July 17, 2023

Strategic Software Selection

Choosing the right set of software applications for the long-term future of the business can unlock huge untapped value, far beyond the direct project and software cost.

Finance companies live and breathe software. Many companies rely on software of course, but for financing, it’s what makes the business possible and where its intellectual property resides.

For many years, therefore, finance houses and banks were also software developers, with in-house teams creating bespoke software that didn’t just run the business, it was the business. Indeed, many of those legacy platforms are still in use today.

Pain of Change

This leads to the first pain point of any software selection project - the risk of damaging or losing the enormous amount of embedded knowledge and value in those custom platforms. 

A very similar trap exists for companies who invested in a software package 10 to 25 years ago. The business processes, staff ways-of-working, custom software changes and screen layouts have become second nature to everyone. At any point in time, it seems a lot more difficult to change than to carry on for another year or two with the existing platform and some new tech around the edges.

Strategy

Everything starts with business strategy. Software selection does not take place in a technology bubble. The software serves a wider purpose expressed through the long-term business strategy.

What are the fundamental objectives that should drive the selection and assessment process? After all, other options are available. Operations and tech can be outsourced to an expert provider. Self-build is back on the table for companies that can absorb staffing costs through off-shoring and their own technical leadership.

Partnership

The strategic analysis provides the first answer and decision point – to review the software market for the sector of interest and find the best long-term partner. This is a deliberate choice of words. These are critical business systems not just from a technical perspective. The way that the business and the software interact will define the future company and its success. The software companies will be long-term partners and stakeholders in that success, not merely suppliers to be managed at arm's length.

Assessment

So if software selection is the right approach, how to reach the correct decision? 

Many people will already have favourites. Existing vendors may be offering upgrades and new platforms. The decision will pit one business department against another. Is credit decisioning more important than the accuracy of the termination calculations. What about regulatory compliance?

There is more at stake than feature selection. System assessment should also consider potential future business models.

There has been a wide-ranging change in customer behaviour towards self-service in many sectors and adopting new ways of working can guide the ultimate choice of system. Avoid the temptation to reproduce how the business currently operates on the new platform – this perpetuates the old systems and loses the benefits to be gained.

Even if everyone can agree on preferred systems, what about the cost? 

The best-of-breed is often the most expensive but also beware of hidden costs not immediately apparent from the tender responses. Relying on a strategic software platform for the next 10 to 20 years requires a very different view of cost than the typical project model.

Technology

Technology choices also proliferate and have passionate advocates on all sides. The trouble with tech is it never stands still. State of the art today, can be next year’s unsupported legacy. Who really owns each software provider and are they here for the long term? Is this sector a sideline for them or are they committed to it?

There is no substitute for onsite reference visits, speaking to existing software company clients in confidence about their experiences. However, sometimes there is an advantage to being an early adopter and working with a new venture or an exciting start-up who do not have a track record.

Validation

Always ensure that time is allowed for pre-contract validation of the preferred or short-listed systems. This can take the form of a proof-of-concept project which incurs extra cost but provides much-needed risk mitigation.

Make sure to include a range of real-life scenarios, such as finance agreements which are run on the intended systems for a full lifecycle including accounting entries and termination use cases.

In Conclusion

Navigating all of the above, keeping everyone on-board and reaching a final conclusion is all encapsulated in the innocent phrase “system selection”. 

Making a definitive choice and then moving ahead rapidly is what puts successful businesses apart from their peers.

Results are not just expressed in terms of ROI or payback in a number of years, but in growth of profitability that is far beyond what was previously possible. 

It’s a challenge of high risks and complex choices, best supported by professional and neutral advice.

Are you ready for the challenge? 

How Finativ can help

Finativ provides practitioner experience to support partner selection, solution evaluation, risk evaluation and critical factors for success. We help drive successful outcomes in areas such as operating model design, data strategy, digital architecture and organisational landscape.

Our team can support new program set-up and governance, help rescue failing projects, or provide oversight, troubleshooting and executive sounding-board roles.

For more information contact:

Pieter-Paul Barker

Consulting Director, Finativ Ltd

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