Local Government Software Purchase Criteria
Power Almanac teamed up with CivicPulse to survey 1,199 senior local government officials to identify the most critical criteria driving software selection in local government.
Three key criteria emerged:
- Total cost of ownership (“TCO”)
- Local government “fit”
Given local government budget pressures, the importance of affordability is hardly a surprise.
The good news – there are proven strategies for addressing affordability while still maintaining margins. In particular, by knocking the other two key criteria out of the park. Read on for actionable strategies and tactics.
(Note: Interest in software among local governments is booming. Be sure to review other articles from our series:
- Part 1 for the impact software is having on local governments, and
- Part 2 for officials’ software priorities.)
Key Software Evaluation Criteria
The surveyed officials provided guidance about the features and benefits most important for future software investments in extensive open-ended comments. The most frequently cited features and benefits are ranked below, grouped into three key criteria “themes”.
Affordability is by far the most critical requirement, and the biggest obstacle to software purchases. Cost has always been an issue for local governments, but the pandemic crisis has escalated financial pressures dramatically.
Comments from officials illustrate these concerns.
- “We’re a small, conservative city of 8,000 people with little likelihood of purchasing anything more than what is necessary to run our operations.” (Top Appointed Official)
- “Now is not the time to roll out new platforms. We are still sorting out the bomb blast the pandemic has caused to municipal services.” (Top Appointed Official)
No marketer wants to hear that affordability is the #1 criteria for investment decisions, but that may be the reality for many local government decision makers in the near future.
(Not ALL of course. Software is still a top priority. But about 20% raised this (unprompted) as a critical issue.)
Action Implications for Suppliers
So how to respond? We suggest 3 key tactics:
- Demonstrate ROI
- Offer flexible pricing
- Reduce the total cost of ownership (TCO) (criteria #2)
There is no better antidote to cost concerns than a convincing demonstration of a strong Return on Investment (ROI). Document cost savings from improved efficiency, as well as revenue enhancements, if any.
- “A major challenge for us is how to present a return on investment (ROI) model to our elected officials so they (and the public) can understand the value of any software spend.” (Head of IT)
Many ELGL Haverford winning software vendors have done a brilliant job in helping their local government customers document cost savings. See our recent blog post “The Makings of Award-Winning Local Government Vendors”, for details.
Local government customers of Haverford vendors commented:
- “Our staff hours reduced from over 300 to less than 50”
- “11.5 million in documented annual savings”
Space Genius, a parking software management provider, has placed “propelling revenue” at the forefront of its marketing messages on its home page.
Improving asset utilization and reducing wait times for fee-based services can drive revenue gains for municipalities in many areas. Consider developing detailed case studies with clients in which cost savings and revenue gains are quantified. (e.g., as CivicPlus documented client staff time savings here.)
Offer Flexible Pricing
Vendors may need to consider more flexibility in their pricing plans.
Some approaches used by Haverford award winners:
- A la carte pricing to allow some cash strapped governments to get only essential features
- Bundling plans that provide discounts for multiple product purchases
- A variety of pricing models to adapt to different government sizes or requirements (e.g., population, usage, number of users, feature- or module-based, etc.)
- Deferred and/or escalating payment plans
- Payments tied to cost savings or revenue enhancements
- Deep discounts to beta testers and others willing to provide extensive product feedback.
#2: Total Cost of Ownership (TCO)
CIO magazine defines TCO for enterprise software as:
“the sum of all direct and indirect costs incurred by that software, and is a critical part of the ROI calculation…” (and adds) “it is often ignored or woefully underestimated.”
Respondents in our survey cited four criteria all directly related to TCO:
- Easy to use
- Easy to implement
- Strong service & support
- Comprehensive training
Representative comments illustrate their concerns.
- “After cost, user friendliness is the #1 issue.” (Head of Purchasing)
- “Most local governments simply don’t have the resources to invest in training.” (Head of Human Resources)
- “We had a disaster implementation of new financial software in 2016 and it’s been hell trying to upgrade and fully implement what we’ve already bought.” (Top Appointed Official)
- “Vendor support should be easily accessible and prompt because an outage impacts not just us, but everyone we represent.” (Head of Buildings.)
The first two are particularly powerful. Software that is extremely easy to implement and use can dramatically cut service, support and training costs for local governments. Ease of use and implementation increases both government customers’ ability to afford the subscription fees and vendors’ ability to deliver and support the product at acceptable margins.
There is no easy fix to these issues. Vendors need to have state of the art user interface design, invest heavily in online / self-serve training and documentation (including video), and have exceptional support staff readily available (and on site if needed).
Finally, vendors need to develop reliable measurements of TCO figures, with local government references willing to attest to the data.
(Local government references are a critical marketing resource, as we’ll elaborate on in a future post about this research.)
#3: Local Government “Fit”
The final key criteria incorporates three related issues:
- Integrates with existing software
- Designed specifically for local government
- Highly customizable
Collectively, these assess the ability of the software to meet the customer’s true needs.
The days of one size fits all software are long gone. Local government software buyers expect most of the software they buy to be both specifically designed for local governments AND highly customizable to their specific requirements.
Not surprisingly, the vast majority of 2020 Haverford winners have an exclusive local government focus.
Respondent comments highlight why this is so critical:
- “Building software vendors MUST have someone on staff at a senior level that understands how building departments actually work. Ideally, a former building department official with an architecture background.” (Head of Buildings/ Permitting)
- “Software developed specifically with local government in mind at the inception is most beneficial.” (Head of Human Resources)
- “Integration with other (internal) departments is a critical factor that is frequently neglected by vendors. Sharing is essential to efficiency.” (Head of Fire Protection)
Action Implications for Suppliers
To address these concerns, we suggest the following:
- Hire employees throughout your organization with experience in local government. There is no substitute for hands-on experience in your customers’ shoes. Designers with such experience will create better products, and sales and support personnel will understand and connect more effectively with your customers
- Beta test extensively in local governments
- Nurture user groups, forums, and other feedback channels and tools to encourage continual customer feedback.
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Over the coming weeks, we’ll be publishing more insights from this first-of-its-kind proprietary research, including:
- Local government obstacles to purchasing new software
- How local government officials learn about new software (one is a MUST know)
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