The Executive’s Guide To

Information Technology

John Baschab
Jon Piot
 Chapter 10
Vendor Selection

Created by: Dr. Bradley K. Jensen, JMC

 Learning Objectives
• Vendor Selection Process
• Generating Target Vendor Lists
• Conduct Effective RFP’s
• Due Diligence
• Meaningful Feedback on Vendors
• Gap Assessment
• Hardware & Professional Services
Considerations
• Negotiation Techniques
• Implementation of Vendor Plans

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 Vendor Selection
• Begins with Definition of Scope for the Product
Being Acquired
• Identification of a Team to Support Selection
Process
• Identification of Potential Vendors
• Issuance of a Request for Proposal (RFP)
• Selection of Vendor Finalists
• Selection of Supplemental Vendors
• Project Planning
• Final Vendor Pricing Negotiations

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 What Vendors Will Do
• Good at Seducing Hapless CIO’s

• Will Drive as Much of the Effort as Allowed

• Wants to Remain in Control

• Will Take on As Much of the Work as

Allowed
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 Vendor Selection Process
• Scope & Requirements Definition
• Preliminary Vendor Screening & Approach
• Request for Proposals (RFP’s)
• Vendor Due Diligence
• Supplemental Vendor Selection
• Project Planning & Approval
• Final Vendor Negotiation

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 Figure 10.1,
Page 261

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 Set Scope
• Clearly Understand the Full Range of
Business Activities to Be Supported
• Understand Business Reasons
• Should help Drive Revenue, Reduce
Costs, or Gain Control
• Should also Define what is NOT in Scope

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 Evaluation Reasoning
• Replacement/Renewal/Obsolete
• Changes to Business Model
• Cost Recapture
• Benefit Capture
• Other System Changes
• Competitive Parity

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 Establish Evaluation Team
• Require a Team of Dedicated Resources
• Should Include Members from Outside IT
• Representation from Each Affected
Business Area
• Get Nominations from IT Steering
Committee
• Should be Co-Located

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 Inventory Business Requirements
• Complete Understanding of
– Business Processes
– Events
– Calendars
– Volumes
– Policies

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 Business Requirements
Deliverables
• Business Process Flows
• Process Descriptions
• Business Event Triggers
• Data Content & Format Requirements
• Processing Calendar
• Processing Volumes
• Reporting Requirements
• User Interface Requirements
• Security Requirements

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 Generate Preliminary Model
• Start a Paper Trail of Estimating Models

• Early Forecast of Potential Costs &

Benefits

• Present Results to IT Steering Committee

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 Preliminary ID & Screening
• Consultants
• Technology & Industry Publications
• Industry & Technology Trade Shows
• Peer Companies
• Focused Web Search
• Vendors
• Technology Research Firms
• Financial Analysts
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 Vendor Evaluation
• Vendor Size
• Product Technology
• Geographic Presence
• Industry Focus
• Functional Coverage

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 Vendor Size
• Vendor Revenues
• Vendor Profitability
• Acquisition History
• Number of Employees, Developers,
Product Specialists
• Number of Customers
• Number of End Users

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 Product Technology
• Server Technologies Supported
• Database Technologies Supported
• Development Technology
• Technology Supported Under Original
Product
• Percent of User Base on a Particular
Server or Database Platform

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 Geographic Presence
• Corporate Headquarters Location
• Nearest Branch Office
• Number of Branch Offices
• Proximity of Branch Offices to Company
Branch Offices
• Primary Location of Development Team

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 Industry Focus
• Industry-Specific Additions/Modifications
to Product
• Industry Implementations of Product
• Presence of Leading Industry Customers

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 Functional Coverage
• Proven Ability for Package or Product to
Support Business Function in Question
• Presence of Function-Specific Modules

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 Vendor Approach
• Full Coverage

• Best-of-Breed

• High Custom

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 Figure 10.7, Page 276

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 Figure 10.8, Page 277
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 Lack of Vendor
• Scope Set Incorrectly
• Scope Indistinct
• Not Enough Vendors Identified
• Vendor Data Incorrect or Missing
• Primary or Secondary Screening Criteria
Set Too Tight
• Additional Criteria Needed

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 RFP Process
• Rationale for RFP
• Rationale for not Doing RFP
• Creating RFP
• Issuing RFP
• RFP Response Assessment
• Refining Vendor List

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 Rationale for RFP
• Distributes Immense Data Gathering
• Allows Vendors to Withdraw
• Element of Natural Selection
• Gives a View of the Vendor’s Capability
• Allows Vendors to “Self-Team”
• Creates a Level Playing Field
• May Point out Shortcomings

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 Rationale for No RFP
• Not Enough Vendors Identified
• May be Considered to Onerous by Target
Vendors
• Preliminary Vendor Selection Conducted
Unearthed Ample Information for Selection
• Decision Needs to Be Made Rapidly
• Vendor Is Minor Level of Investment
• Amount of Separation Between 1st & 2nd
Place Vendors
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 Create RFP
• Contains 2 Primary Sections
– Overview of the Project
– Section for Vendors
• Purchasing Department Helpful with Legal
& Process Questions

