How to Select Vendor?

Selecting a business application vendor is similar to finding the right life partner: a perfect match leads to harmony, while a poor choice can result in a costly and time-consuming separation.

A good approach is to treat this process as a project - establish a workgroup, project team, set a clear timeframe, allocate budget and adhere to the project governance standards.

Let's dive into some important specifics, using the example of selecting a core banking system vendor.

The process should usually follow the principal stages: preparation, selection, signing up.

Preparation

This crucial stage demands full engagement of your organization. The top management should supervise the progress and manage company priorities to avoid unreasonable delays and uncertainties.

The business lines shall clearly map and document the current processes and set the short-term and long-term functional needs and goals referring to the strategic view of the management.

The preparation stage should concentrate on the following actions:

Validate Strategy

Validate the business strategy and identify key features required in the future core banking system. For example if an organization has a goal to operate under several jurisdictions in the future then the support of several entities under one system installation should be included.

Describe

Describe AS-IS and TO-BE business processes, integration end-points, reporting requirements, performance expectations, data protection needs, IT infrastructure.

Clarify budget

Define financial boundaries with a clear budget for both capital and operational expenses.

The outcome of preparation stage is the development of two vital documents:

Request for Information (RFI),
Request for Proposal (RFP).

It helps to make a clear picture for vendors about requirements, constraints, decision criteria and prepare a better proposal.

Selection

The common question here is how to make the potential vendor list?

The company can use several techniques:

Utilize resources like Gartner's analytical reports.

Consider internal user experiences with various vendors.

Explore options through search engines and professional networks like LinkedIn.

Getting references from other businesses on certain products.

These ways are effective but a business has the option to engage with qualified external experts having knowledge in vendor selection. They already have different vendors to propose for certain needs of the business and provide a qualified comparison between them.

Having done the market research correctly a business usually pass the following steps:

Limit your list to a maximum of ten vendors to maintain focus and efficiency.

Share the RFI with potential vendors and sign NDAs with interested parties.

Request the system demonstration and select the shortlist of up to five companies that best meet your criteria.

Distribute the RFP, engage vendors in detailed discussions for clarification, and evaluate the proposals against the selection criteria.

Make a decision and choose the best option.

It is considered best practice to formally communicate the outcomes of the tender process to all participants. Sending an official letter detailing the tender results ensures transparency and maintains a professional relationship with all involved vendors.

Tender Closure

Regardless of the selected vendor or product, it's highly advisable to organize a debriefing session with the vendors not chosen. Providing feedback is not only beneficial to these vendors in understanding areas for improvement, but it also contributes to the overall maturity and growth of the industry. Moreover, maintaining a professional relationship with these vendors is key, as they might be potential candidates for future collaborations.