Chapter 11: How Manufacturers Select IT Partners
Introduction: The High-Stakes Selection Process
The email subject line read: "Notification of Award – MES Implementation."
After six months of effort—three RFP responses, two on-site demos, a proof-of-concept, reference checks, security reviews, and contract negotiations—your firm finally won the $3.2M MES deal. But here's what the client didn't tell you: you almost lost in the final round.
The debrief revealed you were tied with a competitor on technical score and price. The tiebreaker? Your competitor's reference check went poorly. When the client called the reference plant manager, he said: "The technology works, but they overpromised on the timeline, went 40% over budget, and their support team takes 2 days to respond to critical issues. If I had to do it again, I'd choose differently."
Your reference, by contrast, raved: "They delivered on time and under budget, their team became an extension of ours, and when we had a critical issue during the Christmas shutdown, they had someone on-site within 4 hours. I've already recommended them to two other plants in our network."
This is the brutal reality of manufacturing IT selection processes: technical capability is table stakes. What wins deals is trust, proven delivery, referenceable results, and cultural fit.
Manufacturing IT investments are high-stakes, multi-year commitments. A bad decision costs millions, disrupts production, and can derail careers. As a result, manufacturers employ rigorous, multi-stage selection processes designed to minimize risk and maximize the probability of success.
This chapter provides an insider's guide to how manufacturers select IT partners:
- The typical procurement process from RFI to contract signing
- Evaluation criteria and how to score high on each dimension
- The demo and POC process and how to differentiate
- Reference checks and what clients really ask your references
- Negotiation dynamics and common sticking points
- Why vendors lose (and how to avoid these pitfalls)
- Building strategic partnerships vs. being a transactional vendor
Understanding the buyer's selection process allows you to navigate it successfully and position yourself as the trusted partner, not just another vendor.
11.1 The Manufacturing IT Procurement Process
Typical Stages and Timeline
Table 11.1: Manufacturing IT Procurement Process
| Stage | Duration | Activities | Stakeholders Involved | Vendor Tasks | Success Criteria |
|---|---|---|---|---|---|
| 1. Need Identification | 1-3 months | Business case development, stakeholder alignment, budget approval | COO, CFO, CIO, VP Mfg | Not yet engaged (or informal discussions if relationship exists) | Budget approved, executive sponsor identified |
| 2. Requirements Definition | 4-8 weeks | Document functional/technical requirements, define success criteria, draft RFP/RFI | VP Mfg, Plant Mgr, IT Dir, Quality Dir | May be invited to educational sessions; provide input on requirements | Clear requirements doc; realistic timeline |
| 3. RFP/RFI Issuance | 2-4 weeks | Issue RFP to 3-8 vendors, manage Q&A, receive responses | Procurement, IT Dir, VP Mfg | Submit comprehensive response; participate in Q&A; ask clarifying questions | Submitted on time, addressed all requirements |
| 4. Shortlisting | 2-3 weeks | Evaluate responses, score vendors, select 2-3 finalists | Evaluation committee (6-10 people) | Be responsive to follow-up questions | Selected as finalist |
| 5. Demonstrations | 2-4 weeks | On-site or virtual demos with finalists; Q&A sessions | Broad stakeholder group (10-20 people) | Deliver compelling demo tailored to their use cases; show it working | Positive feedback from key stakeholders |
| 6. Proof of Concept (POC) | 4-12 weeks | Hands-on evaluation with real data, integrations, and workflows | Plant Mgr, IT Dir, operators, quality techs | Execute POC successfully; demonstrate ROI; address technical risks | POC meets success criteria; technical risks retired |
| 7. Reference Checks | 1-2 weeks | Call 3-5 references; may visit reference site | VP Mfg, Plant Mgr, CIO | Prepare references; provide diverse reference options | Glowing references; no red flags |
| 8. Final Evaluation | 1-2 weeks | Score vendors on all criteria; make recommendation to executives | Evaluation committee → executives | Address any final questions or concerns | Recommended vendor |
| 9. Contract Negotiation | 2-6 weeks | Negotiate price, SLAs, payment terms, IP, warranties, termination clauses | Procurement, Legal, CFO, CIO | Negotiate win-win terms; be reasonable and flexible | Signed contract |
| 10. Kickoff | Week after contract | Project kickoff meeting, detailed planning | Full project team | Execute project successfully | Successful delivery |
Total typical timeline: 6-12 months from RFP issuance to contract signing
Key insight: Large manufacturers (>$500M revenue) typically run formal RFP processes. Mid-market manufacturers ($50M-$500M) may use less formal processes but still follow similar evaluation stages.
