8 ways to detect assumptions and hidden costs
Analysing and comparing vendors’ offers for digital workplace projects is not an easy task. Customers tell us it often feels like comparing apples with oranges, as each vendor has his own approach and methodology.
There is no quick fix for this challenge, but there are ways to increase transparancy, which is crucial when you want to deconstruct, understand and compare offers. In this post, we give list a number of tips that are designed to help you detect and unearth inconsistencies, assumptions or hidden costs.
1: Detail, detail, detail
It is important that you insist on drilling down costs in as great detail as possible. Make sure the distinction between project cost ( = cost for implementation), run cost (= cost for management and support) and change cost (= cost for standard changes and custom changes) is clear. If you see a fixed price, go into the details and unearth any assumptions it might come with.
Offers usually contain a number of assumptions, intentionally or not. Examples include licencing (a vendor can assume a customer already has certain licences); availability of customer resources (a vendor can assume the proposed timeframe is feasible for the customer, and that he can allocate resources accordingly) and hardware (a vendor can assume that the current end user hardware is capable of running all the applications.). Make sure all the assumptions are on the table.
3: Lead time
Remarkable differences in lead time usually point to differences in scope or to hidden assumptions. Check what is included and what is not (testing? project management? change management?). A 3-month lead time might look more attractive than a 6-month one, but look for assumptions. Your vendor might be able to maintain a 3-month lead time in terms of resources, but the pressure on your own people might turn out to be too high. Ask for details.
When there’s a considerable difference in price, check the following things. Does the offer contain training, change management, a user adoption program, project management etc? Does it include addons or tools which automate manual tasks and which come at a fee, but save money in the long run? Is documentation of your specific (custom) solution and setup included (we’re not referring to manuals here, but tailor-made documentation of your solution). All these features come at a cost, but all of them reduce the risk of failure.
5: Daily rates
Differences in daily rates can point to differences in seniority, business process knowhow, sector expertise and so on. You might want to take a look at cv’s. Also check lead times: high(er) daily rates may come with short(er) lead times, which in turn means you need to check feasability on your side. Find out whether the mentioned daily rates are also applicable after go-live. Often interventions ‘at call’ after a solution has been delivered, come at a much higher rate.
Licencing is a pretty complex issue which requires specialist skills. When checking licencing cost, does the offer contain the licences you need today, or did the vendor take into consideration your (not-so-distant) future needs? If your company has a growth strategy, or is planning to make an acquisition, it might be more advantageous to buy licencing with that scenario in mind, than to stick to what you need today and upgrade later.
A more expensive offer might point to a higher degree of scalability and future-proofness. This can include: the possibility to offer IT support from start to finish and across several disciplines, the possibility to implement the solution in different countries and/or several languages, and so on. Again, the real question here is not what you need today, but what you might need in the (not-so-distant) future.
8: Service Level Agreements (SLAs)
Service Level Agreements come in different flavors. The most crucial question here is: what does your company need? Do you really need a response time of 1 hour as opposed to, say, 4 hours? What is must-have versus nice-to-have? Flexible vendors can offer a wide range of standard SLA components, and thus create a solution that perfectly aligns with what your company (minimally) requires. This way, you don’t end up paying for what doesn’t bring you any added value anyway.
More tips? Download our free guide for decision makers.