Our world keeps changing at a faster pace and the need for a digital presence is not big news anymore. Technology is intrinsic to our day to day lives and businesses. With an increase in software development needs, there is a natural course with which the market tries to fill this gap and more and more companies are born with the purpose of building new digital products. Having this in mind, how do we prepare our companies to look out for the best bespoke software development partners out there? And more: how do we dribble the most common red flags in software development and make a more efficient and proper use of the investment on new digital products? To answer these questions, I compiled a few of the most common mistakes companies face in hiring software development partners and provided tips on how to avoid them.

From fourth to nothing - the FoxMeyer’s Drug case

The year is 1993. FoxMeyer’s Drugs, United States’s fourth largest distributor of pharmaceuticals, is about to implement Delta III, a ERP (Enterprise Resource Planning) platform. The challenge? Due to heavy competition, FoxMeyer’s Drugs needed a software that would be able to take care of high volume transactions as well as complex pricing models. After doing some market research and product evaluation, the company opted to also purchase an automated warehouse and hire a consulting firm that would also add value to the implementation of this higher efficiency strategy plan that FoxMeyer’s Drugs was aiming at.

The total cost of this project was USD $65million with an expected annual savings of USD $40 million. An outside and broad analysis makes us believe that it seemed to be a pretty good deal for FoxMeyers’ Drugs: they would be pioneers in their sector for having implemented an ERP platform at such an early stage of the digital transformation era, the investment was projected to pay itself in less than two years, there was a consulting firm that would assist FoxMeyer’s Drugs during the implementation phase and there there was a new and more efficient warehouse in the game. However, history has proved this theory wrong.

Due to system and many other implementation failures, some of which we are going to discuss below, FoxMeyer’s Drugs lost more than USD $34million and went bankrupt only three years after the beginning of the implementation of Delta III.

Although this is one of the most well-known cases of IT implementation failures in history, it isn’t uncommon for technology project failures to happen. In fact, many projects are late or fail to deliver and one in six IT projects has a cost overrun of 200% on average and a schedule overrun of almost 70%.

And even though it might seem like technology is a “magic bullet”, it isn’t. With an increasing demand for product and technology development, contingent upon a fast-paced and ever-changing world, there is an increase in supply of technology providers. And with this, the following question arises: **how can we be sure that the technology partners we are choosing are the best ones for what our companies need today? **

With more options, it becomes more difficult for us to make choices, as Barry Schwartz explains. But don’t you worry. I’ve prepared a guide with the most common mistakes in hiring a technology partner and will give you tips on how to choose the right one for your digital transformation challenges.

The 5 most common mistakes… and how to avoid them

1. Failure to understand your business needs

Most technology projects fail because there is a lack of understanding what the real issue is. The causes can be many, but if the vendor doesn’t understand exactly what your company needs, chances are he is not going to help you find the best solution.

How to avoid it: A good way to understand if the partner you are looking into is prepared to work with your company and your challenges is to evaluate how invested the vendor is in understanding your demand. We’ve discussed the importance of having the customer at the center of problem solving in the development of a product. The same needs to happen in the negotiation phase. The premise to solving a challenge is to understand the challenge.

Ask yourself or your team questions like:

1. How much time is the vendor investing in understanding the real challenges of my business?
2. Are they asking what my long term-goals and priorities are?
3. Are they looking to support me thrive even after the product is done?

2. Assuming that waterfall project workflows apply to technology products

The second most common failure has to do with how contracts are designed. Businesses are used to hire vendors and finance projects based on the structure of waterfall projects, in which we have a clear vision of the project, we understand the details in the scope and we have a fixed budget and a fixed schedule.

The problem with that model is that technology products are usually unfit to follow this fixed-scope structure. In fact, successful technology products come from

broad views of the expected solution, timeframe and budget: an exact definition of an agile type of project. The very dynamics of a technology product leads to changes because of different technologies that arise and because of the need of product revision and customer collaboration. Building a successful technology product is all about having that product in constant improvement and adapting according to changes.