11.2 The RFP/RFI Process
What Manufacturers Ask For
Table 11.2: Typical RFP Structure and Response Strategy
| RFP Section | What They're Asking | What They're Really Looking For | How to Win This Section | Common Mistakes |
|---|---|---|---|---|
| Executive Summary | Overview of your firm, solution, and value prop | Can you articulate our problem and your solution in 2 pages? | Lead with their pain points and outcomes, not your company history | Generic boilerplate; talking about yourself, not their needs |
| Company Information | History, financials, ownership, locations, employee count | Are you stable? Will you be around in 5 years? | Emphasize stability, growth, customer retention; if startup, highlight backing/investors | Vague financials; frequent M&A; high customer churn |
| Manufacturing Experience | Vertical experience, number of manufacturing clients, relevant case studies | Do you understand our industry and challenges? | Provide 3-5 case studies from similar verticals with measurable results | Generic IT experience; no manufacturing domain knowledge |
| Solution Architecture | How your solution works, integration points, data flows, infrastructure | Will this integrate with our existing systems? Is it scalable? | Architecture diagrams showing integration to their named systems (SAP, Rockwell, etc.) | Generic architecture; doesn't address their specific ERP/MES/SCADA |
| Functional Requirements | 50-200 specific functional requirements with yes/no/customization responses | Do you have the features we need out-of-the-box? | Be honest: Yes (OOB), Yes (configuration), Yes (custom), No. Explain gaps. | Claiming "yes" to everything when it's not true (you'll get caught in demo) |
| Technical Requirements | Infrastructure, security, performance, APIs, data model | Can you meet our technical standards? | Provide detailed technical specs; reference standards (ISA-95, OPC UA, etc.) | Vague technical responses; no specifics |
| Implementation Approach | Methodology, timeline, team structure, change management | How will you deliver this successfully? | Detailed project plan with phases, milestones, risk mitigation, change mgmt plan | Unrealistic timeline; underestimating complexity; no change management |
| Team and Staffing | Proposed team, resumes, roles, % allocation | Do you have the right people? Will they be available? | Name specific individuals; provide relevant resumes; show domain expertise | Generic roles; no named individuals; offshore-heavy with no domain expertise |
| Pricing | Detailed pricing breakdown by module, service, phase | What's the total cost? Any hidden fees? | Transparent, detailed pricing with assumptions clearly stated | Vague pricing; hidden fees discovered later; lowball to win then change order |
| References | 3-5 references in similar industry, similar project scope | Can we talk to happy customers who are like us? | Provide references that match their industry, size, and use case; prep references | Irrelevant references; references won't take calls; lukewarm endorsements |
| Security and Compliance | SOC 2, ISO 27001, IEC 62443, security practices, incident response | How do you protect our data and operations? | Provide certifications, security architecture, incident response plan | No security certifications; can't articulate OT security approach |
| Support and SLAs | Support model, SLA definitions, escalation, response times | What happens when things break? | Clearly defined SLAs tied to business impact; 24×7 support for critical systems | Vague SLAs; business hours only; slow response times |
RFP Response Best Practices
Table 11.3: RFP Response Do's and Don'ts
| Do | Don't | Why It Matters |
|---|---|---|
| Answer every question directly and completely | Skip questions or give vague answers | Shows you paid attention and are thorough |
| Tailor your response to their specific requirements and industry | Use generic boilerplate | Demonstrates you understand their unique needs |
| Be honest about gaps ("No, we don't have this, but here's the workaround") | Claim "yes" to everything | Credibility; they'll find out in demo/POC |
| Lead with outcomes ("Reduce downtime 30%") not features ("Real-time dashboards") | Focus on features and technology | They care about business outcomes, not tech specs |
| Provide specific examples and case studies with metrics | Generic statements without proof | Proof builds trust |
| Submit on time (preferably 1-2 days early) | Submit at the last minute or ask for extensions | Shows professionalism and respect for their process |
| Ask clarifying questions during Q&A period | Assume you understand ambiguous requirements | Better to clarify than guess wrong |
| Format for readability (table of contents, executive summary, clear headings, visual diagrams) | Dense text, no structure, hard to navigate | Evaluators review 3-8 RFPs; make it easy for them |
| Assign a single owner for RFP coordination | Fragmented responses from multiple people | Ensures consistency and completeness |
11.3 Evaluation Criteria and Scoring
How Manufacturers Score Vendors
Most manufacturers use a weighted scoring model across multiple criteria.
