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The True Cost of Enterprise Solutions






A comprehensive guide to budgeting for your next student information or business management solution.



Hidden costs. If you’re not careful, they can be the difference between an enticing proposal and a financial disaster. Unless you know what to look for, it’s easy to feel like you’ve fallen for a bait-and-switch that has left you with no easy way out.
 
When you make the decision to invest in a new student information system (SIS) or business management solution (BMS), you are embarking on a journey with some very specific goals in mind. Improve efficiency and streamline workflows? Check. Provide your stakeholders with 21st century digital learning and communication tools? Check. Reduce ongoing costs with a low maintenance solution that supports your long-term vision? Absolutely.
 
All of these things sound great on paper, but the enterprise technology landscape is more difficult to navigate than most. Unless you’ve been through one of these large-scale transitions in the very recent past, you can’t possibly have a grasp on everything you should expect.
 
We’ve assembled this comprehensive guide to SIS and BMS purchasing, with an eye on the short- and long-term cost considerations that make up your total cost of ownership (spoiler: sometimes, the initial proposal is just the beginning).  
 

When it comes time for contract negotiations, make sure you have a clear strategy in mind that includes continuous backups, disaster recovery, and an annual third-party security assessment.


The Pricing Model

Short-term

Many of the major SIS and BMS providers have transitioned to a Software-as-a-Service (SaaS) model, wherein you “rent” the software for the duration of your contract and pay a relatively consistent annual licensing fee (ALF) for the right to use the technology.
 
The SaaS model is beneficial to many districts because it results in lower upfront costs. A commitment of multiple years is typical, but one of the most common pitfalls is the potential for rapid escalation. Some companies have been known to backload ALFs, building in annual increases of 10-20% or more in order to make the initial proposal look more attractive. This can pose a significant financial burden in the later years of the contract and should be avoided whenever possible.
 
In some cases, you may be presented with an alternative pricing option based on perpetual licensing. In essence, you pay a larger one-time cost at the start of the contract in order to “own” the software as opposed to renting it. As a result, your ongoing annual costs will be significantly lower, consisting of an annual maintenance fee that includes updates and support rather than an entire relicensing of the technology.
 

Long-term

Although it is less common these days, perpetual licensing is typically a better option for long-term partnerships and may be the preferred approach if you’ve received up-front funding for your project or have a temporary budget surplus. If possible, ask your potential partners for an ROI comparison of the two pricing models to determine how many years it will take for perpetual licensing to become the more economical option.
 

During the evaluation stage

Ask your potential vendor(s) to share their average customer lifespan and retention rate. This will give you a good idea of whether your prospective partner is in it for the long haul or just for the duration of your initial contract. Another best practice for managing this risk is to specify maximum rate increases during contract negotiation.


 

The Deployment Method

Short-term

When presented with the option of hosting your enterprise software solution on-premise or in the cloud, cost is just one of many factors to consider. System performance is going to depend in large part on the hardware and bandwidth at your disposal, so the first step is to determine whether your existing infrastructure can support your new student or business management solution.
 
With a careful review at this step, you can estimate the opportunity cost of ramping up your internal technical resources to support an on-premise approach versus the monthly cost associated with a secure cloud provider. 
 
Keep in mind that no two secure cloud providers are alike. Compare the services being offered, with an eye toward security, performance, and potential hidden fees. Here are some items to look for when evaluating cloud providers:
 
  • A single contract that includes all parties and defines a commitment to up-to-date security requirements. This will ensure that you don’t have any accountability issues down the road.
  • The solution meets SSAE 16 Reporting on Controls standards as a bare minimum.
  • Hardware updates and database management should be included without hidden fees.
  • Application updating and ongoing monitoring services as a standard part of the service contract.
  • Multiple data centers and redundant failover.
  • Continuous monitoring of industry standards to ensure that the latest protection and security recommendations are always being followed.
 
The other aspect to consider is your internal staffing resources. Do you have enough staff (and do they have enough time) to manage the application and provide disaster recovery measures? Proficient IT employees are in high demand and a secure cloud service will free up additional time for the team you do have to focus on supporting your instructional needs.
 
