Winery Software and Solutions - Negotiating a Better Contract

Livermore, CA July 1, 2009 - The same question comes up when reviewing software and service solutions for a business. Should the business choose a solution that provides accounting, cash register (POS), production, website services, and more all from a single vender or would picking individual solutions that integrate be a better choice? The answer is always... "it depends".

I can say with confidence that when a sales person calls and tell you that one option is A LWAYS better than another you should 100% of the time run in the opposite direction. There is no ONE correct answer and each business needs to be evaluated independently in respect to expense, commitments, concerns, risks, service, etc.

INSURANCE: The bottom line is that it is truly a tough call as to which option is best for you. Knowing the positive and negatives of both will allow you to listen to the sales people and hear if the entire truth is being represented. Because there is a risk in any agreement or contract it is wise to make sure that you can cancel the contract due to failure to perform (without penalty) and possibly recover some of the initial investment if that failure comes in the first 12 months.

Additional insurance comes from research. Taking the time to actually see how the solution works can uncover major strengths and shortcomings in software. This can help you avoid signing a contract for vapor-ware and seeing the process of each software/service in action is the best way to see how, specifically it will impact your sales, productivity and administrative needs and how it may fall short.

The major difference that sales people pose between choosing a single service provider and multiple providers is the challenge of integration. Although some venders refuse to integrate with other providers the bottom line is that with today's technology all current POS, accounting, production, shopping cart and club solutions integrate with other solutions. Technically speaking anyone using current technology has the capability to work with other software.

The truth is that some companies do not want to integrate with other companies. This is because the initial company is afraid of losing business. This is a decision that puts the service providers need's above those of the business and customer they serve. It is an interesting business decision yet, it is made every day and worse, it is accepted by the customers.

Fact: Service providers usually start by offering a service in a particular area specifically accounting, POS or shopping cart. They built a solution for that area of expertise and build on from there. For example a solution may begin as an accounting solution which added POS, a club solutions and so forth.

There are benefits for selecting a single solution provider to support your business:
#1 SERVICE: A one-stop-shop provides the convenience of only having one number to call for service and support. The finger pointing problem that sometimes occurs with multiple venders should not exist in this case.

The fact remains that even if you have a single point of contact for service and support, the finger pointing is not gone because the service provider needs to deal with the internet access, changes in operating system and browser compatibility, hardware providers, merchant account, shippers and other venders that support the one-stop-shop solution. Additionally, most companies that offer a single service solution actually combine services from several other companies and represent them as a single merged solution. That means that in reality, support may still be distributed to many locations.

#2 INTEGRATION: Integration between multiple departments should be standard. With old technology, integration projects were costly. In today's world, integration between different companies is not a significant task.

There are 4 immediate downside of purchasing a business-wide solution for your company:

#1 - RISK - All your eggs are in one basket. If the service or features of the software you purchased are not what you expected and you want to discontinue service, it can be a major expense to transition off the Single Service Provider's solution. If service is great - you made a good decision. If service is not up to your standards, you may find your self "stuck" with little room for negotiations.

#2 - INVESTMENT = A COMMITMENT OF TIME: The investment that is required to purchase a company-wide solution from a single service provider is significant. Due to that investment, customers find that they are committed to a solution for several years. This can cause a loss in productivity if the systems were not fully investigated by all departments, prior to the purchase.

#3 - OVERALL PRODUCTIVITY: It follows the old saying of "Jack of all trades, master of none". Simply put, it is rare to find a company that can provide an expert solution in all required parts of accounting, POS, club, production, shipping, etc. The results are fewer features which in turn results in a reduction in your company's productivity.

Each department of a business requires specific knowledge and expertise. It's difficult to be an expert in all areas of business and provide the best features for all departments. A company that provides a system-wide solution has to make decisions on where to add functionality. Instead of being able to focus and spend development dollars on powerful features in each specific departments, companies must distribute enhancements across the entire solution. This often results in feature packages and upgrades falling short.

#4 - INTEGRATION - Today's technology allows systems to easily integrate. If you select a single service provide for 80% of their product and want to add a service from a 2nd or 3rd provider, you should ask the primary service provider if they will allow the integration. Many companies are happy to integrate with other providers. This allows businesses to pick the best solutions for their own specific business and department needs. However, some providers refuse to integrate solutions as they don't want the competition. This is a provider which makes decisions based on protecting their business and not on supporting their customers. This is a concern that should be questioned upfront.

Positives of Multiple Service Providers:

#1 - PRODUCTIVITY & EXPERT SOLUTIONS: The strength of selecting multiple service providers is that you can choose the features that best meet your specific business needs. People who specialize in one area usually become experts in their field. Accounting, Club programs, Shopping carts, websites, POS, Inventory, etc. all have their quirks. Hiring people who are experts in each area (or a few areas) can provide you with the strongest feature set. These features can be big time savers in the long run and are worth considering.

#2 - LEVERAGE COMPETITIVE SERVICES: As the providers know it is easy for you to discontinue service you can often leverage changing to a competitor if you have any service difficulties.

#3 - PRICE NEGOTIATIONS: Pricing negotiations can be leveraged for purchases and service when you have competitive offers on the table. This can be significant as the general rule for software is 80:20. The 80:20 rule is that the purchase price of software is 20 percent of revenue the provider generates from the sale. That leaves 80 percent of the revenue to be generated after the sale with upgrades, service, and price increases.

#4 - FLEXIBLE TO LEAVE: If you become unhappy with a provider and need to change providers, switching out a single service is much easier than changing a service for an entire company-wide solution.

Downsides of using Multiple Service Providers:

#1 - SERVICE: The largest concern is service. Coordinating service between multiple venders can be a challenge. If you have a vender who is not open to integrate solutions this may cost you some time. However, if you have a provider that is not willing to cooperate, then you can easily discontinue their service and choose someone who will. At least all your eggs are not in one basket. Additionally, even single-service providers need to integrate with computer operating systems, shippers, merchant gateways and more so both service provides face the "service" challenge.