Purchasing a Solution
Chapter 9
Reasons to Buy
Focus on core competencies
Lower costs
Higher reliability
Built in audit and security
Improved performance
Avoid political conflict
Reasons to Build
Gain competitive advantage
Unique environment
Easier to build than buy
Unsure of requirements
Want to gain expertise and experience
Project Examples:
Build or Buy
Type
Transaction
Processing
DSS
Usual
Option
Purchase
Reason
Build
Need frequent changes
and custom displays
Companies want custom
access
Requires special expertise
and security
Web
Build
Interface
Infrastructure Purchase
Requires extensive audit
and error checking
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
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.
Typical Features
Functionality
Modularity
Compatibility
Maintainability
Reliability
Security
Vendor Support
Sources of Information
In-house expertise
Internet
Vendors
Consultants
Literature
Similar installations
Review services
Features Matrix
Weighting and Rating
Feature
Ease of use
...
Weight
10%
Rating
4
Score (=W*R)
.4
Features Matrix
Estimated Value
Feature
Ease of use
...
Value
$20,000
% Present
50%
Score (=W*R)
$10,000
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
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)
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.
Request for Proposal
OPEN, FAIR COMPETITION WITH
UNDERSTOOD CRITERIA
All qualified vendors given an opportunity
to bid.
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
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
RFP Contents
Introduction
Instructions
Objectives
Contacts
Timetable
System Requirements
Mandatory Requirements
Desirable Features
Evaluation Method
RFP Process
First Pass:
Eliminate unacceptable alternatives;
reduce the choices to 2-4 alternatives.
Second Pass:
Select the final product.
Evaluation Criteria
Features Table
Hard Dollar Evaluations
Soft Dollar Evaluations
Delivery Date
Acceptance Criteria & Penalties
Mandatory Features
Desirable features
Verifying Capabilities
Acceptance testing
Performance testing
Work sample
Generated test data
Benchmarking
Modeling and simulation