choice is selected. A successful preliminary screening lets the team cursorily review a comprehensive set of vendors to ensure all options have been considered but then rapidly narrow the list down to a handful of vendors for further due diligence. Exhibit 16.7 shows an overview of this process, from data gathering through due-diligence vendor selection.
The first step of the vendor screening is to identify a full set of potential vendors. The approach for this step is to conduct a sweep of the marketplace for vendors whose service or product offering fits in the scope defined in the previous step. If the scoping step was completed well, the vendor marketplace should be relatively easy to identify.
The team should employ a variety of sources for its vendor search:
• Consultants: Large-scale consulting firms often have entire practice areas specializing in the selection of the service or product in question; in these cases, they are often willing to provide free, upfront advice in exchange for an opportunity to be involved in the bidding for later work.
Vendor list
Determine
data sources
screening criteria
Industry
• Vendor size
publications
• Product or service scope
• Geographic presence
• Industry focus
Trade
show
Master vendor
inventory and
Peer
Screen
selection
List of
companies
for
criteria
vendors for
criteria
further
investigation
• Vendor size
Consultants
and due
• Industry focus
diligence
• Geographic
presence
Web
search
Vendor
marketing
Financial
analysts
Exhibit 16.7
Vendor Screening Process Overview
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• Industry publications: There are usually several credible, independent publications focused on the marketplace that can provide vendor lists.
• Industry trade shows: Many of the larger players in a particular field have a presence at professional services firm industry-specific trade shows.
• Peer companies: Managers from firms in the same industry are an often-overlooked source of information, and they can be particularly valuable for their objectivity. Developing peer relationships with similar professional services firms can provide insight into their decision-making processes and rationale as well as give a jump-start on vendor data gathering. Peer managers who have recently been through a similar vendor selection exercise can be particularly helpful.
• Focused web search: A web search can turn up candidate vendors as well.
• Vendors: Although obtaining facts from the marketing obfuscation found in many vendor brochures and web sites can be difficult, vendor-supplied information can be useful once a specific set of vendors has been identified.
• Financial analysts: As outlined earlier in this chapter, most large investment banks or money management firms have one or more full-time ana-
lysts covering the market in which a given large-scale vendor competes.
The evaluation team should manage its search using each of these sources to ensure that a reasonably comprehensive list is built. As the team reviews a variety of sources of data, the right list of vendors should fairly easily emerge. Except for the most unique searches, the team should avoid feeling that it needs to “scour the earth” to identify the suite of potential vendors—
vendors that are difficult to find after multiple searches across a variety of sources are not likely to be viable vendors. Good vendors should not be needles in a haystack—the location of an obscure vendor is not necessarily the harbinger of success. Indeed, the best vendor names emerge repeatedly from the research.
The result of this step should be a list of vendors ranging from as few as four to as many as a dozen entries. Although vendors may be added as additional information is uncovered, this is probably the vendor list from which the winning candidate is drawn.
As vendors are added to the list, screening data should be gathered in a template to facilitate analysis. The specific information gathered depends on the vendor selection being completed, but it generally falls into a few categories. These categories are outlined, along with potential information to gather in each category and how much weighting each category might be given, in the following lists.
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VENDOR SIZE.
Vendors should be of adequate size to continue to invest in
the product or service and continue to attract additional customers. Exceptions may be niche-product vendors providing highly specific products or services.
Potential Information to Gather
• Vendor revenues
• Vendor profitability
• Acquisition history
• Number of employees, staff, product specialists
• Number of customers
• Number of end users
GEOGRAPHIC PRESENCE.
Does the vendor have the appropriate geo-
graphic focus and availability? Is the vendor sufficiently focused on the geographies that matter for the company (U.S. versus Europe versus Asia versus other geographies that impact how the product works or support is delivered)?
Potential Information to Gather
• Corporate headquarters location
• Nearest branch office
• Number of branch offices
• Proximity of branch offices to company branch offices
• Primary location of development team
INDUSTRY FOCUS.
Does the vendor have sufficient expertise in the spe-
cific industry to ensure development of the best solution? Does the vendor have a product or service line dedicated to the company industry? Is industry-specific expertise relevant for this evaluation?
Potential Information to Gather
• Industry-specific additions/modifications to product or service
• Industry implementations of product or service (number of imple-
mentations/users)
• Presence of leading industry customers
This type of information is relatively easy to gather and can be used to narrow the vendor list down rapidly. As the information is gathered, the team should begin building a spreadsheet to capture the information.
This process is the most rapid, least-effort method to review the largest number of vendors and rapidly screen out the vendors that are not viable
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contenders for carrying through to due diligence. The preliminary screening forces out undercapitalized, unfocused, or otherwise inappropriate vendors, as well as allows the remaining vendors to be preliminarily ranked. The team should constantly ask the common-sense question: “Can you envision a scenario in which we would actually choose and rely on this vendor?” The result is a quality list of vendors participating in the marketplace, along with a clear, consistent rationale for the inclusion or discharge of each one.
Occasionally, at the end of a preliminary vendor screening process, no viable vendor or combination of vendors emerges. In these cases, the team should go back through the analysis and look for these common missteps in the process described previously:
• Business scope set incorrectly: Too narrow or too broad for a vendor solution to emerge
• Scope indistinct: Difficult to assess vendor capabilities due to lack of clarity on business scope, product or service requirements
• Not enough vendors identified: Not enough data sources searched to yield proper number of vendors; search of data sources too superficial
• Vendor data incorrect or missing: Team did not gather enough vendor data, or vendor data is incorrect leading to vendors screened out im-properly
• Primary or secondary screening criteria set too tight: Criteria for vendor screen set too tight, forcing out viable vendors
• Additional criteria needed: Team adds additional relevant criteria with higher weighting, allowing viable vendors to pass primary and secondary screening
The team should analyze the process for these common mistakes, as well as other holes in the overall analysis. If the team concludes that the analysis has been completed correctly, the marketplace for the scope in question has no vendor participation, and the business needs will have to be filled with internally developed products or services.
Request for Proposal Process Management
An RFP is a time-honored method for choosing vendors in which the company gives a group of vendors the opportunity to show their capabilities by responding to a specific set of business requirements and information requests. RFPs typically request a broad swath of information—product or service data, vendor financial and structure data, customer references, qualifications with similar work, and more.
Requiring interested vendors to respond to a well-thought-out RFP can be a highly effective approach for both gathering additional data without
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imposing incremental workload on the team and screening vendors for ability to produce quality work. There are a variety of good reasons to conduct an RFP:
• It distributes data gathering effort to multiple vendors instead of an internal team.
• It allows vendors to withdraw if the RFP focus indicates they are not a good match.
• It introduces an element of natural selection to the process—vendors that cannot manage their way through an RFP process are not likely to be viable long-term partners.
• It gives a view of the vendor ’s capability for producing a “finished product” early on with little risk; if vendors cannot produce quality RFP responses (typos, clarity, answering the questions asked, organization), there may be similar issues with their products or service.
• It allows vendors to “self-team,” working and proposing in concert on areas where a multivendor solution makes sense.
• It creates a level playing field for the vendors; all vendors see the same RFP request and provide the same response information; this has the