Buying software without evaluating the vendor is like marrying someone after reading their dating profile. They might have all of the qualities you're looking for on paper, but you have to take the time to get to know them and their history before you make any sort of commitment.
When selecting the right software solution for your business, evaluating the software itself is just the beginning. Besides determining whether a particular software can help improve your business processes and is the right fit for your company, you must take the time to evaluate the vendor itself. A binding contract means it’s not easy to switch systems so you must ensure the vendor is just as good of a fit for you as the software is for your business processes. Making the decision solely based on the software itself could be problematic if you are not also evaluating the company and the people which you’re buying the solution from.
Consequences of Choosing the Wrong Software Vendor
When choosing the right software vendor, look for honesty and transparency. They must be willing to see you as a partner and not just a customer. Otherwise, if you sign a contract with the wrong software vendor, you may be left to deal with one or all of the following consequences:
You’re Stuck with the Wrong Software
Being stuck with the wrong software can be a disastrous situation. If you choose a vendor that’s dishonest and desperate to reach sales quotas, there’s a chance that the software that was sold to you isn’t the software that you expected or even need. It’s possible that the software is a good fit for some companies, but it may fail to address your company’s specific pain points and requirements. As good as a software solution may be, there will never be a perfect one-size-fits-all solution.
You’re Left to Fend for Yourself
You may be given a good piece of software, but what good is it without proper instruction on how to use it? On top of the onboarding process, it’s natural for your company to have lots of questions or usability issues that need to be addressed quickly and effectively. You will also need to learn how to maximize the software and get the most out of it for your business. Further, if you are a smaller company and choose a vendor that’s more focused on providing support to their larger clients but neglects their smaller ones, then that can be problematic as well.
You Pay Unexpected Costs
There are many ways that choosing the wrong vendor can lead to unexpected costs:
- Replacement Costs
- Upgrade Costs
- Disruption Costs
If you are bound to a lengthy contract but decide to terminate that contract early after concluding that the software or vendor isn’t the right fit, then the cost to terminate the contract early can be expensive. There will then also be a hefty cost to replace the abandoned software and reimplement a new one.
When the software fails to meet your needs, your company may decide to upgrade the software to include more functionality in the solution. This can happen if the software vendor is unclear in communicating what functionality is included in the base software. Even if these upgrades work to provide the correct functionality, the cost of upgrading to a more nuanced solution is a cost that can be avoided if you conduct the proper research and evaluate vendors accordingly.
Introducing new software or changing business processes is a time-consuming project that requires the full attention of your team. Choosing the wrong vendor can cause disruption costs to soar if extra training time is needed, your employees are unhappy, or if it's not planned properly. During the software vendor evaluation process, don’t forget to ask what the onboarding is like for your team so you can prepare for this implementation to not disrupt current business activities. Also, if you go with the wrong vendor and have to choose another vendor in the future, that will essentially double your disruption costs as your company will have to reimplement yet another software.
Software Vendor Evaluation Criteria
To choose the right software vendor for your business, you must first ensure a level playing field by establishing a consistent set of criteria through which you compare each vendor. Here are 6 ways that you can evaluate the software vendors that pique your interest.
To gauge customer satisfaction, ask for references from each vendor. Instead of asking for 2 or 3, try asking for 5 or 10 and see if it stumps the vendor. A great vendor should have an exhaustive list of happy customers. Pay attention to any video testimonials on the vendors’ websites as these tend to showcase a more honest and true representation of the customers’ experience. A quick Google search can also reveal some insightful reviews and information on past customer experience and the vendor’s implementation history. These are not to be taken lightly. Lastly, it’s key to try to have a phone call with some of the vendor’s customers to get a true sense of how satisfied they are.
An often-overlooked aspect to consider when evaluating software vendors is the size of the vendor. Working with a vendor that is similar in size to your company is beneficial as they will have a better idea of your available resources, business goals, and priorities. They will also be more cognizant of your budget. Many of the large brand-name vendors are less concerned about providing value to their small customers when they have larger customers to worry about.
Each vendor will have a different sales process but there are certain “tricks” to watch out for. Stay away from vendors who say they can provide all the functionality you need. No two businesses are exactly alike, so a vendor who claims they can do “everything for everybody” is most likely exaggerating their capabilities. Although you want the vendor who best meets all your needs, look for an honest “no” when asking them about their functionality. A trustworthy vendor is not afraid to be open and honest about their capabilities and limitations. They have to be willing to spend time getting to know your business to determine if they are the best fit.
