Why Hire an Independent Consultant for Your Construction Software Selection and Implementation Project

By Sheldon Needle

Benefits of Hiring a Consultant
In most cases, contractors think that they know their business processes but there are many things that they don’t really understand. A business consultant has the time and vision to force contractors to think through their business processes. When companies are busy running their day to day operation, documenting business processes is usually pretty low on the list. There is tremendous value in having an outside person understand and document current processes, weaknesses and areas where software support is needed. As a result of this analysis, the company might decide to re-engineer the business processes in order to get the most from the new construction job accounting and/or construction management software system. Another benefit to this exercise is forcing staff to justify each work activity performed as necessary to meet the information needs of the company.
 
Many small companies simply don’t have someone that knows how to put an effective project plan together. With a new construction software implementation this resource is critical! Such a person provides company management with an understanding and vision of a full Job Accounting and Construction Management implementation. The success of the project will be highly dependent on company leadership.  The sooner all managers have a common understanding and vision of the project the greater the likelihood of success. A business consultant can help create an effective project plan.
 
Let’s look at understanding and managing data conversion. It takes someone with an IT system background who has "on the job" operations experience ( estimating, bidding, job management, cost tracking, etc.) to think through data conversion issues. Data cleanup and process discipline need to be in place BEFORE the software implementers come on site. Again, here is a role for your business consultant!
 
When it’s time for construction software implementation, the vendor will provide staff to assist you, but the expertise provided could be limited when it comes time to marrying the contractor’s environment with the new construction software. A business consultant can be a good resource to connect company information requirements and software set up. At this stage there will be many opportunities to make constructive improvements in the design of the information system, i.e. job accounting and links to project management and other applications. Software implementers may not fully understand and lead these changes. A qualified business process consultant will.
 
Summary
Using an independent outside construction software/business expert can often spell the difference between software success and failure. The key is to find someone who has the relevant experience, is competent and independent. By independent I mean the person has no financial relationships with software vendors and is able to objectively evaluate alternatives without bringing strong biases to his/her recommendations.

Case for Buying Construction Software in 2012

By Sheldon Needle

Consulting is pretty strong right now. Consultants are sending out a lot of proposals and getting new business. My associates report that there is a high level of interest in upgrading their clients’ systems. This is supported by improved demand for their services whether they are a General contractor, highway heavy or specialty contractors doing commercial and/or residential work.

Contractors who invest in consultants
When contractors retain a consultant, they are serious prospects. It is also a statement that they are willing to invest in their success.   One current observation is that now that contractors have come most part way through a business downturn, they now have a much better idea of how valuable software (or lack of) is to their business and the future of their company. Consequently, more of them are willing to spend for a consultant in order to help insure they make the right decision.

Flat organizations, limited resources
Due to downsizing over the past few years, many contractors no longer have the staff to do what the construction software should be doing by using Excel/Access or a basic software product like Quickbooks for Contractors.  They now understand they must either have a better solution or get more from what they have through more training on their current construction software solution. Many are realizing that in order to work effectively with their suppliers and customers they need to be in the sweet spot of software technology and connectivity through the Internet.

Enough with the Excel worksheets!
One of the easiest ways to justify a software purchase is to eliminate all the ancillary Excel worksheets used to supplement inadequate systems. One consultant did a revealing exercise with a client recently.  They run legacy software with a lot of Excel worksheets.  It is a $30M mechanical contractor that now has 5 people whose primary/secondary role is to just track purchases, inventory and do custom reports.  Once they implement a new ERP, he estimates all these tasks can be handled by just 2 people with much greater accuracy.  

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Perils of the Construction Software Sales Cycle

By Sheldon Needle

Of all of the products one can buy, purchasing construction software is possibly the most complex and problematic.

Think about it. When it comes to purchasing construction project management software for your construction company you have to truly understand the requirements for all phases of your business. Not only do you need to understand them, ideally you should also understand how the various applications tie together both from a business operations perspective as well as an accounting perspective. Exactly what data should be sent to what applications beginning with an estimate, a bid, then creating a job ledger with the specific cost details needed for the customer, and how and when data should be updated as a result of change orders pending and approved.

Beyond that users must think about how to properly set up their system with respond to their chart of accounts, cost codes, divisions and how they want to be able to access records and data in their system.

Some of the challenging questions that must be answered are:

• What are my priorities in order to meet essential business goals?
• Will staff support putting in new software?
• Will new staff need to be hired with better skills?
• What cost tracking conventions will be used?
• What will be the long term costs of maintaining the system?

All this may be roughly understood but translating the details of that into the ability to evaluate prospective construction software vendors requires a lot more than perusing sales literature and listening to a salesman.

Here are some of the hurdles you can run into along the way.