A solid disaster recovery plan for an on-premise solution typically involves an off-site storage facility and related recovery services that can be a costly added expense. In a cloud environment, such services are typically included at no additional charge.
 

Long-term

There’s a lot to consider when performing a long-term cost analysis of hosting options. How many hours each year does your staff spend running updates for your existing system? How much do you budget for hardware upgrades to support ever-increasing network traffic and applications?
 
Cloud providers will typically charge a flat annual rate in exchange for hosting your solution at an offsite data center, but not all cloud services are created equal. When it comes time for contract negotiations, make sure you have a clear strategy in mind that includes continuous backups, disaster recovery, and an annual third-party security assessment.
 
One of the most valuable metrics in cloud hosting is the recoverty time objective (RTO) and recovery point objective (RPO). These two business continuity measures will give you an idea of how quickly the vendor will be able to get you up and running in an emergency and are often indicative of the quality of support you can expect in non-emergency situations as well.
 
It doesn’t pay to invest in a hosted solution if it means putting your data at risk. On the flip side, the benefits of a trusted cloud provider will often result in a significant return on your investment over the long haul.
 

During the evaluation stage

Some major providers no longer offer a self-hosting option, so be sure to ask for options before you begin crunching the numbers. If you’ve recently invested in your network infrastructure, consider how much of your total cost of ownership might be lost to a service you don’t even need. 
 
Don’t talk yourself out of something you really do need just because it’s not “included.” Semantics should never be an obstacle to improving outcomes.


The Technology

Short-term

The first, largest, and most obvious cost is associated with the technology itself. There’s a reason SIS and BMS technology is sold as a “solution,” and it’s not just because the word sounds better than “software.” The scope of any enterprise level technology is immense, and one-size-fits-all is simply not a viable option.
 
The most common approach for SIS or BMS transactions involves a “core” package with all of the basic/necessary features and functionality, supplemented with “advanced” or “premium” features that can be added based on your district’s specific needs.  When discussing the benefits of our solution, we are often met with “that looks great, but is it included?”
 
The purchasing process for enterprise technology is not unlike that of a new car – you can buy the most basic model to get you from A to B, but you have to weigh the costs/benefit ratio of options such as premium sound, leather seats, or entertainment systems.
 
Solution selling is not a way for technology companies to nickel and dime you; it is about personalizing your proposal to ensure that you pay only for the products and features that offer value to your district, now and in the future.
 

Long-term

Do you start small and work your way up, or dive right into the deep end? Ultimately, no matter your short-term plans, you want your enterprise technology to grow with your district and always incorporate the latest advancements in both technology and process.
 
The best way to avoid additional, unforeseen costs over time is to take a long, hard look at the respective enhancement track records of your potential solutions. How often are updates released? Do you have to pay for the rights to install these updates when they become available? Are enhancements piled on to the same foundation that made up the original release, or has the provider shown a willingness to rewrite their solution so as to remain on the cutting edge?
 
Any attempt to peer into your crystal ball has the potential to backfire, but this is where it pays to find out whether an SIS or BMS is backed by true experts and thought leaders in your industry, or programmers working from a list of generic requirements.  The ability to adapt to your ever-changing landscape can make all the difference in your total cost of ownership.
 
When it comes to features and functions, the biggest financial risk lies in the possibility of future irrelevancy. If it looks like you could find yourself being faced with the decision to either purchase an upgrade or find a new solution, take a moment to step away and reevaluate. In a market like this, stability and customer experience are far more important than a flashy demonstration.  
 

During the evaluation stage

Make sure you understand what you’re buying. We have heard too many stories of vendors bolstering their demonstration databases with customized programming and add-on features to impress evaluators, while failing to mention that the solution they’re showing is not the same one being proposed.
 
Every feature should be broken down into “core” and “premium” categories, but don’t talk yourself out of something you really do need just because it’s not “included.” Semantics should never be an obstacle to improving outcomes.
 
