How to Select Vendors in 2002

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This year, integrators can be certain that IT budgets will be closely monitored and purchases will face a degree of scrutiny that hasn't been seen since the late 1980s. The good news is that manufacturers will be competing for VARs. Today's vendors have their work cut out for them as they try to maintain a competitive edge in a buyer's market.

Remember the early days of e-business? Organizations were highly reactionary in their technology selections and implementation experiences, when extensive IT budgets made it easy to acquire technologies without the absolute certainty that they would deliver value. In contrast, next year, organizations plan to leverage their existing technology investments first and look to new products as a last resort. And when selecting new products, organizations will put vendors and products through more extensive scrutiny before making any buying decisions.

That's precisely why it's important for solution providers to select the right vendor partners. Here are seven ways to gain a competitive advantage with the right products this year.

1. Be sure the vendors can clearly demonstrate their product's value proposition and be able to show how it meets a specific organization's unique application needs. It's also critical for vendors to show how their products leverage an organization's existing platforms and complement solutions from household names, such as IBM, Microsoft, Oracle and Siebel.

2. Determine what kind of ROI you'll be able to offer your end customers. Before entering into a contract, many organizations will also demand proof of payback for their specific technology applications. Most of the customers we advise on technology selection and implementation demand that vendors demonstrate the product's ability to pay for itself and associated implementation costs within 21 to 24 months. Organizations are now highly focused on technology solutions that can help them cut costs and deliver measurable returns on investment. For example, at a recent bidders' conference, a large health-care insurer told bidders not to submit a proposal unless they could show how their products would cut 40 percent of the $150 million the health-care insurer already spends on its customer-service initiatives.

3. Don't be bowled over by whiz-bang, bleeding-edge solutions. Buyers are getting smarter about technology selections. They're not as impressed with bleeding-edge solutions as they are with stable products that deliver what they promise. They expect vendors to prove their products' abilities with inexpensive prototypes before they make any purchasing decisions. Organizations want proof of ROI, implementations that require minimal time and effort, and the option for a phased rollout in which they start with a pilot in one department, and then roll out the product across the enterprise on an as-needed basis.

4. The vendor must understand the competitive landscape, and where its product fits into the market. Ask the following: How many products does your product compete with? Are they all going after the same exact market? Does your product offer horizontal applicability or serve a niche? Does your product messaging clearly articulate your unique differentiators from those of your competitors'? Vendors that can identify and exploit their products' competitive advantages is a must for 2002. When it comes to the product, it is critical for solution providers to deliver superior technology that meets the functional requirements of organizations' application needs. VARs should select vendors that know how their products stack up to the competition in terms of capabilities.

5. After you are sure your vendor understands its own market, make sure it knows yours as well. It should have researched the market and know exactly the types of applications for which organizations are using the technology. The vendor should be able to tell you the key areas of functionality necessary to meet the needs of those applications. Vendors that come out on top in 2002 will know exactly which applications their products complement and will be able to show customers exactly how their products will eliminate specific pain points associated with these applications.

6. Impress upon your vendors that they must distinguish between nice-to-have features and those that are critical to the applications for which your technology is used. As a solution integrator, you know that if you can show customers the value they will derive from your core product capabilities, they'll forgive you some minor functionality gaps. For example, in the area of enterprise-application integration, the key application needs of the majority of our customers are efficient and economic means to integrate their existing systems and the automation of business processes across those systems. The product that does the integration also should have portal capabilities that deliver a single interface to the information on the back-end systems. But, the attractive interface isn't the deal-breaker,the key requirement is the ability to help organizations gain efficiencies by integrating and automating the information spread across their disparate technologies.

7. Does the vendor's products work with the big names in technology? If you're not dealing with IBM, Microsoft, Oracle or Siebel, you'd better have a story for how the product works with those household names. Documentum and FileNET demonstrated their insight on this trend this fall when they announced modules that allow their content-management products to interact with Siebel's CRM solutions. Not only did those vendors recognize CRM as a key application that could benefit from content management, but they also delivered the ability to bring this functionality to one of the biggest names in the CRM space.

James K. Watson is president and CEO; Kelley West is a senior analyst and Bob Anders is a technical editor at Doculabs, an industry analyst and advisory firm that helps companies plan their e-business strategies and select and optimize technologies for their e-businesses. Contact them at (312) 433-7793, or

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