Techniques for Acquiring Software - Case Study Example

TABLE OF CONTENTS 1. Introduction 2 2. Case Study Investigation 3 3. Software Acquisition Process 4 4. Techniques for Acquiring Software 6 5. Bidding instructions 8 6. Request for Proposals 9 7. Description of The Work 10 8. Delivery Requirements 10 9. Bidder Solutions & Information 11 10. Support & Training 11 11. Conclusion 12 12. References 13 SOFTWARE ACQUISITION. Introduction The process of acquiring enterprise class software’s that has been involved in significant development time within their development life cycles is a very broad task. Constantly missed schedules with costly project overruns will always mire the acquisition process. This will eventually make the final system very unreliable and may often miss some of its stated requirements when it is finally being delivered to the end user, this has led to some projects being cancelled even before being fully implemented. Experienced project managers have not been exempted from this, their proven managerial techniques which succeeded in other projects fail when it comes to software acquisition, development or implementation. This is mainly so because they lack insight & visibility into how the final project should be. However, there are proven techniques for managing software acquisitions, there are the system themes which emphasizes that you should not build if you can buy, purchasing an existing product alleviates most of the risks associated with developing a custom application. There is the management theme technique which will guide the management within the process of acquisition, flexibility will definitely be needed within the contract to accommodate the changes and upfront planning is as well needed earlier within the acquisition process for activities such as system acceptance that are late in the process. Finally, there is the people theme, here the customer may work hand in hand with a contractor in order to achieve a common goal, both the client and the customer are free to communicate openly and collaborate in all activities. This subsequently requires that the project managers should not go it alone in acquiring the software but instead they should foster team work within their organization and the chosen software vendor (Mitetrek Systems, 1998). Modernizing an organizations information system is a key element for an organizational improved performance and productivity, at this stage the heavy associated costs should be completely overlooked (Thompson, 2001). Case Study Investigation. Cummins Inc is seeking a proposal for the supply and integration of legacy application programming services. The organization needs to improve their operating performance as well as reduce their overall cost of maintaining the current legacy applications which is currently being outsourced from elsewhere. Different organizations were invited to submit their final proposals in adherence to the Cummins requirements, terms and conditions. With the increased pressure in reducing the legacy application costs, Cummins invited a Request for Proposal from different vendors in which bidders tendered for the proposed solution which they would eventually be evaluated on whether they were meeting the prescribed functional requirements, afterwards all the qualifying vendors were selected on their ability to meet the key selection criteria set out by the contractor. Finally the final notification was sent to the winning bidder in which he was given a period of not exceeding 45 days to respond to the bid award. Among the proposal requirements were that all the information provided to the bidder in connection to the proposal was to be treated as confidential as possible and this applied to both the client and the vendor. Cummins also required that there should be a smooth transition plan in place to enable a smooth migration from the current system to the proposed system with no performance decline, the organization demanded that the contractor should also continuously participate in a system improvement program and any proposals for an additional legacy application support services which had previously not been mentioned in the tender documents would be seriously considered. Customer satisfaction, hours of coverage, repair response time and repair resolution time were key delivery requirements with penalties included within the tender documents to protect the client against contractors performance declining below the required standards. Finally bidders were forced to answer all the required questions to assist in comparison of the bidders responses and incase they were not submitting a bid for any service they were required to explain the exception accordingly, the bidders were supposed to elaborate on how their proposed solution met Cummins goals, their transition plan, any alternate proposal that they felt was better in terms of cost effectiveness & reliability, they were to attest they have agreed and will meet their responsibilities efficiently. They were also expected to submit; bidder specific information which helped in clarifying or adding perspective to specific information within the tender document, the competitive differentiation which elaborated on the unique process knowledge that they were introducing to the organization, the personnel account team specifically assigned to Cummins account together with their resume and the vendors background which included the organization chart together with the annual reports & summarized financial statements. In addition they were also expected to include at least 5 major clients who were using a similar service together with their responses and finally the pricing proposal was to be indicated which factored all the assumption necessary to develop the final cost of supply, integration and implementation of the software before the tender was fully awarded to the most qualified vendor. Finally, the laws of the State of Indiana governed the agreement and the organizations had a right to audit the bidder’s books and records and any violation of the aforementioned would definitely disqualify any bidder without further notice. Software Acquisition process. Choosing the right software is bewildering, there are hundreds of thousands of titles to choose from and they all have different functionalities and features, therefore a hurried and uneducated choice will always lead to various problems within the organization such as the inability to