Feb
2
Written by:
Michael Wilkes
2/2/2008
We can get ourselves into a dither when making decisions about software purchases. Here’s a formula for how to decide about deciding...
Planning is worth 10% of the solution price.
The solution price, remember, includes time spent in the decision-making process too, so add this to your formula... assign a dollar value to your time. I use a planning number of $100 per hour when trying to calculate what a given effort costs.
Here’s a breakdown of some price levels using a technique that I call “the fives,” along with comments about the level of planning you should invest at each level. As you read each level, consider the worst-case scenario which is making such a bad decision that you have to abandon the solution and start over. Thus, the cost of not planning at all would be a maximum of twice the solution price.
Free
This level doesn’t actually exist, as your mother explained to you when you were much younger: “There’s no such thing as a free lunch.” Someone -- even if it’s just you -- will spend time selecting, acquiring, and learning how to use the solution. So forget the notion that you’re getting anything completely for free and move on to the next level.
$500
Find a review of items in this category and don’t consider anything beyond the 3rd most popular item. Ask a friend about it, just so you get out of your own head. Sometimes just hearing yourself describe the problem and the intended solution will add light to the plan. A question well-formed is half-answered.
$5,000
After your own search effort, including the review mentioned above, get two confirming opinions from people you respect. Find people who have some expertise in the solution category, but put a premium on wisdom rather than specific technical expertise. People with scar tissue are pretty good at avoiding open manholes.
$50,000
Now we’re in the range where hiring someone to help makes sense. Ask around to find an independent consultant who can help you with planning. Key to their objectivity is that they do not have a product to push. Never hire a hammer salesman and ask him to advise you about deck screws. Expect the consultant to ask you a bunch of questions (and evaluate him/her on the quality of those questions). They must provide you with a written report that includes the results of your discussion and the research performed.
$500,000
At this level and above, 10% represents a sizable investment by itself, so expect to perform a study to select the right product. Important: Treat the study itself as a project. You will spend time, money and other resources and days or weeks will pass on the calendar. In other words, you have a project that includes a budget, a schedule, and a scope. The goal is to make a fabulous decision and thereby avoid the cost of doing it all over again.
Summary
You may object to the use of a hard and fast rule like 10%. I would too. The 80/20 rule would suggest that I can only be 80% right about this or perhaps I can only be correct 80% of the time. This means that you should allow the 10% rule to have a 20% variation in either direction. So... feel good about spending 8-12% on planning. Question any proposal that calls for more up front cost than that.
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