Australia: Preventing and resolving software implementation disputes

Last Updated: 19 May 2019
Article by Mario Rashid-Ring

In an increasingly digital world, businesses have become more and more reliant on their information technology systems and software 'solutions'. This reliance has been compounded by the e-commerce revolution, which has motivated businesses to upgrade their systems to meet the demands of clients, many of whom are digital natives or simply demand that businesses provide them with the ability to purchase products and services online.

However, businesses have not only adopted the use of these information technology systems and software 'solutions' to meet customer-centric needs, but now see this as a necessary means to monitor the performance and success of the overall business. As many readers will already be aware, software systems often provide businesses with the data necessary in generating business-critical reports (e.g. sales figures, costings, productivity reports) that are relied on by management to make a wide range of decisions relating to the operation of a business.

The significance of these information technology systems and software 'solutions' cannot be overstated, and Australian businesses are now recognising this fact, with Australian IT spending in 2019 forecasted to be approximately $93 billion.

It should come as no surprise that conflicts do often arise between businesses and the providers of these software solutions. By the time the disputes do arise, both parties usually adopt robust positions and blame the other side. Unfortunately, what often follows such disputes is that the software implementations are stalled and delayed, there are losses to productivity, wasted expenditure on investment, significant legal fees, and unfulfilled expectations and disappointment on both sides of the fence.

The purpose of this article is to provide some guidance for businesses and software providers alike, to help address some of the common conflicts that can arise from software implementations, and to provide suggestions on how to avoid these conflicts from escalating.

Overview of a software implementation

Each software implementation will be unique, and will present its own challenges and issues - although broadly speaking, a software implementation usually involves the following steps:

  1. The analysis of business requirements and information gathering;
  2. Identifying the scope and objectives of the software implementation;
  3. The preparation of a project plan;
  4. Process management and configuration;
  5. Implementing user training and testing;
  6. Going Live; and
  7. Follow up training.

Why do most software implementations fail?

Whether a business is looking for new Enterprise Resource Planning ('ERP') software, or new Customer Relationship Management ('CRM') software, it's important that there be a common understanding between that business and the software provider regarding both the requirements of the business, and the capability of the proposed software to meet those requirements. Often, the genesis of all major conflicts relating to a software implementation is a misunderstanding between the business and software provider.

One difficulty that does arise from time to time when a business is looking to implement new software is that they may be unfamiliar with software contracts or service agreements, as well as with what is actually involved in a software implementation. On the surface, these documents may seem fairly straightforward, but the 'statement of work', 'deliverables' and 'milestones' are complex and do require a full and thorough understanding.

These documents can also set out an agreement pertaining to the provision of the software product and any additional services following the implementation. Businesses often don't fully appreciate the 'project management' aspect of software implementations, and subsequently misallocate business resources towards the implementation. Unfortunately, one common consequence of this is that a business can feel that the software provider has failed to either deliver a product that meets the needs of the business, or deliver the product that it had promised.

Equally, there can be a discrepancy in what software providers' sales staff and marketing teams claim the software can do, and what the project management team can actually get the software to do.

Another frustration that businesses can have relates to the software company not having a thorough understanding of the business and its process, wherein there are further gaps in the capability of the software that require further allocations of time, money and resources to overcome. These are understandable sources of frustration, and can arise when the software provider tries to secure a deal at the lowest cost to the customer (but, seemingly, at the expense of the success of the software implementation).

How to avoid software implementation disputes?

Unfortunately, there is no simple answer or solution to guarantee that a software implementation will be successful. With this said, there are some key steps that both businesses and software providers can take to try and avoid conflicts:

Tips for Businesses:

  1. Spend the time necessary to fully understand an agreement with a software provider, including what the business will be responsible for throughout the implementation (e.g. will they need to nominate a project team? Who will be driving the project internally?). The difference between a successful and unsuccessful implementation usually hinges on the level of cooperation that the business provides at all levels, from management and the decision makers through to the project team and those directly involved in the implementation and. Remember to be proactive at all times.
  2. Different expectations held by businesses and their software providers can be difficult to reconcile once a project is advanced, so businesses should ensure that their expectations surrounding the performance of the software (i.e. the performance criteria) are the same as the software providers. One way to ensure this from the outset is to simply ask the software provider to share the performance criteria used during its internal software testing, as well as the test results.
  3. Be upfront with the software provider in terms of the level of experience that the business has with implementations, and if necessary, engage suitable external consultants to both help guide you through the process, and meet your responsibilities. A fresh set of eyes will sometimes help to identify gaps in business processes and assist to re-engineer business processes more easily. More importantly, an external consultant may be able to provide a more comprehensive set of data required by the software provider in maximising the chance that it will be configured correctly prior to the software going live.
  4. Understand that software implementations will often result in some change, and will operate differently to your legacy or previous software systems. Keep in mind the reason that you are implementing the software and try to encourage an internal culture of adaptability, rather than resistance to change.

Tips for Software Providers:

  1. Be certain that any claims made in relation to the software are reliable, based on realistic performance criteria and are supported by rigorous performance testing (e.g. at different workloads). Not only does this start the customer relationship off on the right foot, it provides you with some security if a dispute does escalate.
  2. Ensure that sales staff are adequately trained on the capabilities and suitability of a piece of software. This helps to avoid situations where customers become frustrated due to a sales person providing assurance on a feature of the software that the project implementation team either can't deliver, or can't deliver at the agreed cost.
  3. Understand the customers' requirements and expectations, and ensure that they are accurately reflected as deliverables in the software agreement and statement of works. Once this has been understood, propose a realistic estimate of the time and costs involved in the software implementation.

Ensure that you do not provide a lowball estimate in order to secure the contract, as this will likely cause conflict later.

Key takeaway points

Software implementations are collaborative projects, requiring mutual understanding and input from both businesses and software providers.

Despite both the importance of a software implementation and the potential risks and costs associated with its failure, the negotiations and entry into software agreements are usually rushed - and the complex documents, responsibilities and deliverables are not fully understood by the parties. Conflicts manifesting from these issues do often arise and escalate throughout the implementation.

To avoid these negative consequences, legal advisers with expertise in these types of projects should be engaged at the negotiation stage in order to help ensure that both parties are on the same page, and that the risk of a conflict escalating is reduced.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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