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Step-by-step instructions for how to purchase business software in 2020

 

Step 8. Evaluate vendors

Now that you have identified your problem, determined the outcomes you want to achieve, researched possible vendors, built your case for change and defined your budget, you are finally ready to begin evaluating the potential vendors.

Note: If you organization requires it, now may the time to send out your request for proposal. The purpose of an RFP is to ask for bids from vendors who match your project requirements and to start to determine which of these vendors is the best option. You will likely need to submit an RFP if you work in a large enterprise or government agency. However, if you do not have the bandwidth to do so, then you can delay the creation of your RFP to later in the process — before you create your shortlist.

Going into your vendor evaluation, it’s important to keep in mind why you’re looking for a new provider. Remember the problem you identified in step one and the desired future state you created in step two. Keep this in mind as you start to judge each vendor.

When evaluating suppliers, it may be easiest to consider them based on four traits:

  • Cost
  • Capability
  • Communication
  • Character

Cost

Cost includes a lot more than what the vendor charges for its software. You should also look at:

  • your resulting time and labor savings;
  • your cost savings from optimizing work processes;
  • the cost of dealing with a vendor you can’t trust; and
  • the cost of working with a vendor who has a bad reputation.

Make sure each vendor provides you with a comprehensive description of their pricing structure, including every line item cost. This includes additional travel charges, maintenance fees and administrative expenses.

You should also always look for hidden costs. Some vendors may charge additional fees for in-person training or document management services. You may also find that vendors charge for both annual maintenance and monthly support. Keep an eye open for any arrangements that allow the vendor to increase their fees during the contract as well as provisions that allow you to break the contract if the service or product isn’t working for you.

If you find yourself working with complex contracts, it may be worth investing in an attorney who can provide legal assistance When considering capability, don’t just look at the vendor’s ability to complete the job. Consider the company’s track record and whether you can trust them to continue doing the right thing even when you aren’t paying attention.

Look at the vendor’s experience. How long have they been in business? What sort of reputation do they have?

You should also consider the level of support or customer service provided While online reviews can be helpful during the initial research phase, you should now ask each vendor you’re considering to provide you with at least two references. If they’re unable to do so, then you should probably cross them off your list.

You should try to talk to customers in the same industry as you or with similar implementations. Ideally you would be able to talk to a newer customer and a customer that is more established with the product to get different perspectives of the vendor.

Below are some sample questions you might want to ask the vendor’s references:

  • How did the vendor address your specific needs?
  • How were the employees to work with? Were they professional?
  • Was the vendor on time for appointments?
  • How responsive was the customer service team? Did they seem knowledgeable?
  • If an error occurred or something broke, was the vendor quick to fix it?
  • Was the company able to customize their products or services to fit your needs?
  • How scalable are the products or services?
  • How would you rate the quality of the products or services you received?
  • How would you rate the security of the products or services you received?
  • Would you use this vendor again?

You will also want to know that the company is stable and will be around for the foreseeable future. Ask the vendor to provide background on the company and the software they are offering, including:

  • A history of major and minor version updates.
  • A product roadmap of new features and timing.
  • Size of the product team developing the solution.
  • Number of existing customers and how many match your industry.
  • Trend of profitability.

Communication

Communication refers to how quickly the vendor responds as well as the ways in which it responds and shares information. Has it been communicating regularly, honestly and clearly up to this point? Is it too aggressive? Or maybe it doesn’t communicate enough?

You’ll likely want to work with a company that responds to all inquiries and communications within 24 hours or less. You need a vendor that is going to give you straightforward, clear and logical answers to all your questions and concerns.

Character

Character is potentially the hardest trait to quantify when evaluating vendors. A good place to start is Try to get a sense of how the vendor operates. Does it work the same hours as your company? Is it just as eager as your employees to provide answers and get a job done?

The reviews you receive from references will also be helpful when evaluating character. How does the reference describe the vendor? How responsive was the vendor if after-market support was needed?

In addition, look for a vendor that really cares about getting to know your company and your long-term business goals and values. This will help increase the alignment between your two companies. It will also make it more likely that it will put in extra effort to make sure your business is provided with the best value possible.

Other considerations

Two additional questions you will want to evaluate are:

How much emphasis does the vendor put on training?
Your employees will need to be taught how to get the best value out of the new technology so they can continue providing the level of service that your customers or clients are used to — if not better.

What happens to your data if you decide to stop working with the vendor?
Some vendors may refuse to return your data or they will try to charge you large fees to get it back. If your data has been encrypted, then it’s likely you will have to pay the vendor something, but it shouldn’t be a significant amount.

With all these considerations in mind, you can start to evaluate the vendors based on how they meet your requirements. To do this, transform your decision matrix into a feature requirements list that vendors can respond to. This provides each vendor with a standard format that they can use to identify what features are included, what requires development and what the product doesn’t do. The vendor should simply add an “X” for each requirement in the appropriate column.

Below is an example of a feature requirements list:

Vendor response
Feature requirements
Priority
Included
Additional cost
Custom work
Third-party solution
12-month feature release
Not in product
Vendor comments
Front-end platform support

Interface features

Integration

Reporting

System recovery

Each column can be described as such:

  • Included. The feature is included in the software and does not need additional development.
  • Additional cost. The feature is available as an add-on at an additional cost.
  • Custom work. Application programming interfaces (APIs) or a development environment within the tool is available to you or consultants to solve for the requirement.
  • Third-party solution. You can purchase add-on products from a third party to solve for the requirement.
  • 12-month feature release. The company has a commitment to solve for the requirement within the next 12 months in a feature release that would be included as part of the product.
  • Not in product. The product does not support the feature and the company is not committed to solving for this requirement.

Every vendor will have a position on what differentiates its product or service from another. You should give each of them an opportunity to respond openly in writing on how its offering is an advantage to your project goals.

 

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