Five Key Mistakes Companies Make When Buying Software
After 20+ years in software sales, it is safe to say that I have seen almost everything. At a recent energy analytics event, we presented the “Top 5 Mistakes” that companies make when buying enterprise software. Amazingly, most companies make the same mistakes, over and over. Why is that?
Vendors engage in sales processes dozens of times per year, but energy companies may only buy enterprise software once every few years. Vendors have developed many ways to fool the customer.
Frequently, I am dealing with buyers that are far less experienced than I am in the software procurement process. While I engage in dozens of buying processes per year, the buyer may only deal with a few major software purchases per career. Amazingly, buyers seem to make the same mistakes over and over.
While I have often tried to help the buyer, their process is usually flawed from the beginning and very difficult to correct. Here you will find the top five recurring mistakes that I encounter, along with suggestions on best practices. I hope that my time spent in the trenches can help you avoid some of these common mistakes.
Software Buying Mistakes, The Context:
- Vendors have the upper hand
- Vendors work with dozens of buyers each year. Buyers may only have
1-2 experiences in an entire career
- Vendors have gamed the system
- Vendors want high revenue, captured customers
- Buyers want low cost, high-value, flexibility, freedom of movement
Software Buying Mistake #1
Buying software without extensive solution testing
- Vendors often use bespoke demo version.
- Demo version often use ‘vapor-ware’ to get the sale.
- Buyers don’t find out it was vapor-ware until after the contracts are done.
Your Solution: Always engage in a Proof of Concept or Pilot in the exact configuration that you will be buying.
Software Buying Mistake #2
Evaluating too few companies
- Buyers often “lock into” only one type of solution.
- In every part of the energy industry there are dozens of potential solutions.
Your Solution: Spend extra time investigating a wider range of potential options. If nothing else, you will learn more about the solution space and feel better about your original choice.
Software Buying Mistake #3
Relying on a Solution Expert, or Solution Consultant
- Companies often bring in solution consultants to help with their selection.
- The consultants often have a lot of experience with the major market player.
- The consultant may be looking for a role after you buy, as a system expert.
- They will often insure that the most expensive solution wins.
Your Solution: Understand that consultants want longer engagements. They do not want easy solutions. Make your own decisions!
Software Buying Mistake #4
Requesting only 3 references
- Any vendor can find 3 references.
- What percentage of their customers could be a reference?
- Ask references about initial cost estimate vs actual, initial time estimate vs actual, etc.
Your Solution: Ask for ALL customers contacts and call them at random. Or, do your own homework and find companies using the solution that the vendor will not provide as a reference.
Software Buying Mistake #5
Using a vendor for too much. ‘Best in Class’ vs ‘Single Source’
- Vendors love building their product at customer’s expense.
- 20% of the project takes 80% of the time and money.
Your Solution: Use vendors for their core offering only. But if you do decide to ask the vendor to enhance their solution, the vendor should do this for free!
David Leevan is the CEO of cQuant.io, a SaaS platform for energy analytics.