BearingPoint’s 6 tech-selection steps: Finding the right application ecosystem that lays the foundation for your digital transformation

Industry trends reveal an increasing amount of capital that firms across all industries are investing in digital transformation. And the application ecosystem lays the foundation of digital transformations. Based on extensive experience, BearingPoint has established a leading approach for selecting the right application ecosystem by ensuring that the critical strategic capabilities of organizations are well-integrated and that data is able to flow freely. In this article, BearingPoint outlines the six key steps to conducting a successful software selection process to identify the critical elements of the technology ecosystem.

Step 1 — Define the scope with 5-10 years in mind

A successful selection process considers all aspects of the value chain and beyond the ERP core, typically expanding the evaluation criteria to include functional areas and modules that capture actionable data and feed it back into the ecosystem. This includes standard modules for PLM, HCM, CRM, WMS — but also includes industry-specific solutions for several reasons.

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First, many five-year strategic roadmaps include the establishment of capabilities that are supported by these ancillary applications. These applications have evolved since they were originally conceived and are now both data-rich and data-hungry.

BearingPoint realizes that these applications may be able to operate in a standalone manner, but also that the strategic value is dependent upon being fully integrated into the ecosystem. Strong selection processes consider and plan for these long-term strategic capabilities. This ensures that decisions are not made impulsively, and that obstacles are not inadvertently introduced that hinder the path to implement these capabilities in the future.

Second, data must be able readily accessible by all systems supporting the value chain to be considered a true asset. It is common for systems to be selected independently by each user community without an end-to-end view of data. As a result, difficulties in the long-term can arise and limit an organization’s ability to report on or trace the origins of data (e.g., tying manufacturing data back to engineering and vice versa). Organizations lacking a big picture understanding often resort to duplicating data and creating a scenario where there is not a single version of the truth to act upon. With digitalization and enhanced data availability as the desired outcomes, experience shows that defining the scope needs to include a high-level, future state, enterprise architecture exercise that displays data domains and data flow between systems throughout the value chain.

Finally, BearingPoint recommends that organizations balance the value from digitalization of certain capabilities against the costs associated with the architecture model they pursue. While “best of breed” (selecting tools from many vendors vs. focusing on a single stack) can be a strong model, the total cost of ownership often increases and must be evaluated in the context of the incremental capabilities that can be extracted from this method. These additional costs are generally a result of:

• The loss of leverage gained by negotiating larger purchases when buying from a single supplier
• Increased development and support costs for IT to build initial integrations as well as continually testing and maintaining them

Wrapping up Step 1, BearingPoint recommends laying out a 5- to 10-year scope and considering the total cost of ownership and integration challenges along with estimated benefits when selecting an application ecosystem. Typically, this involves modeling both best-in-class applications and a full software stack from a single provider. The process should also include defining the future state expectations of the IT organization and the impact on staffing levels with both models.

Step 2 — Understand the future state by process

The old-school approach to systems selection often started with capturing requirements that tended to replicate the specifications and the requirements implemented in the previous solution. BearingPoint realizes that this process is inherently flawed because organizations replicate what they know, as opposed to exploring and adopting best practices that have since evolved outside of the organization. Leading organizations leverage outside expertise to understand what the best companies are doing in each process area, and how different modern solutions enable transformation. This approach transforms the conversation from “this is how we do it today” to a forward-looking conversation asking, “why can’t we adopt best practices that have been tried and tested across thousands of other organizations?”

These early conversations are critical and form the basis of the change management strategy as the future-state is compared, at a high level, to how processes are executed in the current environment. The underlying intent of these conversations is to focus on understanding the user community’s ability and willingness to adopt new ways of working. It quickly exposes key areas of change — not only where things will be significantly different and will require training and monitoring — but also where the organization will need to gain user buy-in.

Leading organizations will often enhance their business case by identifying the KPIs associated with each process and use them to set a baseline. BearingPoint can help identify future state targets that quantify the benefits of achieving process targets. As those future state targets form a component of the business case, the ability to deliver those targets become required criteria in the software evaluation. For example, will the solution help us achieve what we expect to gain in each area?

Step 3 — Create an evaluation team that exhaustively covers all process areas

Creating a team to evaluate solutions (and be heavily involved in Step 2) should include subject matter experts across every process area with an open mind to evolve their specific work areas of expertise. If an organization has formal Global Process Owners, at a minimum, they should be on the core team. Additionally, organizations should not shy away from assigning a large team for the selection process as it begins to support change management. This allows users to be part of the process, understand why certain products were selected and establish buy-in from the ground up.

