Enterprise software purchasing

To run almost any business a piece of computer software is necessary. There are many kinds and sizes of enterprises and houndred thousends software companies around the world. So it is easy to think about economic paradise-like situation: huge demand meets huge supply. However if you are customer looking for software or software vendor looking for customer you do not feel like in paradise - isn't?

In this blog I am going to show some experiences, ideas, theories, hypotheses, cases and mechanisms related to software or sometimes generally "technology" acquisition.

Recently my friend, sales guy told me a story. Midsize company stated need for basic ERP system. Basic means full accounting functionality, inventory, simple CRM functionality. Estimated budget was about 200.000USD (software, services, some hardware). Within this company purchasing team was formed: CFO, Head of Accountants, Sales Manager, Inventory Manager, IT Manager. They worked very hard for four months. They evaluated what they need, red some analytical materials what is available on the market, sent RFI to choose broad group of vendors. Then they started workshops and presentations and defined detailed list of features required. Next they sent RFP, based on answers they made short list with pros and cons about each solutions. Finally they invited CEO and showed him what they did. They asked him to help them made final decision. CEO listened them for long time, asked some questions and said: purchase the less expensive solution.

Well known story, isn't? But be careful, there are two conclusions about this story.

First comes from software providers being in this process (my friend lost this deal). These vendors typically said: during economic downturn price is the most important factor, these kind of customers are extremely price sensitive, CEO's in such companies very often are professionals in their core business but in terms of technology they are low educated and not able to understand of importance of particular solutions, etc.

Second comes from CEO: I saw my people worked really hard for four months. They gathered many information's, a lot of knowledge, they wanted to do their best for our company. However their work and experience is not bringing as much value to our company as they though. At this stage of software technology development all these features are the same in most of the systems, the most of companies are using the same solutions, so there is no space for competitive advantage and according my business understanding there is no reason to pay for such systems as much as providers want.

What is up with this CEO? - my blog is about to begin.