No vendor is going to proactively share the skeletons in their closet, but a little bit of research can reveal all you need to know to make an informed decision.


The Implementation

Short-term

This is the step that separates the niche players from the market leaders. It is tempting to look at an SIS or BMS as “just another product purchase,” but if you’ve ever been through one of these transitions, you know that couldn’t be further from the truth.
 
Even the best technology will be undone by a haphazard implementation. In the not-too-distant past, it was commonplace for technology vendors to invest all of their time and payroll into software development and leave it up to you figure out the rest after the purchase. As enterprise solutions become ever more complex, that model is no longer sufficient.
 
Your proposal will include significant one-time costs above and beyond the technology license. Implementation fees, including project management, training, and data migration will make up a healthy percentage of your year-one budget for the project. Some of those potential costs (and their short-term impact) are detailed here.
 
Project Management – The scope of an enterprise technology implementation is so big that both your district and your vendor should have a project manager on board. These individuals should have a firm grasp of PMBOK (Project Management Body of Knowledge) best practices and will serve as the primary points of contact from the day of your contract signing through well beyond the launch date.
 
The role of the project manager is to craft a viable project plan that includes a schedule of all the necessary implementation steps, continuously review the project to ensure that all milestones are met on schedule, conduct ongoing risk management analyses, initiate change review processes, and clear obstacles as they arise. The last thing you want to deal with is crossed wires and haphazard communication. An effective project management program will ensure that all parties remain accountable for the scope of work you’ve agreed upon. 
 
Consultation – Only the most experienced firms will include a consultation program. Even then, it is one of the most misunderstood elements of an implementation project. What are you paying for, exactly? Enterprise technology consultants are typically some of the most knowledgeable and experienced individuals you’ll find anywhere.
 
Consultants aren’t “technology” people; they are industry experts who know how your district or municipality operates, either due to a previous career in your shoes or the fact that they have dozens of implementations under their belts. The consultant will spend his or her time learning the ins and outs of your district, then report back to the project manager with recommendations for optimal software configuration, customized training, and a deep understanding of the workflow you’ll rely on to get the job done.
 
Data Migration – At some point, your data needs to be moved from your current solution into the new one, but it’s never as easy as just pressing a button. In 35 years of partnering with the public sector, it has been our experience that the most painful aspect of a traditional conversion is the data migration process.
 
From custom interfaces to incompatible data validations, it sometimes feels like you’d be better off setting aside a few weeks (and a large team) to just manually enter your information into the new system. Of course, that’s simply not feasible. Make sure you know what your investment includes – we’ve heard horror stories from districts who paid for migration only to be handed a massive spreadsheet and asked to fill it with all of their existing data. That’s just not good customer service (or a productive use of your staff’s time).
 
Ideally, your team won’t need to be trained or even involved in the actual upload of data to your new solution. At most, your data technicians should be able to upload your information to a secure location and let your new technology partner take care of the rest. As with any element of implementation, communication will be key – make sure you’ve assigned subject matter experts to be available when your provider’s programmers have questions about fields or formatting.
 
Training – Arguably the most crucial aspect of any implementation, an effective mix of on-site, web, and self-service training will set your team up for success in your first year with a new SIS or BMS. But, that knowledge transfer comes with a cost. In the short-term, there are two important factors to consider:
 
1) The delivery model
As mentioned above, the best mix will involve more than just direct instruction. Hands-on, just-in-time instruction has been proven to be more effective in the educational environment, so you should expect the same for a software solution that will touch nearly every aspect of your day-to-day operations.
 
Make sure your scheduled sessions are supplemented with quality documentation and an internal learning management system that your end users can revisit and your department leaders can keep abreast of their staff’s progress.
 
2) The depth of the proposal
A common tactic employed by vendors in the increasingly competitive enterprise solutions market is to lowball the training section of your proposal in an effort to come in as the lowest bid.
 