support the important business processes, unhappy clients, loss of sales and poor financial performance among others. Certain procedures need to be completed before the actual purchase is made, the organization should start by interviewing its current members of staff by addressing their corporate vision in comparison to the existing system limitation and at the same time looking at the current policies and procedures. After that they may determine the requirements for the new system by creating a prioritized list, this may be achieved by surveying end users in determining their requirements, analyzing the current system and eliminating some of the existing requirements and finally scrutinizing how the current system is being used by identifying its shortcomings and any new requirements required by the end users. Vendors may be invited to show case their products so as to reduce evaluation time and on the other hand inviting too many vendors might increase the cost and affect the timeliness of the project. During the evaluation process, the evaluation team chosen should concentrate on standard functionalities and key features of the proposed system, technology requirements, the system considerations such as the viability costs & stability, products targeting different industries should be eliminated as fast as possible, avoid products that are in development or under a new release because most software’s are released with a lot of bugs and finally the licensing & support costs should be thoroughly scrutinized to avoid over/under pricing of the software (Pieter Van Staaden & Sam Lubbe). Proper acquisition of an organization software’s is a very complex, risky and all in all an essential task for any business success, the I.T department in collaboration with the procurement department has to work hand in hand in the process of evaluation, customization, acquisition and implementation for any new software product within the organization, this in turn makes the whole process of software acquisition and its supplier management a very critical issue that organizations have to handle with extreme caution. There must be professional management of a supplier-customer relationship which automatically sets pre-requisites such as risk management, managing the legal aspects, establishing communication and controlling costs. In order to avoid failure along the process, a proper strategy for procurement needs to be implemented. The acquisition strategy should consists of a well laid out process based on proven tactics & methodology within each phase of the acquisition process (Thomas & Tobias, 2002) In the software acquisition process important risks and exemplary performance from a vendors side may include lack of end-user satisfaction this may result in project cancellation or reduction, poor quality of the system which may result in high maintenance cost of developments, missing the set out deadline which may also lead to loss of a business opportunity due to project cancellation and finally overrunning the set budget limit which is likely to result in financial losses and a possible inability to complete the project which may lead to the project being cancelled, however from the clients point of view there are risks such as the unreliable vendor, exaggerated financial demands from the vendor, the product may be useless even though it appears it is meeting most of the demands and finally lack of money to finance the project (Jakub Miller & Janusz Gorski). Techniques for acquiring software’s. Software’s may be acquired by purchasing directly from the vendor on the shelf, developing it in house, a contractor may be contracted to design, develop & implement and finally the organization may outsource the I.T functions to a third party whereby the third party will run the services on behalf of the organization and they will in return charge some agreeable fee for independently running of the system. Developing the software in-house requires very skilled personnel and most organizations will find it unnecessary to hire in-house developers because software is developed once for every long period of time and also the in-house developers are very expensive to hire in most organizations and they also might be lacking the requisite experience and technical knowhow to come up with a quality system. Tendering methodology has its unique advantages over traditional methods such as direct buying from the shop, auctions, leasing, or even concessioning. When it comes to tendering the organization issuing the tender tends to protect its own negotiating position by obtaining the best prices from the bidders, this is made possible by managing the entry cost of the bidders in an effort to attract a number of serious, highly competent vendors so that the competition for the project may be improved upon with the possibility of finding the most cost effective bidder (Jeffrey Delmon pg. 322) in other words in tendering you get what you pay for. Bidders may also be forced to issue bid bonds will act as security should they pull out the process midway after being awarded the tender, this amount may be used in re-negotiating for the tender with the other bidders. Increased competition may also provide opportunities for the new market entrants opening up competition for local vendors who might be more innovative and with this a level playing field will be created. Also going by the fact that there is usually some high level of transparency in tendering procedures it may increase an organizations reputation. With tenders bidders may be in a position to obtain finances from sources such as the Capital Market Authority and other financing institutions such as the World Bank, International Finance Corporation and African Development Bank, these new funds may provide additional benefits to the project such as ensuring all the supplies e.g. mainframe systems, servers & client computers are delivered on time because there is ready money, this eventually motivates the vendor hence the client organization. The organization issuing the tender may negotiate its financial position by fixing terms of the bid and not allowing the bidders to re-negotiate after the tender award. Tendering also expedites the acquisition process since the issuer needs only to compare the bids, corruption and abuse of office will be eliminated since the bidders have significant amount of information on the basis which the tender will be awarded, the