Table 11.4: Typical Vendor Evaluation Scorecard
| Criterion | Weight | What's Evaluated | How to Score High | What Kills Your Score |
|---|---|---|---|---|
| Functional Fit | 25-30% | % of requirements met out-of-box vs. custom | Meet 85%+ of requirements OOB or via configuration | <70% functional fit; extensive customization required |
| Technical Fit | 15-20% | Architecture, integration capability, scalability, performance | Pre-built connectors; proven scalability; open APIs; reference architecture | Proprietary architecture; poor integration story; scalability concerns |
| Manufacturing Domain Expertise | 15-20% | Industry experience, vertical knowledge, manufacturing references | 5+ relevant references; industry certifications (IATF, AS9100); consultants with plant experience | Generic IT firm; no manufacturing clients; no domain experts |
| Implementation Approach | 10-15% | Methodology, timeline, risk mitigation, change management | Realistic timeline; proven methodology (e.g., Agile, SAFe); strong change mgmt plan; pilot-to-scale approach | Unrealistic timeline; waterfall for complex project; no change mgmt; no risk plan |
| Team Quality | 10-15% | Experience, certifications, domain knowledge, availability | Named individuals with relevant experience; certifications (PMP, SAP, Rockwell, etc.); committed allocation | Generic roles; no manufacturing experience; offshore team with no domain knowledge; low % allocation |
| Price | 15-20% | Total cost of ownership (TCO) over 5 years | Competitive pricing; transparent; good value for scope | Significantly higher than competitors; hidden costs; lowball with change orders |
| References | 10-15% | Quality and relevance of reference customers | 3-5 glowing references in same vertical, similar scope | Weak references; refused to provide references; references warn against you |
| Financial Stability | 5-10% | Company financials, longevity, customer retention | Profitable, growing, low churn, backed by stable parent/investor | Frequent M&A; high churn; financial instability; startup with no backing |
| Support and SLAs | 5-10% | Support model, SLAs, response times, escalation | 24×7 support; business-aligned SLAs; clear escalation; managed services option | Business hours only; vague SLAs; slow response; no escalation path |
| Security and Compliance | 5-10% | Certifications, security practices, compliance documentation | SOC 2 Type II, ISO 27001, IEC 62443; documented security architecture | No certifications; can't demonstrate OT security knowledge |
Example scoring: A vendor scores:
- Functional Fit: 90/100 × 25% = 22.5%
- Technical Fit: 85/100 × 20% = 17%
- Domain Expertise: 95/100 × 20% = 19%
- Implementation: 80/100 × 10% = 8%
- Team: 75/100 × 10% = 7.5%
- Price: 70/100 × 15% = 10.5%
Total: 84.5/100
How to Differentiate When You're Not the Cheapest
Table 11.5: Competing on Value, Not Just Price
| Strategy | How to Position | Example Language | When It Works |
|---|---|---|---|
| Total Cost of Ownership (TCO) | Show that cheaper upfront = higher long-term cost | "Competitor A is $200K cheaper upfront but their annual support is $120K vs. our $60K. Over 5 years, we're $100K less expensive." | When competitor has hidden costs, expensive support, or frequent upgrades |
| Risk Mitigation | Quantify risk of failed implementation or poor fit | "We're 20% more expensive, but our success rate is 94% vs. industry average of 68%. A failed $1.5M implementation costs $3M+ in rework and lost opportunity." | When you have proven delivery track record and competitor doesn't |
| Faster Time to Value | Show you deliver results faster | "We deliver 70% of value in 6 months vs. Competitor B's 18-month timeline. Faster payback means $800K in early benefits." | When you have accelerators, pre-built integrations, or pilot-to-scale approach |
| Better Outcomes | Reference customers with superior results | "Our automotive customers average 18% OEE improvement vs. industry benchmark of 10-12%. Better outcomes = $2M additional annual value." | When you have data showing superior results |
