Is Lowest Price The Priority in Software Decisions?

What is the Real Price of Software
It’s hard to believe. Not much has changed with regards to the software selection process in the last two decades. Today, as it was way back when, price seems to always get more importance than necessary in finding the right software to address the needs of an organization. In this article, I will address the misconception that the “Price” of software is the most important “Pain” to overcome in software selection success.

Nonprofit Software Selection: Is Lowest Price The Priority?

First, I suggest you take three quick minutes to enjoy this very amusing video below. And, stay till the end, it will certainly add value as you review the rest of the article:

[youtube]https://www.youtube.com/watch?v=ix_zcwY5Qi0[/youtube]

I believe this video encapsulates the thoughts on the “weight” of “Price” in many people’s mind. But, as a very sage software executive once stated the following to me, “The biggest cost of software is not price”. “No”, he stated very confidently. “The greatest cost of software is when the software does not work”. Suffice it to say, that statement has stuck with me for quite some time.

Unfortunately, I see it in almost every software search engagement. The more inexperienced the “Buyer” the more heavily “Price” weighs into the equation to buy. Of course, it’s important to have a realistic budget, but solving the problem should always be the #1 goal. If you cannot solve your operational problems, there is no need to spend anything. But, for some what trumps everything else is “Price”.

Price is always at the top of the List!

People buy software systems all the time. Well, not exactly. But, those who have been through one realize that you learn quite a bit from being involved in the experience. That said, there is actually data to support this as well. In a study reputedly attributed to Big 4 accounting firm Deloitte & Touche years ago, they studied the responses of people who went through the process to select and purchase software systems. The study aimed to know how experiences varied between “inexperienced” and “experienced” buyers.

In their survey, the consulting firm sought input from folks who were first-time buyers of software systems “inexperienced buyers” versus those tagged as “second-time” or “experienced” buyers. In the study, the consulting firm asked each to rank the importance of various key purchase factors, each group ranked their concerns as follows.

To less experienced buyers, the survey recipients were provided a list of priorities in software selection and asked them to rank them on a scale of 1-5 accordingly (1 being highest). After the results were tallied, Deloitte found the following results:

  1. Price of Software
  2. Ease of Implementation
  3. Ease of Use
  4. Ability to fit Business
  5. Features & Functionality

For experienced buyers (2nd time buyers), the same criteria was furnished and the results were almost completely inverted even with the same options. Here are the results in this sample:

  1. Support of Provider
  2. Track record of Success in Supporting Similar clients
  3. Ability to Fit Business needs
  4. Growth Potential
  5. Price of Software

For some, these findings do not shed anything new here. In fact, it mirrors the results from a similar IBM study performed years ago which has been cited numerous time by various sources.

Other Factors Should Trump Price

For good reason, the decision to make a software change is not usually taken lightly. It’s certainly not something which most wake up and are eager to do. Therefore, selecting a software solution should be based on sound fundamental business factors. Company strength, product support, and certainly the underlying technology is much more important in your final decision. An organization cannot afford to buy something that is obsolete or something that is unproven despite being “Low Cost”.

And, the key factors in the decision should be geared towards answering questions such as these:

  • Will the proposed solution (software & service provided) help us solve our key business objectives?
  • Does this tool give us the best chance to achieve the vision we outlined for success?

Every organization is “unique” just like every software system has it’s own “uniqueness” which makes it more valuable than the alternatives. The “Best software“, whatever category (CRM, ERP, Marketing Automation, Nonprofit Database etc.) is one that solves the majority of your business challenges and propels your company mission forward. And, just like every other major investment which you put your hard earned dollars into, it boils down to the return on investment of the decision. If the software fails, your ability to reap a return is nil. Price is a moot point then.

Relevant Experience Matters

Perhaps the most challenging aspect of software selection for most organizations, is not having the time or experienced players involved in a selection project. Even before the knowledge of these findings, it has been my experience that when the proper executives are not involved in the process, “Low cost is the priority”.

So, why is price the most important factor in a software buying decision? Here are my thoughts in answering that question:

  • Lack of experience: Without question, experience plays a role here. We learn so much by going through the process. Most organizations do not switch enterprise software very frequently, therefore, “The Team” on staff never has the chance to learn.
  • Chutzpah: Typically, a delegated representative can’t or won’t challenge the budget which is set. How likely is it that a staff person will go out of it’s comfort zone to push the envelope on issues of importance?
  • Time to Decide: The pressure is overwhelming to make a decision. For many, merely keeping up with their regular day to day activities in order to “stay above water” while juggling their “real job” is a drain. In most instances, a delegated staff’s day to day activities will trump the attention and due diligence needed to find a new enterprise wide software tool. And, who can blame them for that!
  • The Path of Least resistance: Who will argue if you offer up the least expensive option to solve a problem, right?
    To be clear, this is not unique to one type of company or industry. In my experience, this transpires across all size, classifications, and industries. And, this is something everyone who is involved in the buy/sell process deal with on a regular basis.

Assessment before Software Selection

In our minds, having experience on board during a software search is paramount to ensure success. And, by no means does that experience have to always come from the outside. However, regardless of the source of the resource, an organization must first prioritize their needs and set the foundation for what success will be after acquiring the appropriate tools to address an organization’s challenges. They must be supportive of the process and give the “team” or “project leader” the support needed to help make a smart decision.

In short, “Price” is important, but should never be the driver of a software decision. While it’s likely the easier choice to side with “Lowest Price” for many, the pain of making a wrong choice will be far greater if you leave out the much more important factors in your decision.

Until next time, keep SmartThoughts in mind.

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