Having successfully selected many IT vendors over the years, we’ve been able to boil the process down to nine important steps. These steps can serve as both a checklist and a plan. This plan ensures that important steps are not missed and that the best vendor is selected for the project.
In some ways, it’s easier to select vendors today than it was years ago. For example, the free Wide Area Network (WAN) provided by the Internet means that companies can avoid complex infrastructure issues like server configuration, storage, backup, etc. (it’s “their problem”). In addition, if solutions are provided via Web services and J2EE, low-level development can be skipped. Of course the flip side of this is that vendor integrity and stability become even more critical.
The nine steps described here provide a structured approach to this process and help guarantee that, in the end, you have selected the correct IT vendor.
Step 1 – Discovery and problem definition
This is the most important phase of your vendor selection process, where you define the actual problem and discuss the expected solutions. To begin, you need to do the following:
- Assess the current situation. For example, if the project involves automating a manual business process, be sure to describe how it’s done currently. Collect as much information as possible. Identify and interview stakeholders and users, review existing internal materials such as reports, stories, and statistics. Additionally, gather technical information including standards, descriptions of the current technical environment, architecture, etc.
- If available, gather industry information, such as Gartner or Forrester reports or articles from industry publications. Of course, check Google and other search engines too.
- Consider creating and circulating a request for information (RFI) to likely vendors early on in the process. This may be helpful in framing solution approaches.
- Write a problem definition report that consolidates all the information you have gathered. Describe the current problem and how it will be resolved as a result of the vendor selection project.
Step 2 – Analysis and requirements
In this step, you will first analyze stakeholder and user interviews from Step 1 regarding wants and needs. Then you can analyze the results, referring back to the problem definition report as needed.
The end product for this step will be a high-level requirements document.
Review the first draft of your written requirements document with each stakeholder to make sure you’ve understood everything correctly. Reviewing the requirements helps you achieve consensus if there are competing interests. Further, this process encourages buy-in from all parties.
You may want to develop a business case, which establishes the project’s return on investment (ROI). Items to consider in the business case are: estimated cost savings, accelerated time to market, reduced business risk, increased customer satisfaction, competitive advantage, competitive risk, compliance, etc.
Building the business case can be difficult and time consuming since it requires obtaining financial and other data and then estimating appropriately. You may not want or need to include the business case effort in this analysis/requirements phase. In some cases, the business case has been done previously or is not necessary for strategic reasons.
Lastly, identify and recruit the resources needed to conduct the rest of the selection process.
Step 3 – Request for proposal development
Developing a great request for proposal (RFP) is a critical step in the vendor selection process.
A practical approach is to locate an RFP template within the organization or find one on the Internet and use it as the basis of your RFP.
As you begin writing the RFP, it’s important to clearly describe the business/technical problem in as much detail as possible. Here is where you can reuse information from the problem definition report from Step 1. Including this description will help vendors suggest creative solutions that may not have occurred to you.
Be sure to cover the basics:
- Financial stability
- Delivery capability
- Technology fit to current and future state architecture
Establish an RFP response schedule and include it in the RFP. Also, if a Proof of Concept (POC) is required, make sure you ask vendors how it can be supported.
As you develop the RFP, keep in mind that you will use it as a tool to evaluate the vendor responses. So divide the RFP into segments with individual questions to facilitate the scoring process.
Before sending an RFP to your selected vendors, make sure that it has been reviewed by your management as well as your organization’s legal department and vendor management resources.
Step 4 – Vendor identification
Concurrent with developing the RFP, identify a set of potential vendors and don’t forget about current vendors. For suggestions, check with analysts like Gartner and Forrester or consult trade groups in your industry.
Establish vendor criteria based on technical functionality, stability, ability to deliver, perceived value, past experience, and technology direction.
Determine the top vendors and initiate communication (an RFP is coming).
When the RFP is complete, distribute it to your list of vendors and give them enough time to complete their responses. (You can be sure, at least one of them will ask for more time.)
Step 5 – Evaluations of RFP responses
Construct a weighted RFP evaluation model that multiplies a basic score by its priority. For example, if the vendor meets a requirement with a score of 8 (on a scale of 1 to 10) and the priority of that requirement is 4 (on a scale of 1 to 5), then the response can be scored as 32. This helps magnify the differences among vendors.
Contact references and include site visits, if possible. Following this, adjust the scoring based on new information.
Narrow the candidates down to the top 2 or 3 vendors. Then contact those who’ve made it to the short list and set up the Proof of Concept (POC).
Now that you have more information, including costs, you may also be able to measure the solution cost vs. ROI from the business case, which may have been developed in Step 2.
Step 6 – Proof of Concept with top vendors
Prior to the POC, locate a physical space for the POC and make sure the hardware and software are installed and functioning properly. Establish the POC evaluation criteria and involve stakeholders in the POC to get a wide response.
Make a scorecard for stakeholders to focus on and simplify their involvement.
If possible, test integration points but try to avoid extensive development.
Step 7 – Selection of the vendor(s)
Following the POC, modify vendor scoring as needed. Select and rank the vendors according to their scores and consult with management about the rankings and final selection.
Additionally, decide if multiple vendors can satisfy the project requirements and inform the vendor negotiation team if competitive bids are required.
Write a report that includes the scoring and reasons for the final choice. If more than one vendor is recommended, to support a negotiation strategy, list each vendor’s strengths and weaknesses. This list will be useful for the vendor negotiation process if there is more than one eligible vendor at this stage.
Step 8 – Vendor negotiations
Initiate price/cost negotiations with the selected vendor(s) and engage the legal/vendor management team for contract terms. Try to obtain the best vendor support services possible. For example, on-site install, off-hours support, training, industry best practices, etc.
Use information from the vendor selection report to support the negotiations.
Step 9 – Recommendation – final
Write a final recommendation or an addendum to the vendor selection report for management, described in Step 7. This document will serve as the official record after the vendor negotiation.
Include a summary of the business problem from the problem definition report in Step 1, solutions considered from the analysis and requirements document in Step 2 and the rationale for this vendor choice in Step 5.
Identify or describe the implementation approach, needed resources, and the initial high-level project plan.
This nine-step process ensures that the vendor selection process is clear and that the path to solving the business problem is mapped out and well documented. Your organization can clearly see what it is buying, and the vendor understands what it is selling. A structured approach to vendor selection means that the project is off to a good start and the groundwork is in place to ensure your project’s success.