Thinking of Asking Your Vendor for a Proof of Concept or Proof of Value? Think Again!
When it comes to purchasing software, it is no secret that companies like to ‘try before they buy.’ This holds true for companies of all sizes, whether a large fund administrator implementing a costly enterprise system or a more modest single family office looking for a simple portfolio accounting solution.
As a result, the Proof of Concept (PoC) and Proof of Value (PoV) have become so pervasive in the software selection process that companies routinely request these processes with little understanding of the difference between the two. Or more alarmingly, without first identifying the company’s goals and what defines success. According to Alex Ivanov, CEO and founder of FundCount, approximately 70% of FundCount’s prospects request a PoC/PoV before making a system purchase decision.
Distinctly Different Approaches
The terms PoC and PoV are often used interchangeably, but the process they represent is very different. A PoC validates that the software will work and do what it says it will do. For example, a PoC may prove that the software is properly programmed to compute net asset value (NAV).
The more evolved version, the PoV, goes a step further. It proves that the software does what it says and that it will work in your environment and deliver the results – and value – you expect. In the case of NAV, for example, the PoV would show how the software aggregates information from disparate entities in your ecosystem to compute NAV, thereby minimizing the need for time-consuming manual input and possibly reducing headcount.
But none of that really matters. If you’re thinking of asking your vendor for a PoC or PoV, you might want to think again. Neither option is the best way to assess whether the software under consideration will provide real-world success. Here’s why:
Square peg, round hole – PoC/PoV requirements are written from specifications that are based on existing workflows. This limits a firm’s ability to understand what the new system can do. Going from manual processes with Excel spreadsheets to a modern accounting system with a real-time general ledger is a huge step-change. It’s impossible to reconcile workflows between the old and new systems, so a PoC/PoV will not accurately capture how the system works and the value it brings.
Implementation realities – The greatest challenge of any new software project comes with implementation, not functionality. Projects are highly complex and many data requirements cannot be addressed in a PoC/PoV, so they are simply glossed over. Also, a PoC/PoV won’t provide an accurate picture of a vendor’s expertise or customer service, both of which are critical considerations in any software decision.
Visualization blindness – A PoC/PoV is applied in a controlled environment that typically allows only selective features and a handful of reports to be trialed. It is easy to be influenced by functionality and “sexy” reports with impressive visualization capabilities rather than looking deeper to ensure there is substance behind the visuals.
Scope creep – A PoC/PoV can drag on without ultimately providing the value the exercise was intended to deliver. It is not unusual, for example, for the number of requested sample reports to grow because the reports are so new and so different that they open up more questions. Scope creep is exacerbated by a firm’s lack of a clear and tangible measure of success when assessing the PoC/PoV.
Lack of commitment – Running a PoC/PoV requires a certain level of commitment from the prospect. Holes in the data or missing dependencies can easily compromise results of the exercise. In spite of the best intentions, prospects may lack the time, resources or expertise needed to gather required information.
The Path to Success
If a PoC/PoV is not the best way to assess a software solution, what is? According to research by McKinsey, “In a wide-scale transformation effort, improvement initiatives need to be piloted in selected units before they are rolled out across the whole organization.” Moving from manual processes or legacy systems to a modern accounting solution is indeed a significant transformation.
The best approach is to commit to a vendor and deploy the system within a limited scope. Isolate a part of your business – one entity, a group of entities, a single fund, one client, or whatever makes sense for your firm – and get the system up and running.
This approach accomplishes several things that a PoC/PoV cannot do:
- It enables you to integrate all dependencies and explore the full capabilities of the system rather than test just a watered-down, hand-selected group of functions.
- It provides the opportunity to re-engineer a portion of your business, discover what you didn’t know and use that knowledge to streamline implementation across other groups of entities or clients.
- It lets you stress-test implementation and customer support, providing an accurate window into what you can expect from the longer-term relationship.
- It enables you to gain a thorough understanding of the system, assess the value it delivers and validate whether it is a good fit before committing to wider deployment.
- It provides the opportunity to identify implementation issues or gaps and iron out the kinks on a smaller scale, which will make the full rollout faster and easier.
After all is said and done, if you decide that the software is not the best match for your needs, you will have invested only a modest amount of time and money. That is much wiser than “betting-the-house” on an all or nothing approach, which leaves many organizations unhappy with their selection or burned by implementation failure. More importantly, you can walk away from the project with greater knowledge and a clearer understanding of what you are looking to accomplish and the type of system you need.
At FundCount, we are implementation experts who know our software inside and out. We understand the value that a phased implementation brings and can build an observable and measurable pathway that allows you to leverage our expertise across many verticals and clients. We are committed to delivering the results you need on time and on budget while setting you up for success with the larger rollout to your whole organization. Contact us for details.