Purchasing a Solution

Chapter 9

Reasons to Buy

Focus on core competenciesLower costsHigher reliabilityBuilt in audit and securityImproved performanceAvoid political conflict

Reasons to Build

Gain competitive advantageUnique environmentEasier to build than buyUnsure of requirementsWant to gain expertise and

experience

Project Examples: Build or Buy

Type UsualOption

Reason

TransactionProcessing

Purchase Requires extensive auditand error checking

DSS Build Need frequent changesand custom displays

WebInterface

Build Companies want customaccess

Infrastructure Purchase Requires special expertiseand security

Steps to Success

Understand your needsDo your homeworkFind a reliable, flexible, relationship-

oriented vendorNegotiate a contractPut 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

FunctionalityModularityCompatibilityMaintainabilityReliabilitySecurityVendor Support

Sources of Information

In-house expertiseInternetVendorsConsultantsLiteratureSimilar installationsReview services

Features Matrix

Weighting and Rating

Feature Weight Rating Score (=W*R)

Ease of use 10% 4 .4

. . .

Features Matrix

Estimated Value

Feature Value % Present Score (=W*R)

Ease of use $20,000 50% $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 finalistsFormal presentation

Don't let vendors run the selection

Evaluation standardsLegal requirements and company

policies

Concerns

Retain Core CompetenciesYou get what you negotiate

services people

Understand your needsInclude basis of cancellation

for cause for convenience

Vendor expects to make a profit

RFP Contents

IntroductionInstructions

Objectives

Contacts

Timetable

System RequirementsMandatory 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 TableHard Dollar Evaluations

Soft Dollar Evaluations

Delivery DateAcceptance Criteria & PenaltiesMandatory FeaturesDesirable features

Verifying Capabilities

Acceptance testingPerformance testing

Work sample Generated test data Benchmarking

Modeling and simulation