Vendor Selection: Quick Tactics to Select the Right Vendor

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For the past few years, vendor selection has become extremely important. This is mainly due to the importance and reliability of vendors within the business market.

Nowadays, many businesses, including yours, are becoming more comfortable relying on third-party vendors to handle different business aspects through SaaS applications.

However, the vendor selection process is easier said than done. It’s stressful and complicated, especially if you don’t know how to proceed and have limited bandwidth to conduct detailed vendor research.

The simplest method is to have the right experts and a thorough proposal evaluation to complete the process. But you still need to know the best process for vendor selection.

This is where this blog and our vendor selection criteria will prove informative. This article will discuss the important steps to remember while choosing the perfect vendor for your business.

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1. What is the Vendor Selection Process?

The vendor selection process can help your business find the right partners for your needs. It involves identifying, evaluating, and negotiating with potential vendors.

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This process typically includes finding new vendors, evaluating them based on criteria, checking their backgrounds, and negotiating contracts. During this process, formal terms like RFIs, RFPs, and RFQs are often used.

With a pre-defined process, you can evaluate vendors against certain criteria. It ensures you’re choosing vendors relevant to your business’s needs, not based on personal preferences.

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2. 10-Step Vendor Selection Process

2.1. Determine Your Needs Properly

If you want the vendor evaluation and selection process to succeed, you must start by identifying your needs This is why you need a solid idea of what you’re looking for.

Whether you want a specific solution or are looking for any certain requirement, you need to be transparent with your needs. The more transparency you have on your needs, the easier it will be to narrow down the best vendors.

Don’t forget to focus on the specific features and functionalities based on your needs. If you want certain features, create a list. Compare the list with the vendor’s offerings, and you will know if they are perfect for your business.

But what about your budget? Choosing a vendor without considering your budget and project timeline would be a grave mistake. Defining these two aspects will ensure the vendor is capable of fulfilling your needs without breaking the bank.

2.2. Consider the Pre-Solicitation Planning

Now that you have defined your needs, your next focus should be the solicitation process. However, make sure you don’t jump on this step directly. You need to know a few things before you start your proposals.

You need to determine whether hiring internal teams or outsourcing would prove most beneficial for your business. This is why you must consider important factors like cost, skills, time, and resources.

Remember that hiring external vendors will help you acknowledge skills you lack. Meanwhile, relying on your internal teams will give you more control.

There are three different types of solicitation documents available: RPF, RFI, and RFQ. RFPs suit complex projects with detailed specs, whereas RFIs gather general vendor information.

On the other hand, RFQ is for simple purchases with clear specs and prices. Pick the right document type to convey your needs and get relevant vendor responses.

2.3. Identify the Potential Vendors

Once you’re transparent about your needs and the types of solicitation you'll receive, you'll be able to choose the best vendors for your business.

Industry publications and online directories are the best places to search for a vendor. Do you know why? It’s because these resources can provide you with a list of the best vendors with relevant experience.

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However, we believe the best way to identify potential vendors is by seeking professional referrals. You can ask your colleagues or clients to share vendor names. If they had a positive experience, they will likely help you find someone with relevant expertise.

You can also find vendors at trade shows and events. Attend these workshops and build connections with people. You can meet numerous vendors face-to-face and chances are, you will find the right one.

2.4. Focus on Developing Evaluation Criteria

With potential vendors shortlisted, we focus on the next stage, developing evaluation criteria. This process is as important as making data-driven decisions during the vendor selection.

First, you must create a list of crucial factors for your vendor selection process. This might include

• Cost
• Product Quality
• Service features
• Experience in your industry
• Customer support options

Next, you need to determine the criteria based on its importance. Do you want a vendor with higher reliability and uptime? Make sure you focus on it more than other criteria.

Here are a few key factors you need to consider while choosing a vendor:

• Transparent pricing according to provided services
• Compliance and security practices
• Genuine reviews from previous customers
• Robust compliance and security practices
• Better support and integrations
• Comprehensive features and desired results
• Thorough communication

Use these factors as a checklist and select the right vendor who ticks all the boxes.

2.5. Issue Solicitation Documents

The next step is to issue solicitation documents. The documents you issue will depend on your specific needs and objectives for vendor selection.

Remember that you need to consider this step at the earlier stage of your vendor selection process. After you choose the perfect vendors, you need to draft your RFP, RFI, and RFQ.

But do you know what these documents are? What can you get from them? Let us explain.

RFP

An RFP, which stands for Request for Proposal, is a formal document. It collects potential vendors' proposals to assess the project's feasibility or acquisition. This step is part of the procurement process and clarifies your organization's requirements in the Request for Proposal (RFP).

