software selection: fast tracking and doing it right

Software Selection: Fast Tracking and Doing it Right Lawrence DelGatto Executive VP, CIO Radian Philadelphia, PA

Ellen Griffith CMA, CPIM, Principal North Highland New York, NY

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 challenges

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” • Taking the selection to leadership

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 markets

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

mistakes

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

Requ

ireme

nts D

efinit

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

Proje

ct Re

sour

cing

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

Secure external resources for Phases 2 & 3 Incomplete

A readiness assessment and addressing the findings is recommended (illustrative)

Core software selection process

• 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

Objectives Key Steps Common Pitfalls Accelerators

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


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 Capability

Ability to meet strategic and critical requirements

• 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


• 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


• 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


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

Software Contract Systems Implementer Contract

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







1. “As Is” report and form cataloging and collection

2.“As Is” process documentation refresh

3.Future state opportunity identification






System Integration Plan Design Build Test Deploy 1.“As Is” master data cleanup

(vendor, customer, fixed assets, planning data, chart of accounts)

2. Begin documentation of the data migration plan to identify:

• time frame • data elements







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 channel and tool development

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




Learning | Formal lessons learned, pre-selection training

Governance | Executive direction

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

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software selection: fast tracking and doing it right

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