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Transcript of Purchasing a Solution Chapter 9. Reasons to Buy zFocus on core competencies zLower costs zHigher...
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Purchasing a Solution
Chapter 9
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Reasons to Buy
Focus on core competenciesLower costsHigher reliabilityBuilt in audit and securityImproved performanceAvoid political conflict
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Reasons to Build
Gain competitive advantageUnique environmentEasier to build than buyUnsure of requirementsWant to gain expertise and
experience
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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
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Steps to Success
Understand your needsDo your homeworkFind a reliable, flexible, relationship-
oriented vendorNegotiate a contractPut appropriate metrics and methods in
place
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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.
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Typical Features
FunctionalityModularityCompatibilityMaintainabilityReliabilitySecurityVendor Support
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Sources of Information
In-house expertiseInternetVendorsConsultantsLiteratureSimilar installationsReview services
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Features Matrix
Weighting and Rating
Feature Weight Rating Score (=W*R)
Ease of use 10% 4 .4
. . .
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Features Matrix
Estimated Value
Feature Value % Present Score (=W*R)
Ease of use $20,000 50% $10,000
. . .
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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
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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)
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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.
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Request for Proposal
OPEN, FAIR COMPETITION WITH UNDERSTOOD CRITERIA
All qualified vendors given an opportunity to bid.
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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
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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
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RFP Contents
IntroductionInstructions
Objectives
Contacts
Timetable
System RequirementsMandatory Requirements
Desirable Features
Evaluation Method
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RFP Process
First Pass:
Eliminate unacceptable alternatives; reduce the choices to 2-4 alternatives.
Second Pass:
Select the final product.
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Evaluation Criteria
Features TableHard Dollar Evaluations
Soft Dollar Evaluations
Delivery DateAcceptance Criteria & PenaltiesMandatory FeaturesDesirable features
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Verifying Capabilities
Acceptance testingPerformance testing
Work sample Generated test data Benchmarking
Modeling and simulation