Technology vendor selection is a critical process for organizations because of the implications of making a wrong decision. The vendor selection process can be complex, time-consuming, and challenging, so it's essential for organizations to be aware of these challenges to ensure a successful outcome.
Below we discuss seven challenges, and the ways to mitigate these challenges, during the vendor selection process.
1. Identifying the Right Vendor
With the expansion of the technology landscape, there is a multitude of vendors in every area and market, each offering a diverse set of products and services. Choosing the right vendor can be a challenge as organizations must assess the vendor’s capabilities, experience, and compatibility with the organization’s goals and objectives. According to a survey conducted by the Institute of Supply Management, 55% of organizations found it challenging to identify the right vendor.
Solution: Conduct some preliminary research using industry knowledgeable sources to find the best vendors for the specific needs.
2. Lack of Clear Requirements
Lack of clear and concise business and technical requirements can cause significant challenges in the vendor selection process. It is essential for organizations to have well-defined needs and expectations of the vendor to ensure that the product or service is delivered as desired. Without clear specifications, misunderstandings will inevitably arise between the organization and the vendor, creating a difficult working environment and unnecessary tension.
Typically, requirements include scope of work, timelines, budget, performance targets, and any other relevant details. This is essential for enabling vendors to properly demonstrate their solution and identify how it is the best fit for the client.
Solution: Establish a selection committee with representation from across the stakeholder community and instruct them how to define their requirements as well as how to evaluate the vendors’ responses in a tangible way that can be measured.
3. Time Constraints
Time constraints are a major challenge to the vendor selection process, as the process can be time-consuming, and organizations will likely not have enough time to thoroughly evaluate all the vendors. Time constraints can lead to hasty decisions and a poor choice of vendor, which has obvious negative implications to the organization . Time constraints are critical during a vendor selection process because of the need for a fast decision in order to meet deadlines, start a project, or address a critical issue. This pressure can result in a rushed evaluation process and a sub-optimal assessment of the vendors.
Solution: As a committee, determine a reasonable timeline for the project which includes considering the time that the vendors will need to provide proper responses.
4. Cost
Cost is one of the most critical factors in the vendor selection process because of its impact to current and future budgets . Obviously, when selecting a vendor, organizations must balance the cost of the product or service with its perceived quality and benefits. They need to choose a vendor that provides the best value for money, which means that the vendor must offer competitive prices while demonstrating that it can deliver high-quality products or services.
Solutions: Conduct research on the structure of vendor deals [e.g., licensing options, price breaks, solution bundling] and investigate risk sharing models with vendors related to the organization’s products or services.
5. Lack of Standardization
The absence of standardization in the vendor selection process can lead to inconsistencies in the selection criteria and the evaluation process, resulting in unreliable results. Organizations must have a standard process for evaluating vendors to ensure a fair and objective assessment. Vendors will often respond to RFPs using their own templates that doesn’t allow for easy comparison.
Solution: Prior to starting a selection process, organizations need to establish a structure for how they will evaluate the various vendors /solutions and they must use this template as the only way to collect and assess the various responses. Apples to apples is key here.
6. Resistance to Change
Change can be difficult, and organizations will almost always face resistance from employees who are used to working with a particular vendor. This resistance can lead to delays in the vendor selection process or worse, the wrong solution. A survey conducted by Gartner found that 40% of organizations faced resistance to change from employees.
Solution: When picking members for the selection team, it is important to engage people from the organization who are positive and future-looking and are also considered to be leaders in the company. This will certainly help in easing the adoption of the whatever solution is selected.
7. Unforeseen Challenges
The vendor selection process can encounter unforeseen challenges, such as new technologies being introduced mid-stream or changes in the vendor landscape, which can have a direct impact on the selection process. Organizations must be flexible and adaptable to these challenges to ensure a successful outcome.
Solution: While it is important that a project timeline be followed diligently, it is important to build in ‘reality check-points’ to determine whether a ‘project-pivot’ might provide significant advantages to the company.
The vendor selection process can be fraught with risks and challenges, and organizations must be aware of these to ensure the ‘right’ outcome. Proper planning and preparation, clear requirements and specifications, and effective communication will certainly help organizations overcome these challenges and choose the right vendor. Additionally, organizations must have a standard process for evaluating vendors to ensure a fair and objective assessment.
The Litcom Approach
Litcom offers impartial guidance and support to clients seeking to evaluate and choose enterprise-wide business systems, solutions for specific industries, leading software applications, and the hardware and network infrastructure necessary to support their operations. Our approach begins with a clear definition of our clients’ distinct business and technical needs. Our experienced professionals work with clients to not only understand their current business processes but also identify opportunities for improvement through the gathering of requirements. To see how Litcom can assist you with your organization’s vendor selection process, please contact us at: [email protected].
