The ACE software selection process

Megan Meade

On average it takes 20 weeks to select business software.

You’ve identified a need, now you just need to find the right system.

But researching software and compiling a shortlist isn’t easy.

The software you select now will impact your organization for years to come. Select the wrong one, and you’re in for a hard path ahead. Not only is the cost of failure high, but selecting software is confusing.

So we’ve created a process to make software selection simple.

Now you just have to ask yourself one question: Does it ACE the software selection test?

Using our three step ACE software selection process you can determine if the software on your shortlist is a good fit for your business.

The ACE software selection process:

  1. Affordability: is your software value for money and within budget?
  2. Culture: is the software vendor’s culture a good fit with your organization? And, how will your employees react to the software?
  3. Efficacy: does the software meet your requirements? Will it help you achieve your business goals?

1. Affordability

The first question on most businesses minds is: how much will the software cost?

The average enterprise software budget can range between $1,800 and $10,000 per user over a 5 year period.

Our software project reports found that the average budgets were:

Most businesses should look to work with, at the very least, a cost estimate of their system. There’s no point in finding the ‘perfect’ software if it falls in at $100,000 over your listed budget. 

Starting your software shortlist with a ballpark figure of each possible system allows you to view which systems are within reasonable reach.

While we’ll focus on system cost as a point of comparison, you should remember, that the software licensing costs aren’t the only factor to consider in your total budget, and the software cost itself shouldn’t consume your entire budget. When selecting software, there is more to consider than just the label price of the software itself. We recommend estimating your software spend over the next 5 years taking into account the future costs, as well as your capital costs.

How much does the system cost per year?

The price of software can be formatted in many different ways (more of this below), so it’s important to compare cost over the same time period. For example, if a system is billed yearly, we should compare it with a system that is billed monthly for the total cost over 12 months.

The first step of system cost is an “at a glance” comparison to form the basis of our best price point. This will allow you to see if all the systems on your shortlist are in a similar range, or if there are outliers which are vastly cheaper, or more expensive.

What features do you get for the price?

Now we’ve had a snapshot of the system cost as a high-level, it’s time to analyze what functionality you get for your system cost. 23.6% of companies were looking to gain a greater level of functionality by implementing a new ERP system according to our recent research. 

Have a quantitative analysis of how many features the system will include. Then, break this list qualitatively in terms of how useful the features are to your business either now or in the future. You can even create a rating system for features which ranks them based on usefulness (0 being not useful, and 5 being the most useful).

This will provide a fuller image of what is being provided for the total cost.

Further, cross-compare which features seem to be included ‘as standard’ across all systems, and review whether the systems without the additional functionality have additional modules to support the system, and how much they cost.

What does the software cost include?

It’s important to clarify what each vendor includes in their software cost. Some vendors may provide a specific tier of support to those who have purchased their system, e.g. live chat or call center support channels. Whereas, other vendors may offer this as a paid-for extra. As many as 10% of software purchases are driven by poor support, so don’t underestimate its value.

Vendors may also include software training manuals, online classrooms, or downloadable tutorials to train your users on the system. This could reduce other areas of budget spend on your user training.

What a vendor offers as standard is an important consideration when it comes to comparing system cost.

Pricing models

There are also different pricing models that you should take into account, your business may prefer one setup over another. We’ll discuss the two main hosting methods below.

Perpetual licensing 

This hosting method means your business hosts the software on their own server on-premise.

This can be a popular choice for large businesses who have the infrastructure in place to support it, but can present higher startup costs for smaller businesses.

Businesses without the existing hardware to support the software will incur higher capital costs to get the system running, but over time on-premise systems can save costs.

The perpetual licensing model provides a clear cost of ownership of the entire system, as well as permanent use of the software license without subscription costs which can offer a lower total cost of ownership to businesses.

Although, the price can be too high for businesses without the on-site infrastructure already in place to support them, which can lead to a lot of expense at startup. Additionally, scaling up the system can be more difficult as the infrastructure must also be scaled, and paid for, as the system grows.

Our recent software research found that only 6.2% of businesses were looking specifically for an on-premise solution.

Software as a Service (SaaS) model

The SaaS model, most often seen in cloud hosting, is steadily growing more popular with businesses of all sizes. In our CRM report, we found that 98.5% of businesses were open to a cloud-based solution. This model resolves the issue of infrastructure cost by hosting the system in the cloud, thus reducing some of the initial outlay for new software. 

Some benefits of this pricing model include the aforementioned low upfront costs and lower initial outlay for software license. As the pricing model is subscription based, this can provide a high degree of flexibility and scalability in terms of user numbers or transactions. 

There are also drawbacks to this model, including that the subscription cost could outweigh the cost of a perpetual license during the lifetime of the system meaning it ultimately costs more. In addition, spikes in demand can increase costs under specific on-demand license agreements meaning system costs can be uncertain.

Which one is the right pricing model?

The right pricing model for your software should be determined during your requirements. This means auditing your existing IT infrastructure and its capabilities, as well as future growth plans at both user and transaction level. 

