The vendors who sell budgeting software make it look as if you simply “click here”, your budget process will no longer be in spreadsheets and you live happily ever after. However, both my experience as well as 3rd-party research studies simply do not support this claim. According to several credible research studies including BPM Partners Pulse Survey, we are finding that about 1 in 3 budgeting software solutions implementations FAIL. I get calls all the time from finance staff who have purchased a budgeting software solution to replace Excel and have failed, and it is very difficult to get approval from your boss once you've already been part of a software debacle.
This blog entry will include the reasons software fails and more importantly: WHAT TO DO ABOUT IT so you reduce your risk. I often see the price of software as of critical importance, but as long as the price is within reason (i.e. in the $10k - $25k range but not in the $75k - $150k range), my bet is that software price should not be your core concern. The real issue wlll be whether or not your budgeting software solution will be a success. And remember, time is money. As a general rule, take the number of hours the software company estimates for consulting support and multiply by 3 to estimate the amount of time required by you to implement the software solution.
REASON #1: Project goes over Budget!
Our software will be just $2,000. We forgot to tell you it costs $15,000 for consulting help to build your model – oh yeah, it’s really easy to use. Then if you want the $15,000 estimate to be an actual cost for your project so it’s a fixed fee, that’s fine, but instead of $15,000, it turns out it will be $20,000. But then next year happens and you find out that if you need additional help, that’s not in “project scope” so you’re going to pay another$5,000. When you go to present the next year’s budget using your budgeting software solution, the boss concludes, maybe we should take this budgeting software thing out of the budget, it keeps costing us more and more each year! Be wary of the “add-on” costing mentality. This is an exaggeration, but I hear stories where sales reps do in fact sound like the proverbial used-car salesperson. Here is the budgeting software version: “Our budgeting software starts at just $995 per year. If you want to have the balance sheet, then we’re talking an extra $3,000.” All of a sudden that $995 cost is looking more like $19,995. Those will cost you another $4,000. By the way, did you want floor-mats with that?
WHAT TO DO ABOUT IT: Ask for a ridiculously low bill-rate once the total project cost hits a certain number. For example, if the vendor estimates you will need 50 hours at $200/Hr which is $10,000. Then say: “Great! So, if we do in fact pay $10,000 upfront for the 50 hours, can we get a bill-rate of $100/Hr thereafter if additional consulting is requested? After all, it is unlikely we will need more than 50 hours.”
REASON 2: Your Post-Sale Consultant!
The research shows that the biggest predictor of which software we buy is actually the sales person (NOT THE ACTUAL SOFTWARE PRODUCT). In other words, we buy software from the sales person we like the most. So, you like your salesperson and the software seems great, and you make the purchase. A month later, you find out you’ve been assigned to a consultant who turns out to be a 3rd party partner who's built one model as practice and recently completed an MBA degree, but really has no track record. While the decision to purchase software is (and to some extent should be) largely driven by your relationship with your original sales person, once the purchase is complete, your sales person is off your case and is out of the loop in terms of the actual modeling and ongoing support. Turns out, one of the biggest predictors of success after you buy software is the relationship you have with your primary contact going forward, your consultant.
WHAT TO DO ABOUT IT: Probably the single biggest tip I have in this blog is: do not agree to purchase any software until you’ve at least met the consultant assigned to your project. If you don’t click with your consultant, the project is doomed, and in this case, you should either 1) ask for an alternate consultant or 2) simply choose not to make the software purchase. If you do feel your consultant understands you and is going to be able to make your project a success, you are probably right. You should probably then purchase that software plus you might even ask that the software vendor specify the name of your consultant in the contract prior to signing. The bottom line here is that you are better of building your model in Excel with a top-notch consultant's help than building a model in some budgeting tool with a second-rate consultant.
REASON #3: Project Takes Too Long!
“They said it would take 4 weeks, but 6 months later, we’re still not done!” This just doesn’t add up. The software vendor has case studies featured on their website that say “I was up and running in just 4 weeks!” What actually happened was the customer paid for 160 hours of consulting by the time the project was considered complete. Since 160 hours divided by 40 hours per week amounts to 4 weeks, one way to break this down is that "...it took 4 weeks." A more honest but less enticing marketing message would be: “I was up and running with 160 hours of consulting which took place over a 6-month period”... If you go to your boss and say we'll be done in 4 weeks, your boss will think you mean calendar time, not billable time. The deck is stacked against you from the outset.
WHAT TO DO ABOUT IT: Ask for a project timeline with key milestones defined prior to making the purchase decision. Review this project timeline with your boss and get a sign off and ensure there are no questions from your management team prior to the software purchase.
REASON #4: Get Lost in the Details
I mostly see this problem when accountants or IT folks are very focused on importing data from one system to another. The fact is that all the budgeting solutions out there pretty much can get data from the accounting package in and out of their budgeting package. If not, they would not be in business. I’ve seen it time and time again, the initial concern is so focused on moving data around that the consultant skips over the key step of defining objectives and understanding the audience for the budget model as well as the kinds of decisions that your budget model needs to support. The problem is that until the first 5-10 hours of consulting are completed and key players all nod their heads that regarding the why and what this budgeting model will actually need to look like, moving data from one system into another is just that. The “data dance” as I call it. I agree that it is important to be able to move data from one system to another but this is what I call “simple busy work” – The fact that the data moves from one system into another will not be a good predictor of your success with a budgeting software package. The better predictor of your success will be the extent to which your consultant helps you determine the following 3 items: 1) which data to import and from which data sources (not just the GL), 2) what level of detail (account totals or line item detail), and 3) to what extent to bring in non-financial data (example units and rates from a sales database).
WHAT TO DO ABOUT IT: Ask the vendor to provide the initial 5-10 hours of consulting at a minimal charge or for free so as to define the data requirements. Once the data requirement is in place, moving the data in and out of the system should be accomplished in minutes not hours or days.
Stay Tuned for Next Post!
Here's a preview of next post in which I will summarize what I am calling the "Budgeting Software Industry Consolidation Phenomenon" and the impact on you as the customer:
It all started with Pillar and many companies were doing pretty well moving off spreadsheets for budgeting. Then Hyperion acquired Pillar and eventually phased it out with Hyperion Planning since Pillar was really not that great for huge companies which had the larger pockets. Many smaller companies were fine with Pillar and some still use Pillar though it’s no longer supported. Hyperion was later acquired by Oracle, and companies using Pillar now have no one to call if they need help unless their original consultant is still in practice for some strange reason. So, now some companies who use Pillar are basically forced to purchase a new budgeting software package. Instead of “buy one get one free”, this amounts to something more like: “buy one at full price, get the option to buy another one at full price and also spend a ton of time moving your old system onto the new platform.” As you can imagine, your sales rep is not going to be volunteering information about the future viability of the software solution they are representing; nonetheless, you should ask them just to see how they respond…