Vendor Selection & Management

Business Situation

MediServe’s Strategic Plan identified a significant program to transform the company’s flagship single tenant, client server product into a Software as a Service (SaaS) architecture.  Execution of this program exceeded the manpower capacity of the in-house software engineering department.  Executive management determined that the best approach would be to acquire engineering capacity through a long-term provider relationship, and that offshore resources would be used to mitigate the cost of this expansion.

Solution

Over the course of a 3 month span, Dennis developed a vendor sourcing program from scratch and executed the plan to initially select two vendors to commence development activities.  Eight months later, the vendor list was down-selected to a single source candidate. This relationship is now approaching its 5th full year, and continues as a valued partner for the company.

RFP & Selection Process

Since MediServe had not performed any outsourcing or contract bidding activities prior to this point, Dennis developed an RFP describing a software development project which was the first step in the SaaS program.  9 vendors were invited to submit bids on this RFP.  Vendor proposals were processed through an explicit scoring matrix to produce the top 3 candidates, who were then invited to telephone interviews before final down-selection to the top 2 vendors, each of which was offered a contract to perform part of the proposal project.

Dennis published a version of his RFP template on his blog as an opportunity to share it with others who were undertaking similar activities:  Software Outsourcing RFP Template You Can Download for Free

The Microsoft Word version of the document can also be dowloaded here: 

Dual Source

Two candidate companies scored very well during the RFP process.  Each of them presented a different set of strategic advantages.  Rather than picking only 1 winner, and possibly missing out on a superior  option, the initial project was divided into 2 portions and each  vendor was asked to execute one portion.  This strategy quickly surfaced the strengths and weaknesses of the two companies  and allowed domestic team personnel to compare the operating styles of the two vendors.  Over the course of several months, the leading partner emerged, and was offered a contract to proceed with the program.

Single Source

Dennis modeled a collaborative working relationship with the single source vendor.  This relationship was anchored in two fundamental values:

  1. Face to face relationships between the 2 organisations
  2. Free-flowing and open communication

To support the development of face to face relationships, Dennis traveled overseas to visit the offshore team a total of 5 times.  Other key members of the MediServe team also made overseas trips to build rapport, educate, train and provide onsite feedback for the offshore team.  Further, using Skype, a robust daily dialog was allowed to emerge, developing the offshore team as an extension of the MediServe software engineering organization.

Issues were always addressed quickly and directly.  In an early situation, the offshore team failed to comply with the technical requirements regarding software testing.  Dennis communicated with all the principle parties the scope of the problem, the costs of the problem and the consequences if the problem was not fixed rapidly.  The vendor quickly re-educated the team, adjusted staffing and brought the problem area under control.  This model for managing issues became the template for all future issue resolution matters.

Benefits

Over the course of almost 5 years, the offshore team demonstrated value to the MediServe organization and grew from an initial team size of 8 staff to over 35.  This flexibility and scale afforded MediServe the scale to react to market situations.  The offshore team was integral in the following activities:

  1. 3 new versions of the MediLinks EHR package
  2. 2 feature expansions to the MediLinks EHR
  3. 1 data collection instrucment to support a CMS payment reform study
  4. A SaaS application which addressed the major features of the MediLinks EHR

Existing MediServe software engineering staff did not have the capacity to address these items on top of their existing product support duties.  At the same time, the cost model of the offshore program allowed MediServe to save in excess of $8 million over a similar build-out of resources as company employees or local contractors.

Dennis was initially hired to drive our sourcing strategy. The methodology he followed in determining our eventual outsourcing partner was terrifically run–the process was open, and all stakeholders were involved in both determining the scoring criteria and in scoring the various vendors. His status updates were frequent, relevant, and well-disseminated throughout the company. When a final vendor was chosen, Dennis managed the vendor in the same manner, with openness, frankness and a collaborative spirit to drive the needed results.

– Matt Guthrie, Vice President Engineering, MediServe

Sample Artifacts

Additional comments and thoughts on Vendor Selection and Management can be found on the Original Thinking blog here.

Software RFP

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2014 © Dennis Stevenson