| Lower Total Risk | Highlight competitor weaknesses without bashing | "We include change management, training, and 90-day hypercare in our price. These are critical for adoption and often overlooked, leading to underutilization." | When scope is more complete than competitors who lowballed |
| Strategic Partnership | Position as long-term partner, not transaction | "This isn't just an implementation—we're investing in your success with quarterly business reviews, continuous improvement, and roadmap alignment." | When selling to strategic buyers who value partnership |
Key principle: Never compete solely on price. If price is the only differentiator, you've lost. Differentiate on value, outcomes, risk mitigation, and partnership.
11.4 The Demonstration Phase
What Makes a Winning Demo
Table 11.6: Demo Best Practices
| Element | Poor Demo | Winning Demo | Why It Matters |
|---|---|---|---|
| Audience Customization | Generic demo; same for every client | Tailored to their industry, use cases, and workflows; uses their terminology | Shows you understand their specific needs |
| Data Realism | Fake data (Product A, Product B) | Real-looking data that mirrors their products, SKUs, and processes | Helps them visualize using it |
| Use Case Relevance | Show all features in product | Focus on 3-5 use cases that solve their pain points | They care about solutions to their problems, not feature tours |
| Integration Demonstration | Standalone system | Show live integration to ERP, SCADA, or QMS (or realistic simulation) | Integration is critical and often a risk; prove it works |
| User Experience | IT person navigating technical interface | Operator-level user showing shop floor workflow; mobile/tablet interface | Operators will use this—prove it's usable for them |
| Performance | Slow, buggy demo environment | Fast, polished, production-like performance | Slow demo = perception of slow product |
| "What If" Scenarios | Rigid script; can't deviate | Handle "what if" questions live; show flexibility | Proves deep knowledge and capability |
| Business Value Articulation | "Here's how you create a work order" | "This automation saves 15 minutes per shift = 4 hours/day across 8 lines = $28K/year in labor savings" | Quantify value for everything you show |
| Stakeholder Engagement | Presenter talks for 90 minutes | Interactive; ask questions; get operators to try it hands-on | Engagement = buy-in |
| Proof of Delivery | Just show the product | Show client testimonial video, reference architecture, project timeline | Prove you can deliver what you're showing |
Common Demo Pitfalls
Table 11.7: How to Blow Your Demo (And How to Avoid It)
| Pitfall | Impact | Prevention |
|---|---|---|
| Technical difficulties | "If they can't even run a demo, how will they implement this?" | Test everything 3× before demo; have backup plan (recorded video, offline mode) |
| Feature overload | Audience overwhelmed; can't remember anything | Focus on 3-5 key use cases; skip irrelevant features |
| Speaking over the audience | Disrespectful; turns them off | Pause for questions; read the room; let operators try it hands-on |
| Not answering questions | Looks like you're hiding something | Answer honestly; "Great question—we don't have that today, but here's the workaround" |
| Ignoring operators | Operators sabotage later: "This won't work for us" | Engage operators; get their feedback; show you value their input |
| Going over time | Disrespectful of their time; lose attention | Respect the allotted time; if running long, ask permission to continue or offer to schedule follow-up |
| Trash-talking competitors | Looks unprofessional and desperate | Never badmouth competitors; focus on your strengths |
| No clear next steps | Momentum dies | End with clear next steps: "POC starting week of June 5th; we'll send detailed plan by Friday" |
11.5 Proof of Concept (POC) and Pilot
POC vs. Pilot: What's the Difference?
