Having recently published a report for purchasing managers that explains some best practice recommendations for reviewing digital asset management systems, we decided to devote a separate article on the role of vendor selection consultants and how external advisory service providers can be used in the vendor selection process.
There has been a fair amount of discussion about this topic in the software industry and beyond. While we cannot offer a definitive answer as to whether using an external vendor selection consultancy is worthwhile or not, we can share some experiences and thoughts, as well as outline a methodology that we believe encourages selection consultants in the DAM industry to offer a more ‘outcomes oriented’ approach to choosing vendors that aligns their goals more with those of end users.
As with any discussion of this nature, you need to form your own view about the relevancy and accuracy of the points raised by researching the subject closely yourself. As such, this article is more of an opinion post rather than a best practice guide.
What Is Vendor Selection?
Vendor selection means identifying a service provider to fulfil a project or implementation requirement you might have. Like any other business activity, it can be done in-house or contracted out. Outsourced vendor selection is most commonly used when the end user believes they could benefit from hiring a third party to help them choose a suitable service provider. The role itself has an unusual position that is part recruitment/hiring agency and part critic/review panel.
Why Use A Vendor Selection Consultant?
The textbook business case for using a vendor selection consultant is the ability to leverage their expertise, contacts and knowledge of the industry you are trying to purchase products or services in. Depending on their previous dealings with you and your sector, they might also cite their knowledge of your industry and company culture as additional benefits.
A good vendor selection consultancy will thoroughly research the market for your specific DAM needs. They should have a more in-depth research methodology than typing a few choice phrases into an internet search engine and making follow-up phone calls to arrange meetings (as you can do that in-house). The method used for selecting vendors should be clear, transparent and they should have an authoritative grasp of the majority of products on offer and a deep knowledge of key suppliers: their specialisms, sectors, key strengths etc
Change For The Better
Although vendor selection services can be invaluable for some organisations, the wider practices of these consultancies require industry-wide revision. It seems unsatisfactory that a single external entity can potentially impact the course of the implementation without necessarily remaining for the duration of a project or having any further stake in it. Therefore, in this article we aim to demonstrate a range of potential issues with using third parties to choose technology vendors and illustrate some solutions that may benefit everyone involved.
What Exactly Is The Problem?
Below are a number of areas where poor or biased selection consultant decisions can impact negatively for their clients.
1. Charging Vendors To Participate
Some analysts charge clients a fee for a report with existing evaluations of vendor products (based on a previous analysis or a dedicated review). If the document is independent and vendor neutral, then this is a reasonable option and allows cost conscious purchasing managers to get feedback without the expense of hiring the consultancy for a full engagement. In some cases however, the analysts will contact vendors and ask them to pay to participate or ‘sponsor’ the report on the understanding that they will be offered the opportunity to feedback on their own product. It is difficult to see how buyers can get a reasonable and fair evaluation from a report where the participants are required to ‘pay to play’. Either vendors will refuse to participate or will request some control over content.
If you are considering using these reports, find out how vendors are chosen for inclusion and why. You might not be able to glean this directly from speaking to an account manager, but perusal of their website should tell you if the marketing is as much to the sellers as it is the buyers. One further point with these reports is, even if they are impartial and objective, they may not cover a number of the vendors your own research has revealed, so that point needs to be verified also.
2. Lacking Deeper Knowledge
One benefit of vendor selection consultancies is their deeper knowledge of both the technology and how it can best serve your organisation and business sector. An intimate understanding of both the technical and business environment is required to match a suitable vendor to each client’s unique requirements. Such specific knowledge is not gleaned quickly, however. Even if a consultancy team has been involved in several DAM implementations, they may still lack the critical experience in the specific problems the DAM system must address. When sourcing vendor selection consultants, clients need to be assured that the team has some experience of the usage scenario proposed. Experience of the vertical market is a bonus, but with DAM it’s more about the nature of the task at hand and the business case, as these can vary widely across different firms – even those who operate in the same market sector.
Check who will be evaluating vendors and ask them about their personal experience in DAM, previous projects, etc. How long have they actually worked in this market and for who? Don’t just go on the credentials of the consulting company – it must be the people who you will work with directly who must be assessed. Also worth checking is how long the principle consultants will remain assigned to the project and in what capacity. If personnel changes to the consulting team are proposed later in the project, similar scrutiny of these individuals may also be required.
