IS

• Software selection


  A routine and very challenging aspect of the information system of any organization
• What makes software selection challenging


  • Type of software being evaluated
  • Scarcity of software
  • Expansiveness in scope of software
• Probe approach in software selection

  1. Quickly identify the best potential package solution

  2. Demonstrate that it is the best solution

  3. Move on to the next promising candidate if selected solution misses the mark
• Benefits of probe approach

  • Considers current and future requirements
  • Uses ranking and grading methodology to eliminate subjectivity and bias
  • Project team approach creates company ownership and develops team building and knowledge transfer
  • Can be cost- and time-effective
• Steps in the probe approach

  1. Form steering committee and project team

  2. Document process flow

  3. Prepare the request for proposal (RFP) and rank selection criteria

  4. Identify vendors and issue RFP

  5. Hold vendor conference

  6. Evaluate and rank vendor proposals

  7. Finalize vendor selection

  8. Present vendor recommendations and review implementation plan
• Steering committee


  1. 3 members of executive and senior management who are knowledgeable in the area where the software is to be utilized
• Responsibilities of steering committee

  • Review scope and progress
  • Review and approve decisions
  • Resolve cross-organizational issues
  • Define key business requirements and drivers
  • Approve changes in scope and obtain requested resources
• Project team


  Key members of the company staff who are the real workers and can make the project a success
• Role of project team


  • Conduct interviews
  • Define business requirements and required process flows
  • Document and analyze findings
  • Present recommendations to steering committee
• All projects consist of three phases: fact-finding, analyzing and reporting
• Fact-finding step


  • Include a representative sampling of the company activities
  • Understand and appreciate the unique requirements of each location
• Project team needs to think out of the box but still within the four walls of the company and within reason
• Project team needs to consider requirements 3-5 years down the road and anticipate future growth and the need for expandability and adaptability
• Project manager should review the findings with the steering committee to achieve accuracy, completeness, plausibility and acceptance of the data collected
• Request for Proposal (RFP)


  Documentation that makes the internal axioms fit for public consumption to avoid confusion and misunderstanding for vendors
• Response format in RFP

  Columnar list of specifications by functional area, with vendor indicating whether their software exceeds, meets, meets with modification, partially meets or does not meet the required specification
• Evaluation criteria in RFP

  • Degree of fit
  • Hardware and software compatibility
  • Scalability
  • Use of technology
  • Implementation support
  • Cost
• Evaluation criteria and their weights are shared with department executives so they have an appreciation of the methodology and objectivity
• Identifying vendors


  1. Survey of literature and trade groups

  2. Internet search engines

  3. Talking to clients, word of mouth, reputation, financial background checks, request of demo CD
• Critical to issuing the RFP is the establishment of key compliance dates
• Vendor conference


  1. Held within a week, but no later than two weeks, after the RFP is issued

  2. Not to review the RFP but to answer vendor questions

  3. Publish responses to questions to ensure consistency and completeness

  4. Explain the evaluation process and criteria but not the assigned ranking and weights
• Evaluating and ranking vendor proposals

  1. Each project team member evaluates the functionality aspects independently

  2. Multiply the weight assigned to each criterion by the grade and sum the resulting values to get the vendor's functionality score

  3. Evaluate the proposal costs against the functionality scores

  4. Reach a consensus and rank the vendors
• Vendor selection grades


  • 5 - Exceeds
  • 4 - Meets
  • 3 - Meets with modification
  • 2 - Partially meets
  • 1 - Does not meet
• Finalizing vendor selection


  1. Prepare scripts for functions to confirm vendor responses during demonstrations

  2. Screen and check references, conduct a site visit to a vendor installation and confirm functionality grades

  3. If comfortable with the results, finalize the selection, otherwise proceed to the next vendor in ranking
• Presenting vendor recommendations


  1. Overview of the process used, review of the rank criteria, results of the vendor ranking, results of the demonstrations, reference checks and site visits

  2. Separate the financial analysis from the functionality

  3. Provide an initial glimpse of the implementation plan, timeline, hardware acquisition and costs

  4. Seek steering committee's approval of the selection
• The deliverables from a software selection project are: Request for Proposal, Selection Criteria and Ranking, Reference Checks, Results of Site Visits, Implementation Work Plan
• The reason for designating multiple project team members is to allow representation of both the IT and user communities
• Outright purchase


  Paying for the equipment all at once at standard retail pricing
• Benefits of outright purchase

  • Can claim capital allowances for tax purposes
  • Disadvantages: have to pay full cost upfront, may need to use overdraft or loan, responsible for maintenance and repair, asset depreciation
• Leasing


  A contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset
• Advantages of leasing


  • Balanced cash outflow
  • Access to quality assets
  • Better usage of capital
  • Tax benefit
  • Off-balance sheet debt
  • Better planning
  • Low capital expenditure
  • No risk of obsolescence
  • Termination rights
• Leasing


  An off-balance sheet debt that doesn't appear on the company's balance sheet
• Lease expenses


  • Usually remain constant for over the asset's life or lease tenor or grow in line with inflation
  • Helps in planning expense or cash outflow when undertaking a budgeting exercise
• Leasing


  • Ideal option for a newly set-up business given that it means lower initial cost and lower CapEx requirements
  • For businesses operating in the sector where there is a high risk of technology becoming obsolete, leasing yields great returns and saves the business from the risk of investing in a technology that might soon become outdated
• Leasing contract


  • At the end of the leasing period, the lessee holds the right to buy the property and terminate the leasing contract, thus providing flexibility to business
• Lease payments


  Treated as expenses rather than as equity payments towards an asset
• Paying lease payments towards a land


  The business cannot benefit from any appreciation in the value of the land
• Long-term lease agreement


  Remains a burden on the business as the agreement is locked and the expenses for several years are fixed
• Lease expenses


  Reduce the net income without any appreciation in value, it means limited returns or reduced returns for an equity shareholder
• Investors


  Consider long-term lease as debt and adjust their valuation of a business to include leases