How to decrease the risk of a bad purchase
I’ve been constantly involved over the years in selling IT products and services, having on the other side various roles on behalf of potential customers, from top managers to key users.
In many interactions, people are more interested in price than functionality or the risks they are exposing themselves to by choosing the wrong system.
I admit that there are plenty of people who have learned to evaluate a supplier and an IT product or service correctly, and in recent years, their number has been steadily increasing.
However, even the most open-minded of potential customers ask the wrong questions and, after a while, regret their decisions. Not everyone has purchasing experience, and if you get it wrong once, with the next supplier, you become defensive.
So, for everyone’s sanity, we have compiled a list of questions that should be asked more often to decrease the risk of a bad purchase.
What are all your system costs for a year? What about for 3 years?
An IT system is like a car. When you buy it, it’s new, it looks fine, and it’s just starting to be used. As time goes by, if it’s maintained properly, it gets you where you want to go. If it’s not, it gets in the way of your daily activities and costs you a lot of money. The real costs of a system are seen somewhere between 1 and 3 years and include EVERYTHING from usage, new users, scaling, new functionality, servers, third-party licenses (e.g. operating system), support, upgrades, etc. Often, IT vendors just offer the initial cost, and customers relate to it. If they knew how much it would actually cost over time, they’d get cold feet and stop buying.
What’s in it for me? How can you demonstrate them to me? Can we do a simulation with my figures?
As Romania is a price-driven market and not a value-driven one, the first reaction of most customers is “Wow, that’s expensive!”. Most of them don’t even know what they’re talking about; it’s just an oriental shopkeeper’s reflex, used to negotiating whatever is put on the table.
Warren Buffet used to say that “price is what you pay, value is what you get.” If the market in Romania were also value-oriented, we would be much further ahead. We would have much more efficient factories, and suppliers whose only value is that they sell cheaply would disappear.
So the discussion has to move towards benefits. If the supplier can demonstrate the benefits, and a simulation with the data provided by the potential customer shows that they are higher than the cost of the solution over a period of time, we have a win-win situation.
How many similar customers do you have? Can I make a reference visit?
You’re making sure the person trying to sell you something knows your industry. Manufacturing, in particular, is a complicated industry. Many people try, but few succeed in creating products or services of value. Try to identify whether the person in front of you knows your specifics and understands what you’re dealing with, or whether you’re just a guinea pig for them, shifting the risks of developing a product or service to your backyard on your dime.
Do I have additional costs for licenses, hardware, or services?
A classic habit of IT vendors, which not all customers are aware of, is to offer strictly proprietary components. That is, they give you solution A for 3 lei, but in order to work, it needs one or more servers with X capacity, on top of which come some operating systems. But surprise, the servers and licenses don’t appear in the offer or are mentioned in a language like “the customer will provide the necessary infrastructure to run.”. Easy to understand?
And there you go. From a budget you thought was 3 lei, it’s actually 10 lei or more. And don’t forget that over time, that infrastructure also needs to be maintained, and the factory usually doesn’t have the specific skills.
What resources are needed from my side for implementation? With what training? What about over the life of the system?
A common mistake customers make is that they jump into projects without understanding the resource requirements on their side. They sign up, then discover they don’t have the staff or skills needed for implementation. Some also make a decision that, in my view, deepens the potential problems in a project: the CEO (or other top manager) becomes the project manager. People who are burdened daily with operational work sit in meetings a lot and cannot respond in a timely manner to the needs of a project.
Make sure you understand the load you are exposing yourself to as an organisation. If it’s bearable, go ahead. If not, wait until the situation changes.
Do I have access to my data from outside your system? When, how, and in what form?
An almost non-existent topic from a factory perspective. For us as vendors, it’s sometimes frustrating to see how some companies, usually large corporations, have implemented expensive systems with data hermetically sealed behind proprietary technologies. When a potential customer tries to give us access to their factory systems, we are surprised to find that we can’t integrate. Why? Vendors don’t give access to customer data, even though it’s theirs. Or they give access to prohibitive sums, which the customer does not have. Even if the client wants to opt out, the data cannot even be exported manually in an open format.
Before signing a contract, ask any supplier how you can access your data. Make sure that in the future you are not exposed to situations like the above.
Does your solution integrate with others? How? What are the costs of integrating with other systems in the future?
Another topic that is almost non-existent in the questions we receive from potential customers. Production, maintenance, quality, logistics – all processes are managed by specialised solutions or the famous Excel. Sure, big companies can afford an SAP-like solution that says it does it all, but most companies don’t have the budgets for it.
So you end up with an amalgam of IT solutions. I call them “digital islands”, unconnected to each other and delivering little, local value to the team or process owners who use them. And at the factory level, the famous Excels emerge where data is consolidated from these digital islands, with high costs and low benefits.
Normally, there should be some widely used methods that each of these systems already has built in. I mean, connection via web services, jobs that export/import data to a central database or others.
So ask at the outset if the system the provider is promoting has these mechanisms built in, and if so, how much would it cost?
What can go wrong in implementation? What about later? What are the weaknesses of the solution?
Questions I ask myself every time something is presented to me. Depending on the answer I can tell who I’m dealing with: if they claim everything is ok – I take it as a lie, or if I get some “let’s make it good not bad” answer – it’s bullshit. The supplier either doesn’t know what they are selling or is lying to me.
If he’s honest instead, he’ll give an answer that includes the downsides, things he’s faced in other implementations. A good choice for a future road partner.
If I want to give up on your solution after a while, what are the steps? What are my costs?
There is a formal contract conclusion procedure written into every contract. X number of days notice etc.
But from a business point of view, things need to be clarified beforehand: what do we do with the data so far? How do you deallocate/deactivate the system? Are there other preconditions you need to know about?
Back to the data issue above. Do I get the data automatically or in some open form?
If the answers to the above questions are clear and you are at peace with them, you better understand what you are exposing yourself to and the risks will be lower.
See who I am and who I write for. If you want to know more about the subject of the article write to me directly at adrian.dima@kfactory.eu
