Inspired by InformationWeek’s 9 Questions To Ask A Tech Startup, here are the equivalent nine questions that you should be asking your prospective sourcing and procurement technology vendors.
What’s Your Background?
This question applies to founders, key executives, and the company itself. Look for the right mix of people with deep technical expertise, deep domain expertise, and proven success in managing a growth company in a growth industry. If the depth of technical expertise is building websites (and all coding is outsourced), the depth of domain expertise is buying office supplies, and the depth of management expertise is managing a team of advertising executives – RUN!
When Was Your Company Formed?
Anything less than two-to-three years is a cause for caution. You want to see maturity in terms of the management team, revenue, and the product.
What’s Your Financial Situation?
You want to know where the company is getting the money it needs to support day-to-day operations. Is it drawing on VC funding? If so, at what rate is the required draw decreasing on a monthly basis and can the company honestly expect to be at least break-even before the funding runs out?
Do You Expect To Be Acquired?
Most companies in this space are start-ups, or were in the not-too-recent past. They should have had an exit strategy from day one. If the exit strategy was acquisition, how soon do they expect that to happen? If the exit strategy is six months down the road, be cautious – since many companies in the space will acquire a competitor just to take it off of the playing field – and there goes your investment in learning to use their technology!
What Do You Have Today?
Every vendor and their dog will paint you a rosy picture of where the space is going and where their product is going if you give them the chance, but what’s really important is what they have today. You’re buying a product because you need to increase productivity and decrease costs today – not 3 months or 3 years from now! Furthermore, this is an emerging market – that means that not every solution is equal, and, thus, not every solution is equally appropriate for your needs. You really need to understand what the vendor has today and how it solves your problems.
What Success Have You Had With Customers Similar To Us?
The usual “our e-auctions have saved an average of 12%” is not enough to base a decision on. Although you shouldn’t be considering any vendor who can not make a significant productivity or savings claim, you want to be sure that the vendor you select has saved money in the categories that you need to source or reduced processing time in the processes that your organization employs. An average is just that – an average. Maybe they save on average 20% on office and janitorial supplies and 2% on high-tech purchases. If the bulk of your purchases are for high-tech, then the product they have today is not the product you’re looking for.
Can I Talk To An Early Customer?
You’re looking for a company that has demonstrated the ability to continually improve – not just a company that expresses a willingness and a grandiose roadmap. An early customer will be able to give you insight as to whether or not you can expect the promised savings or productivity gains, how long it’s likely to take, and whether the company has a history of delivering on its roadmap and promises.
Who Are Your Competitors?
The list they give you should be similar to the list you build yourself after doing your homework. If it’s not, either they don’t understand what they’re selling or don’t think they stack up well against their real competition. Either way, it’s a warning sign.
Can I Visit Your Offices?
You want to feel comfortable that you’re dealing with a professional, mature company. This is sometimes the only way to know. Just because the salesman is slick and well-prepared, doesn’t mean the company is well managed. And just because the competition tells you that the company you’re considering is four-guys-in-a-garage, doesn’t mean it is. The opposite can be true. Just like you take the time to visit a new supplier before giving them a major contract, take the time to visit a new technology vendor before giving them a major enterprise contract. It’ll only take a day and won’t cost you much, especially compared to how much you could lose if you pick the wrong vendor!