Avoiding Common Pitfalls During Vendor Selection

Choosing a service provider to get your job done is something which many of us do on a regular basis - at home or at the workplace. Whether it is choosing the right broadband provider, the vehicle insurance company as homeowners or choosing the right coffee vending machine. 

Selecting a vendor that can offer a solution to meet your software or service-related needs is as crucial as choosing a partner for your business. It is a critical decision for an organization as the right vendor will have a considerable impact on the success of your business, and a wrong one will be nothing more than a hindrance.

When Selecting Your Vendor

When choosing a vendor, it is necessary to ensure that both the vendor and you understand the business, outcomes, and expectations to avoid wastage of resources. 

The vendor selection criteria may vary depending upon the organization but it is a must to include them in the inventory management plan. 

1. Assess Your Requirement

Before choosing any vendor, first, analyse what your project or organization want from the vendor. Hiring a vendor can greatly reduce your operational cost and effort in creating the product by yourself. You should document what your expectations and needs are from your vendor. This will greatly benefit you to outline the benefits of hiring a vendor. Later on, when deciding on between vendors you can compare these expectations with their offerings so that you’re able to match what you need from them and what they can offer.

2. Check The Offered Product

Next, you will have to do your own research and identify which vendors can provide you with the right solution as per your requirement. Provide an introduction of your business, a summary of your requirement for a one-on-one discussion. Demo the products to gain insights by porting a sample of your company's data into the available products to test out the entire workflow and know whether it will work for your organization or not. This will give you a fair idea of what will the product offer and how the system would be integrated into your company's existing business processes. By this stage, after you test the product, you will be able to weed out vendors to understand their profitability for your business.

3. Ensure Product Complies With Security Standards

It is important to check whether the offered product complies with your organizations’ regulatory standards, in terms of how data is kept and stored. Ensure that the vendor takes up the onus of helping you with the security and regulatory compliance of the product.

4. Review Past Performance

When you’re done evaluating the right solution for your project that falls within your organization’s budget, you should consider investigating the past performance of your chosen vendor and take the final decision. Consult the online business references to see their past reviews. However, it’s possible the vendor you're looking is new and untested and may not have online reviews. In that case, you can ask for third-party referrals. And in cases where vendors do get negative reviews, it is important to see how professionally they deal with them. 

5. Total Cost Of Ownership

By now, you will be left with 3-4 vendors and you will be deciding to go with one of them post this crucial stage of judging the total cost of ownership involved. You will have final discussions with your shortlisted choices on the upfront costs involved and the long-term cost of maintenance. The costs should be compared with all competitive choices to evaluate they fall within the organization’s budget. Also, this is the right time to mention whether you’ve any special requirements and needs from the vendor. Provide as much information as possible so as to select the best vendor in terms of price and service.

It is a time-consuming process for the project manager to know which vendor will deliver the well-maintained, scalable product as promised and at an affordable cost. And no matter how much you strategize, you won’t know whether you found a reliable vendor, until you give them a chance to prove. And when you feel the decision makes good business sense as vendor delivers exactly what you’re looking for, you need to nurture the relationship with them as you do with your employees.