Strategic Tech Selection & Negotiation
IT organizations are shifting from building and operating to selecting and integrating solutions. This requires a thoughtful approach to planning, sourcing, and delivery. MURTEC University tapped the expertise of Peak Portfolio, a firm specializing in technology vendor selection and negotiation, to help attendees devise a vendor selection process that: ensures an objective and educated decision; infuses stakeholder input into the decision-making process; optimizes negotiating leverage; and creates a long-term relationship with your vendors.
PLANNING
The planning phase in a vendor selection is critical. The output of planning is the foundation that sets the stage for all activities leading to making the right decision. Planning should include a program/project charter, business case, selection plan, and scoring matrix.
Round 1: Education Focus
The focus of round one is education. The primary objective of this round is to determine which vendors should participate in the selection. This is accomplished through a Request for Information (RFI) that helps to screen vendors based on a set of minimum criteria and confirms the vendors’ interest in competing for the business.
Round 2: Quantitative Focus
Round two is focused on a quantitative evaluation. This round should include sending the Request for Proposal (RFP) to six to eight vendors and using the responses to narrow the list to three to four vendors. Operators should consider using an online RFP tool for efficiencies and the ability to apply multiple weighting sets and scoring sets – perfect for operators with multiple brands with different priorities.
Round 3: Qualitative Focus
The three to four vendors who make it to round three will participate in the more qualitative evaluation methods. This can include onsite presentations/demos, vendor site visits, customer reference calls, customer reference site visits, and/or a vendor showcase. This is a costly round for both the operator and vendors so it should be limited to three to four finalists.
Round 4: Validation Focus
In some selections where the decision is very close, operators may elect to include a round four to validate what they learned in rounds one to three. Evaluation methods can include conference room pilots, lab testing, benchmark testing, and/or a production pilot.
DECISION PROCESS
Once operators have completed the rounds of vendor evaluation and have narrowed the list to three to four finalists, the next step is forming a recommendation for the steering committee. Survey participants and ask for their ranking, justification, and pros/cons for each vendor. Then in the results review meeting, display the results of the survey. Often a vendor can be eliminated right away if there is consensus based on the ranking. Another beneficial activity in the meeting is defining the pros/cons of each vendor by scoring matrix category. Then highlight pros/cons that are high-priority as well as the cons that don’t have a mitigation strategy. This activity can help the core team and decision-makers to make an educated decision.
NEGOTIATION
Once a vendor has been selected, negotiations begin. Negotiations can be with multiple vendors at the same time or two vendors can be placed on hold while top vendor is under negotiations. Note: always keep at least three vendors in the running until a deal is signed. That way, if the decision is made to walk away from one vendor, there is still competitive leverage with two vendors remaining. It’s best to negotiate pricing first, then business terms, and finally contract terms. Save the contract terms for last to minimize costly attorney fees.
ABOUT PEAK PORTFOLIO
Peak Portfolio is a management consulting firm focused on strategic technology vendor selection and negotiation. Visit peakportfolio.com for more information consulting, RFP tools, and training. Allen and Brian will be presenting a MURTEC University session at the 2017 MURTEC, "Selecting Innovation Partners."
PLANNING
The planning phase in a vendor selection is critical. The output of planning is the foundation that sets the stage for all activities leading to making the right decision. Planning should include a program/project charter, business case, selection plan, and scoring matrix.
Round 1: Education Focus
The focus of round one is education. The primary objective of this round is to determine which vendors should participate in the selection. This is accomplished through a Request for Information (RFI) that helps to screen vendors based on a set of minimum criteria and confirms the vendors’ interest in competing for the business.
Round 2: Quantitative Focus
Round two is focused on a quantitative evaluation. This round should include sending the Request for Proposal (RFP) to six to eight vendors and using the responses to narrow the list to three to four vendors. Operators should consider using an online RFP tool for efficiencies and the ability to apply multiple weighting sets and scoring sets – perfect for operators with multiple brands with different priorities.
Round 3: Qualitative Focus
The three to four vendors who make it to round three will participate in the more qualitative evaluation methods. This can include onsite presentations/demos, vendor site visits, customer reference calls, customer reference site visits, and/or a vendor showcase. This is a costly round for both the operator and vendors so it should be limited to three to four finalists.
Round 4: Validation Focus
In some selections where the decision is very close, operators may elect to include a round four to validate what they learned in rounds one to three. Evaluation methods can include conference room pilots, lab testing, benchmark testing, and/or a production pilot.
DECISION PROCESS
Once operators have completed the rounds of vendor evaluation and have narrowed the list to three to four finalists, the next step is forming a recommendation for the steering committee. Survey participants and ask for their ranking, justification, and pros/cons for each vendor. Then in the results review meeting, display the results of the survey. Often a vendor can be eliminated right away if there is consensus based on the ranking. Another beneficial activity in the meeting is defining the pros/cons of each vendor by scoring matrix category. Then highlight pros/cons that are high-priority as well as the cons that don’t have a mitigation strategy. This activity can help the core team and decision-makers to make an educated decision.
NEGOTIATION
Once a vendor has been selected, negotiations begin. Negotiations can be with multiple vendors at the same time or two vendors can be placed on hold while top vendor is under negotiations. Note: always keep at least three vendors in the running until a deal is signed. That way, if the decision is made to walk away from one vendor, there is still competitive leverage with two vendors remaining. It’s best to negotiate pricing first, then business terms, and finally contract terms. Save the contract terms for last to minimize costly attorney fees.
ABOUT PEAK PORTFOLIO
Peak Portfolio is a management consulting firm focused on strategic technology vendor selection and negotiation. Visit peakportfolio.com for more information consulting, RFP tools, and training. Allen and Brian will be presenting a MURTEC University session at the 2017 MURTEC, "Selecting Innovation Partners."