One size fits all. Some sales people see all prospects as the same. “They are contractors, we sell contractor software so what’s the problem? We have hundreds or thousands of customers. We can make them happy!”

How well does the salesperson know his or her product? How much experience do they have in the industry? Turnover of sales people is high in the software business. They come and go and many of them never really learn their product well enough to answer your questions properly. At the same time, a salesperson who is able to master a slick demo can come across as knowledgeable. It is not unusual to find companies who base their buying decision more on how much they like the salesperson instead of product capabilities. Conversely, an incompetent or inexperienced salesperson can make good construction software look terrible.

Ideally on a sales call, there should be both a person who is assigned to your account and the sales representative and another person who is the technical representative there to answer product specific questions. But that won’t happen if you are a small company because the vendor will not want to invest two people for a small prospect.

Project managers. Once you buy the software it has to be set up and installed. You could purchase a pretty good system and still have it fail if the project manager does not know his product well or understand your type of business. Setting up a General Design-Build Contractor can be greatly different than setting up a specialty contractor with a service department. Be sure the project manager has experience implementing systems for your type of operation.

Pricing games. Prospective buyers often waste a lot of time looking at software that ultimately will be too expensive for them. Salespeople often don’t want to be upfront with the total system cost because they might scare you off. So they will low ball the price and gradually move it up in hopes that you will fall in love with their system by then. In the meantime, there can be dozens of sales calls and back and forth when that the product was never a realistic candidate for you to begin with.

Are you worth their time? I sometimes hear from buying prospects that certain vendors are not responsive to them and show no interest in them a buyer. In those cases, the vendor has likely decided that they are not going to spend enough to make it worth their while servicing them. Or they may think they lack the profile of a serious buying prospect. What are those characteristics?

• Has set a budget
• Have a committee working on the project
• Management is involved
• A “software champion” is present to guide the project on the buyer side
• Is coming off software that is not too far removed from what they are looking at buying
• Has adequate resources to train, implement and operate the system properly.

Assuming all these criteria are in place, things can still go awry when software decisions are put off indefinitely due to indecisive managers or failure to justify the purchase to management.

Summary
The more a construction software buying prospect understands about the software sales process and possible pitfalls, the better able they are to avoid wasting their time and the vendor’s time, by thoroughly evaluating their requirements and their company’s commitment to buying a better software solution.

Report from the Front – Observations from a Veteran Construction Software Consultant

By Sheldon Needle

Based on a conversation I recently had with a very experienced ERP consultant who works with a variety of contractors, here are some timely observations about some of the most common challenges faced by prospective buyers of integrated job accounting and construction project management solutions.

Challenge #1: Getting straight answers on price
One of the first things many prospective buyers of construction software want to know is what will it cost them.
But vendors don’t like to talk about price until late in the evaluation process. A frequent technique is to lowball the software price up front on basic applications and then have price creep once you start adding applications. In fact one well known construction software vendor represented that he could sell his software to a single user prospect for $3,500. When the prospective buyer said he needed their estimating and document management applications he was charged for $1,300 for the estimating, $500 for document management, $1,000 for first year maintenance and $1,080 for 8 hours of job accounting training. But who knows whether that would be enough? When he said he needed 2 users instead of one, they added on another $1,595.

Bottom line, what started out as $3,500 product, quickly escalated to almost $10,000.

Challenge #2: Industry FUD
When vendors start slamming one other using the class FUD (fear, uncertainty and doubt) approach they may bring up that the vendor does not support the product, that the product is unstable or that the product will shortly be replaced by something new. But how do you separate fact from trash talk? The fact is that sometimes these accusations may be largely true. But it’s practically impossible for the buying prospect to determine the truth.

To read the complete post, go to CTSGuides.com

Understanding Construction Software Pricing

By Sheldon Needle

When vendors first contact buying prospects, the last thing they want to talk about is cost because that is the most likely criteria to scare off potential customers. So if the prospect insists on some kind of a dollar amount, they will usually give a number which is only half, or even one-third of the eventual price.

I’ve identified two types of costs – upfront and hidden. Both types of cost make up the true cost of construction software purchase.

Upfront Costs include:

• Software applications price
• Data conversion (significant and can be high risk)
• Consulting fees for preliminary evaluations
• Cost of 3rd party applications
• Cost of custom additions like nonstandard reports
• Annual maintenance costs
• Travel and hotel costs for trainers
• Training costs
• Scope change contingencies (user brings up new requirements after contract is signed)
• Licensing costs for underlying database (e.g. Oracle licensing costs for Oracle based software).

This list represents the easy stuff. Now let’s look at the really tricky aspects of known and unknown pricing. We’ll call these hidden costs:

Late schedule pricing – if the user does not deliver what is promised on time, they may be liable for additional trainer or implementation costs due to time delays.