Small businesses may find their software shortlist candidate falls at the affordability metric as the infrastructure cost would send them over budget. Alternatively, a larger business may find they can dedicate a higher percentage of their budget to an on-premise solution as their infrastructure is robust enough to handle a new software.

Shortlisting software on affordability

The affordability of your software should be based on multiple factors beyond the licensing cost. It’s also important to consider what the costs include, for example, if a vendor offers support and user training in their initial licensing cost, this will result in a reduction in another area of budget.

Therefore, when comparing vendors it’s important to make sure you’re comparing offerings on a like for like basis. To recap on the steps for our affordability criteria.

1. Gather pricing information on software you’d like to shortlist

You should first look for pricing information on software you’d like to shortlist, this can be found on software profiles. Make sure you gather details on every available pricing tier that you may use to allow for an accurate comparison.

2. Make like-for-like comparisons between systems comparing cost over the same period of time

Compare pricing information across multiple systems over the same time period. This will allow you to make accurate comparisons for how much a system will cost over a set period of time; calculate the system cost over one year, and five years time taking into account user numbers and projected company growth.

3. Check the number of features each system offers depending on pricing model

You should identify the features each software provides, and if the feature lists expand when selecting higher tier pricing models. Include a breakdown of what the software offers in terms of features, functionality, and user capacity, and cross reference the offerings across all compared systems. 

4. Check what the software cost actually includes

Find out what level of support is offered with the pricing plan selected; it may cost more to upgrade to 24/7 support, but know your options. Also check if they offer any training materials or access to online courses on how to use the software.

5. Check what pricing model the system can run under and the costs of each 

If you are undecided between which hosting method you’d like to use, you should find a cost for both a cloud and on-premise version of software. From here, you should calculate the point where a subscription cost would cost more than the outlay of the on-premise cost as this may impact your decision.

2. Culture

Culture is a multifaceted component of the software selection process; it includes your own culture, as well as the considered vendor’s company culture.

Let’s start with your company culture.

Your business will dictate which software is a viable option in your organization. If your team has never used any type of software before, it’s unlikely to be a success bringing in a highly complex non-user friendly system into your company (not that you’d want to anyway).

Consider your company’s main reasons for implementing as part of this; why are you moving towards this new system? Our report data found that the reasons for implementing a new business software varied from:

  • Implementing to increasing efficiency
  • Supporting growth with a new system
  • Received poor support from existing vendors
  • Replacing an outdated legacy system
  • Integrating global operations

The backgrounds of those using the system the most should be taken into consideration during the choosing of the system. Your selection team should have spoken to stakeholders during the requirements gathering process, but here it’s important to remind yourself of their needs and interactions with the system.

If your employees are resistant or slow to change, a system with completely new re-engineered processes is unlikely to be a successful software selection. 

Don’t forget your stakeholders either, at all levels. Especially not the executives who you secured buy-in from during your initial software pitch.

Will the software deliver on the business goals they are looking for?

Remember, different departments will have different goals; your finance department will view the system differently to those in sales, and both teams will expand at different rates. Your chosen software will need to interact with different departments and people at different levels.

If the software works like a dream for your sales team, but adds to the workload of those in finance and administration, you’re not going to be the most popular person there, and it can cause intradepartmental rifts to develop.

Team collaboration

Selecting a software should be a collaborative effort across the entire business. The software you select will be a part of your business for many years, so it’s important to make the right choice which means your team working together to find the best system. 

Your team should have one place where they can compare features across different systems and provide everyone with the same information in one place. By having a centralized location to compare shortlisted systems, your team can gather all the information they need to make accurate comparisons.

Once a shortlist has been created, you can start to break down the benefits of each system with a side-by-side comparison. A team member can compile the list and then invite other members of the organization to collaborate and add their feedback to the shortlisted software.

Once your shortlist team has been created, members of the team can view and edit the shortlist allowing the team to work together to find their perfect software.

Making the selection process collaborative from the initial shortlisting helps your team to feel included and valued during the selection process.

Vendor company culture

When we add a new employee to our business, we usually undertake a series of interviews with multiple stakeholders to determine how good a fit they’ll be for our business. You should approach your software selection the same way.

After all, your vendor will be involved in your business intimately for years to come; interacting with many people and many different departments. It’s important to be sure you know who you’re working with.

Company culture is a great indicator to see how well you think you’ll work together. That starts with industry standing, and what their employees are saying about them; happy employees who like their job provide better service and show support for their business. It’s great to check out resources like Glassdoor to find out what employees think of the companies they work for, and it can provide a positive outlook for their future.

Don’t look at the future of their business, but look at their past dealings; how long has the vendor been offering the software? And, how many people are using it?

This can provide a good indication of the stability of the vendor, and show their proven track record of successfully maintained customer relationships. If you’re investing in a system to last at least five years, you need to be sure that the vendor is going to be around to support your system for equally as long, if not longer.

Although no two businesses are the same, it’s also useful to see if your potential shortlist has worked with those in similar industries as your own. 