Table 11.8: POC vs. Pilot
| Dimension | Proof of Concept (POC) | Pilot | When to Use Each |
|---|---|---|---|
| Purpose | Retire technical risk; prove integration works | Prove business value; validate ROI | POC before pilot; pilot before full rollout |
| Environment | Lab/test environment; sandbox data | Production or production-like environment; real data | POC: "Can it work?" Pilot: "Does it deliver value?" |
| Duration | 2-8 weeks | 3-6 months | POC is shorter; pilot longer to measure business impact |
| Scope | 1-2 technical risks (e.g., integrate SAP to MES) | 1 production line or cell; end-to-end workflow | POC: narrow technical focus; pilot: full workflow |
| Success Criteria | Technical: integration works, performance meets spec | Business: OEE improved 10%, scrap reduced 30%, payback <12 months | POC: technical; pilot: business outcomes |
| Investment | $10K-$50K | $100K-$500K | POC is discovery; pilot is real investment |
| Outcome | Go/no-go to pilot | Go/no-go to full plant/multi-plant rollout | POC de-risks; pilot proves value |
How to Structure a Winning POC/Pilot
Table 11.9: POC/Pilot Success Framework
| Element | What to Define | Example | Why It Matters |
|---|---|---|---|
| Scope | Exactly what's included and excluded | "Line 3, Stations 1-8, 3 SKUs, 2-shift operation, 6 operators. Excludes Line 4 and warehouse." | Prevents scope creep; sets expectations |
| Success Criteria | Measurable outcomes that define success | "OEE improves from 68% to 75%+; scrap rate reduces from 3.2% to <2.5%; operator adoption >80%" | Clear go/no-go decision criteria |
| Timeline | Start date, milestones, end date | "Kickoff: June 1. Build: June-July. Deploy: Aug 1. Measure: Aug-Sept. Review: Oct 1." | Keeps project on track |
| Roles & Responsibilities (RACI) | Who does what | "Client provides: data access, operator time. Vendor provides: software, integration, training." | Avoids confusion and gaps |
| Data Sources | What data, from where, in what format | "Production data from MES (Rockwell FT), quality data from QMS (ETQ), downtime reasons from operators (manual entry)" | Ensures data availability |
| Integration Points | What systems to integrate | "Integrate to SAP ERP (work orders, completions), Rockwell SCADA (machine status), ETQ QMS (inspection results)" | Proves integration feasibility |
| Infrastructure | Where it runs | "On-premises edge gateway + Azure cloud; client provides network access, VPN" | Ensures infrastructure is ready |
| Training | Who gets trained, how much | "2-day admin training, 4-hour operator training per shift, 1-day super-user training" | Ensures user readiness |
| Exit Criteria | What triggers go/no-go decision | "If OEE <72% after 60 days, pilot is no-go. If technical issues >15 critical incidents, re-evaluate." | Objective decision framework |
| Investment | Cost for pilot | "$185K: $120K software/services, $40K integration, $25K training. Success fee: $50K if we hit targets." | Aligns incentives |
POC/Pilot Best Practices
- Under-promise, over-deliver: Set conservative targets; exceed them
- Engage operators daily: Daily huddles; collect feedback; make them advocates
- Track metrics religiously: Baseline → weekly → final comparison
- Communicate progress: Weekly stakeholder updates; flag issues early
- Celebrate quick wins: 2 weeks in, highlight early successes
- Plan for failure scenarios: Have rollback plan; be transparent if struggling
- Document everything: Photos, videos, before/after metrics, testimonials
- Transition to full rollout: If successful, seamless path to plant-wide or multi-plant
11.6 Reference Checks: What Clients Really Ask
The Reference Check Process
Manufacturers typically call 3-5 references and may visit 1-2 reference sites. Here's what they ask and what they're listening for.
