This article originally was published in July 2008. It was updated in February 2010.
Have you ever felt like your business was on one side of Pacific Ocean and your software vendor was on the other? Have you ever attended an industry meeting and heard of software horror stories from your peers? Are you thinking about switching vendors?
Your software vendor is more than a vendor because your business depends on that company 100%. I challenge you to find a construction supply company that does not use software to run its business.
So, what should you look out for in a relationship with your existing or future software vendor? Here are 10 sets of questions to consider, plus tips on how to assure you're getting the most out of your software and your relationships:
1) Healthy Business Relationship. Do you have a high level of trust with your vendor? Is it a profitable relationship for you, or is it one sided in the other direction? Would you recommend the vendor to another industry peer? Is the vendor helping you in areas of your business where you need it the most? Tip: Grade your Vendor. At the next management or staff meeting, ask the participants to grade your software vendor from A to F in areas of functionality, support response time, support solutions, software reliability, and speed. Compile the results and then contact your software vendor and make a first move towards a healthy business relationship.
2) Total IT Costs. How do you measure up in total IT costs as compared to other dealers? Do you know your total cost of ownership over the next five or ten years? Have asked your vendor for these numbers? Do you spend less than 1% on sales on IT on an annual basis? If you do invest more, are you seeing a return on the bottom line? Tip: Know your IT costs and work with your vendor to better understand these costs. If you don't have an IT budget, prepare one now. Don't just look at the expense side; measure productivity.
3) Support. How long does it take your software vendor to help you with support questions? When you call support, do they make you feel like you are bothering them and not treating you like a customer/partner? Tip: Begin logging your support calls. Then, on a monthly basis, compare you log to their log and see if you match up. This is also helpful for diagnosing problems that may not be easily solved without documentation and history.
4) Functionality. Does the software function well in your environment? Can you process orders with speed and accuracy? Can you instantly view stock levels and pricing for customers? Can you better manage your inventory? Are you able to analyze Accounts Receivable? What about the profit plays, like inventory shrinkage analysis, lien tracking, or vendor performance reporting? Tip: Make sure you are using a GPS and not a compass. If you are using your software as a posting machine, get with your vendor and look for way to improve your bottom line. While a compass (posting machine) will work when times are good, you really need a GPS to navigate through the fog and bad weather.
5) Stability. Are you constantly dealing with software bugs and system crashes? Do you see a pattern? Tip: Document. Record each time that you have a system bug. Don't just document the problem; document the solution.
6) Speed. Did that last upgrade cause your system to operate at caterpillar speed? Are you waiting to process an order so you can assist a customer? If you are printing documents, are you waiting for the printer? Are your customers frustrated with your ability to find information? Tip: Check Your Speed. Document speed issues. Again, there might be a pattern. Plus, many speed issues are caused by malfunctioning hardware and networks, as well as spyware, viruses, and spam missiles.
7) Future Enhancements. Where is your software in the system life cycle? Are the enhancements in line with a changing industry and do these enhance your business? Tip: Obtain Software Enhancements. Ask your software vendor for a list of enhancements and the deployment schedule of the enhancements.
8) Advanced Software. Are you replacing your snail-mailed invoices with e-mailed invoices? Are you optimizing the deliveries through efficient routing and loading of trucks, or are you still using the thumb-in-the-wind approach? Are you scanning your delivery tickets and all related documents into a document management system? Can you see every document from the delivery of a special order from a vendor to a copy of your customer's invoice or do you have a paper farm on-site with farmers looking for documents? Tip: Special Order Litmus Test.. Calculate the cost of time, paper, and accuracy on a special order from when you receive the order from your customer to when you pay the vendor. You will be amazed at how much paper and time may be included. I am hoping it is little time, 100% accuracy, and very little paper, if any. But, you be the judge of your own environment and software system.
9) People. Is the software vendor attracting the top talent? Can these people understand your business? If you are teaching your software vendor how to calculate board footage, this is a sign that either you have the wrong software vendor or they have the wrong people on their bus. Tip: People Enhancements. Ask your software vendor some tough questions like: "Tell me about your training program, what percentage of your people are onshore vs. offshore, how are you attracting top talent. What is your attrition rate? Do you have a health and fitness program for your people?" The last question will raise eyebrows, but it is important. Since there is a tremendous knowledge base in heads of the employees of the software company, you do not want to align yourself with a company that has a lot of turn over because of health related issues or just high attrition rates.
10) Profitability. Does your software work as a tool that enhances your profit? What is the return on your software investment? Tip: Probe within your organization. Begin asking each department to report on the impact of the system on productivity, hence profitability. Take this a step further and ask your software vendor to look at their P&L.
If you have a healthy business relationship with your software vendor, they will expose their P&L to you. The last thing that you want is a software vendor that will go away because they could not manage their internal finances. In fact, if you working with a software vendor that has issues managing their internal finances, think of the negative impact this may have on your business.
Chris Rader is president of Rader Solutions, a consulting firm working exclusively in the Construction Supply Industry. Rader Solutions provides a 100% managed network solution for dealers that do not have an IT department and provides hosted servers, e-mail, Web site, and firewalls. In addition, Rader Solutions provides advisory services about product pricing models and strategy work focusing on bottom line financial improvements. Contact him at [email protected].