bidders may be required to pay certain fee for the bids, certain fee for achieving a bidding status, the winning bidder may be required to pay a fixed fee or reimburse a certain fee, this gives the organization some extra cash to aid in software acquisition which could not have been available when using the other acquisition methods(Jeffrey Delmon pg. 340). They may introduce term sheets in tendering, these are financial documents that may legally bind interested financiers to adhere to the conditions of a tender after it has been issued to any bidder, these terms sheets increase efficiency in the tendering process because they are like a guarantee that there will be money available to finance the project for the vendors and in this case the tender issuer will only concentrate on other aspects of the vendors such as the account team and past reputation. However the tendering process may have some impediments such as lack of familiarity with the tendering processes for newer companies, inability to raise the bid bond requirement which may deter competition but its benefits far outweighs the drawbacks and I would strongly recommend tendering for any major software upgrade, design or installation. Bidding Instructions. In bidding there should be a proper timetable which should be strictly followed to ensure that the software is developed, delivered and deployed on time. The timetable should contain provisions that will easily allow bidders to submit any necessary questions in relation to the project, and responses should be delivered to the bidders within the same time frame to ensure that there is no biasness or discrimination in the tendering process whatsoever. It is proper that the organization organizes only one contact as the contact point person and no any other person should be allowed to communicate with the vendors on behalf of the organization. Shortly after the bids have been submitted, it is very important that there should be a post-bid conference, here the organization will meet with the bidders formally to discuss their proposals, this should only be done for proposal clarification and bidders strategies in relation to the proposed solution. When a vendor is evaluated on the above dimensions and given a clean bill of health in most of the key requirements there is a very likely hood that his track record is exceptional and incase there are several vendors meeting these key criteria then a more strict and vigorous qualification mechanism should be involved, this may include number of years of operation, key account personnel, financial background and the reputation from previous projects undertaken. These rules should continue getting tighter and tighter until a final vendor has been selected and awarded the project. Finally, the winner should be notified within a given specified time frame to enable him have proper planning and implementation of the proposed solution even though the odds of a software project finishing on time is close to zero(Mc Connell, 1996). In tendering, the first concern is identifying the bid that offers the most value for the clients money, but other factors that may come into play particularly in a business context factors to influence the awarding decisions may include: Bidders operating environment: does he appear informed about the activities within the sectors the business is engaged in. Partnering & Synergy: Is the bidder best placed for this type of work, and has he understood well the corporate values. Risk & Professional Accountability: Does the bidder indicate an understanding of the significance of a successful contract performance. Innovation: Has the bidder presented new ideas, new competition that the competitors will find hard to match and will easily win the bid for them. Flexibility & Responsiveness: Are the bidders ready to adopt methods and procedures which have occurred in response to unforeseen changes within the contracts requirements (Harold Lewis pg. 28) Should the client evaluate a bidder on these pre-assumptions then he is more likely than not to have a competent contractor on site. Request for Proposals. Here the client or rather the organization should write down a project plan which is entirely unique to software, the plan may include identification of the facilities, the system environment, project oversight techniques, acceptance strategy, maintenance concepts, risk management and the acquisition strategy which is even likely to take place before the contractor is on board (Mitetrek, 1998). The tender document may be amended, modified or withdrawn at any time and should it be so there will be a written communication to the bidders and in case of any changes ample time should be awarded to the bidders to re-position themselves and re-align their operations for the next move. After the successful bidder has been selected, the two parties will enter into an agreement with all the terms and conditions set in the bidding documents, the acceptance of a proposal will be contingent upon executing a written contract which should be suitable among all the parties involved and the organization should not be legally bound to any bidder prior to executing a written contract and all the pricing, terms and conditions specified in the tender document will automatically be incorporated into the agreement between the organization and the vendors unless otherwise stated. Description of the Work. The contractor’s job description should be fully defined and in case there is a transition plan in place it is recommended that it should be done in phases. There should be a standard tool to manage the work, it should interface with the existing system, a standard language should be used throughout the application and all work enhancements should be approved and prioritized by a review board within the organization which will consist of people from both I.T and non-IT key departments such as the finance where money for the project will be coming from. Proposals for any additional service which was not included in the tender document should be welcomed and the bidder should advice the organizations how the proposed service will help the organization achieve its goals. Delivery Requirements. There should be consistent service level with proper customer satisfaction, the software should be able to run 24 hours a day at least to serve mission critical responses, the response and the resolution time should be considered as critical. Penalties