I used to work for a very large system integrator. Deals required us to select products from large corporations like Microsoft, IBM, Oracle, and others. The following factors were taken into account when determining the product supplier:
- Price per license
- Technical support and training
- Suitability of the product for the overall solution
The SI team would review a product for its suitability. Once the suitability was established, management teams would negotiate pricing and lifetime support costs.
Let me share with you another example from my experience as a business consultant. We were developing a global sourcing model for a multinational food corporation. Suppliers from different parts of the world were visited, and the products they proposed to offer were examined for quality, cost, support, delivery time, delivery quantity, supply chain from farm to port, packaging, and taxes were all considered. We analyzed data from competing suppliers from different parts of the world and then made recommendations. Existing suppliers’ costs and quality were compared with new suppliers, and the best commercial deal was selected.
To summarize, the factors governing the selection of suppliers were the same irrespective of the sector. These were total lifetime cost, quality, taxes, and track record of providing uninterrupted supply throughout the requirement period.