Vendor Selection: More Art Than Science
As I begin my 26th year in this business, it surprises me how many companies fail at a successful vendor selection.
The primary objective of a vendor selection is to find an organization that can assist your team in reaching your project goals and, ultimately, your company objectives.
Unfortunately, cost is often one of the first elements used to make the vendor decision, when in fact it should be the last. Don’t get me wrong, cost is important. You have a budget to adhere to and you want to get the work done for the lowest price possible. But when it comes to selection, price should be the last on the list.
Hear me out.
The most important criteria in selecting a vendor is choosing a company you trust, one you feel can become a true partner. Your goals and objectives must become theirs. You have to be able to candidly share your strengths and weakness so they can compensate and be the Yin to your Yang. Your partner must feel comfortable to tell you what you need to hear, the bad with the good, and not just what they think you want to hear.
Finding that perfect match is much like dating. It’s much more of an art than a science. That said, it is more than just a gut feeling. Here are some things that might help:
- Ask for a list of all their customers or look at their website for a listing. Then you pick the references you want to speak with. Choose four or five as one or two might not be available, but this way you’re not getting a “spokesperson” that this vendors uses consistently to sing their praises. And if there are excuses for many of the companies you choose, that should be a warning sign that not all their customers end up happy.
- As a predictor of how your relationship may go with a vendor, focus on the relationships they have with their past customers. Ask for multiple references. Make sure at least one is current. The other two should have some similarity to your project, but avoid asking for references that are identical to your situation. That will cause your selection to unnaturally move toward larger firms who may have hundreds of implementations but might not have the right fit to work with your team on your project.
- Don’t allow the reference conversation to stay only in the positive realm. Ask the references about how the vendor responded in difficult situations. Have them give you an example of something that went wrong and then listen to hear how the vendor reacted and got through the issue. Every project will hit challenges and roadblocks. You should know how your vendor will react when that happens. Do they point fingers, trying to defer blame, or do they step up and fix the problem, asking questions regarding responsibility later?
- Be open with respect to which vendors you are evaluating. Let everyone know who is competing for your business. This will be extremely insightful. The vendors know each other’s strengths and weakness better than you do. You’ll quickly be able to discern each vendor’s reputation within the industry through the comments they will make about one another. Also telling will be those that are confident and stay positive versus those vendors that go negative and become defensive. A great question to ask a vendor is, “Who would your competitor not want me to speak with?”
- Once you feel a vendor has become a trusted advisor don’t be afraid to share budget information with them. This often will take place after you’ve made your selection. Otherwise your vendor will continue selling you and may not be forthright with the challenges that will accompany a lower project cost number. Most vendors will quote as low as possible to win the “cost” competition. Unfortunately that low price often includes many assumptions increasing the risk of the project or expecting that you, the customer, will do large portions of the project. While that might be acceptable in order to drive to a lower outside spend, you need to be keenly aware of those risks and responsibilities and they are not always obvious in a proposal response. By jointly working to create a project approach and team that can reach a budgetary number your vendor can share the risks and advantages to using their expertise versus yours as well as provide alternative project approaches like using off-shore resources or using a lab.
Sound complicated? It’s not — a lot of this is driven by common sense and listening keenly to judge reactions. It is complex, though, as well it should be: this isn’t something you want to take lightly. I’ve seen companies go through this at a surface level, or choose based exclusively on a single criteria (usually cost), and in the vast majority of these cases the selection winds up coming back to haunt them. Sometimes massively.
I would love to chat about this if you have any questions or comments. Don’t hesitate to email me or speak up in the comments.
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More links:
MIPRO Consulting main website.
