Insights 15 February 2022

Vendor Selection: In the quest of finding right and perfect-matching vendors

Digital transformation is a must for the organizations that want to survive and improve their competitiveness. It includes the application of digital technologies for organizational changes, the adjustment of business models and personnel development. There are lots of new ideas and projects at organizations, especially projects to apply technologies and solutions to increase business potential. Certainly, such projects are expected to be implemented successfully in accordance with their objectives, scopes, budgets, time frames and standards.

The Program Management Office (PMO) is duty-bound to manage medium and large-scale projects for organizations, ensure efficiency in the activities of projects, address risks, coordinate project implementation, solve problems with all parties concerned and manage vendors for smooth project implementation. Many projects run into problems because vendors underperform or fail to honor their contracts. Sometimes executives have to terminate contracts and replace vendors. Such an incident has negative impacts on all aspects of a project and no one wants it to happen.

A key factor that reduces risks from vendors and boost the possibility of successful project implementation is careful vendor selection. It ensures that selected vendors are qualified to realize successful collaboration (partnership).

At present, the selection of technology-related vendors mainly consists of two parts – 1) the selection of software or solutions and 2) the selection of software or solution vendors who are specialized for selected software or solutions.

Medium and large-scale companies take vendor selection more seriously because they are aware that it lessens risks and helps them reach goals. They had first-hand experience from their vendor management in previous projects.

Good vendor selection

Good vendor selection focuses not only on the evaluation of software/solution vendors but also on processes and criteria for the selection, reports on selection outcomes, requests for selection approval and the structure of working groups and committees tasked with the selection. Such a panel can consist of representatives from a procurement team, a business team and an IT team who jointly set requirements and scopes of work and select right solutions and vendors. Some organizations realize the significance of vendor selection but lack qualified personnel to do it. They can hire a consultancy to set guidelines, procedures and criteria for the selection, record scores and communicate evaluation findings. A consulting team will compile business requirements and demand for solution technologies and vendors. The team will then send requests for proposal (RFP) to the potential vendors that are invited to a selection process. The contenders then submit their proposal documents with relevant details and answer questions from a selection committee during their proposal presentation. An experienced consulting team will help pose the important questions that need careful communication. It will conclude answers, analyze them and compare the solutions and proposals of different contenders. The information will allow a selection committee to make transparent decisions.

Evaluation Criteria

During an evaluation process, vendors will be considered according to carefully established evaluation criteria. A PMO consulting team must first understand the demand of a client. Each criterion has its template for scoring based on business and technical requirements. The quotations and proposals that are within budgets are among factors for consideration.

The vendor selection criteria that sting

1. Vendor characteristics – The first question is whether vendors have relevant expertise and experience needed for the installation of software or solutions. Do they have any record of their local and overseas services as references? What are their ideas to maximize efficiency in their project management? They should have good records of work and reputations that are credible and traceable. The software or solutions that they propose should have research and development teams and plans to develop new features and technologies (product/solution roadmap) at least in the next few years.

Besides, a PMO team can clearly show differences and possible risks among potential vendors regarding their planned timelines of project implementation and can advise project owners to seek clarifications from potential vendors to reduce the risks.

2. Project organization structure –Vendors’ teams must have relevant skills and expertise and enough personnel to ensure successful project implementation. Importantly they must include executives with decision-making authority in the steering committees of projects.

3. Support service model – This concerns vendors’ services after project completion. Do they have teams of enough experts with communication skills to solve urgent problems within deadlines as required in service level agreements? Can vendors offer help at clients’ premises or via remote support?

“Some organizations prioritize quotations. Actually they should instead focus on the methodologies, characteristics, ideas and attitudes of vendors. Organizations should look for the vendors who are reliable and likely to collaborate. In other words, there should be a working chemistry between them.”

No benchmark – everything depends on demand and experience

There are no fixed criteria, fixed weight of each criterion or fixed benchmark for vendor selection. Criteria are based mainly on the demand of organizations.  There must be the details of organizations’ demand and consultancies can advise on this. Bluebik’s teams have experience and expertise in vendor selection and can help business organizations set criteria and the weight of each criterion for the appropriate selection of their vendors.

The costs of vendor selection consulting

The costs of vendor selection consulting vary, depending on the scopes and details of demand from organizations. In some cases, consulting teams lay out basic guidelines and the procurement teams of organizations then follow the guidelines. In other cases, organizations may want consulting teams to provide them with end-to-end vendor selection services because they realize that suitable selection processes will reduce risks and negative impacts during project implementation. Such problems can cost companies more than their expenses on vendor selection consulting.

A right-hand man guarantees project success

Medium and large-scale organizations in many industries attach more importance to vendor selection. They want their projects to be successfully implemented as planned according to their strategies although they have to spend more times and money on vendor selection.

Bluebik has teams of the consultants who have considerable experience and expertise and are ready to support business organizations in designing end-to-end vendor selection processes covering planning, the development of criteria, requests for proposal (RFP), coordination, vendor selection proposals for approval, risk management and recommendations on negotiations with vendors.

Vendor selection is like the selection of the right and knowing persons. It takes times for familiarization, mutual understanding and the development of the partnership that will result in goal achievement.