Unknown but known surprises – some construction accounting software vendors know there are certain issues that come up again and again during implementation but fail to incorporate those into the contract to keep costs down. You may then be hit with added expense during implementation with no options in order to keep the project moving.

Some of these unknowns may have to do with nonstandard reports or custom changes to meet user needs that were not spelled out clearly enough in the contract.

Lower quality trainers than expected – a vendor may send out someone not as experienced as they initially indicated and your project will be delayed resulting in additional “soft” costs of your staff having to wrestle with unexpected delays on setup and or training.

The cost of great software your staff cannot use effectively – the greatest cost of all since you have spent your money and may get little or nothing in return. It is not uncommon for smaller or medium sized companies to choose a very powerful system that they have neither the people nor time to utilize properly. Net gain may be nothing.

Maintenance costs which provide little or nothing – typically construction software vendors will charge 18-22% of the initial purchase price of the software. This covers you for routine support and software upgrades. But suppose you rarely, or never, use support? Or suppose the vendor stops investing in making any significant improvements to the system? Essentially you are then paying for maintenance costs and getting little or nothing in return.

Another twist is when some vendors use the current retail cost of the software to compute your maintenance costs. This means that if you purchased a system 5 years ago for $20K, and the same package now sells for $30K, your maintenance cost will be based on a percentage of the $30K!

Conclusion
There are many ways you can be surprised by initial and final cost expectations for a new integrated contractor accounting system. Keep in mind that the written contract is really just a jumping off point and that your actual hard and software costs may vary greatly. You may want to hire an attorney skilled at reviewing software contracts to reduce your risk. It may also pay to hire an experienced consultant to help you navigate the cost pitfalls of selecting a construction software package.

9 Keys to Screening Construction Software References

By Sheldon Needle

Everyone recognizes that one of the main steps in due diligence for a Construction accounting or project management software purchase is asking for and contacting references for that product.

And yet, it can also be one of the most useless, or even misleading, items on the due diligence checklist. Why is this the case for a seemingly simple and straightforward activity? After all, all you need is a checklist of questions to ask about the product and how the vendor handles it, right?

I’m afraid it’s much more than that if you really want to dig deeply into what the software can or cannot do for your operation.

Here are nine critical issues to keep in mind when checking references for a new system for your General or Specialty Contractor operation:

1. Who are you talking to? – was that person intimately involved in the planning and project management? Are they familiar with the details of all the bumps and curves involved or at a higher level and unfamiliar with some of the knotty issues that came up and how the vendor may have helped or hurt them during training and implementation.
2. Ask all the pertinent questions, not just are you happy with the system? Cover such things as do you think the vendor was honest and forthright in their dealings with you. Did the final cost come anywhere near the initial projections from the salesperson? Was the final contract fair to both parties. Did you miss covering any important items?
3. Ask open ended questions, not yes/no’s. For example, rather than say “are you satisfied with the work in process report for that system, “ ask how do you feel about the work in process report?  You will learn much more from open ended questions than yes/no’s

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5 Reasons That Prolong A Construction Software Purchase Decision

By Sheldon Needle

Anyone who has been involved in selecting or selling construction accounting software knows the process can drag on for months, if not years , and be agonizingly painful. This is not a casual circumstance, but one built on some very specific issues which affect both the buyer and the seller.

When do companies start looking for new job cost and/or project management?

The answer is only when they have to! “Have to” situations include when an employee who is retiring currently supports their custom legacy system;r when the application software they own will no longer be supported by the vendor; or when their mediocre system costs thousands of dollars a year to maintain and is not being improved in any noticeable way.

Typically, new construction software candidates are looking for an integrated system that ties together estimating, job cost accounting, progress billing, purchasing and inventory control, and field data capture as well as project document management.

Five reasons for delay (and confusion):

Reason # 1 – Past Experience

Firstly, there is the approach-avoidance issue in purchasing new software. Nowadays, most managers have been through at least one and, possibly, severa software acquisitions and implementations. They have experienced all the trauma bringing new company-wide ERP software to the organization in terms of stretching its resources and staff patience to the breaking point and beyond.

These past traumas are lurking in their minds even when they know new software is needed by their current organization, so they inevitably vacillate back and forth with proceeding with the job cost accounting and project management software acquisition.

To read the remaining 4 reasons, go to CTSGuides.com.

Software Selection – The Questions Less Asked

By Guest Blogger Mike Terrien, CPA

Construction Software selection is an expensive, difficult and time consuming process.   There is really no controversy about that.  Oftentimes companies have very little choice but to look at new construction software for job accounting and project management for several reasons including:

• Processing and reporting compliance regulations (e.g. certified payrolls, union reporting, bonding company required reviews and audits, sales tax)
• Customer demands (e.g. customer portals)
• Internal customer requirements (e.g. executive dashboards, automated exception reporting) and
• Increased efficiency (e.g. companies trying to do more with less).