Once you’ve signed the contract and begun implementation, these companies are counting on you paying for whatever additional training is necessary when you realize your team doesn’t actually know how to use the solution. This can have a detrimental effect on both morale and the total cost of ownership associated with your new solution.
 
Contract negotiation can be a death knell for effective training plans as well, with purchasers and district administrators scrutinizing every dollar. Unfortunately, it’s these services that often find themselves on the chopping block.
 

Long-term

The success or failure of your implementation can have lasting ramifications on your switch to a new enterprise solution. A poorly managed or under-researched project can fall apart before it even takes off. When you read stories of cost overruns and multi-year transitions that sap district resources, the cause is almost always the same: underbidding technology vendors who put more effort into getting the contract signed than getting you up and running.
 
While the cost of an effective implementation can be intimidating, the results are what ultimately matters. For those who have never been through this process, concepts like consultation and project management can appear to be nothing more than proposal padding, especially when held up against competing proposals that include little more than software licenses. In reality, these services are essential to the health of both your administrative operations and your budget.
 
Of all the line items on your proposal, those associated with training carry the biggest long-term risk. The switch to a new SIS or BMS can be a major source of excitement for all of your district’s stakeholders. After all, the expectation is that you’re moving on to something that will ultimately make it easier for everyone to do their job and be more effective in the process.
 
Nothing kills excitement over time more than the feeling that you are not getting the most out of your technology. You may know that the functionality you need is there, but what does it matter if your end users don’t know how to get at it. This results in a snowball effect of more training, year after year, followed by the unending cycle of diminished productivity.
 
Think of what that does to your costs over the course of a five-year contract. Now, you’re not only paying for the licensing fees, but you’re tacking on potentially tens of thousands of dollars in training that you thought you’d only have to pay for once. Refresher training is important and – depending on your turnover rates – sometimes necessary, but it should not be an annual occurrence. This is where the aforementioned, self-service learning management systems can put a huge dent in your bottom line costs. 
 
An often-overlooked aspect of long-term satisfaction and financial security is the technology firm’s commitment to user experience and community. A lack of transparency can result in otherwise valuable enhancements that fly under the radar or significant changes that you have no way of preparing for. The ability to share best practices and stay up to date on everything that’s new in your SIS or BMS will result in significant cost savings over the lifespan of your contract.

 

During the evaluation stage

Dig deeper than just features and functions. Sure, a massive specification workbook is the traditional method of comparing two similar “products,” but enterprise solutions are more than just a product. Specs can’t identify the real factors in the success or failure of your implementation - traits like industry leadership, relevant experience, and stability.
 
Put extra weight on references and research – have other similarly sized districts experienced success with a particular solution? Was the implementation completed on time and on budget? Do they feel like they were sold a bill of goods, or has the solution delivered everything that was promised?
 
It also pays to rely on more than just the vendor’s word. Call some districts that you know are using their solution but weren’t on the reference list. Use Google to browse recent commentary and news items. No vendor is going to proactively share the skeletons in their closet, but a little bit of research can reveal all you need to know to make an informed decision. 
 
A little bit of homework can help you weed out those whose market presence is a byproduct of effective marketing and minimalist proposals as opposed to a track record of successful partnerships.

Your student information and/or business management systems will form the backbone of your operations for years to come. More so than any other technology you will invest in, it is important to find the best fit for you. Unfortunately, hard facts are hard to come by in an increasingly competitive environment.
 
If you begin the process of change with a clear understanding of what to look for, you’ll have a leg up over those who have come before. The ability to see through the bluster and the promises so you can identify real value when you see it can make all the difference.
 
Don't settle for more over-promising and under-delivering. Take ownership of the buying conversation and hold vendors accountable for the promises they make before you ever sign a contract. A little bit of homework can help you weed out those whose market presence is a byproduct of effective marketing and minimalist proposals as opposed to a track record of successful partnerships.


10 Things Infographic
 


For More Information

If you need assistance navigating the SIS or BMS landscape, get in touch with us today. We’ll be more than happy to discuss additional strategies based on a combination of thought leadership, best practices, and advanced technology.


 



 
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