What to consider when evaluating vendors

What to consider when evaluating vendors

Summary: Large organizations tend to select vendors based solely on the lowest price, while small firms tend to nominate vendors that are their friends. But we should decide based on the vendor most appropriate for the job at the time.

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Every buyer believes the ideal situation is to have sufficient budget to purchase products and services from the best vendor in the market. In practice, though, employees of large organizations tend to select vendors based solely on the lowest price. Small businesses, on the other hand, tend to nominate vendors who are their friends.

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However, we really should be deciding based on which vendor is the most appropriate for the job at the time. For instance, your business typically would specify its ICT requirements and a few vendors would then submit their proposed solution with the quoted prices. But you realize that you are not really able to "compare red apple to red apple" because each proposal is different from the other. These typically are a few considerations other than price.

Here are some questions we should be asking when we evaluate vendors:

1. Does the vendor want to understand your business?
Some vendors persuade you to adopt their proven practices, while others are willing to make any customization you want -- whether or not your requests make sense. You have every right to choose either approach. Objectively, though, the vendor must be able to work with you toward a solution that works for your business. To be fair, you too need to provide the necessary and timely information to the vendors.

If you want the vendors to remain interested in your business after you commit to purchase the scope of work at the quoted price, do remember to assure them you are just as committed to pay more for any necessary changes in the interests of your business, or to accommodate a longer schedule, or to do both.

2. Is the technology proprietary to the vendor?
The proposed solution may be based on internationally agreed technical standards, or their nearest equivalent such as Internet RFCs (Request for Comments), or proprietary technology. If the vendor invented the technology or developed the enhancement over published standards, it is likely to be the only experts. If so, your subsequent purchases may be limited.

For other vendors reselling their proprietary technology, you may have to escalate complex problems back to them. You may have a valid reason for choosing a proprietary technology, such as getting a competitive advantage with better performance than what your competitors are implementing. Remember to weigh the impact of such indirect costs.

3. Can the vendor manage its manpower movements?
The vendor may have a brilliant representative who communicates with you. However, if his boss, peer or assistant is never there, he may potentially be a "single point of failure", for example, if he falls ill. It will be worse if he does not systematically track his communication with you.

On the other hand, a vendor with many officers attending a meeting may not necessarily be able to manage its manpower movements. Robust teams, of course, do not come free.

You may find it acceptable to eliminate coordination overheads by working with a freelancer in whom you have full confidence and you are prepared to deal with the potential drawbacks of working with only one person. After you select the vendor for the project, be aware that it may not always have the same officers involved in your project. A reputable vendor is more likely to ensure a pleasant client experience for you than a cost-sensitive vendor.

A good practice is to specify your requirements such that they reflect your solution selection criteria, including its importance to your business. When vendors propose their solution, have them explain how they are able to deliver each point of your requirement fully, partially, indirectly, or not at all, and it will become clear which vendor is your best choice for the job at the time.

Topics: Project Management, CXO

Imelda Tan

About Imelda Tan

Based in Singapore, Imelda is an arts fan disguised as a business consultant and Infocomm technical writer.

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