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Technology leaders don’t have the luxury of only thinking about upfront costs when choosing a software vendor. In today’s digital business world, a software vendor has a big impact not only on the day-to-day productivity of clients, but also on their budgets, their future growth, the satisfaction of their employees and customers, and, often, even their reputations.
Because the stakes are so high, it’s essential to thoroughly vet potential software vendors and ensure the working relationship with the chosen provider is well-defined and set up to run smoothly. Below, 20 members of Forbes Technology Council share important steps to take before closing a deal with a software vendor.
1. Go Through A POC Or Trial
Doing a proof of concept or trial with the software vendor before closing the deal ensures you’ll have smooth technical and business integration into your organization. But before you do that trial, make sure you have clear, prioritized parameters for measuring success. A good software vendor will help you with this and make sure you are evaluating their solution with the right metrics. - Carolyn Raab, Corsa Security
2. Analyze Their Cybersecurity Readiness
A thorough analysis of the vendor’s cybersecurity readiness must be conducted. If we learned anything from the MOVEit attack, it is that assuming your vendor is secure may lead to devastating outcomes. Many of the more publicized attacks in 2023 were a result of third-party software or vendors being compromised; as a result, their customers’ data was stolen or encrypted. - Dror Liwer, Coro
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3. Request An SBOM
Companies can’t afford to close a deal with a software vendor before gaining visibility into their supply chain. At a time when cyberattacks, ransomware and data leaks make headlines daily, software bill of materials management and overall software supply chain visibility have become essential to ensuring your next software purchase doesn’t expose your company or customers to undue risk. - Brandon Daniels, Exiger
4. Look At The Platform’s Longevity
Evaluate the platform’s longevity and the level of investment by the vendor. Small startups get acquired; big vendors may change strategy. Either situation can lead to a platform getting killed or deprecated. Look for good signs—such as the platform’s integration with others from the same vendor—and bad signs, such as immaturity or overlap with their other products. Research and protect yourself! - Andrew Brust, Blue Badge Insights
5. Prioritize The Technical Scope
Beyond pricing, prioritize the technical scope in your sales cycle. Avoid excessive price shopping; ensure the solution aligns with your organization’s technical needs and fully safeguards your environment across platforms. Before final authorization, revisit the beginning to verify alignment with technical requirements. - Michelle Drolet, Towerwall, Inc.
6. Ensure New Software Complements What You’re Already Using
Connectivity and integration with your existing IT architecture and systems are key. Enterprises are trying to build out seamless frameworks to deliver their digital initiatives, so new software must complement and interact with what they already have. - Jeremy Sindall, digitalML
7. Ask For Case Studies And Information On ROI And AI
First, ask for the ROI and multiple case studies. Second, ask about their adoption of artificial intelligence and machine learning. There is a lot of “AI washing,” in which bogus claims are made for marketing. Ask them about what models they use and what data they train those models on. Are they building their own models or using canned models? Do they have a data science team? How accurate and trustworthy are their models? - Elise Carmichael, Lakeside Software
8. Establish And Track Renewal Conditions
Leaders often focus on the minutiae of a software deal before signing, but one often-overlooked step is renewal planning. Many teams lose sight of the future when selecting software, but it’s important to establish the conditions the vendor must meet before getting a second contract. Setting reminders, assigning decision makers and planning the assessment are critical to obtaining ROI over the long term, not just year one. - Rujul Zaparde, Zip
9. Assess Their Ability To Tailor A Solution
Ensure there will be flawless and timely integration with other internal company systems. The vendor must be able to customize the process according to your specific business requirements. They must be flexible, because they will have to tailor their software to the specific needs of your industry or company—that might range from data formats to a unique legal environment. - Julius Černiauskas, Oxylabs
10. Look At Their Change-Management Procedures
Leaders must prioritize assessing how the vendor handles workflow change management and user onboarding. Understanding how the vendor manages changes and mitigates resistance is pivotal to ensuring the successful adoption and integration of the new software. Software with no users is of little value; vendor commitment to user-centric change management is important. - Christina Cai, Lydia AI
11. Calculate The TCO
Before closing a deal with a software vendor, it’s vital to evaluate the total cost of ownership. This includes not just the purchase price, but also implementation, training, maintenance and operational costs. Understanding the TCO ensures a choice that’s cost-effective over the long term and that aligns with your strategic goals. - Armon Petrossian, Coalesce
12. Lock In Licensing Costs
CIO engagement is highest in the final phases of the buying process, when vendors have the most sway over purchasing decisions. Given that ROI is important, in the final stages of a sale, it is very important to lock in licensing costs or cap price increases over three to five years. This is the most important step before closing a deal with a software vendor. - Kannan Venkatraman, Pinochle.AI
13. Ensure Values Alignment
The most important step is not technical. All the functionality, integrations and so on are table stakes, and if the vendor couldn’t offer them, you wouldn’t be talking to them in the first place. You need to ensure the philosophy of the vendor matches that of your company. Do they have similar values? Do they treat their people well? And frankly, will you and your team enjoy working with them? That would be my focus. - Ken Feyder, Hermès of Paris
14. Verify That There’s No Unnecessary Duplication
CIOs, CTOs and technology executives need to look at their tech architecture to ensure there is no unnecessary duplication and waste. Being thoughtful here leads to cost savings in the long run without sacrificing functionality. - Pradeep Madhavarapu, Isima
15. Evaluate Their Track Record And Commitment To R&D
Our view is that a vendor should not just be a service provider, but a partner in innovation and growth. We evaluate their track record and commitment to innovation through references. Do they invest in research and development? Are they adaptable to emerging technologies? A partner who is forward-thinking and aligns with your organization’s growth trajectory is a valuable asset! - Matt Berseth, NLP Logix
16. Establish A Well-Defined Data Strategy
CIOs and CTOs need to have a clear understanding of the strategic benefits of the data the new software will bring. When combined, the new software and your infrastructure need to make the data available seamlessly to drive strategic decisions. Any friction with the data will impact your competitive edge. Developing a well-defined data strategy that’s endorsed by the chief data officer and business leadership is an important step before acquiring new software. - Prashant Motewar, Equinix
17. Ensure Ongoing Support, And Have An Exit Strategy
There are a couple of relevant details. First, ensure there are proper incentives for the vendor to provide ongoing daily support. Second, evaluate switching costs to ensure there is a clear path to migrate out to a different vendor if the relationship does not work out or the software vendor’s business continuity is at risk. - Ludovic Lassauce, SIMO
18. Examine Their Financial Health
We are in an era when more than half of startup software companies risk insolvency or acquisition. CIOs and CTOs must examine a vendor’s capitalization table for financial health, assessing the cash burn rate and the leadership’s track record of exiting companies in the past. Otherwise, what you are buying won’t even exist in a year, and you will be back on the starting block. - Blake Brannon, OneTrust
19. Make Sure You Understand Their Future-Proofing Strategy
It’s important to understand a vendor’s future-proofing strategy as part of their software evolution journey. Though feature roadmap discussions are of low priority, it’s critical to understand how the product’s evolution matches up to their five-year plan for organizational growth and how nimbly and seamlessly they adapt to and integrate new and upcoming technologies within their own stack. - Bibhakar Pandey, CX Studios
20. Be Clear On What The Vendor Can And Can’t Do For You
Speaking as a vendor, buyers must consider how to build trust between themselves and the vendor. Some organizations cannot share details even with trusted vendors; for such organizations, a consultative vendor may be limited in what they can do to support you. In contrast, younger organizations may benefit hugely from bringing in experienced consultative vendors, provided they build trust and work closely together. - Mike Pappas, Modulate
