How to Choose a Vendor

1. How to Choose a Vendor N-TEN DC Regional Conference October 23rd, 2003

2. Agenda • Introductions • Why selecting IT support is hard • How nonprofits get tech support • When to look for outside help • How to find the right vendors to approach • The Proposal Process • Requirements through contract negotiations • Goal: understand how to make informed decisions when buying software and technical services 2

3. Introductions – Lisa Rau • Confluence: • IT services firm providing support exclusively to the nonprofit sector • Over 110 nonprofit customers and ~25 staff since founding 3/2001 • Lisa Rau: • CEO and cofounder • ~20 years of experience in the IT support services industry • Managed dozens of teams of contractors / vendors • Negotiate contracts for service 3

4. Services Breakdown 4

5. Introductions – Lisa Rau • Responded to hundreds of RFPs • Write around 2 proposals a week for nonprofits • As IT contractor to the Federal government, learned “best practices” in procurement • Frequent invited speaker on IT budgeting, fundraising for IT, and IT-related capacity building • VP on the Board of the YWCA NCA • Computer Scientist (BS, MS and Ph.D.) • Peer Reviewer, for MD Nonprofits’ Standards of Excellence Program 5

6. Why selecting IT support is hard • Complex, unfamiliar material • Benefits are hard to quantify • Costs often run well beyond estimates • The people explaining the choices are not always good at explaining • Extra due diligence to ensure you are getting the right stuff at the right price • Further exacerbating the situation: • Fewer economies of scale • Every tech dollar seems a dollar not spent on clients • Small capital budgets 6

7. When to Look for Outside Help How do nonprofits get technical support?

8. How do nonprofits get technical support? • Accidental techie • Limited relief from “primary” job responsibilities • Self-taught • Limited authority to make policy • Lone consultant • Can appear to be less expensive if based on hourly rate • Cannot have breadth of skills • Limited backup for when occupied or not available • No quality assurance, best practices, methodologies, etc. • Circuit rider • Same as lone consultant • Often focused on specific purpose 8

9. How do nonprofits get tech support? • For-profit organizations • Best is exclusive / primary focus on nonprofit sector • Smaller ones w/nonprofit practice can work, • Commercial approaches are appropriate for the largest of nonprofits • Nonprofit providers • Special people for special projects • Pro-bono / Volunteers • High turnover and not necessarily there when you need them • Contractual relationship often overlooked • Same problem as lone consultants • In-house IT Departments • Other 9

10. When to Look for Outside Help • Do you fix your own phone system, copier, or program your own accounting system? • Special expertise / Expertise not available in-house • Design and development of database or website • Selection and/or implementation of commercial software system • Networking, security, equipment selection • Outside is better than inside • Independent view – consultants are often “heard” more than internal staff • Staff tend to open up more to outsiders who guarantee privacy • Second opinion • Unbiased and fresh perspective 10

11. When to Look for Outside Help • Extra Capacity / Initiative • A consultant will make sure things move along • Extra Hands • A special project may need temporary extra effort • Moving offices, major system upgrade over a weekend • Philosophy / Cost • Some organizations like to stay focused on their mission • Maintaining systems and the technology infrastructure is often not part of the mission • Paying a part-time expert is often more cost-effective than a staff member who dabbles 11

12. How to find possible partners

13. How to find the right vendors to approach • In the Greater DC Area, there are vendor listings at the: • Washington Council of Agencies • Maryland Association of Nonprofit Organizations • Washington Regional Association of Grantmakers (paid) • Technology Works for Good • www.techsoup.org • It was supposed to be coming soon – N-TEN Capacity Map • Exploit your network – ask your peers • Traditional Means: • Research (Internet, yellow pages, advertising in Chronicle of Philanthropy, etc.) • Post on listservs • Nonprofit-Tech-Jobs (mostly for staff) • DC Web Women • Disseminate 13

14. How to find the right vendors to approach • Know whether: • The recommendation is given freely or with a hidden referral fee • Vendor / consultants had to pay for their listings • The sponsoring organization did any quality assurance on the listings / referrals • Time / Quality tradeoff • The more widely you disseminate your need, the more time it will take to choose but the better the end result 14

15. What if you already have a vendor you like? • For major or new projects (outside the existing working relationship): • Competition can only help your nonprofit. Why? • Forces you to think through your requirements enough to communicate them effectively • Can help provide leverage / negotiate with your current vendor • You may find a firm that is better suited to do the work at hand • Periodically re-compete your contract • Like you re-compete your audit firm • Ensures your vendor doesn’t “take you for granted” • Likely to get a break and/or find a better match • Sooner or later, you reach the limits of that vendor’s abilities and/or experience 15

16. The Procurement Process

17. The Procurement Process • Requirements Analysis • Request for Proposal • Questions and Answers • Down-Select to Finalists • Interviews • Selection • Negotiation • Project Implementation and Management 17