While large teams may evoke concerns about critical operational resources being removed from day-to-day responsibilities for extended periods of time, BearingPoint studies have shown that the time commitment by individuals is ultimately not a major factor. Efficient evaluation processes compartmentalize demonstration sessions and use detailed demonstration scripts that allow users to come in for only the demonstration of process areas that apply to them.

Step 4 — Include the best vendors

Affordability of the software is a primary concern for mid-size organizations and will often be part of the core criteria for selecting the initial set of vendors to evaluate. This often leads to evaluating smaller software suppliers in lieu of the leading vendors because the smaller vendors are perceived to be more cost-efficient. However, this is a misconception because leading vendors typically price their software based on client size, and therefore become affordable for most mid-market organizations.

In addition, larger vendors often incorporate leading edge capabilities that propel their customers toward digitalization and support future growth in a way that the smaller software vendors cannot.

BearingPoint recommends, at a minimum, that organizations look at the long-standing and leading software vendors. If concerns exist and there is a desire to evaluate smaller and best-of-breed solutions, then we suggest extending the evaluation period to include the additional vendors in addition to the leading vendors. Carefully evaluating different options will help ensure the organization fully understands the market and the trade-offs between solutions and the respective pricing.

Step 5 — Understand a day in the life

Standard RFPs should serve as the basis for describing the client organization, scope, current state, integration points, desired transformation goals, critical success factors, etc. While these traditional RFPs will help the vendors understand the organization and begin to prepare, they are not sufficient to drive the selection process on their own.

The most effective selection process starts with the RFP and is complimented with carefully crafted demonstration scripts that reflect a “day in the life” of key users for each area. This includes particular emphasis on capabilities that differ from vendor to vendor and process areas that are likely to undergo significant transformation.

Well-developed demonstration scripts must be comprehensive enough so the vendors have adequate time to prepare. These scripts are unique to the client and can exceed a full day of process demonstration per vendor. Three to four weeks preparation is generally allotted with dedicated time for vendors to ask questions about the script, current processes and engage in discussions about the decision criteria for each process area. External partners typically gain enough knowledge in the first four steps to play a key role and help the vendors prepare without consuming user time.

Step 6 — Understand the business case in the context of software-as-a-service

 Software licensing models, especially in a world dominated by a software-as-a-service pricing plan (SaaS), can be very complex and leave an organization at risk for incurring unexpected costs. BearingPoint’s team of experts can help navigate the market, achieve the lowest total cost of ownership and gain the most favorable terms.

Complexities often reside at the line-item level, and companies need to ensure they fully understand what is included in each software vendors bill of materials, what else may need to be purchased, and the levers for pricing — which vary by vendor and can be dependent on a high number of different metrics.

To justify the cost, a good selection process will contrast the Total Cost of Ownership with the transformation objectives and metrics from each process area to identify which solution best helps the organization meet the future state goals. In addition, the incremental cost of any gap not addressed by the solution should be evaluated to understand the impact and the available alternatives.

The ultimate selection and negotiation strategy should incorporate the implementation strategy. Revisiting Step 1, the process should consider the full value chain and value of digitalizing a given process to establish the long-term roadmap which, in turn, defines what is purchased and when to minimize the licensing costs of applications.

Conclusion

BearingPoint realizes that three to four months on software selection is a long time for organizations, but that prevents the mistake of viewing the process as simply looking for an application that satisfies the current functional requirements. However, the selection of a technology ecosystem is a strategic discussion focused on the future of the business. In this context, leading companies are eager to spend the required time to diligently evaluate the options and lay the groundwork for change management and adoption to support the strategy.

An external partner that assists with the technology ecosystem selection is the ultimate strategic partner. A strong partner will bring expertise in software selection and sourcing along with functional expertise to help the organization understand the “art of the possibility.” In addition, the partner will manage the process through an executive lens to ensure that transformation decisions are made in alignment with the long-term business strategy. BearingPoint has significant experience helping organizations select software solutions for ERP, CRM, PLM, HCM, WMS and many other areas.

About BearingPoint 

BearingPoint is a multinational management and technology consulting firm. With operations in 23 countries and over 4,600 employees, it is one of the largest management consultancies in the world.

 BearingPoint provides industry-specific solutions and insights for technological advancement in organizational operations. Our experts seek to understand the business and the strategy prior to recommending digital transformation. Contact us for more information.

Reach the authors here: Scott Glenn, Partner, CIO Advisory,  Scott.Glenn@BearingPoint.com — and Matt Ellis, Senior Manager, CIO Advisory, Matt.Ellis@BearingPoint.com