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How to engage a software development company – Part 3 – Select suppliers that play in your ball park

Shopping for suppliers is no different than shopping for anything else – you want to select a supplier that’s geared towards providing the best service available, within your budget.

Custom software suppliers, like most industries are organised into tiers based on which end of the market they serve, and what you pay for those services.

The entry level tier is mostly independent contractors, small development shops and offshore suppliers. At this end of the market suppliers tend to have fewer established processes, quality controls and lower rates, so can turn projects around quickly and cheaply.  It’s my experience that suppliers at this tier are capable of working in a more ad-hoc manner, with less emphasis on specification and more on outputs – which can be a good or a bad thing depending on your needs and requirements.  It’s typical to find that individuals at this level often wear many hats – your developer may also be your business analysis and your project manager.

When to consider entry tier suppliers:

  • If you have a very clear understanding of what you want to achieve, and are able to document it clearly, and with a high level of detail
  • Your budget is in the tens of thousands
  • You are prepared to accept potential quality issues, and a longer timeframe to have these resolved

At the other end, the top of the pyramid (tier 1) is dominated by a handful of major enterprise players (think Microsoft, Fujitsu, IBM), who often come with their own platforms attached.  Clients with a need for enterprise suppliers fall outside the scope of this series, as engagement is typically handled in house, by an experienced procurement and projects team.

The vast majority of custom software suppliers fall in the mid-tier.  At this level most suppliers aim to strike a balance between affordability and appropriate levels of process, management and quality control – with each supplier varying the degree of importance placed on each subject to their particular business focus and market approach. Any reputable mid-tier supplier should provide dedicated development, business analysis and project management staff.

You should be considering mid-tier suppliers if:

  • Longevity, relevant experience and a proven track record is important to you
  • Quality assurance, accountability and solid project management are priorities
  • Your budget starts at about $100,000

Differentiating between mid-tier suppliers is difficult.  Narrow down the field by asking the following 5 questions:

1. Do you have established and documented project governance, development methodology and quality control systems?

Having established processes is a sign of business maturity in a supplier and a great insight into how the supplier works. Most suppliers will have a standard process that they vary according to the project being undertaken. Project artefacts (the documentation produced), governance and level of testing will be scaled to meet your requirements.  What should remain constant is a strategy for periodic review points between yourself and your supplier, a stated escalation process and what’s expected of you in terms of your input and responsibilities.

2. Do you offer a warranty period?

A warranty period gives you piece of mind that bugs will be addressed in a timely manner. I strongly encourage clients to make full use of their warranty by stressing their software as much as possible during this period.  Be aware that suppliers will often classify a bug as something that doesn’t work as they expect and a variation as something that doesn’t work as you expect. Differentiating between the two underlines the importance of having a clearly defined specification.

3. Do you have any industry awards?

If you’ve never built custom software before it’s difficult to judge the qualitative aspects of a supplier. Industry awards are fantastic in that they are judged by people who do know. Recent industry awards are fantastic indicators of how a supplier is viewed by its peers.

4. Who owns the intellectual property created for my project?

Suppliers typically approach IP ownership by either giving you a perpetual license to use what is produced, by releasing all IP to you – or a hybrid of both when the supplier uses frameworks and accelerators developed in house in the realisation of your project.  Anything considered ‘common’ is licensed for your use, and anything created specifically for you is considered your IP. Avoid suppliers who state that they must retain the IP – that means they clearly plan to sell it to your competitors.

5. Who do you see as your main two competitors?

When shortlisting suppliers it’s important to be able to make an ‘apples to apples’ comparison – and the easiest way to achieve this is to ask the supplier who they see as their primary competitors. Approaching a number of competing suppliers is a fantastic way to validate the size and scope of your project and the expected resources it will take to complete. I’d recommend disclosing your intention to approach a supplier’s competitors as this transparency is appreciated and tends to be reciprocal.

Mid-tier suppliers often have a breadth of experience they can draw on and are typically happy to act as trusted advisors, and this is what you should be looking for with your questions.  You’re about to invest a large sum of money in a project, and you want a supplier that can act as a partner and advise on available courses of action and the ramifications and impact of each. Don’t underestimate the importance of relationship – ask yourself, “Is this a company that I want to have a close working relationship with for the duration (and beyond) of my project? Do they truly value the partnership, or are they only in it for this project with little investment in the future relationship?”

Comparing suppliers across different tiers offers little value as the suppliers’ process and overheads reflect their target market and thus the cost of engagement of a supplier outside ‘your’ tier is disproportionate to the value you obtain.