As part of the construction software selection process, there are many factors to consider including: licensing fees, service and maintenance agreements, what is included / excluded with respect to the scope of implementation and associated costs, software company partnerships, features and capabilities of the software, software fit to the industry, company stability and the list goes on.

Read the rest of the post at CTSGuides.com

The Importance of Leadership Skills in Software Selection

By Sheldon Needle

What is a leader?

A leader is someone who organizes and manages various resources to achieve a specific goal.

Let’s take a look at  some of the notable qualities of a leader

• Decisive -  doesn’t endlessly contemplate pros and cons but is willing to make decisions
• Willing to take a stand –  challenges  the status quo, takes a position even if it’s not politically  correct
• Trust themselves -  Confident but not arrogant
• Persistent – knows and trusts their instincts to keep moving  toward their goal
• Knows what they don’t know – does not fear asking for help when they need it
• Inspires confidence – people follow because they lead with a sense of authority

In one word, we might just say someone with courage.

Where would the world be today without the  courageous actions of  individuals like Roosevelt, Churchill, Eisenhower and Martin Luther King?  The potential impact of a single individual on world events is truly a wondrous thing.

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An Enlightened Perspective for Contractor Software Acquisition

By Guest Blogger Chaim Yudkowsky

Choosing construction software today is different than it used to be. Depending on the function for which software is designed, there is an abundance of off-the-shelf choices. Construction accounting software today has become much more customizable and adaptable to a wide variety of business types. More than ever before, developing your own solution makes no sense except for extreme situations that cannot be met by off-the-shelf solutions. And software is generally more reliable than ever before.

Still, despite software evolution and buyer maturity, many small and midsize contractors grapple with defining the best approach to a software acquisition. Have key selection criteria changed as other expectations and value elements have changed? Are there contemporary insights that converge age-old truths with modern-day technologies and system capabilities?

To answer these questions and to help you walk through an acquisition framework, let’s review a purchase decision in the context of three categories:

longstanding truths, what is new today, and what should no longer matter.

Longstanding truths:

• Decisions are made at moments in time. While construction software projects may take time to implement and complete, the decision to proceed is made based on your circumstances with the best information available from a vendor(s) at a single point in time. As time passes beyond that decision point, the facts sometimes change in ways that can be significant to the success of the project or the appropriateness of the choice made. For example, if after the choice was made a new business unit was acquired, the business software project plan may need to be reevaluated. The result is change orders, workarounds, and sometimes even the need to reconsider proceeding with that solution. Expecting your vendor or your software to deliver 100% in the face of emergent or unknown events is unreasonable.
• Vendor references matter. One way of assuring the best possible decision at a moment in time is to perform due diligence. A construction application “working” for a competitor does not indicate that it is a good match for you, that the company that publishes it is financially stable, or that the deployment consultant you are intending to use for the project is any good. You need to spend time researching and understanding vendor and consultant strengths and weaknesses based on publicly available, customer, Internet, and industry analyst perspectives. Therefore, due diligence combined with functionality and feature sets, help support an optimum buying decision.
• Reliability of vendor. Most projects have at least two essential vendors involved – a software publisher and a deployment consultant / value added reseller It is necessary to check financial viability and references of both vendors. Are the vendors committed to their customers? Are updates or upgrades smooth? Is support helpful and timely? What type of support prioritization is there?
• Security. Security risks that new software may expose you to should be on your radar screen. This is not limited to Sarbanes Oxley, PCI, HIPAA, or other legal compliance. Depending on the system, this may include protecting trade secrets and both substantive and perceived security for your customer.
• What happens if things go bad? Critical systems take time to install and may have a use lifetime of many more years than initially planned. Therefore, as you enter a relationship with a software product and vendors, you should do some preplanning of your choices for secondary and tertiary support sources and other plans to keep the system going in case the initial support services are lost.
• Standards. As part of the technology evolution, standards have been established for the management of data and user interface protocols. Clearly not every product for every niche industry is fully compliant with all standards, but some sense about how the software does or does not meet current industry standards will be helpful in the decision process. The more you and your vendors can articulate the surrounding ecosystem, the better.
• Every project has a risk of failure. Your job as the decision maker is to mitigate and reduce decision risk by planning and evaluating all common risks methodically.
• Cross-disciplinary input. Never make the purchase decision unilaterally within an organization. Even the most aware IT, finance, marketing staff will never be able to speak for everyone in their organization. Understandably, organizational dynamics often discourages group decision making, but the input and perspective from all stakeholders is essential to making a great match. In addition, this involvement will usually result in better justification for the new system in terms of return on investment.

Read the complete article CTSGuides.com.