The RFP needs a section for vendors to share their qualifications and project experience to help the organization choose the best fit. It should also ask vendors for pricing and payment terms to compare and select the most cost-effective option.

RFI

RFI (Request for Information) is a step in the procurement process where your business will gather information from potential vendors to assess the market and identify suitable partners. Unlike RFPs, RFIs don't demand formal proposals from vendors.

RFI is handy when more insights are needed before committing to a project or agreement. The document typically includes questions about the project, timeline, and delivery needs.

RFQ

An RFQ is a document used in procurement to get supplier bids for products or services. It usually outlines the requested items, quantities, and onboarding timeframe.

The document must clearly describe the requested products, the required quantity, and other relevant details. Additionally, it should specify a timeline and any specific requirements.

These documents will contain different pieces of information specific requirements, evaluation criteria, product offerings, terms and conditions, and other important details.

2.6. Conduct Comprehensive Vendor Review

This is one of the most important steps you need to remember while selecting vendors. While you evaluate the reliability and reputation of a vendor, you cannot be certain of their services. This is the primary reason you need to conduct a vendor overview.

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Look for vendor reviews on online platforms like G2 Crowd, Capterra, or similar platforms. Pay close attention to the user reviews to know their real-life experiences with the vendors.

We suggest you start by looking for reviews on Gartner. Leverage its market guide and magic quadrant, which will prove highly beneficial in analyzing the vendor's quality.

However, make sure you consider both positive and negative reviews. Every vendor will have a few negative reviews. You can build a partnership with them as long as the ratio is 80:20.

Social media platforms can also help you conduct a thorough vendor review. These platforms will help you learn about the vendors' brand reputation and customer satisfaction. Additionally, pay attention to how a vendor addresses a negative review.

Last but not least, contact the vendors' former customers. While not every vendor will showcase transparency, try to find 2-3 former customers. Contact them and ask them about their experiences with the vendor and whether they are satisfied with the services.

2.7. Shortlist the Perfect Vendors

During this step, you need to choose a small group of vendors. But how can you determine which vendor to include and which to exclude? It’s simple - consider the vendors with affordable pricing while providing high-quality services.

Once you have a small list, the real problem begins—shortlisting the best vendor. We suggest you evaluate the vendors based on some previously mentioned aspects, including budget, timeline, and reviews.

This is where Gartner stands apart from the crowd. While you may find fake reviews and testimonials elsewhere, Gartner is all about listing only reputed vendors. As stated earlier, use their market guide and magic quadrant to shortlist the final vendor.

Does the vendor provide competitive pricing? Are they effective at delivering results within the promised timeline? What are their customers talking about them on online review platforms and social media platforms?

Most SaaS vendors offer demo sessions, so you can schedule a quick call with their team to see how the product works. This will also allow you to ask the right questions, get your queries answered, and tick your checkboxes.

Never finalize a vendor without getting a brief product demo from the team. It’ll help you avoid second-guessing.

2.8. Negotiate with the Vendor and Finalize the Contract

With the best vendor shortlisted, you’re ready for negotiation. This stage is important as it ensures you get the best deals within your needs and budget. In this stage, you must pay close attention to vendor contract negotiation.

The terms you’re agreeing on should benefit both you and your vendors. This is the best way to create a long-lasting vendor relationship. Here are some key benefits of vendor negotiation:

• You can save a significant amount of cost, potentially leading to a healthy cash flow
• You don’t need to worry about vendor lock-in
• You can acquire better renewal terms
• You will receive flexible and scalable contracts
• You can maintain a healthy vendor relationship

The final contract should be a clear and comprehensive document. It must outline specific details like pricing, termination clauses, responsibilities, delivery time, etc. The drafted contract must outline the responsibilities and expectations of both you and the vendor.

2.9. Complete the Selection and Onboarding Process

The last step of the vendor selection process is finalizing the selection and onboarding of the vendor. Carefully consider all the factors throughout the selection process. Choose the vendor that meets your requirements and impresses you with their professionalism and value proposition.

Upon finalizing your selection, establish a smooth onboarding process for a successful professional relationship. A supportive environment will create a long-lasting and mutually beneficial relationship.

But what strategies must you follow to build a healthy relationship with your vendor? Take a look at these key points:

• Set clear expectations with the vendor
• Maintain an open communication without any hesitation
• Streamline the vendor onboarding process
• Monitor the vendor performance continuously
• Negotiate and receive the most favorable contracts
• Regular performance reviews to assess their capabilities.

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3. What is the Most Important Step of the Vendor Selection Process?

Now, you might wonder what is the most important step of the vendor selection process. We can confidently say it’s the vendor negotiation stage. No matter how effective a vendor selection strategy you apply, your efforts will be in vain if you fail to negotiate better deals with the vendors.