Is the vendor rushing you to see their software demo without spending the necessary time to understand your business? This should be a red flag — a generic demo without a thorough business analysis is often a waste of time and may lead to numerous misunderstandings of your requirements in the long run. You should make a conscious effort to only look at demos when you are confident that the software has the functionality you need. Seeing too many demos of different vendors will not only take up too much of your time but cause unnecessary confusion in the selection process.
Sometimes, usually with smaller vendors, you may get the opportunity to speak with C-Level executives and the owners of the company during the sales process. This helps build the relationship between your business and the vendor and helps to ensure you’re not just a sales statistic.
After-sale support is an important factor to consider when evaluating a software vendor. Will you need 24-hour support? Do you have offices located in different parts of the world that require support in another language? Larger vendors are usually better at accommodating international and 24-hour support because they tend to outsource their support overseas. On the other hand, if these factors are not important, smaller vendors tend to have more personalized in-house support that results in you getting to speak to the same few representatives each time. You can speak to those who will make the effort to get to know you and your business on a personal level. Either way, the best way to get a real feel for support is to speak with current customers to determine response time, level of expertise, and how personalized the service is.
You may also want to consider whether the software will be hosted on the web or the cloud. Cloud and web-based software both store data on the cloud, but the difference is in the way that you access the data. Cloud software tends to be more secure since there are extra steps of authentication when you connect to the server through RDP and VPN. With web-based software, the only extra step might be 2FA if the company happens to offer it. Also, with cloud-based software you are logging into the vendor's IP address, whereas with web-based software you are using your own IP address. The ability to use your vendor's IP address gives cloud-based software the advantage of being single-tenant software, meaning that you can get your own instance of the software which then paves the way for customization.
It’s also important to determine the cost structure of maintenance, and whether or not maintenance fees are included within the software’s monthly fees. Will maintenance fees just include bug fixes or upgrades to the software as well? Consider things like the cost, quality, and frequency of upgrades. Ideally, you want to look for a vendor that makes upgrades at least once a year without an additional cost.
A primary concern amongst decision-makers when evaluating software vendors is determining whether the software will be supported in the long run as well as how it will be supported. Working with larger businesses that have resources and investors in place to ensure the business is around might seem like less of a risk in the long run. However, it comes with its own set of complications, such as discontinued products. Although some small companies might come and go, so too can specific products offered by large vendors. In both situations, it is important to evaluate whether or not the product you are seeking is still supported and likely to be around for a while. Ensure that the product’s source code is in escrow, and get a sense of whether or not the product will be sunsetted soon.
It’s not only important to make sure that the software will be supported but to make sure that the vendor supports you like a partner, as opposed to having a transactional relationship. Having a partner relationship with your vendor means that your vendor and your company are mutually committed to each other’s success and growth. A vendor who is your partner will really take the time to get to know your business on a deeper level and help provide quality support, customization, business advice and so much more.
It's no coincidence that costs are the last factor to consider during the software vendor evaluation process. Although it can be easy to select the least expensive proposal when selecting a software vendor, never should the decision be made on cost alone. Knowing what you’re paying for and evaluating the hidden costs is more important. The most important factor when it comes to evaluating vendor costs is to make sure you are comparing “apples to apples”. It is essential that you understand each proposal cost and compare them across vendors, and determine what the implementation process will look like. Is training scheduled for a few days or a few hours? Will the vendor do the data migration or is that left to the customer? Differences in these services will drastically impact the costs and success of an implementation, and these details tend to vary widely from one vendor to the next.
Other cost considerations include multiple payment and pricing options to help ease the transition, and price discounts. Getting a price discount can provide relief from a large initial investment. However, you have to make sure you fully understand what the discount entails as these discounts are usually only available for year 1 with significant price increases going forward. Although some vendors will provide honest price discounts to help businesses afford all the necessary components, be wary of time-sensitive and unwarranted discounts. A time-sensitive discount may lead you to make a hasty decision without fully evaluating your options. An unwarranted discount such as one given “just because we like you” is often misleading and both types of discounts may cause the original cost to increase in the years to come. In any case, make sure you question the implications a discount has on future costs and read the fine print to get the full story.