Managing Vendor Selection for Vertical Enterprise Applications
AbstractBoston, MA, USA August 7, 2006
Poor vendor selection processes prevent financial institutions from achieving goals rapidly. Celent offers a set of guidelines to improve these processes.
Despite the fact that most financial institutions depend on vertical enterprise applications (pricing engines, core banking systems, order management systems, policy administration systems, etc.) supplied by vendors, many continue to be ineffective and inefficient at selecting vendor solutions, and the process of systems replacement or addition, already stressful, becomes further laden with fear, uncertainty, and doubt溶ot to mention excessive and complex documentation which impedes the process rather than assisting it. Celent's new report, , is designed to help financial institutions rethink their processes.
"The vendor selection process at many financial institutions is poorly designed," said Matthew Josefowicz, manager of Celent's insurance group and author of the report. "Too often, it is treated like any other purchasing decision where the choice is between different providers of essentially comparable products or services, like in desktop hardware or telecom service. Vertical enterprise applications are more complex and idiosyncratic than almost any other purchasing decision a company can make, and approaching it wrong can lead to unnecessarily inefficient processes that don't provide the right information to make the best decisions."
Celent recommends that financial institutions take a revised approach to vendor selection consisting of:
- A simplified RFI (not an exhaustive RFP) to identify "deal killers" among potential candidates.
- In-person meetings and demos to further evaluate the likely candidates.
- Reference interviews to reality-check impressions from the meetings and demos.
- Detailed RFPs to only the top two or three candidates, which are already deemed to be possible fits for a binding proposal.
- Selection based on response to the detailed RFP and all of the information gathered in the previous steps.
The report is based on Celent's own vendor selection methodology as well as interviews with industry-leading financial services CIOs. It is 19 pages long. A table of contents is available here.
Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].
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Table of ContentsBoston, MA, USA August 7, 2006
|Typical Practice and Its Risks||5|
|What Is Wrong with This Picture?||5|
|First Step: Simplified RFI||8|
|Next Step: Meetings and Demos||10|
|The First Round||9|
|The Second Round||12|
|Fourth Step: Detailed RFP||13|
|Transparency and Accountability||13|
|Define Business Goals||14|
|Support and Organization||15|
|Proof of Concept||16|
|Objectivity and Methodology||18|