How to measure the risks & benefits when considering a Capex software vendor

New software always sounds like a great idea, but problems with execution can mar even the best ideas. If your organization is like most, you simply want to be able to obtain your specific business benefits without the typical hassles, delays and cost overruns endemic to traditional enterprise software.

The first step is to ask the right questions. Some software vendors may have well recognized brand names and recognizable customer bases, but what does that give you at a practical level? Instead, ask each vendor: What percentage of your software deployments have failed?

As you ask this question, bear in mind that there are really two types of failure:

  • Total failure – where the system could not be fully installed and was not put into widespread use, and
  • Partial failure – where the system is in use, but deployment took longer than planned or cost more than advertised.

Most likely, the vendor will be reluctant to come clean. Independent verification is difficult, but some industry analysts have estimated that for the well known on-premise enterprise software vendors, total failure rates are as high as 1 in 3, and partial failure rates exceed 2 in 3.

The reasons for these failures are diverse and complex. At the end of the day, the excitement about the cloud is about more than just the subscription model and lowering the total cost of ownership (TCO), it’s also substantively about:

  • Eliminating the risk inherent to customizing on-premise software,
  • Dramatically reducing the time to value for new applications, and
  • Aligning the vendor’s and customer’s interests to promote satisfying and effective long-term relationships.

    As you might expect, many traditional software vendors now claim that they have moved to the cloud as well. But beware – do not fall for this claim on its face. Instead, ask the vendor if they:

    • Offer the application only through the cloud, not as a hybrid cloud or on-premise solution,
    • Have built the application from inception as a multi-tenant SaaS application, and
    • Utilize a highly-regarded third-party cloud infrastructure provider operating on a global scale.

      If the answer to all three is not an unequivocal yes, then you are dealing with the false cloud. While there certainly are a number of other important factors to consider, weeding out vendors who don’t meet these criteria will spare you a lot of time, effort and agony.

      To learn more about the Finario system architecture and the steps we take to ensure a highly reliable and secure application, have a look at our Finario Security Overview.

      By the way, being a true cloud or software-as-a-service solution is not in and of itself sufficient. The majority of SaaS applications have been architected for small and medium-sized businesses and thus lack key administrative and security features required to adequately and safely serve a large enterprise. Don’t be misled by reports of large numbers of customers or a few marquee names.  It’s more important to understand what percentage of their customer base is similar to your company in size and industry focus.  

      Another valuable metric that you should request when considering a Capex software vendor is what percent of their revenue comes from the application you are considering, and which is being used for the specific purpose you intend to use it.  If it’s not the majority, you may find the level of support and ongoing innovation to be much less than what you really need.

      These are just some of the critical factors to consider as your organization begins the search for a suitable Capex software vendor. In the course of this process, be sure to hold each vendor accountable – ask to see proof of customer success, closely evaluate their true cloud capabilities, and don’t shy away from pressing them on their dedication to continuously innovating the product in question. Taking these steps to control the the conversation and develop a complete sense of the Capex software vendor’s legitimacy will ultimately help you avoid surprises, delays, hidden costs and further disappointments down the road.