3. Value For Money Or Buying The Cheapest?
Understandably there are considerable cost pressures at the present time and procurement teams will be motivated to ensure that maximum return-on-investment is achieved. However, be careful how the vendor selection consultancy is incentivised. If the vendor selector has some management control over your budget or gets remunerated based on ‘best value obtained’ they can potentially be motivated to place too much emphasis on price at the sake of other key criteria. Ultra-cheap vendors may indeed represent great value for money or there may other less favourable reasons behind their pricing strategy (for example, underestimating the project scope). Always ensure you understand how any discount has been achieved and any potential concessions that may conflict with overall objectives for the solution (for example, long-term contractual commitments).
4. Financial Conflicts of Interest
This is less common with DAM because most vendors are not big enough to be publicly quoted, but just as financial analysts are required to declare an interest when issuing comments about market participants, it’s not unreasonable to request similar information from vendor selection consultancies as standard practice. If the project is significant and the award of it highly lucrative for the vendor then there is a potential risk of impropriety and that has to be minimised. The situation can become more complicated if the consultancy employs individuals who used to work for a vendor (‘poacher turned gamekeeper’). However, if all vendor selection consultancies are required to declare their interests, purchasing managers can at least make an informed decision about the potential risks and decide how to proceed.
5. Too Risk Adverse: Reliance on ‘Safe Lists’
Of course, all good vendor selection consultancies will only want to recommend those vendors who can provide reliable services to their clients. A common tactic amongst hiring agencies is to retain a ‘safe list’ of individuals or service providers with whom the organisation has worked successfully in the past and to refer back to this list to reduce selection risks. However, the use of safe lists does reduce the value of the selection consultancy to the client as rather than evaluating the entire market, only a small percentage of potential vendors are ever reviewed. In a market that is changing so rapidly, this strategic approach can be detrimental, as new or improved solutions are bypassed in favour of those ‘tried and trusted’ options. Remember, the role of the selection consultancy is to find the best vendor match for your problem, an objective that is impacted if only a sub-section of potential vendors is ever considered. Avoiding this problem is not easy. Some methods include asking the selection consultancy to declare how many times they have selected a vendor over a given period and for what implementations. Even if an NDA prevents them from naming specific clients, it should be possible to provide the business sectors involved and the numbers alone may speak volumes.
How Can Clients And Vendor Selection Consultancies Collaborate Better?
Analysis of the potential issues above indicates that some changes to practice are required. As outlined above, one methodology is to better align the goals of both client and consultancy throughout the duration of the engagement. Essentially, this requires that consultants have a stake in the overall outcome of the DAM project in common with the other participants in the process.
What Methods Can Be Used?
First consider the two most difficult tasks with Digital Asset Management system implementation:
- Building DAM products
- Realising the potential ROI from DAM
Software engineering is difficult. The implementation of a DAM system involves complex planning, coding, testing and refinement by a highly skilled team of people across many disciplines. Further, ensuring that an organisation is able to exploit the full potential of their DAM system once implemented is an equally complex task. Often this activity is labelled ‘change management’ and sidelined as ‘stuff that happens afterwards’ rather than being at the forefront of the procurement process when the system is initially considered.
This is where the DAM vendor selection industry is well positioned to provide high quality, results-orientated services to their clients. By working with clients to design strategies for full service delivery, rather than simply selecting a vendor at the starting line, consultants would be able to support those critical initial decisions made over the longer term, and clients would be able to benefit from a similar ‘results-orientated’ service as they do from vendors.
Instead of paying someone x days at y consulting rate for choosing a vendor to build the solution and then going away, the vendor selector should have responsibility for getting it into active use and be at least partly remunerated based on how well they achieve that goal (on project outcomes). This would ensure there is a correlation between the vendor consultants choose and how effectively that vendor/consultant team meet the Digital Asset Management needs of the business.
All the potential risks described could be avoided if the consultant, vendor and client all shared a common commercial objective. It would enable those consultants who really understand what makes a successful DAM to gain a proven advantage over their less diligent counterparts.
Our contention is that this ‘results-orientated’ approach may become commercial reality sooner rather than later. At the time of writing this article, the economic outlook remains poor outside the tech industry and although the DAM market has boomed over the last few years, the issue of long-term usage and adoption is becoming critical as the relative cost of replacing a DAM increases and access to capital investment is constrained. Companies simply cannot afford under-utilised systems that cost substantial amounts, both in terms of direct expenditure and staff productivity.
It is difficult to conceive of buyers in any software market being willing or able to retain consultancy services unless consultants step up to the challenge and demonstrate how they can add value to the delivery process beyond their current approach. More experienced consultants in both the Digital Asset Management and general Content Management markets have identified this issue and are likely to lead the way in a more client-centric, outcomes-lead service offer.