You can also consider any interaction you’ve had with the vendor already, if any, to determine how well the team responds and engages with you. Remember, vendors who are pitching their product will be presenting the best version of themselves possible, so always do additional research.

Shortlisting based on company culture

Smaller companies may find that they identify more with smaller software teams who offer a more personalized level of support. In comparison, large enterprises may find they prefer well-established, large-scale vendors who have hundreds of people ready to support them in support centers around the world.

To recap on the steps for our culture criteria.

1. Assess your employees technological skill level

You should consider your employees technology skills before selecting a system that may be too cumbersome or difficult to use. If your employee base is primarily people accustomed to very simple systems, bringing in a complex system will isolate them.

2. Get each team’s feedback on what they expect of the system

It’s important to understand what each department expects the system to be able to do, and the main business objectives that the software hopes to achieve so everyone is on the same page.

3. Create collaborative software selection environment for your team

Make sure your team is working from the same information from the start of the software selection process. Ensure your team has a shortlisting environment where they can work together.

4. Check out Glassdoor company reviews of potential vendors

Do your due diligence on software vendors by reviewing how their employees see the company by checking out sources such as Glassdoor during the shortlisting process.

5. Ask vendors to provide customer reviews of companies similar to yours

Make sure to ask potential software vendors for information from current customers in similar industries to your own whether that is case studies, reviews or contact details of companies willing to talk about their experiences directly.

3. Efficacy

Finally, and perhaps most importantly, does the software do what you need it to?

Before researching vendors, you had to create a list of software requirements; things your system needs to do to deliver on the process improvements you’re looking for.

You likely divided these into three categories based on priority: 

  • Functional requirements
  • Nice-to-haves
  • Extras

Now, you need to assess the potential software by those requirements, starting with your must-have functional requirements.

High priority requirements are non-negotiable; they’re the key driving factors behind your software selection process, so make sure that your shortlist criteria reflects this.

Once you’ve removed any software that doesn’t meet your functional requirements, you should have a shortlist of systems that offer the base functionality you want.

Next, we look at our nice-to-have features; these are requirements that would provide benefits to our business, but aren’t a top priority. This list should also be prioritized based on the value each feature would add to the business.

These are areas that your project team have identified have potential, but if the budget can’t include them, they aren’t mission critical.

A software that can tick off as many of your nice-to-haves as possible is likely going to be prioritized over a software that meets only functional requirements.

The next step down from nice-to-haves is the extra features. These are requirements that aren’t mission-critical and don’t add a great deal of value to the business, but provide marginal benefits to stakeholder groups. 

Extra features that may fit into this category would be features such as on-demand reporting of specific metrics, or customizable summary dashboards at user level. These features are useful, and can provide insight, but aren’t critical to the project success.

How efficacy factors into the software selection process

When factoring efficacy into your software selection, you should ask yourself a series of questions:

  • Does this software meet all our functional requirements? (this should always be yes)
  • How many of our nice to have features does it include?
  • Are there any extras this software includes?

You should score each software based on how many priority features it satisfies. 

Software ASoftware BSoftware C
Functional features473
Nice to have features744
Extra features957

The example above would indicate that Software B meets more functional feature requirements than any other software, despite the fact that Software A and C have more features, meaning it is the clear winner.

This is why it’s extremely important to prioritize your needs, reducing the likelihood of similar systems yielding the exact same score across categories. 

You should also consider your users during this process.

Does this software meet the needs of your users? If your requirements gathering process was a success, and consulted stakeholders across all departments, resulting in a well-prioritized list of requirements, the answer should be yes.

The next level to this is the usability; is the system easy to use? Users expect an intuitive interface that isn’t cumbersome to use. If you promised to make their lives easier with streamlined processes, deliver on the promise with a simple to use system. This also ties in with our earlier discussion on culture.

The next consideration is: how well does this meet the aims of our selection team?

You’re selecting the software for a reason; to meet a specific set of objects and business goals that were set at the start of the project. How likely is it that the shortlisted systems will achieve these goals? And, assuming they do, how long will it take them to fully realize the goals?

Different systems implement at different speeds; if implementation timeframes vary by only weeks it’s unlikely this will have a massive impact on the deliverance of these goals. However, if the systems time frames vary by months, or even years, it may be a deciding factor during your efficacy evaluation.

The steps of assessing efficacy in software

To recap on the steps to assessing the efficacy of your software shortlist.

1. Divide your requirements into functional, nice-to-have, and extra features

During the selection process you should divide your requirements list into three sections to determine which features are the most important to your overall business goals and objectives.

2. Filter software based on your requirements

Filter your software comparison and shortlist by software that meets your basic functional requirements so you only have software that will meet your needs.

3. Determine which software meets the most functional requirements

You should assess your shortlist by how many functional, nice-to-have, and extra features each system has, then remove any software that does not meet the functional requirements you need.

4. Shortlist the software that meets the highest number of feature requirements across the categories

This will allow you to determine which software will meet the most of your needs and objectives as well as provide additional functionality that would benefit your business.

Does your software ACE the selection test?

Megan Meade

Megan is the Content Editor at Software Path.

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