Vetting a Software Vendor to Ensure a Perfect Product Fit

In the first part of this series, we examined the core factors government agencies must consider when planning to replace a poorly supported or end-of-life Permitting & Inspections solution. Referencing that information will be helpful for those looking to build a compelling business case for the implementation of a more fully realized Permitting & Licensing System solution for your jurisdiction.


As you progress into more concrete procurement and vendor vetting processes however, you will inevitably discover that companies like Computronix are a rarity in this space (i.e. a privately owned, debt-free company with a 40+ year history devoted exclusively to developing award-winning software for government agencies).


The more common operational profile for a government enterprise software vendor is a formerly independent company now guided by a private equity firm.


Why is this relevant to your vendor vetting efforts? To answer that question it’s important to first appreciate the primary objectives of private equity firms in principle. Such firms are in the business of investing in or outright acquiring ‘growth’ companies to maximize their return on investment. Achieving this end typically involves: A) a focus on extensively ‘streamlining’ operations of the acquired company to maximize profit margins, and/or, B) a focus on increasing the short-term profitability and marketability of the acquisition to facilitate a profitable re-sale.


Wait a minute, you say. Isn’t increasing the profits and business valuation the goal of all successful companies? Why is this a concern?


Recognizing conflicts of interest associated with the equity funded model


A predominant focus on profits alone is a concern because the implementation of a legitimate enterprise software solution for a broad government footprint anticipates a generational product lifecycle that is considerably longer than that of more conventional product lifecycles. Given the cost and complexity associated with deploying such solutions, it is imperative that the software vendor possesses the commitment and wherewithal to design, develop, maintain and upgrade such solutions for this generation AND the next. Doing so ensures that a government client achieves the ideal solution profile where operational skills and technology improvements are advancing in unison over a period of years, thus maximizing your return on agency’s investment while simultaneously attaining peak efficiencies in your organization.


At Computronix for example, we’ve been building and implementing government enterprise software solutions for over 40 years with an unprecedented 100 per cent project success rate, and we fully intend to continue doing so for the next 40 years! This type of generational product and services commitment runs contrary to the shorter-term profit expectations and timescales of a prototypical private equity firm.


Over the years, the pitfalls of this potential conflict of interest have become abundantly clear as we meet with prospective clients who are consistently expressing some of the systemic challenges associated with maximizing the benefits from an equity-funded government software vendor relationship.


Whether you’re pondering the possibility of replacing your current P&I solution to solve these issues permanently or simply looking to improve a deteriorating situation with an existing vendor where possible, it is important to be aware of the drawbacks associated with this short-term investment profit vs. long-term product commitment conflict of interest.


Potential Pitfalls of the Equity Funded Software Vendor Model


Financial Charts


Support costs increase while support quality decreases


While an equity funded model is undoubtedly beneficial in the beginning stages when exorbitant R&D costs threaten the viability of even the most well managed company intent on building a true enterprise scale solution, it becomes less beneficial as products mature and investor interests dictate the need for ever-growing profit margins. For this reason, equity funded software vendors typically follow a shorter lifecycle approach to product implementation and solution support, ramping up support resources when products are first released and then scaling back available resources as products mature to maximize profit margins.


A clear indication of such motivations are increasingly punitive support models designed to push clients towards self-service or automated support solutions.


Core services are increasingly outsourced, reducing available vendor expertise


In addition to support automation, equity owned software vendors are increasingly outsourcing core services such as new product development and onsite implementations to third-party companies lacking the nuanced understanding of these complex systems that is best acquired through initial and ongoing immersion in product development and client implementation.


Such practices, while undoubtedly more profitable, are doubly problematic from a new client perspective. Not only does an outsourced implementation carry the potential for your system launch to take longer, cost more, and be more fraught with errors; this multiple degrees of separation from the actual product development experts compromises the experience and acumen available to you as ongoing resources throughout the extended lifecycle of your solution.


Lacking an intimate knowledge of the codebase and product design architecture, outsourced implementation and support teams will invariably fail to deliver the same quality and timely turnaround of support outcomes as those realized from a vendor delivering a full product and services solution, from implementation to maintenance to upgrade and beyond.


Client input into current and future product development is minimized


Another area in which publicly traded or private equity guidance seeks to maximize its investment returns is an ongoing effort to commoditize product(s) to facilitate a ‘one size fits all’ approach to initial project requirements and ongoing product development priorities.  This strong avoidance of product customization manifests itself in: A) profit skewed implementation proposals that proactively push clients away from much needed custom configuration work in favor of more limited ‘vanilla’ solutions, and B) marginalization of client requirements in ongoing product roadmap and upgrade plans.


The evolution towards COTS, and now COTS+ solutions, is undoubtedly a positive trend in enterprise software delivery, mitigating as it does the excessive risks associated with building a custom solution from scratch. That said, there truly is no such thing as ‘one size fits all’ for an enterprise scope government software solution when you consider all of the variables of existing technology infrastructure, operational processes, data availability, and staff resources that factor into an agency’s optimal system requirements.


For this reason, Computronix developed its award-winning POSSE Platform as a highly configurable workflow and business processes engine designed specifically for the purpose of facilitating the integral configuration work required to ensure a precision fit between client and software.


Further, with the ongoing provision and perfection of government software solutions alone as our sole corporate mission, it is to our mutual benefit to invite and facilitate an inclusive dialogue with each of our customers to best inform future product roadmaps and upgrade plans. This product input and our adoption of same ensures the total client satisfaction and repeat business upon which our privately-owned business model is predicated, to be your preferred provider of government software solutions for this generation and the next.


While facilitating product commoditization to maximize per project yields is undoubtedly a more profitable pursuit in the short term, such investment motivations are antithetical to a more long range, customer-service-centric philosophy focused on broadening the utility and appeal of a product platform, as opposed to limiting its functionality and implementation flexibility to reduce short term overheads.




Software vendor is slow to embrace emerging technology trends


One of the most telling aspects of the public equity investor and government software provider relationship is the timing of the partnership. Typically, such relationships are cemented when most, if not all, of the cost-prohibitive R&D work has been completed to arrive at a viable product solution. New technology innovation, while marketable in a re-sale scenario, is not nearly as profitable for the umbrella investor as immediate product commoditization and monetization.


For this reason, government software providers guided by equity investment interests are often slow to research and develop new technology and product applications until the demand for such innovations reaches a drastic tipping point requiring such innovation to remain competitive in the marketplace.


By contrast, an enterprise software provider prioritizing long term customer retention over short term profit maximization places a large emphasis on preserving a fixed R&D investment over the lifetime of their business to ensure their product platform maintains its utility for both current and emerging usability applications. Additionally, the maturation of the client and customer relationship over a generational lifecycle inevitably leads both parties to broaden the solution footprint into other business areas to better leverage the employee skills and experience associated with the established and widely adopted toolset.


With these customer centric priorities in mind, Computronix invests in excess of 12 per cent of its annual revenue into ongoing product research and development to further refine a government enterprise platform that we’ve already been developing for nearly 40 years! That is the kind of commitment that a software vendor demonstrates when they are interested in one thing, and one thing only, to build the very best government software solutions in the world to ensure total client satisfaction.     


What’s Next?


  • In the first installment of this series, we examined some of the challenges faced in staying status quo with an underperforming P&I solution.
  • In today’s installment, we widened the focus of our examination to include the dynamics of the client-vendor relationship, and the inherent conflict of interests that can arise within the private equity led software provision model.
  • In the next installment of this series, we’ll look at the process to create a suitable vendor profile—one with an optimal product and services mix to match your technology vision and project requirements.


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