Table 11.10: Reference Check Questions and What They Reveal
| Question | What They're Really Asking | Green Flag Answer | Red Flag Answer |
|---|---|---|---|
| "How was the implementation? On time? On budget?" | Can they deliver what they promise? | "Finished 2 weeks early and 5% under budget. Great project management." | "Went 6 months over and 40% over budget. Lots of scope creep and surprises." |
| "What was the team like to work with?" | Are they good partners or difficult? | "Felt like an extension of our team. Responsive, collaborative, honest about challenges." | "Hard to get hold of. Felt like they had 10 other priorities. Defensive when we raised issues." |
| "Did it deliver the promised ROI?" | Do they deliver business value? | "We projected 12% OEE improvement; achieved 16%. Payback in 9 months vs. 14-month estimate." | "They claimed 20% improvement; we got 8%. Still waiting for payback after 2 years." |
| "How's the ongoing support?" | Are they there when you need them? | "24×7 support as promised. Had a critical issue on a Saturday—they had someone on-site in 3 hours." | "Support is slow. Tickets take days. Had to escalate to get attention." |
| "What would you do differently if starting over?" | Would they choose you again? | "We'd start the pilot 2 months earlier and involve more operators upfront. But same vendor, absolutely." | "Honestly, I'd evaluate other options. The product works, but the delivery and support have been frustrating." |
| "Any surprises or gotchas?" | What did the vendor hide or underestimate? | "No major surprises. They were transparent about risks upfront. Integration took longer than planned, but they absorbed the cost." | "Training costs were way higher than quoted. Upgrades require downtime we weren't told about. Lots of little fees add up." |
| "How do they handle problems?" | Do they own issues or blame others? | "They own mistakes. When their integration had a bug, they fixed it immediately at no cost and gave us credit on support." | "They always blame our infrastructure or our people. Never take responsibility." |
| "Would you recommend them?" | Ultimate question | "Absolutely. I've already referred them to two other plants. Best vendor we've worked with." | "Depends. The product is good, but I'd have concerns about the delivery team and support." |
How to Prepare Your References
Table 11.11: Reference Preparation Checklist
| Action | Why It Matters | How to Do It |
|---|---|---|
| Select the right references | Match client's industry, size, and use case | Have 5-7 references ready; let prospect choose 3-5 |
| Prep your references in advance | They'll give better, more specific answers | Send them prospect's name, what they're evaluating, likely questions |
| Brief references on key points | Reinforce your differentiators | "They may ask about our change management—can you speak to the training and adoption support we provided?" |
| Ask references to be specific | Generic praise is less credible than specific examples | "Instead of 'they're great,' can you share the story of the Saturday night support incident?" |
| Thank your references | They're doing you a favor | Send thank-you note, small gift, or offer reciprocal reference |
| Debrief after reference calls | Learn what prospects are concerned about | Ask reference: "What did they focus on? Any concerns I should address?" |
| Have a bad reference recovery plan | Sometimes a reference goes poorly | If you suspect a reference might be lukewarm, have a backup; address concerns proactively |
11.7 Contract Negotiation
Common Negotiation Points
Table 11.12: Key Contract Terms and Negotiation Strategies
| Term | Manufacturer's Position | Vendor's Position | Typical Compromise |
|---|---|---|---|
| Price | "Your price is 15% higher than Competitor A" | "Our TCO is lower and our success rate is higher" | Discount 5-8% for multi-year commit or bundle with managed services |
| Payment Terms | "We pay net 60-90 days; no payment until go-live" | "Standard terms are 30% upfront, 40% at milestones, 30% at go-live" | Milestone-based: 20% upfront, 30% at FAT, 30% at SAT, 20% at 30 days post go-live |
| SLAs | "We need 99.9% uptime with 15-minute response for P1 incidents" | "Standard is 99.5% uptime with 1-hour response" | 99.7% uptime, 30-minute response, with penalties for breaches |
| Liability Cap | "Unlimited liability for damages" | "Liability capped at fees paid in past 12 months" | 2× annual fees or project value for negligence; unlimited for willful misconduct/IP |