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 Project Overview Section
• Contains Three Subsections
– Information
– Project Information
– Process Information
• Should Provide Information Helpful to
Vendors
• Vendors Should Sign Nondisclosure
Agreement (NDA)
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 Vendor Section
• Vendor
• Functional Coverage
• Technical
• Customer Qualifications
• Project/Implementation Approach
• Economics

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 Vendor
• Company Overview
• Contact Information
• Financials
• Overview of Product Lines
• Total Employees
• Developers
• Account Management Approach
• Customer Input Method
• Service Levels
• User Satisfaction Surveys
• Training
• Competitive Advantages
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 Functional Coverage
• Mapping of System Modules
• Requirements Rated by Vendor
• Explanation of Functionality
• Overview of How Configuration is
Accomplished
• Overview of How Customization is
Accomplished

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 Technical
• Overview of Technical Architecture
• Current versus Planned Technology
• Technologies Supported
• Release and Patch History
• Third-Party Products Required
• Demonstrated Product Scalability
• Interface Method
• Security
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 Customer Qualifications
• Competing in Same Industry
• Using this Specific Product or Service
• Same Technical Platform
• Similar Size
• Corresponding Geographic Footprint
• Similar Business Volumes
• Interfaced Same Systems
• Implementation was Similar
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 Project/Implementation Approach
• Specific or Proprietary Approach that Will
Be Required

• Requires a Certain Implementation

Approach?

• Approximate Effort to Implement

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 Economics
• Main Drivers of Product Acquisition Pricing
• Price for Installation
• Maintenance Pricing Terms
• Other Product License Pricing
• Training Pricing
• Other Professional Services Pricing

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 Issue RFP
• Distribute to target vendors
• Require each attendee to sign an attendance
roster
• Lack of attendance
– Mismatch between project scope and capabilities
– Misread of the RFP
– Mistake
• Questions by vendors
• Individual site visits
• Resist to hold information too closely
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 RFP Response Assessment
• Allow between 1 & 4 weeks for responses
– Complexity
– Level of investment
– Depth of questions
• Refrain from additional contact during
evaluation period
• Summarize scores

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 Refine Vendor List
• Cut at 1st point of significant ranking drop-
off
• Walk IT steering committee through
summary of process and outcome
• Inform participants in writing

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 Vendor Due Diligence
• Update due-diligence evaluation
framework
• Conduct functional due diligence
• Conduct technical due diligence
• Conduct company due diligence check
vendor references
• Conduct gap analysis

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 Conduct Functional Due Diligence
• Most important
– Most difficult to evaluate
• Principle vehicle for conducting
– Vendor product demonstration
– Should conduct 2 separate demonstrations
• How much has to change from the default
installation to get there

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 Conduct Technical Due Diligence
• Technical Platform – Options and
Requirements
• Transaction Volume Support and
Scalability
• Development Environment/Approach

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 Figure 10.19, Page 304

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 Conduct Gap Analysis
• Confirm satisfactory approach to handling
requirements
• Estimate effort required to cover the gap
• Options
– Reconfigure
– Customize

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 Figure 10.20, Page 307
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 Figure 10.21, Page 308

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 Supplemental Vendor Selection
• Hardware Vendors
• Professional Services Providers

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 Hardware Vendors
• References
• Versions
• Reliability/service
• Pricing
• Upgrade path
• Existing environment
• Sales model

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 Professional Services Providers
• Pricing
• Performance guarantee
• Bench discounts
• References and experience
• Staffing
• Approach
• Location

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 Project Planning and Approval
• Build Preliminary Project Plan
• Perform Next-Round Economic Analysis
• Project Presentation/Approval

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 Build Preliminary Project Plan
• Work tasks
• Sequencing and dependencies
• Deliverables
• Milestones
• Task timing and duration
• Resources
• Rollout and cutover
• Training
• Lead times
• Business calendar

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 Perform Next-Round Economic
Analysis
• Preliminary project plan
• Updated applicatin or product costs
• Preliminary estimate of hardware,
supplemental software
• Components
– Project cost
– Vendor maintenance
– Steady-state cost model changes
– Accelerated depreciation
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 Vendor Negotiation
• Negotiate each point spearately
• Keep at least two vendors in the mix
• Don’t single-source the negotiation
• Timing is everything
• Keep talking to current and prospective customers
• Don’t compare apples to oranges
• Nominate a “bad cop” for your team in advance
• Ensure that the vendor must close the deal
• Employ “bogeys” to force reciprocal concessions
• Check the contract for liability limitations
• Never prepay maintenance
• Know when to disappear
• Know when to say when
• Watch the licensing terms

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