Vendor Selection: A Fourteen-Point Guide

Thursday Dec 7th 2006 by George Spafford
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You’re investing a lot with your vendors. Are you vetting them properly?

It is essential to take the time to adequately assess not just the functionality of your IT tools but also the vendors who sell them. After all, the relative success or failure of your vendors will directly affect the quality of services that you yourelf can render to customers.

With that in mind, here’s a 14-point guide to selecting an IT vendor who most closely fits your needs:

1) Formalize the Process The product and vendor review process must be formalized. To be thorough and fair, the requirements need to be identified for the tooling and the vendor. There should be a formal request for proposal or at least a checklist by which evaluations are performed so the various prospective solutions can be understood, documented and reviewed.

2) Identify the Stakeholders The correct stakeholders need to be identified and involved in the tool selection process. All too often purchases are done in a vacuum without the involvement of all stakeholders and thus only a partial set of requirements are identified.

Instead, the correct people should be involved to fully understand the breadth of requirements and their priority. The IT Infrastructure Library recommends that a tool only be selected if it meets 80% of the mandatory requirements. For groups that follow this sage advice the mandatory requirements must be known.

3) Look for Experience Involve vendors who have the experience necessary to support your organization. Look for same-industry experience or experience in other markets that can directly cross-over into yours. For example, if a vendor doesn’t have experience in hospitals but they do have considerable experience in the insurance business, is that sufficiently related for your needs? The idea is to make sure that there is depth of understanding and that the vendor will bring real value to the engagement, extending beyond simply installing their system.

4)Beware of the Low Bid When reviewing vendors, beware of the low-cost bidder. Some have low costs due to legitimate business models such as outsourcing or a desire to penetrate the market. Others, however, will purposefully under-scope the amount of work needed. Then when the project begins, they will have solid project change management and every time a new requirement comes along, they will formally review it with management and add fees. In these situations, the low cost bidder can very quickly exceed the original highest cost bidder.

To avoid this make sure that the scope of work is accurate across vendors. For example, training, testing and organizational change activities are very important. Vendors who focus merely on the technical installation of a solution may deliver a product that, while technically correct, ultimately fails in your environment due to people and process issues that should have been addressed.

5) Think Total Costs Bear in mind the total costs associated with proposed solutions. The purchase cost of a package is usually relatively small compared to the total costs of a system. A simple total cost calculation is to take the purchase price plus the associated implementation costs, including professional services and training, and then factor in how much the system will cost from an operations perspective each year. Factor in facilities, electricity, personnel, licensing, support, etc.

6) Presale Customer Service Pay attention to the quality of the vendor’s presales customer service and understand how their support model works. If your organization has 24x7 operational requirements yet the vendor is only open 8-5 Pacific Time and does not have after hours support, will that work?

7) Upgrades How does the vendor handle upgrades? Do you receive them as part of an annual support plan? What happens when there are major version upgrades? Some vendors include them with the support plans and others do not. As this can vary dramatically across vendors and affect total costs over time, it is an important element to understand.

Next page: References, Risks, Documentation

8) Strategic Vision What is the vendor’s strategic vision? How does it align with the needs of your organization? For example, if you plan to move to service oriented architecture in two years and the vendor does not, is that acceptable? In many respects, this is part of risk management (which we will cover shortly).

9) Quality Management What is the vendor’s quality management philosophy? What does the vendor do to ensure that customer requirements are met and that system errors are continuously being addressed? If a given tool is going to be mission critical in your organization, then you need assurances that it will reliably meet your requirements.

10) Implementation What are the vendor’s implementation capabilities? Do they have a formal implementation methodology that scales to your size organization? If they do not, then what assurances do you have that they can repetitively install systems with a high level of quality? Does their methodology demonstrate an understanding of what it takes to facilitate organizational change during their implementation?

11) Training What are their training capabilities? Proper training is essential to maximize the use of a tool. What training do they provide not just on the technical aspects but on the new processes that will be introduced? Does the training plan demonstrate an understanding of the needs of the organization?

12) Documentation What documentation do they provide? What documentation will they provide in terms of the work performed, configuration values set, etc.? What about instructions to the operations team in terms of how to maintain the system? What is online vs. offline? What will be provided that is specific to your implementation?

13) References When asking vendors for three references, you will undoubtedly get their three best references. Try to develop some independent references as well to see what other opinions you can obtain. For example, when interviewing their three references, ask them who they talked to and see if you can get some contact information. Then see what names are not on the vendor-supplied list, attempt to contact them and see what they have to say as well.

14) Risks Finally, consider the risks associated with each vendor. How are they doing financially? Are they a merger target? How is their industry doing? What is their technology direction? It pays to not only understand risks during vendor selection but during the implementation project as well. Risk management needs to monitor not just the project and organizational risks but also must explicitly monitor the vendor as well. If a vendor begins to have problems during the course of a long project, then mitigation plans must be developed.

In closing, organizations need to ensure they properly review both the tools and the vendors of those tools. As the level of investment – and level of importance – increases, then so do concerns over the risks associated with having both a successful implementation and partnering with the correct solution provider. By asking pertinent questions about the vendor in addition to the system, better procurement decisions can be made.

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