Purchasing a Solution

1. Purchasing a Solution Chapter 9

2. Reasons to Buy • Focus on core competencies • Lower costs • Higher reliability • Built in audit and security • Improved performance • Avoid political conflict

3. Reasons to Build • Gain competitive advantage • Unique environment • Easier to build than buy • Unsure of requirements • Want to gain expertise and experience

4. Project Examples: Build or Buy

5. Steps to Success • Understand your needs • Do your homework • Find a reliable, flexible, relationship-oriented vendor • Negotiate a contract • Put appropriate metrics and methods in place

6. Requirements • Mandatory: must be present for the product to be acceptable. Often yes/no. • Desirable: features that would be useful but not critical. Often evaluated for different levels of quality. • Irrelevant: features that may be interesting but have no real value to the organization.

7. Typical Features • Functionality • Modularity • Compatibility • Maintainability • Reliability • Security • Vendor Support

8. Sources of Information • In-house expertise • Internet • Vendors • Consultants • Literature • Similar installations • Review services

9. Features Matrix Weighting and Rating

10. Features Matrix Estimated Value

11. Acquisition Strategies • Rent: Short term, complete vendor support, high cost • Lease: Intermediate term, local support, user specified equipment • Purchase: Cheaper, total user responsibility • Contract: Full vendor responsibility, contract sensitive

12. Licenses • By machine: product can be installed on a single computer only. • Concurrent usage: product can be installed on a network as long as no more users can be running it than licensed. • Site license: organization can install up to the negotiated number of copies anywhere. • By individual: product can be installed on machines used by a single individual (e.g. home and office)

13. Request for Proposal A formal process for getting vendors to supply a product and a portion of the design work in exchange for a chance to get the contract.

14. Request for Proposal OPEN, FAIR COMPETITION WITH UNDERSTOOD CRITERIA All qualified vendors given an opportunity to bid.

15. Need to publish: • Written requirements (RFP document) • Process for selecting finalists • Formal presentation • Don't let vendors run the selection • Evaluation standards • Legal requirements and company policies

16. Concerns • Retain Core Competencies • You get what you negotiate • services • people • Understand your needs • Include basis of cancellation • for cause • for convenience • Vendor expects to make a profit

17. RFP Contents • Introduction • Instructions Objectives Contacts Timetable • System Requirements Mandatory Requirements Desirable Features • Evaluation Method

18. RFP Process • First Pass: Eliminate unacceptable alternatives; reduce the choices to 2-4 alternatives. • Second Pass: Select the final product.

19. Evaluation Criteria • Features Table Hard Dollar Evaluations Soft Dollar Evaluations • Delivery Date • Acceptance Criteria & Penalties • Mandatory Features • Desirable features

20. Verifying Capabilities • Acceptance testing • Performance testing • Work sample • Generated test data • Benchmarking • Modeling and simulation