Due Diligence for Software Shopping: The Basics

Business owners need to shop for new software frequently, either to solve new problems or optimize existing systems and processes. With the right software products in place, your business can hypothetically operate more efficiently and tackle novel challenges. But to be successful here, you need to be discerning in your software selection.

What due diligence steps do you need to follow to accomplish this?

Why Is Due Diligence Important in Shopping for Software?

First, why are we even discussing this? What is it about shopping for software that makes due diligence so important?

• Avoiding bloat. For starters, if you submit to buying every software platform that looks interesting or potentially useful for your organization, you'll end up with software bloat. Essentially, that means having too many competing apps and software services, ultimately complicating your organization and leading to unnecessary confusion. Integrating various software platforms together can resolve this issue, at least hypothetically, but this still requires you to seek platforms that can be easily integrated with each other. You need to make sure that every new piece of software you purchase is worth adding to your tech stack.
• Ensuring effectiveness/competence. It's also important to make sure that you find platforms that are most capable of helping you solve your biggest problems. Not only do you need to ensure effectiveness and competence, but you should also attempt to find the most effective and most competent platforms within a given niche.
• Maximizing ROI. Beyond that, due diligence can help you build the biggest return on investment (ROI). This is a measure of how much value you get from a piece of software, compared to how much you pay for it. For example, if a new software platform can help you save $10,000 in labor costs and generate $10,000 in new revenue, it provides $20,000 of value. If you only pay $10,000 to use this platform, it has a return of 100 percent (or 200 percent, depending on how you want to measure it). Ideally, your due diligence will lead you to the platform with the greatest potential ROI.

Due Diligence for Software Shopping: The Basics

So what are the most important steps of due diligence in your software shopping?

• Identify the problem you're trying to solve. Most companies develop products and services based on perceived needs of their customers. Before you can start finding appropriate products, you need to be able to identify what your needs are. Start by identifying the problem you're trying to solve. What is it that's ailing your business, and why is it a problem?
• Identify the potential solutions (and outline your needs). Next, identify the possible solutions to this problem and start outlining your core needs. What type of product is going to be best positioned to aid you in resolving this problem, and what would be the most important features of this product? The clearer this picture is, the more effective you can be in searching through software options.
• Generate ideas from many channels. Look for software platforms capable of solving your problems and start building a list. Try to use a variety of channels here, such as talking to partners and colleagues, conducting searches, and getting referrals. A bigger list means more options to wade through, but it also means a greater chance of finding the perfect fit.
• Compare features. Start comparing platforms and packages. Which platforms have the greatest number of features, and are all these features truly necessary? What types of features do you truly need, and which ones would be nice to have?
• Compare prices apples to apples. At this point, you'll be ready to start comparing prices, since you'll be able to do so apples to apples. It's unwise to simply resort to choosing the cheapest platform because it's the cheapest, or choosing the best platform no matter how expensive it is. Instead, you should search for the platform best capable of solving your specific problems at your specific price point.
• Go nuts with free trials. Most software companies are very generous with free trials, hoping to convince new customers to make a purchase based on their experiences during these trials. Accordingly, feel free to take advantage of them. You should try to get your hands on every platform in your consideration portfolio and give it a solid try.
• Narrow the list. As you start getting more acquainted with each platform, you should be able to start ruling out platforms that aren't a good fit for your organization, for one reason or another. The narrower your list becomes, the easier your final decision will be.
• Collect opinions. Start collecting opinions from anyone who might have a stake in your final decision. Employee feedback is especially valuable here, as your employees will likely be the ones on the front lines, using this software. Is there a platform they like above the others?
• Review internally. Finally, take all the information you've been able to gather less far and try to stitch it together into a coherent picture. In most cases, there's a clear frontrunner.

Due diligence isn't fun, but then again, neither is shopping for new software in most cases. But if you're willing to go through these steps, and fully investigate the software options available, you'll end up with much better fits for your organization.