How to avoid it: The best technology projects are open in scope. Closed scope technology projects should raise a red flag, because you are very likely to have to hire an extra-hours package to get that product finished or, in the case you have no budget, have no finished product at all. Ask your partner questions like:

1. How do I avoid getting overcharged for an unforeseen challenge during the development of a product?
2. How does it work if we have to reroute the development of the product?

3. Watermelon reporting

Another most common failure relates to “watermelon reporting”. A watermelon type of project is where things appear to be green on the outside, or when there are no issues with the project, when in reality, when you dig a little deeper and look in the inside, the project is red, where you find that there are serious issues with the course of your end solution. This usually happens when the development of a product is done one sided and when reporting and monitoring usually lack consistency and frequency. Watermelon reporting usually increases the risk of a project failing.

How to avoid it: There are a few ways that this can be done, and it is all about asking how transparent the relationship with your partner is going to be. Find out if the projects and development are done collaboratively, how much access you will have to the design and development platforms and how the communication and reporting work. Ask what tools they use and how often the verbal communication happens, so that you can follow the work progress on a daily basis if you wish to. It is also important to know how transparent the partner really is. Don’t be afraid to ask questions, request for recommendations, look for other clients and projects the partner has worked with. And foremost,  make sure the intellectual property of the product being developed belongs 100% to your company.

4. Neglecting design and thus customer centricity

It is also very common for companies to neglect the design portion of the development of digital products because they consider it superfluous and thus unable to contribute to business goals. The problem with focusing 100% of your investments with coding and functionalities, neglecting the end user in the development of your product is that it can cause usability frustrations and compromise the performance of your software.  No one wants to do laborious tasks throughout the day anymore.  We want simple, intuitive and easy to use platforms - and that’s the bit that design teams can give your product. Design is responsible for mapping and understanding your business’ challenges and goals, user behavior, expected results and restrictions. So, I wonder: how can a product be successful without having these basic questions answered?

How to avoid it: Look into how your partner is inserting the design portion in the methodologies of product development. Ask simple questions about when will the end user be involved in the project, how are the opportunities and attention points will be mapped out or if there are qualitative and quantitative research being done prior to the development of the product. If you want a successful product, customer centricity should be the core of your software development process.

5. Failure to understand your partner’s work culture

Understanding your vendor’s work culture can tell you a lot about the continuity of the products you are developing together. It is not uncommon for technology products to suffer time and investment consequences from high turnover rates of software teams. In fact, poor employee retention has a negative impact on software development productivity and product quality. Can you imagine having to go over everything that has been learned throughout the development process to someone new in the team constantly? High team turnover rates can also be synonyms to other management related problems that surely can put your product development at risk.

How to avoid it: Although it is extremely difficult to understand a company’s work culture from a few meetings, try asking questions about the teams, if they ever participated in the development of other digital products and try to understand how long they have been working for your partner. Employee loyalty can definitely tell you a lot about the success of your tech provider and thus your product.

Is this all there is?

Unlike cake recipes, technology and product development challenges are not usually the same for every project. In FoxMeyer’s case for example, some of the ingredients in its bankruptcy went beyond the development of the technology portion of Dexta III. Besides technology implementation errors, there were also management and organizational variables that played a big role on the path that followed the years of its bankruptcy. However if you take into account the tips we discussed above, I am positive that you’ll feel a lot more confident to choose the best technology partner for what your business needs.

References:

• Forbes - How to choose the right tech vendor: 13 strategies for small business 
• Forbes - 14 common reasons software projects fail and how to avoid them 
• Double whammy - How ICT projects are fooled by randomness and screwed by political intent’ by Alexander Budzier and Bent Flyvbjerg, Said Business School working papers, Oxford, August 2011.
• Clutch - 6 points to consider when choosing the right technical partner