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Comparing apples to apples in vendor pricing

We're considering migrating from one software vendor to another in order to make our data center more efficient. We're being pitched by half a dozen vendors - all of whom say they can offer the best price. All of them have different approaches to pricing, and we're having difficulty figuring out which one would work best for us. Are there some guidelines to follow that will help us determine which pricing method would work to our benefit?

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Truthfully, there are two halves to your question: 1) How do we get information from the vendor in a format we desire? And 2) What pricing method works best in our environment?

Unfortunately, I am not able to answer the second question, because the answer depends wholly upon your specific environment, your specific needs and your individual business requirements. Licensing models are plentiful and each has benefits and detriments depending on the software, the environment and the application (intended use).

However, I can answer question one and tell you how to get pricing information in a way that is most valuable to you.

The best guideline to follow at this point is to prepare and release a formal RFP to get the vendors to provide you the information you're seeking - as approaches to pricing, while necessary to review and evaluate, are not the most important item in the list of things to evaluate when purchasing software. So, with that in mind, let's step through the RFP process. If you have never used an RFP before, there are several good templates available online (do a Google search for "rfp template" - just make sure to customize ANY template used to your business' requirements!)

First, and of utmost importance, is your ability to clearly define what problem you're looking to solve. This can be a requirements document or a technical specification. Regardless of the form, make certain that you clearly define your needs (and wants). Additionally, now is the time to request pricing in a certain form (that is, you want "concurrent user licenses" versus "per seat licenses"). Some vendors will not budge, but now is the time to ask.

Second, you'll "wrap" those requirements inside an RFP package. This package contains all sorts of instructions (how to respond, who to contact on your side to maintain consistent communication, etc.) along with a series of technical and business questions designed to give you a feel for each vendor's abilities to handle your business. Oh, and don't forget to include a copy of your template standard software license agreement with a statement that you intend to use this license instead of theirs.

Many times the next step is determining the list of vendors to which you'll send the RFP, but in this case, you already have that list. Contact each vendor and ask them if they'd like to participate. Then send your RFP to each vendor. Responses will come back to you, and it will then be up to you (and hopefully your team) to review the RFP responses.

If you've drafted your technical and business requirements with a good deal of specificity, you should have each vendor's specifications and pricing in a format that is useful to you. You can then compare apples to apples instead of apples to oranges and can make the most informed purchasing decision possible.

This was first published in March 2005

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