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ering. 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
• 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 invest-
ment 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 nee-
dles 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 addi-
tional 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 cate-
gories. 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.
Purchasing, Procurement, Vendor, and Asset Management

VENDOR SIZE. Vendors should be of adequate size to continue to invest in
the product or service and continue to attract additional customers. Excep-
tions may be niche-product vendors providing highly specific products or

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 ge-
ographies that matter for the company (U.S. versus Europe versus Asia
versus other geographies that impact how the product works or support is de-

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 indus-
try-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-
• 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
414 The Back Office: Efficient Firm Operations

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 sce-
nario 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 vi-
able 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 so-
lution 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-
• Primary or secondary screening criteria set too tight: Criteria for ven-
dor 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 second-
ary 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 com-
pany gives a group of vendors the opportunity to show their capabilities by
responding to a specific set of business requirements and information re-
quests. RFPs typically request a broad swath of information”product or
service data, vendor financial and structure data, customer references, qual-
ifications 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
Purchasing, Procurement, Vendor, and Asset Management

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 in-
ternal 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, organiza-
tion), 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
double benefit of encouraging vendors to participate if they perceive a
fair selection process and of forcing the internal evaluation team to con-
sider each vendor equally, mitigating any potential biases.
• Multiple analyses of the requirements and information in the RFP by
highly skilled vendor sales and delivery staff may point out shortcom-
ings or inconsistencies in the previous analysis by the internal team and
vendor manager.

Not every vendor selection is a good candidate for a full RFP. The team
may elect to not conduct a full RFP for a variety of reasons. In these cases,
the team may proceed straight to the vendor investigation and due-diligence
process. Some examples include:

• The number of vendors identified during the previous screening is
small enough to justify proceeding directly to due diligence.
• In a seller ™s market, the RFP may be considered too onerous by target
vendors and discourage participation; they will opt to go after easier-to-
win business.
• The preliminary vendor selection conducted in the previous step un-
earths enough information to satisfy the selection team.
• The final decision needs to be made rapidly, and not enough additional
time is available for a full RFP-response-analysis cycle.
• The vendor(s) being selected is minor, or the level of investment is
minor enough and does not justify the effort of a full RFP.
416 The Back Office: Efficient Firm Operations

• There is a large separation between first- and second-place vendor, so
first-place vendor takes the decision by default.

Creation of a high-quality RFP requires the team to have a clear command
of the business scope of services or product requirements. If creating a good
RFP is difficult for the team, it is likely that these elements were not clearly
defined in the previous task. A good RFP not only reduces the effort for the
team but also ensures enthusiastic and full participation by target vendors.
Exhibit 16.8 provides an overview of the RFP process. The steps are de-
scribed in the following subsections.

CREATE REQUEST FOR PROPOSAL. A well-constructed RFP contains two
primary sections: an overview of the company, which gives the responding
vendor information on the company and required service or product to help in
its response, and a section for vendors to provide a detailed response to spe-
cific questions on company, capabilities, functionality, and other relevant con-
siderations. The first section may include the following company information:

• History of company
• Size of business: three- to five-year revenue history, number of
• Geographies covered: headquarters, branch offices, plant locations
• Service line overview
• Key points that differentiate the company business operations
• Single point-of-contact e-mail address for all questions and responses

Conduct Evaluate Select
Decide Distribute Answering
Generate RFP and finalists
selection RFP questions
RFP follow up for due
framework to vendors (ongoing)
if questions diligence

• Based on Vendor
scope conference
Method of
vendor Period should
information be 2“8 weeks

Exhibit 16.8 RFP Process Overview
Purchasing, Procurement, Vendor, and Asset Management

The section should also include RFP process information such as:

• RFP distribution method
• Response required (number of copies, format)
• Names of decision makers on the evaluation team
• Vendors invited to participate
• Time line for response and review of RFP
• Criteria for selection and relative weighting

The focus of the document should be on providing information helpful to
the vendors, as well as answering the qualifying questions that most smart
vendors ask before pursuing a lead:

• Is the scope under consideration a good match with my product or
• Is the playing field level?
• Is there a budget approved?
• Who will make the decision?
• How long will the evaluation take?
• Which of my competitors will take part?
• Does the client have a clear understanding of what they are doing and a
good process for getting there?

Although the buyer of products or services is in the driver ™s seat during an
evaluation, going to the trouble of providing the right kind of information to
the candidate vendors in this section ensures that the opportunity is attractive
to successful, smart vendors”the exact kind that will be ideal partners.
Because the vendor orientation section of the RFP often contains com-
pany proprietary information, the team may want to consider having the ven-
dor recipients sign nondisclosure agreements (NDAs). The firm™s legal team
or retained counsel can put together a simple NDA to be completed by all
The second major section of the RFP should be focused on gathering the
detailed data from the vendors; this helps determine which vendors should
be carried forward through vendor due diligence. This information is simi-
lar to the data gathered for the preliminary vendor screening but goes into
additional depth. Achieving this level of detail is possible because the indi-
vidual vendors alone have the expertise to fully answer the questions and
because the work is distributed across multiple vendors instead of the selec-
tion team.
The typical categories of information to be gathered in this section
418 The Back Office: Efficient Firm Operations

• Vendor: Information concerning the vendor company”size, stability,


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