The Nature of Commercial Software

The Nature of Commercial Software

Product Selection and Negotiation Points

The Total Cost of Ownership Model

We’ll Cover

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Gartner Group2015 Magic QuadrantAdvanced Analyticsas of Feb 2015

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using namespace std; int main() { int counter = 0; // Initialize counter to 0. Int numTimes = 0; // Variable for user to enter the amount of times. Cout << "How many times do you want to see Einstein?: "; cin >> numTimes; // This is how many times the loop repeats. cout << "\n"; while (counter < numTimes) // Counter is less than the users input. { cout << "Einstein!\n"; counter++; // Increment the counter for each loop. } cout << "\n";

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Source Code

Object Code

Executable

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Layered Product Appoach

MS Windows CE6

ENVIRONMENT DIVISION. INPUT-OUTPUT SECTION. FILE-CONTROL. SELECT ZAP001D1-FILE ASSIGN TO ZAP001D1ORGANIZATION IS SEQUENTIALACCESS MODE IS SEQUENTIALFILE STATUS IS ZAP001D1-STATUS.

SELECT ZAP001D2-FILE ASSIGN TO ZAP001D2 ORGANIZATION IS LINE SEQUENTIALACCESS MODE IS SEQUENTIAL FILE STATUS IS ZAP001D2-STATUS. ***************************************************************** DATA DIVISION. FILE SECTION.FD ZAP001D1-FILE DATA RECORD IS ZAP001D1-REC .01 ZAP001D1-REC.05 ZAP001D1-DATA-01 PIC X(00080).FD ZAP001D2-FILE DATA RECORD IS ZAP001D2-REC . 01 ZAP001D2-REC.05 ZAP001D2-DATA-01 PIC X(00080).

Customization Configuration

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Major Version ReleaseMajor functionality addedRedesignSometime requires data conversion

Maintenance ReleaseCorrects known (but not all) bugsCorrects security vulnerabilitiesCumulative

PatchesSecurity fixesHigh priority bugsMicrosoft’s Patch Tuesday

Minor Feature Release

Software Releases

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Major Release #

Maintenance Release

Patch # Minor Feature Release Number

Build #

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Products geared to the widest market

Multiple software modules Software from multiple

sources (e.g. open source) Large number of

known bugs Dependent layering Configurable (table driven) Customizable at high initial

and ongoing operating costs

Under the Hood

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Single User LicensePerpetualSubscriptionFreewareShareware

Special ChanelEducation, OEM,

Concurrent UseRatio of possible users

Volume PurchaseMinimum required

Site/EnterpriseUsually location restricted

Software License Types

UnlimitedNo location restrictions

ServerPer machine/per cpu

Per seatPer machines connected

Per mailbox Per address domain

Electronic publishing Add-ons

secondary usehome use

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Misguided User Pressure

The Much Misunderstood EOL (End of Life).Product no longer sold, but may be supported

Vendor Purchases Competitor to Gain Market ShareOracle and PeopleSoftSiemens and Shared Medical Service (SMS)

Support Sunset.Support no longer supplied by vendor

Maintenance Costs EscalateMaintenance costs higher that break-fix support

Layered Hardware/Software DiscontinuedOften happens with operating systems

New Functionality or Compliance RequirementsBlood Banking

Technical Personnel in Short Supply

Interoperability limitations

How Software Dies(Lies CIOs Tell)

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Negotiate with your vendor

Look for boutique support organizations

Reduce maintenance levels with your vendor

Consider self maintenance

Run non-critical applications unsupported

Keeping Your Software Alive

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Monolithic (not necessarily integrated or big)

Best of Breed Best of Cluster

Consider Your Application Architecture

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A Monolithic Architecture

Usually a single vendor

Single hardware platform

Minimal software layering

Not necessarily a mainframe

Central control

The IBM 370

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The Best of Breed Architecture

Very popular in early 1990’s

Separate products for specific operational requirement

Multiple hardware platforms

Multiple software platforms

Data exchange layer Connected via

interface

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Best of Breed InterfacingThe N*(N-1) Problem

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Supports workable number of hardware and software vendors

Good chance to integrate ‘like’ functions

Maximize performance by functionality

Managed workflow by function

The Best of Cluster Architecture (function)

Financial Cluster Clinical Cluster

Decision Support/Business Intelligence Cluster

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Selecting Your System

Gartner Hype Cycle Technology Trigger

Event generating significant press and industry interest.

Peak of Inflated ExpectationsA phase of over enthusiasm and unrealistic projections. The only enterprises making money at this stage are conference organizers and magazine publishers.

Trough of DisillusionmentExpectations are unmet and the technology becomes unfashionable

Slope of EnlightenmentFocused experimentation and hard work yield positive results.

Plateau of ProductivityReal world benefits of the technology are realized.

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How to Spend Millions: Three Buying Methodologies

Traditional RFP/RFI(Least Risky)Detailed functional specificationStrong focus on vendor answersAccepted methodology

Scenario BuyingUser defined operational scenarios

Pre-designGood when partnering for new development or customizations.

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Bullshit Bingo

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Request for Information

(RFI)Broad

Definitionof Problem

andProduct

Requirements

Request for Proposal (RFP)

DefineFunctional

&Technical

Requirements(RFPs)

FinalProduct

PriceProposals

Short VendorList

Ref ChecksDemos

Due Diligence

FinalNegotiations

FinalProjectPricewith

Total Cost of Ownership

ProductPrice

Window

ProductTechnology

PriceEstimate

VendorProduct

PriceProposals

AnalyzeVendor

Response

Vendor ProjectImplementation

Plan (PIP)

InternalCapabilities

The Request for Proposal (RFP) Process

Budget Decision Points

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The RFP Table of Contents Legal boilerplate Description of organization Description of technical environment/architecture Description of existing systems Schedule for response Chapter for each functional area (include

IS/security/’others’.) Financials and references Layered products required Recommended hardware configuration Line item pricing Install team resumes

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Request for Information

(RFI)Broad

Definitionof Problem

andProduct

Requirements

Develop Operational Scenarios

(“Show us how you...”)

