How to find the right tax technology vendor

Adopting a new technology solution can be transformative for your tax operation. Yet choosing the wrong one could have disastrous consequences. Not just in terms of wasted money, but also the risk of operational disruption and compliance failures.

Then there’s the stress this would place on your team, plus the damage to your credibility as a tax leader – and to your ability to secure investments in the future.

That’s why it’s worth carrying out a thorough, step-by-step process to ensure you make the right decision.

You’ll need to understand the market for the software you need; identify and evaluate the options on offer; and maybe conduct a pilot with your preferred vendor.

That can take a while: up to a year in the case of larger implementations. But it will be time and resource well spent.

Going through a structured process like the one below will help you to find the right solution, by bringing objectivity to each stage of the decision.

Start by making a long list of vendors whose products could meet your technical requirements (which my previous blog covered how to capture). You might carry out your own research, or work with an external expert who knows the tax technology landscape.

Throw the net wide at this point: focus only on your core requirements. If you’re looking for, say, an IFRS tax provisioning software, you’ll probably find around 20 possible solutions.

Now narrow down your list, by evaluating each solution against your wider requirements – by considering factors such as:

• Is it a cloud-based technology?
  
• Is it a software-as-a-service offering?
• How much can it do out of the box, and how much bespoke configuration will be needed?
• What support options are available?
• Does it cover all the jurisdictions you operate in?
• How easily would it integrate with your wider IT landscape?
• Will you need a systems integrator to implement it?

This detailed analysis should leave you with perhaps three or four remaining suppliers.

Objectively measure how each shortlisted product meets your most (and least) important requirements.

I’d recommend using a weighted scorecard. This will allow you to rate each of your requirements according to its importance to your tax operations. Ask all stakeholders who will interact with the solution to do the same.

Your scorecard will form the basis on which to evaluate your shortlisted vendors at the next stage.

Get each supplier to answer a questionnaire based on your weighted scorecard. And carry out a ‘beauty parade’, where they demonstrate how their product meets your various requirements.

Involve your stakeholders in this, so they can score the features and capabilities they’ll need to use.

Total up your and your stakeholders’ scores to create a ranking of the solutions on your list – and reveal which performed best across all requirements. The weighting will mean that your top-rated vendor is the closest fit for your and your combined stakeholder’s needs.

Your scorecard will give you a fairly reliable guide to the most suitable supplier. But it shouldn’t be your only input. Especially if none of the shortlisted solutions meet all of your requirements.

• In that’s the case, then you’ll need to think about:
  
• What compromises would you have to make with each product – and which of them are acceptable?
• What extensions would be needed, and at what cost?
• Which product will be easiest to extend?
• Which vendor offered the best cultural fit with your team, and with your wider stakeholders?
  

You should also obtain client references to find out how your top suppliers have performed in the past. And chat to peers who’ve deployed their solutions, successfully or otherwise.

For larger implementations, consider asking your preferred vendor – or potentially the top two – to develop a pilot before you make your final decision. That will enable you to validate their ability to meet your requirements and surface any misunderstandings about what the product can and can’t do.

It’s also a chance to test the fit between their team and yours. Is there clear and open communication? Do you feel you’ve found a genuine partner?

If the pilot hits problems, then go back to your requirements. Have you got them right? Are they realistic? Can you live with some of them not being met, or extending the product to deliver them all? If not, you might need to consider building the solution yourself, rather than using a third-party solution.

Once you’ve chosen your preferred vendor, the last step is to agree contractual terms.

Take the time to get this right before jumping into delivery. Both sides should be clear on what success looks like; what’s required to realise it; and how it will be measured.

With that in mind, make sure the contract sets out:

• specific KPIs and metrics – in terms of user numbers, technical and commercial outcomes, etc. What should be possible once the software is in place?
• accountability for achieving the targets – on both sides. What are your responsibilities, and what are vendor’s?

I’d also recommend taking a phased approach to delivery and payment. Finish, review and pay for a phase before moving to the next. That will prevent you from overcommitting, and allow you to work with the vendor to address any issues as they emerge.

There are good reasons to work with a third-party expert when selecting your technology vendor.

Firstly, it removes bias, subjectivity and politics from the process. Your stakeholders might prefer certain products, but that doesn’t mean these will meet all your requirements. Plus, independent support for your choice will help you to make a stronger investment case.

What’s more, a partner like KPMG can bring tried-and-tested tools and processes, which will do much of the work for you – faster than you can do it yourself. For example, our tax technology experts can provide a ready-made list for the market-mapping stage, and a template weighted scorecard covering the most common requirements.

We’ll also work with your team to carry out the desktop review, and set the scorecard weighting. We can sit in on the beauty parade, to help you match vendors’ capabilities to your requirements. And we can put you in touch with clients who’ve used the suppliers you’re considering, to provide unvarnished feedback.

We can support your vendor selection process end to end, or at any particular stages where you may need help. And once you’ve made your decision, we can assist you through the implementation phase – and beyond.

Please get in touch to find out more.

Transform Tax with KPMG.