should be included in the service agreement and bidders should be requested to submit proposals with a performance disincentive. Should the bidders fail in any aspect of the project performance there should be a penalty clause that will automatically be triggered, and the bidder or the software vendor in this case, will automatically be penalized for that. The client should be strict and to the word when it comes to these delivery requirements, it is here that everything usually goes wrong, once a faulty system has been accepted as operational then it becomes very tricky criticize, the product should come with a long term warranty clause this will ensure that incase it malfunctions, the client is at liberty to request for a refund or even seek a lawsuit depending on the financial magnitude of the system. Bidder Solutions & Information. All questions in the tender documents should be fully answered and incase there is no specific answer there must be a proper explanation to that, this is so mainly as to compare the different services being offered by the different vendors and to ensure that the bidding process is as competitive as possible, the bidder should explain how its proposed solution will meet the organizations goals and it is at this point that any alternative proposal should be presented. The bidder should ensure that all the relevant information is supplied via the tender documents which will help in clarifying responses within the body of the tender document. The organization should evaluate a bidders competitive differentiation, this will elaborate on unique process knowledge that the bidder is likely to bring to the organization, the unique software technology that they are likely to offer, the unique partnering arrangements they have in place, the unmatched infrastructure they have and unique innovations within their disposals. The bidders account team should also be prioritized, the number of employees both administrative & technical that have been dedicated to the organizations project on a full time basis together with copies of their resumes and the information about the secondary organizations that the bidders have some contract agreement or partnership pertaining to the organizations tender. Support & Training. There should be some level of end user support and training. This should include both internal and external training for the product and it should part of the key selection criteria, it will be the sole responsibility of the vendor to offer a proper training materials to be used in providing support to the application within the organization, it may be in form of CD ROMs, textbooks, vendors journals, intranet and extranet (Joan Trottier, 2004). Conclusion. The process of acquiring a well functioning is not only a tedious task but a tricky affair, there are quite a number of issues that have to be carefully evaluated on a point to point basis that will give the general guideline towards the most convenient approach & methodology to pursue. The tendering process which is not only expensive and complex affair but a very reliable technique for acquiring software’s is very ideal. From issuing a request for proposal, bidding, evaluation and awarding the tender requires considerable sacrifice within the different departments of the organization and for instance the I.T department has to work hand in hand with the accounts & procurement sections of the organizations. While competitive bidding will ultimately encouraging competition and with the eagerness for most of the organizations in outwitting their competitors, it becomes very tricky in establishing who is the best in the business. Choosing the right vendor should be as transparent as possible this becomes very hard when most competitors offer similar services, have proven technologies, have the positive feedback and have been in the business for a long period of time. However, after a series of some careful bit by bit evaluation and scrutiny of each and every bid, the organization will be in a better position to scrutinize each vendor in detail and come up with their strength & weaknesses, get to know them better, establish crucial information as to who the owners are, when and where did they start their operations, their liquidity cash flow, reputation among clients whom have previously been offered similar services with the particular organization, these particular insights will generally enable the organization to make accurate, reliable and timely information pertaining to the right organization who is most suitable for the type of job being sought for. It is only with these careful scrutiny & evaluation that Cummins Inc will make an informed decision and have a strong case against the other unlucky bidders and award the tender to the most qualified vendor who will not only deliver the technology but enhance the image of the organization by implementing a technology that is robust, user friendly, efficient and stable in its operation. References. 1. The road to successful ITS software acquisition US department of transportation. Federal highway administration. Retrieved on Nov 20th 2009. Available http://www.fhwa.dot.gov/tfhrc/safety/pubs/its/architecture/rdsuccesses.pdf 2. Sanjay K Singh, Hugh J Watson, Richard T Watson. (2002) EIS Support for The Strategic Management Process. 3. Thomas & Tobias (2004) the evolution of a software acquisition process model. 4. S. Mc Connell. (1996)Rapid Development: Taming wild software schedules, Microsoft Press. 5. Thompson Louis S, (2001) railway modernization in Europe, (European conference of minister’s transport). 6. Joan Trottier. (2004) Information Technology software procurement procedures. Retrieved on Nov 20th 2009. Available http://www2.smcvt.edu/itweb/PDF/SoftwareProcurementProcedures.pdf 7. Jakub Miller & Janusz Gorski. (2002)Supporting team risk management in Software procurement and Development projects. 8. Cummins. Request for Proposals for Legacy Application Programming Services. 9. Jeffrey Delmon. (2005) Project Finance, Projects and Risks. Illustrated Edition. Kluwer Law International. 10. Harold Lewis. (2005) Bids, Tenders & Proposals. Winning Business through Best Practice. 2nd Edition Illustrated. Kogan Page Publishers. 11. Pieter Van Staaden & Sam Lubbe. A case Study on The Selection & Evaluation of Software for an Internet Organization. Retrieved on 26th November, 2009. Available http://www.ejbrm.com/vol4/v4-i1/Van_Staaden_Lubbe.pdf Read More