Supply Chain Digest editorial staff
The Issue: Companies often fail to fully evaluate the cost and other impacts of third-party software required to run an application vendor’s solution.
The Recommendation: Ask vendors to clearly state the number and cost of these third-party products; work with your IT organization to understand how this might impact costs and upgrade issues down the road.
What is the cost of a license for supply chain or logistics software, whether it is a warehouse management system (WMS), transportation management system (TMS), supply chain planning or other application?
Customers have often complained that a software vendor’s base price for the application is wrapped in mystery. But experts caution that it is also critical to understand the costs and potential long-term impact of various third-party software that may be required for the vendor’s own applications to run.
“The costs of third-party software are often not clear until late in the contracting processes, and companies frequently fail to fully assess how these products may impact costs and upgrade requirements down the road,” noted Mark Fralick, Supply Chain Digest Contributing Editor.
When purchasing supply chain software, make sure you understand what third-party software is required for the total solution. Look beyond operating systems and databases to more specialized products like report writers, client-side or “GUI” technologies, label printing packages, and integration tools. Other potential third-party products might include event management technologies and analytic tools.
Why? First, there may be important upfront licensing costs. These need to both be considered in evaluating costs between vendors, and to see whether there are other options for sourcing those products (e.g. databases).
Second, these products may require internal IT skill sets. For example, if a third-party integration tool is used, will IT staff need to learn that package to maintain integrations?
Third, there might be upgrade issues – you may have to upgrade these tools before the actual application package, or deal with incompatibilities between the application version and the third-party software version.
For example, in general you want to ensure that you are using the latest version of a database vendor’s products in the implementation. This will delay the time when you are perhaps required to upgrade the database software even if you are not upgrading the core supply chain application.
“There is no guarantee that the upgrade policies and strategies, such as support for old versions, will be same for the third-party products as they are for the main application,” added Fralick. “In fact, it’s more than likely they will be different.”
For some third-party tools, it may also be important to understand the stability of the tool vendor. If a warehouse management vendor relies on third-party RF “middleware,” for example, what is the risk/impact down the road if that vendor in this immature market is bought or doesn’t survive? Would you have to potentially upgrade the entire WMS to get the version that supports a new middleware solution?
The bottom line: make “short list” vendors completely detail these third-party products and costs, and work with your IT team and the vendor to understand the options and the potential impact these third-party products may have down the road.
Do you agree companies need to evaluate third-party software required for supply chain software solutions? Any stories you can share? Let us know your thoughts.
Article key words: supply chain software, warehouse management