FinalProduct

PriceProposals

Short VendorList

Ref ChecksDemos

Due Diligence

FinalNegotiations

FinalProjectPricewith

Total Cost of Ownership

ProductPrice

Window

VendorProduct

PriceProposals

AnalyzeVendor

Response

Vendor ProjectImplementation

Plan (PIP)

InternalCapabilities

Scenario Buying

Budget Decision Points

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Scheduling Script #1

Multiple Tests, Cyclical AppointmentsA patient reports neck pain and numbness of his arms and hands to his primary care physician (PCP) during a scheduled appointment. The PCP conducts reflex and mobility tests and suspects a pinched nerve or disk degeneration in the cervical spine. The receptionist is asked to schedule:

• A series of X-rays of the patient’s neck and spine, to be conducted immediately at the radiology clinic affiliated with the IDS.

• An electromyography (EMG) to diagnose any nerve damage, to be conducted at the hospital's neurological center.

• A follow-up appointment with the physician to discuss the test findings and next steps. This appointment must occur after the X-rays and EMG are complete and the results returned.

• Pending the test results and, for the patient’s relief, four weeks of physical therapy sessions — three one-hour sessions per week at the closest therapy clinic. These sessions will include ultrasound, moist heat and electronic traction therapy, as well as controlled exercises with a licensed therapist. Because the patient’s work schedule does not permit a standing appointment (such as Monday, Wednesday and Friday at noon), the scheduling application must allow flexibility for different times and therapists.

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DevelopDetailed

Functional Specification

Short VendorList

Ref ChecksDemos

Due Diligence

FinalProjectPricewith

Total Cost of Ownership

ProductPrice

Window

NegotiateFinal Price

Vendor ProjectImplementation

Plan (PIP)

InternalCapabilities

Design before You Buy

Budget Decision Points

NegotiateDesign Price

ApproveFinal Design

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Define the applicationWhat will it beWhat will it doWho will use it

Develop models of the systemUsersDesignersProgrammers

Develop and information flow Understand workflow

implications Create prototypes Draft design documents Complete final specification

Developing Your Design

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1.0 PMRcvsCall

7.0 PMCloses

Call

CallDatabase

2.0 PMContactsSubSp

3.0 PMGets 3Way

Call

?????

On CallList

Initial Call Info

Initial Call Info

NewCallInfo

PreviousCallInfo

CurrentCallInfo

4.0 Sub DrAdvises

Primary Dr

AvertedReferral

CallInfo

PrimaryCare Dr

5.0 PMArrangesReferral

ReferralRequest

CallDatabase

6.0 PMFollows

Up

OpenReferralReport

ReferralUpdate

ReferralComplet

e

SubspecialtyClinic

ReferralUpdate

8.0 PMPrints MgtReports

Referral Reports

Primary Care Dr.

ReferralUpdate

MgtReports

Pediatrics Subspecialty Referral Network Workflow

MgtReports

ClosedCall

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Negotiating Rules of Thumb Dual negotiate if possible Form “deal breaker price points” for critical categories

of line items There is no such thing as list price for software Never listen to ‘it’s the end of the quarter’ schpeel.

There will be another quarter. No bait and switch for professional services Always negotiate delivery of escrow source code (and

training) based on non-support and bankruptcy. Always use hardware and third party software certified

by software vendor. Place ceiling on vendor expenses. Hold to your expense

policy.

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More Rules of Thumb

Expect ongoing hardware/software maintenance fees of 15%-20%.

Control maintenance fee increases (CPI). You want your vendor to make a profit. Never,Never, Never accept beta software. Software

release 1.0 should make you suspicious. ‘Other’ costs may approach 1.5 to 3 times direct system

cost. Vendor ‘hold harmless’ is standard. Indemnity against

patient action is becoming an issue.

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Total Cost of Ownership (TCO)

You won’t believe how much this baby is really going to cost

TCO was originally developed in the late 1980s by the research firm Gartner to determine the cost of owning and deploying personal computers.

Simply stated, TCO consists of the costs, direct and indirect, incurred throughout the life cycle of an asset, including acquisition, deployment, operation, support and retirement.

What is Total Cost of Ownership?

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IT Project Life Cycle

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Direct costs: These costs generally cover the visible IT- and support-related investments and expenses,

• Hardware and software. Software and hardware purchase or lease costsCapitalized implementation costsDepreciationRequired layered productsMaintenance contractsAnnual costs of all supplies and materials. Disaster recovery

• Operations. Technical operations and supportFacilities costsNetwork costs

• AdministrationOverhead personnelOverhead facilities allocation

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Indirect costs: These costs are less visible and usually are dispersed across the business operations organizations and are comprised of:

• End user operations. These are the costs incurred when individuals gradually evolve to become part of the support structure. They usually do this on a part-time basis in addition to their "regular" job. A shadow support group starts to emerge, consuming considerable time and resources in an unplanned way. This most often manifests itself when self-nominated individuals step up to handle personal computer assistance within a work group. In order to properly calculate TCO, costs of this nature must be identified and captured, a task that is sometimes quite difficult.

• Downtime. This occurs when the end users are interrupted from their regular work when things break or something goes wrong with the system. Regular maintenance can also cause downtime when, for example, a software update takes 30 minutes, resulting in 30 minutes of lost productivity.

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Source: The Gartner Group

Source: Mobile Demand

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Happy Hunting

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