18. Requirements Analysis • Figuring out what you want to do is often the hardest part • The broader the staff input (and potentially board’s) the better the end result • It is OK to state outcomes in functional, not technical terms • Write down the results of your analysis • Prioritize • Incorporate into RFP 18

19. Requests for Proposals • The proposals you receive are a direct reflection of the RFP you issued • Provide: • The specific information you want from each vendor, in what order; how proposals should be submitted, • The evaluation criteria – it should be complete and measurable • What’s wrong with this: “Proposals will be evaluated on all appropriate criteria, including, but not limited to, cost, experience and support offered.” • Timetable and schedule • Don’t ask for information you don’t need or won’t evaluate • Process for Q&A • Costs should be clear and broken out into tasks / subtasks 19

20. Evaluation Criteria • Components to weight: • Capabilities of specific individuals • Corporate Expertise – in this area • References and Prior Experience • Technical approach • Understanding of requirements • Cost • The quality of proposals is often an indication of the quality of the work • Work must be broken into phases with visible milestones • Evaluate credibility and reliability first 20

21. Questions and Answers • Do not let on who the other bidders are • Use “Bcc” if emailing all vendors at once • All questions should be submitted in writing by a certain date • All questions and all answers should be responded to in writing to all respondents • Ensures a level playing field 21

22. Down-select and Interviews • After receiving the proposals • Now it is time for you to ask questions back – give the vendors one chance to “make it right” • CRs (Clarification Request) and DRs – (Deficiency Reports) • Price comparison requires apples to apples – low bid is as dangerous as high bid • Make a matrix with your evaluation criteria in it and score the responses • Get a committee together to make the decision • Consider bringing the vendor in for an in-person interview • CRs and DRs can be handled through this oral process – • Make sure the company knows what kind of people to bring • Often, the it is clear who the winner is – • the selection is obvious 22

23. Hiring Technical Support – Best Practices • The specific individuals assigned to do the work is the biggest contributor to project success • You get what you pay for • The “hourly rate” fallacy • But how MANY hours at WHICH rate? Is travel time included? • Past performance is the best predictor of future success • Check references – last 5, not their choice • Get resumes for the specific individuals who will be assigned • Look for the real thing – not someone who learned technology on the side • Academic degrees or technical training • 2+ years on-the-job, relevant work experience 23

24. Negotiations • Don’t pass up the opportunity to negotiate • Terms of contract • Price and payment • Develop a web of relationships • Technician and organizational point of contact • Business managers • Executives • Contracts are there to protect your organization • Non-solicitation - Nondisclosure • Insurance - Payment / Billing • Arbitration • Intellectual property / ownership • Escrows • Lock-in future escalations 24

25. Some Specific Observations

26. Proposal Manners • Don’t issue an RFP unless you intend to issue an award • Be sensitive to the time and effort of the vendor – they aren’t getting paid for this! • Always provide useful feedback to the vendor so they can do better / be more successful the next time 26

27. Network / Desktop Maintenance • Don’t cut corners on wiring • The incremental cost of adding another drop are small compared to bringing the cabling guy back • Professional installations are appropriate for professional organizations • Backup, support, and reliability are more important than performance • Most nonprofits rarely tax their networks • No such thing as “set and forget” with a network – you need in-house skills • Don’t overbuy your server – most nonprofits need moderate performance 27

28. Web development • This is a commodity now • Make the oversupply work for you • Websites are works in progress – don’t plan on a finished product • The associated internal business processes for maintenance are as important as the website itself • Putting responsibility in the communications department seems to work pretty well • Build only as much as you can keep updated • Think first about WHO will view your site, then about WHAT they will want to see • Plan review of site every 6 months 28

29. Custom programming • These types of projects succeed or fail based on the quality of the up-front requirements analysis performed • Make sure to get a broad set of staff input up-front • If you didn’t get sticker shock, the price is probably too low • Budget 30% of development per year for updates and support • Stick with commonly used languages and applications • You’ll use 60% of what you ask for – buy only that • Pay special attention to any contract you enter into – protect your organization from exposure • Negotiate with the vendor 29

30. When you run into problems • Don’t hesitate to surface problems early • Often, the firm doesn’t know there are problems – they aren’t mind readers! • The best performing vendor is one who thinks they are about to be fired • Suggest specific fixes – i.e., replace the assigned technician • The hardest decision to make is to cut your losses • If outcomes are not achieved you MUST ask whether to continue • Avoid blame and move on – proving fault is very difficult in IT 30

31. Conclusions / Discussion / Questions • Time and effort spent up-front will pay off down the road • Competition can only help • Proposals you receive are only as good as your requests 31

32. Contact Information Lisa Rau Confluence Corporation 202-296-4065 (office) 703-819-3067 (mobile) lrau@confluencecorp.com 1111 19th Street, NW Suite 900 Washington DC 20036 32