Poor vendor negotiation will cause numerous problems for your business. Some of them are:

• Non-refundable auto-renewal policies
• Less control over the contract
• Limited flexibility and poor customization
• Increased spending due to price change

Negotiating with vendors will help you secure the best deals for your business, ultimately leading to significant cost savings. You can also customize the terms and conditions, such as favorable payment terms, delivery schedules, warranties, etc.

Let’s take WeFunder as an example. Wefunder wanted to save money but found that the costs of its compliance management tool were too high. Even after negotiating, the vendor insisted on a big upfront payment, which was too much during uncertain economic times.

With CloudEagle's assistance, Wefunder realized they could optimize compliance management transactions. SaaS buying experts led negotiations, eliminating upfront payments.

We advised Wefunder against looking for other options and instead focused on getting a good deal with the vendor.

Here’s what Sophie Wang, Director of Finance, Wefunder, has to say about CloudEagle.

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Effective negotiation skills will also protect your business from unforeseen challenges and help you build a good and long-lasting relationship with the vendors.

Active negotiation with vendors helps you focus on SLAs to guarantee reliability and performance. Clear expectations hold providers accountable for delivering the agreed service level.

SLAs have important clauses. They ensure vendor accountability and liability in case of data breaches. Here are some of the key clauses you need to pay attention to:

• Limitation of liability
• Data security and privacy
• Standards of service
• Legal and regulatory compliance
• Terms of termination
• Confidentiality
• Indemnification

Upon discussing contract negotiations with Dave Beckwith, Vice President of Global Procurement & Endpoints at 8x8, he said:

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He further added, “SaaS vendors will play a shell game and go to extreme lengths to get you to purchase more or agree to their demands”.

Are you eager to know the intricacies of SaaS vendor negotiations? Make sure you check out this podcast by Terry Larock, Procurement and Negotiation expert.

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Last but not least, you must pay close attention to the SaaS agreement checklist. A SaaS agreement is a legal document that protects the buyer's and SaaS vendor's interests. It will ensure both parties meet all obligations.

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As a business owner, you must understand the terms of usage and obligations within a SaaS agreement. Here’s a checklist for a better understanding:

• Start and end dates
• Customer support
• Data Ownership
• Access rights and users
• SaaS contract value
• SaaS renewal alerts
• Data compliance
• Consumption metrics
• Service level agreement
• Termination policy

Remember, your ultimate goal is to save money by negotiating the best deals. Contact us and our expert negotiators will ensure you receive the most favorable deal from your vendor.

4. What is the First Thing You Should Do While Selecting a Vendor?

The first thing you must do while choosing a vendor is determine your needs. This is the most important aspect you need to consider. If you’re unsure what you want, you cannot onboard a suitable vendor for your business.

The key to a successful vendor selection process is understanding your requirements upfront. This step involves researching and attracting vendors who can truly meet your needs. Take time to pinpoint exactly what you need, whether related to pricing, timeframe, or services.

Once you know the general category, get specific. What features are essential? What would be nice to have? Make a list of requirements to guide your search and discussions with vendors.

Consider your budget and timeline realistically. Knowing these constraints can help you find vendors who meet your financial and timing needs.

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Conclusion

Selecting the perfect vendor is extremely important for your business. Following these 10 steps outlined in the article will help you go through the vendor selection process efficiently and confidently. However, navigating complex negotiations and ensuring you secure the most favorable terms can be a daunting task.

But you don’t need to worry—CloudEagle’s vendor research feature is here to help. We will simplify your vendor research process to a great extent. With the power of AI and machine learning, we will help you choose the perfect vendor for your needs.

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Don’t believe our word? Let’s see what Pratibha Mehta, head of operations at Falkonry says about the vendor research module of CloudEagle:

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Let’s see how the vendor research feature of CloudEagle can prove beneficial for your business:

Simple searching process: CloudEagle makes finding the right SaaS vendors easy. Enter your business problem, and you'll get a list of relevant vendor options.

Discover the best vendor: Our platform informs you about new, innovative vendors and their top-notch products. You'll never miss out on valuable solutions and stay updated on potential vendors.

Connect with your peers: Find out what software your peers use to narrow your options quickly. Connect with them to speed up your buying process and validate your SaaS vendor choice, making it easier to get management approval.

Find the most relevant reviews: As discussed earlier in this article, reviews will help you determine the vendor’s professionalism and promises. Our latest machine learning technology will highlight relevant reviews and the vendor's strengths and weaknesses.

Thorough side-by-side comparison: Making decisions is tough without comparing options side by side. With CloudEagle's comparison feature, you can easily compare potential choices based on price, features, support, and other important factors.

CloudEagle will help you choose the best vendor and build long-lasting partnerships. Don't settle for anything less than the best. Book a demo with our experts today.

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