the nature of commercial software product selection and negotiation points the total cost of...
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The Nature of Commercial Software
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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";
3J4988D8 ( ??? *c**s* cKKKiK#@#D
Source Code
Object Code
Executable
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Layered Product Appoach
MS Windows CE6
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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
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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
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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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