Make Vendor Evaluation, a part of your software selection process.
Consider, that the relationships you will build, the support, enhancements, integration work, and new features will be made by the people and by the organization you are evaluating. The technology and its fit to your requirements is a snapshot in time. It tells you about the present. The vendor, their roadmap, and ability to support you is a look beyond today. It tells you about the future.
Your candidate vendors ability to resolve your issues quickly, their willingness to listen, adapt to your needs, their internal roadmap and plans for the platform will shape the future of your project and its ultimate success. Consider these 7 Evaluation Criteria as you interview software vendors and review their proposals.
1. Right size, right fit
Make sure your candidate software vendor is big enough to support you, but not so large, that they forget you exist once you made your purchase.
If you are evaluating software produced by a startup, are they capitalized enough to grow with you? Will they be around in a year? Do they have the necessary staff to support your issues should you have problems? Buying software technology from startups is exciting and will produce sexy, bleeding edge technology. Make sure your organization can deal with bumpy support, and direction changes.
Alternatively, will you be on the radar of a large software firm when your project is finished? I have experienced the result of buying from a very large software integrator while working for a smaller company. You could be buying from a company well prepared to collect their fees, but otherwise kept on hold while the next representative could answer your call.
Beware of the claims from large software integrators that they have a small/medium company program. That is a marketing claim. Money is money, and in the end, they may not be as responsive to you, as to a client that paid ten times in licensing fees.
Find a relationship with a Software Vendor who will care about your issues, respond to outages, consider enhancements you propose and see you as an essential part of their client portfolio.
2. Ownership and investment history
Consider where the Software Vendor is in their growth as you review them and their history. If you are seeing a young technology company are they a startup vying for Series B investment? If so you are dealing with a new market entrant; a company that is in the process of breaking even or just starting to make money.
Your startup vendor will focus on selling, building new features and growing internal maturity. Lots of opportunity for changing hands here or a buyout. Also a lot of opportunity for a license discount. Look up your potential vendor on crunchbase.com. It is an excellent resource for finding their funding sources.
Pre-IPO companies have been around for a while, their software is more of a sure bet and will be a known market participant. However, if you get a sense that your software vendor is in the process of going public, pay attention to their internal support and operations.
How are their support staff doing? Are they stretched thin, is the culture and excitement holding up? Any company looking for a buyer or getting ready for investors will focus on their financials, that is growing revenues and cutting expenses. It could have an impact on the morale and the quality of support you receive. Look up recently filed IPO companies, or simply ask your sales rep.
If a company you are evaluating has grown organically and is held in single proprietors hands, are they looking for a buyer? What are the owner’s goals regarding the growth of their company? Where will they be in the next three years? If you get a sense that the company owner is looking to sell, it may impact staff, morale and result in a turnover.
Alternatively, if the owner is holding tight are they involved in product design, micromanaging and stifling creativity? Do you trust them to lead their organization and effectively compete? While dun&bradstreet is an excellent source of company information, you can look up what employees think of your vendor on glassdoor.com.
3. Vendor location
Pay attention to the address of an international company. It may seem like a non-issue, however, please consider: if you are buying from a vendor headquartered across the ocean, do they have a local presence? When you call, will you be limited to their business hours or a 24-hour call service outsourced to India? What response time will you get for having your questions answered during implementation, or in case of troubleshooting?
Even if the vendor is willing to provide access to their staff off hours, you will still be dealing with individuals who are tired and working early or late depending on where they are. If your international vendor claims an office locally, will the support staff work there, or is it merely a sales office?
While time zone issues are an annoyance more than anything else, they eventually become irritating. Make sure you candidate vendor has a local office you can meet with, and at least a representative who can respond during your business hours.
4. Software Product Lifecycle
As you research your vendors, it is essential to determine where their software is in its lifecycle. A typical product’s progression will include prototyping, alpha, and beta versions. Eventually, it will be released to the market. Once there it will grow, acquire new features, mature and eventually decline.
If the platform you are evaluating has been around for a few years, look up the most recent past releases and their feature sets. Is this technology actively invested into, or is it a Cash Cow? What is your Vendors attitude towards the product? Do they see it as a money maker? Are they recouping their R&D investment? Every vendor will have a different approach towards a software platform that they own.
Some vendors may buy an older platform with the intent of stripping it and giving it new life. Others may take a successful popular product, slow down R&D and focus on sales and marketing. It is a question worth exploring before you sign on, especially if your investment is expected to last the next three to five years.
There will be no right answer as it will depend on your particular plans and goals for the platform and technology. However, considering your vendors’ attitude towards the platform will give you an idea of its future path, your ability to grow with it, and vendors ability to support it.
5. Software vendors’ product portfolio
You have done your homework; you identified the technology, you like the vendor, they are a good fit and located nearby. Before you sign on, review your software vendors entire portfolio of products. Where does your product fit? Are there any other products with similar functionality? Is it a flagship software product, or something they acquired later?
Be very careful if you see duplicates in your vendor’s portfolio. Ask yourself, why does this vendor own two accounting packages or two e-commerce portals? The vendor will often have a marketing answer, something akin to tailoring different platforms to different sized companies, etc. You may be told that at some point both platforms will be merged into a new super product.
The reality may be different. Technology companies often buy our their competition and absorb their products. The result may be a purchased Cash Cow, with no investment, and steeply rising license costs. Those who are stuck owning the license will get priced out, and move on. The competing product will be deprecated. A similar suite of products in a vendors portfolio deserves your careful consideration.
6. Terms and Conditions
At some point in the negotiation process, you will receive a set of documents describing license costs, renewal rates, support information and Terms & Conditions. I am not a lawyer, however, do not skip the step of talking to yours. A big tell on the nature of the relationship between you and the vendor will be their willingness to work with you on adjusting the Terms and Conditions. Are they willing to make adjustments, even if just symbolically? Are they sticking to the default language and unwilling to change?
It goes without saying that having your legal team review the software Terms an Conditions is a necessary step. However, consider using the potential vendor’s willingness to accept redline contract changes, as yet another indication of fit. Any vendor will adjust their legal contracts if they want the deal badly enough. Make the language fair to you and the vendor. If they are not willing to make changes, you will have yet another piece of information on which to base your decision.
7. Sales timing
This evaluation criterion does not necessarily help determine if you should sign with a vendor, but it does help identify when. Every software product company, vendor, reseller works on a sales cycle. As you evaluate your vendors, keep an eye on their fiscal year. End of quarter and end of year reports are going to be an important part of their performance evaluations and sales tracking.
If at all possible, time your purchase to the end of quarter or end of year time frame. You will have additional leverage when discussing terms and conditions. It is also at that time when the vendors will be most willing to offer discounts. Incidentally, vendors are very open to this scenario and will use it as a sales tactic, to entice you to sign on. Keep an eye on timing, but do your due diligence. If it makes sense, use the end of quarter timing to your advantage.
Picking a new accounting package, CRM, Content Management System, or any other enterprise level platform could result in a five-year relationship, sometimes even longer. It is imperative that you give as much attention to the organization as to the technology that it is selling. It is particularly important when evaluating mission-critical or future line of business applications. Evaluate the technology first, to determine what the market has to offer. Then use Software Vendor Evaluation to down select to the final few choices from which you’ll select your future technology partner.