Buyers fall into tender trap

A vast number of companies buying financial systems are going about it in a highly unintelligent manner, and IT consultants are either exploiting this or are just as ignorant as their clients, claimed a leading market researcher this month.

Tate Bramald Consultancy managing director Jyoti Banerjee based his comments on results from a trio of research projects that were commissioned by software vendor JD Edwards.

The latest survey asked 200 financial directors about their software buying intentions and expectations.

The most surprising finding, said Banerjee, was that over half the respondents expected their selection process to take more than six months.

‘Many of them are still using invitations to tender (ITTs) and 76% anticipated including up to eight vendors on their shortlists,’ said Banerjee.

‘That shows a lack of understanding of what’s happening in the market. Today, there aren’t the same number of players from whom you should be seeking information,’ he added.

Ten years ago, he said, the research consultancy identified 200 different software systems used by 800 survey respondents. Earlier this year, a poll of 1,200 companies identified just 63 systems.

Market consolidation and proliferation of Microsoft-driven financial applications changes the buying equation, Banerjee explained.

‘Today, everyone has client/server, relational databases and Windows interfaces. The word we use to differentiate vendors is capability.

‘More than technology and features, vendors need to have an understanding of users’ needs, which only comes from vast experience,’ he said.

The latest Tate Bramald survey confirmed organisations were slow to adapt their approach to market changes. Product features and functionality were the primary criteria for a new software purchase, followed by flexibility of the package, and then the speed and ease of installation.

In a previous project, Banerjee looked at the role of consultants, many of whom still base their services on drawing up ITTs and evaluating the responses from suppliers.

‘We’re chucking away a pile of consultancy money on mechanical aspects, not expertise,’ said Banerjee. ‘Nowadays, when you go to a consultancy you should be advised to consider two or three companies who have both the market share and capability to meet your needs.’

But consultants were faced with a difficult choice between independence or expertise. ‘You can be independent, but lose out on really knowing how the products work and implementing them,’ Banerjee said.

‘If you put resources into gaining that knowledge, you end up recommending products in which you have a deep pool of talent,’ he added.

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