#8 – How to Control Technology Procurement Outcomes | Part 4
Many aspects of business technology can be boiled down to a matter of science. However, most would agree procuring and negotiating contracts does not fall under the term “scientific”. It is often at this phase of the technology lifecycle, they feel they’re at the mercy of salespeople or a process that hinders optimal outcomes. We believe there is, in fact, a way to standardize your evaluation and contract procurement giving you control of your technology purchases. The following segments cover the 5 steps you need to know to negotiate the lowest possible price for the services you need.
Part 4 – Evaluating and Selecting Vendors
With a clearly defined specification, a pricing response format, and your vendor scorecard, you’re ready to begin the actual evaluation process, which means you can now open your RFP for responses. For some organizations, this is an extremely formal event, with legally mandated periods for accepting and developing responses, question and answer periods, and billing structures. For other organizations, this could be as simple as calling a number of carriers yourself, or hiring a professional service to help you evaluate. However you execute the mechanics of the evaluation, the most important part of this process is the scorekeeping. In many situations, different providers will recommend different technologies to solve the same problem. In such cases, it’s unproductive to try to compare the pricing against the technology being provided. The key here will be standardizing your scoring on what you will be experiencing as a customer of this provider.
In terms of how to describe the experience you are seeking, this would be where we list out the KPI results we ratified earlier. You may have noticed throughout this entire article there has been a heavy emphasis on being able to clearly define the outcomes you need to achieve. The reason for that is because measuring outcomes-achieved to dollars-spent is consistently the easiest and most meaningful way of turning two different technologies into an apples-to-apples comparison. By defining your requirements in terms of outcomes, and requiring the providers to answer in a format that directly speaks to those outcomes, we can create a filter by which we can standardize all provider responses, regardless of the underlying technology.
What we haven’t put a strong enough emphasis on yet is the structure of a vendor scorecard. Since this is the recording of your grading of each solution and provider, the scorecard will be the largest influence on your decision throughout this entire process. Therefore, it needs to be something you stand fully behind. As previously mentioned, the scorecard helps you identify the “Ys” so you can answer the “Whys.” To be more specific, what that means is the scorecard is a mechanism to quantify what are usually intangible qualities. Transparency, Flexibility or Scalability, Reliability, etc. You should be building a grading rubric that takes these into account, alongside the standard terms and conditions and pricing components that everyone already grades on.
Typically, to build a scorecard, you’ll select 3-5 traits for each intangible quality that you’re looking for. For example, if Transparency is a quality you want to grade on, then you might choose traits such as “clarity of pricing structure,” “frankness of salesperson,” “all fees revealed on contract,” or you’ll want to see evidence of the TCO, including renewal costs and discount potential. If your focus is Flexibility/Scalability, you’ll want to grade on pricing commitments, deployment commitments, and ability to integrate into both current and future expected network conditions. Reliability focuses on the SLAs (and ensuring they aren’t toothless), repair & replace commitments, security achievements, and the competency of their various SME’s. All scorecards should have a section just for the Terms & Conditions, wherein you’d grade the usage/audit rights, control and licensing rights, renewal rates, and maintenance fees. Lastly, there should be a section comparing the proposed pricing.
To fill out a scorecard, you’ll weigh the traits of each quality amongst each other to define priority, and then you’ll give each provider a score of 1-5. As an example, if the most important quality to you is Transparency, and you break that down to mean “all fees revealed on contract,” but also “frankness of salesperson,” and “clarity of pricing structure,” then you might weight “all fees revealed on contract” as 2x the score value, while the other two traits remain at 1x the score value. This would mean any individual provider has the potential to earn up to 20 points in the Transparency category ( 5x2 for revealing all fees, 5 for frankness, and 5 for clarity of pricing).
Now that you’ve got your scorecard, you’re ready to review the proposals and interview any providers you are interested in. As you’re beginning to review the proposals and interview providers, there is one last point to address. Many people pursuing any sort of pricing exercise often make the mistake of asking everyone and their brother to submit a quote. It is far better to limit the number of suppliers you accept bids from. It might seem like the more pricing options you get, the stronger your position is, but there are two reasons this doesn’t work. First, the more bids you accept, the more time you have to spend interviewing and grading. Second, when a provider sees you shopping every option, they’ll consider you less serious, and not reach as far to win your business. You’ll be in a far better position to use the information we gathered from the RFI segment (see Part 3) to narrow down the providers you want to take into the pricing round. When you advance a provider to the semi-finals, and they see that they only have a couple of competitors to beat, rather than the entire market, they will be more incentivized to make a deal to help them win.
When you’ve completed the interviews of the shortlist of providers you accepted bids from, you’ll have the completed scorecards, which should make it extremely easy for you to determine who you should proceed to contract negotiations with. Simply multiply each score by it’s associated weight, and tally up the total points. The provider with the highest score is the one most capable of providing you the experience that best serves your needs.
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