So, You’ve Decided to Invest in Digital Tech. How Do you Know Your Vendor is up to the Challenge?

Selecting the right technology vendor can help determine the success of a company’s transformation especially during this challenging period when the coronavirus pandemic has accelerated the adoption of digital technologies.

Generally, a company needs to study different factors in choosing a third-party technology partner such as the latter’s track record, transparent pricing, solutions and features, customer service and support, service downtime, as well as data security and privacy policies.

It starts with knowing what your needs are and how technologies can help the business cope with the rapidly evolving economic environment. You should study the solutions that fit your requirements and whether you just need to upgrade existing software or purchase new ones.

Once your problems and needs have been identified, proceed with reviewing available technologies, their robust features and customizability. Look at the solutions’ ease of deployment, accessibility and integration capability. You may also need to evaluate the adoption rate of the solutions and the key performance indicators or KPIs.

With the right products in mind, look at the list of vendors who provide the solutions that you need. It is recommended that you conduct due diligence including on the vendor’s financial condition, track record, investments in innovation, expertise, performance and capability to upgrade and improve offerings, quality of service and customer support.

It is advisable that a company thoroughly study the transparency of costing and partnership agreements that may include revenue sharing, incentives and fixed prices.

Listen to customer feedback and the recommendations of other companies with existing agreements with the prospective vendor. Review customer relationships and payment and financial agreements to avoid possible disputes in the future.

Aside from customer service, look at how the vendor supports training and development for its clients.

In an article for Brainyard, Janet Schijns, CEO of JS Group and a former Fortune 500 C-suite executive, says it is important to gauge a technology partner’s viability early on by looking at their performance on specific KPIs as well as references.

She warns against red flags such as high churn rate, low profitability and poor payment/credit history. A business failure on the part of the vendor will also affect a customer’s critical services.

This is why it makes sense to look at the vendor’s financial statements as part of the supplier review process. Schijns suggests looking at net profits as well as gross profits as business success metrics.

She says that in the technology industry, best-in-class service providers that rely on recurring revenue from end customers have the following key profit metrics: 60% gross margins for services and subscriptions; 30% for hardware sales; less than 30% SG&A costs; and higher than 20% EBITDA margin.

These figures alone are not enough to determine financial health, she says, while suggesting other KPIs such as customer churn; actual revenue vs. target revenue; gross profit margin; aging accounts receivable; net profit margin (net profit/total revenue);

Schijns says the review process should also cover services agreement, non-disclosure agreement and quarterly reviews to measure the vendor’s willingness to share information with you.

“Speak up promptly if you perceive a problem with a partner. The industry is changing quickly, and being aware of the risks, noticing downticks in performance and monitoring the financial health of your partners is the best way to make sure they continue to support your needs. After all, technology is critical to your long-term success,” she says.

An example of technology partner that provides the latest cloud-based application with robust features and manages vendor relations effectively is Netsuite. It is the leading integrated cloud business software suite that includes business accounting, ERP, CRM and e-commerce software.  

Marj Enriquez
Author / Marketing Head CloudTech ERP

Marj is Marketing Lead at CloudTech, with over 5 years of industry expertise, specializing in crafting innovative campaigns that drive tangible results and resonate with diverse audiences. Passionate about pushing the boundaries of digital marketing, with combination of strategic prowess and understanding consumer behavior to shape the future of the industry.



Send Us A Message