Six questions to ask before signing 
that distribution software contract

by Don Curless

You have probably heard about (or experienced) a major software purchase gone awry. You can greatly reduce making a costly purchasing error if you do some homework before making your company’s next software purchase decision. If you can satisfy yourself on the following six questions, your chance for success increases dramatically.

What about the vendor?
What is the software’s vendor’s primary business? How many customers does the vendor do business with? How long has the company been in business? Insist on financial information. Check with your trade association about the vendor. The primary issue here is vendor stability. You want to make sure the vendor will be around for a long time after the sale.

How are the vendor’s references?
This is crucial. Talk to customers of the vendor that are in the same business as yours, or in a similar industry. Three references should be about right. A good question to ask them is, “Would you buy from this vendor again and why?” The key issue is, does this vendor have customers with requirements the same as mine?

How is the vendor’s support?
You’re looking primarily for three things: 1) Who provides the support? Is it the vendor or a third party? Third-party support is usually less desirable than the vendor because a third party typically has less experience. 2) The availability of support.  Must you get in line or is it readily available? 3) Delivery options. If the vendor must send a support technician onsite, this is expensive and restricts availability. Does the vendor offer Web-based training and support? The main issues here are depth of experience, availability and cost-effectiveness, recognizing that implementation support is always a major expenditure.

Do I have user buy in?
You need support among your key managers for the software package and vendor you choose. At best, new systems are challenging projects for any distributor. The software you choose will have a major impact on most of your personnel and some impact on all of your employees. If one or more of your key managers is not supportive of the decision, problems that normally occur will quickly become major snags, endangering the entire outcome.

Always consider that some resistance or objections may be legitimate. In these instances, get the vendor involved to resolve the issues. The point is to get management buy-in before you sign a contract.

How do I prevent gotchas?
It is surprising how often this occurs. Every vendor will sell you on the strength of its product. In many instances, these strengths are so impressive you may overlook critical elements in your business. These are often referred to as show stoppers. A few examples include multi-company support, multi-location capability, cost and price positions to the right of the decimal, needing six address lines, handling cases and pallets.

Thoroughly checking references of businesses similar to yours will prevent most of these gotchas. A simple way to avoid all gotchas is to have each of your key managers or department heads write down a list of “can’t live without” functions. Avoid wish-list or nice-to-have items. Require the vendor to positively confirm each item on your must-have list or offer a workable alternative. To prevent gotchas, do your reference checks and get your must-have list confirmed in writing by the vendor.

What about my unique requirements?
This is different from gotchas. All traditional distributors perform the same basic functions. You receive and process orders, maintain inventory, pick, pack and ship, purchase goods, bill customers, collect money, pay bills, keep your books and do some business analysis. Gotchas apply to these areas.

Unique requirements fall outside of these tasks. If you deal with governments, you may be required to keep 5 to 7 years of history. You may need weekly vs. monthly analytical and reporting tools. If you deal with mass merchants, that’s another unique set of requirements. The best way to cover your unique requirements is to select one knowledgeable long-time employee to review these with your potential vendors. Have this individual present the best solution to you.

You’ll notice price and terms are not one of the six questions. Your company should be able to quickly determine which vendors are priced somewhere near what you can afford, whether it’s $50,000 or $1 million. The six questions raised here are designed to get you the best software package, with the greatest chance for success, within your budget. After you have reached your comfort zone on these six questions, you can begin price and terms negotiations in earnest with your vendor of choice. Keep in mind that too low of a price or too good of a deal is almost always fool’s gold. 

This article originally appeared in the November/December 2004 issue of Progressive Distributor. Copyright 2004.

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