illustrative Evaluation Criteria

Factor Criteria Source A B C Evaluation Weighting

Software Evaluation

Requirements Score 35.0%

Fuctional Lead Score 10.0%

Integration capability IT Evaluation 17.0%

Scalability and agility IT Evaluation 9.0%

Web-based user interface

capability IT Evaluation 5.0%

Level of support

availability IT Evaluation 5.0%

Ability to provide functionality as part of

core ERP system IT Evaluation 9.0%

3-year development investment as a percent

of Operating Expenses IT Evaluation 5.0%

Internal IT capability IT Evaluation 5.0%

Weighted Score /100 0 0 0 100%

Solution Scoring Software Solution Stage 1 Evaluations

IT Capability Functional

(13)

•Determine vendors worth consideration and time •Tier 1 ERP’s •Best in Breed •SaaS •Focus on viable vendors with functional, practical, and cultural fit

•Look beyond features

to vendor track record and fit with firm

III. Shortlist potential vendors

•Consult multiple

industry analysts and research firms

•Use RFIs or “profiles”

to get high-level vendor screen

•Consult procurement

for previous history with each vendor

•Focusing only on

product; ignoring implementation and viability issues

•Using critical time on

vendors who are either early-stage or declining

•Keeping more than 3-4

vendors past shortlist phase

•Not a fit: Solution is

too big or too small

•Using research-based “profiles” instead of formal RFIs •Using 2-3 critical requirements as “filters” or an “acid test” to generate your vendor shortlist

Deliverables: Vendor Capability Matrix, Cost Benefit Analysis

(14)

•Find vendor(s) that

best address the business case

•Use facts and data to

build consensus around selection

•Determine true total

cost of ownership (TCO) for each solution •Determine Proof of Concept (POC) or prototype approach for critical functionality

IV. Evaluate and Decide

•Issue detailed RFP •Grade in multiple

dimensions (fit, support for business case, etc.)

•Host general and

scripted demos for each vendor •Conduct detailed, structured reference checks •Complete POC or prototype if necessary •Issuing question-begging RFPs •Confusing vendor

costs with TCO

•Doing only general

demos

•Using a “scoring

matrix” that collapses key issues together

•POC or prototype not

completed or contracted •Having evaluation toolkit based in organization experience

•Having a full TCO

framework (software, implementation,

training, maintenance, upgrades, etc.)

Deliverables:

RFP, Standard Response Template TCO, Requirements scoring

(15)

• Needs analysis • Contract playbook • Scope and key roles and

responsibilities

• Obtain pricing that will

achieve business case

• Hold firm on terms, but

set a positive tone

• Consider other

negotiation levers, (e.g., terms and conditions based on small vs. large software providers):

 _{Escrow the source code}  Liability if software fails

(e.g., starting point is unlimited liability)

• Consider “stop gap”

contract to start the work

V. Contract and Negotiate

•Identify vendor’s

critical motives

•Define “target” and

“acceptable” pricing, terms, and conditions upfront

•Sketch out “contract

playbook” with all options, including walking away

•Not knowing what you

want or need going in

•Not acting as a

coordinated team (business, IT,

procurement, legal)

•Leaking information to

the vendor unwittingly

•Pre-aligning coalition

on target and

acceptable pricing, t’s & c’s (business, Pro, legal)

•Conducting

disciplined, closed-door negotiations in person with vendor

•Contract playbook

•Good guy bad guy

 clear roles and

responsibilities

•Outcome-based

agreements

•Understand your value

proposition to provide leverage

(16)

Contract Negotiations

(average time 2 to 3 months)

1. Understand pricing software environment factors

• Per user • Per module

• Per platform (e.g., may need a separate platform) • Maintenance

• Implementer considerations where software

provider is the implementer (e.g., Banner)

2. Understand where vendors are willing to negotiate vs. where you are flexible

• Concurrent vs. per user

• Grouping of modules and users

3. Understand your value proposition to vendors to provide leverage

• Ask what you can do for software vendor

4. Consider other negotiation levers (e.g., terms and conditions based on small vs. large

software providers):

• Escrow the source code

• Liability if software fails (e.g., starting point is

unlimited liability)

5. Consider “stop gap” contract to start the work

1. Consider different types of contracts

• Fixed fee

• Time and materials

2. Consider incentive structure

• Share risk and reward

3. Consider “stop gap” contract to start the work

4. Understand your value proposition to vendors to provide leverage

• Ask what you can do for systems integrator

(17)

Opportunities to “Jump Start” the System

Implementation

• Leading practice activities during contracting include:

Program Management Office

Program/Project Mgmt, Governance, Performance Mgmt (Benefits Realization, Scorecard)

Business Process Management

Current State Understanding, Future State Design, Process Implementation, Org Design

Technology Support

Architecture, Business Intelligence, Master Data Governance, Run Organization

Organization Change Management

Internal Stakeholders, Internal Project Team, External (Customers & Suppliers)

System Integration

Plan

Design

Build

Test

Deploy

1.Creation and assignment of sub process ownership to implementation team members

2.Project Portal

3.Revisit project steering members begin biweekly meetings to remove project barriers

(18)

Opportunities to “Jump Start” the System

Implementation

• Leading practice activities during contracting include:

Program Management Office

Business Process Management

Technology Support

Organization Change Management

System Integration

(19)

Opportunities to “Jump Start” the System

Implementation

• Leading practice activities during contracting include:

Program Management Office

Business Process Management

Technology Support

Organization Change Management

System Integration

Plan

Design

Build

Test

Deploy

1. “As Is” report and form cataloging and collection 2.“As Is” process documentation

refresh

3.Future state opportunity identification

(20)

Opportunities to “Jump Start” the System

Implementation

• Leading practice activities during contracting include:

Program Management Office

Business Process Management

Technology Support

Organization Change Management

System Integration

Plan

Design

Build

Test

1.“As Is” master data cleanup (vendor, customer, fixed assets,

Deploy

planning data, chart of accounts) 2. Begin documentation of the

data migration plan to identify: • time frame

(21)

Opportunities to “Jump Start” the System

Implementation

• Leading practice activities during contracting include:

Program Management Office

Business Process Management

Technology Support

Organization Change Management

System Integration

Plan

Design

Build

Test

Deploy

1.“As Is” Organizational assessment / role and responsibility cataloging 2.Readiness assessment and action

plan to address findings

3.Immediate onboarding of full-time resources and role definition 4.Immediate project communication

(22)

Building repeatable selection discipline

(23)

Building repeatable selection discipline

Commitment to process maturity | “We need to be skilled at selection”

Reusable tools | Core selection artifacts and templates

(24)

Building repeatable selection discipline

Commitment to process maturity | “We need to be skilled at selection”

Reusable tools | Core selection artifacts and templates

(25)

Building repeatable selection discipline

Commitment to process maturity | “We need to be skilled at selection”

Reusable tools | Core selection artifacts and templates

Learning | Formal lessons learned, pre-selection training

Governance | Executive direction

(26)

Closing

Ellen Griffith, CMA, CPIM , Principal North Highland

One Penn Plaza Suite 3030

New York, NY 10119 212.594.9090 Lawrence DelGatto, Executive VP, CIO or

Soofi Safavi, Senior VP, CTO Radian 1601 Market Street Philadelphia, PA 19103 215.231.1605