| IP Ownership | "We own all deliverables, code, and data" | "We retain IP for our platform; you own your data and custom work product" | Vendor retains platform IP; client owns data, customizations, and work product |
| Termination | "30-day termination for convenience; immediate for cause with no penalty" | "No termination for convenience; 180 days notice; termination fees for early exit" | 90-day termination with 6-month notice; reasonable termination fee (e.g., remaining support prorated) |
| Warranties | "Warranty for 24 months; fix all defects at no cost" | "90-day warranty; defect fixes under support contract" | 12-month warranty for defects in software and implementation; defect fixes no-cost; enhancements under change order |
| Data Exit | "If we terminate, you provide all data in usable format within 30 days at no cost" | "Data export is available but requires professional services" | Data export tools provided; one-time export no-cost; ongoing exports or complex transformations billed at cost |
| Audit Rights | "We can audit your security, compliance, and performance quarterly" | "Annual audit with 30-days notice; limited scope" | Annual audit rights with 60-days notice; SOC 2 report provided semi-annually |
Negotiation Best Practices
Table 11.13: Negotiation Do's and Don'ts
| Do | Don't | Result |
|---|---|---|
| Understand their constraints (e.g., procurement policy requires 3 bids) | Refuse to participate in RFP process | Find ways to work within their process |
| Be flexible on structure (e.g., offer capex and opex options) | Take hard line on payment terms | Enables deal to happen |
| Propose win-win trade-offs (e.g., "I'll discount 10% if you commit to 3-year managed services") | Make one-sided demands | Aligns incentives |
| Focus on value, not price | Get into price-only negotiation | Maintains margins |
| Walk away from bad deals (if margin too low, scope unrealistic, or liability uncapped) | Accept unprofitable or risky terms | Protects your business |
| Get legal involved early | Let salespeople negotiate contract terms | Avoids last-minute legal blockers |
| Document everything in writing | Rely on verbal agreements | Prevents misunderstandings |
11.8 Why Vendors Lose (and How to Avoid It)
Top 10 Reasons Vendors Lose Deals
Table 11.14: Common Reasons for Losing and Prevention Strategies
| Reason for Losing | Frequency | What Happened | How to Prevent |
|---|---|---|---|
| 1. Poor references | Very Common | References gave lukewarm endorsements or warned against you | Deliver exceptional results; maintain relationships with clients; prep references |
| 2. Failed POC/demo | Very Common | POC didn't work; demo was buggy or unconvincing | Test thoroughly; use realistic scenarios; have backup plans |
| 3. Wrong team | Common | Team lacked manufacturing domain expertise; junior staff proposed | Assign A-team to proposal; include manufacturing veterans; commit named individuals |
| 4. Overpromised | Common | Claimed capabilities you don't have; unrealistic timeline; lowball price | Be honest about gaps; realistic estimates; don't lowball |
| 5. Didn't address key concern | Common | Had obvious weakness (e.g., no automotive experience) and didn't address it proactively | Identify weaknesses early; address head-on; provide mitigation plan |
| 6. Arrogance | Occasional | Acted like you were doing them a favor; dismissive of their concerns | Humble, consultative approach; respect their expertise |
| 7. Lack of cultural fit | Occasional | Didn't align with their values, pace, or communication style | Adapt to their culture; mirror their style; build rapport |
| 8. Security concerns | Occasional | Couldn't demonstrate adequate OT security; no certifications | Invest in security certifications; articulate security architecture |
| 9. Financial instability | Rare | Concerns about your company's financial health or frequent M&A | Be transparent; if startup, highlight backing; if M&A, explain continuity |
| 10. They never intended to buy from you | Rare | You were "column fodder" to make preferred vendor's price competitive | Qualify early; if you're being used, decide whether to invest effort |
Post-Loss Debrief
When you lose, always ask for feedback.
Questions to ask:
- "Can you share why we weren't selected?"
- "What could we have done better?"
- "How did we compare to the winning vendor?"
- "Would you consider us for future opportunities?"
- "Any advice for how we can improve?"
Value of losing gracefully:
- Learn what you need to improve
- Relationship remains intact for future opportunities (many "loses" become wins 6-12 months later)
- Referrals "You're not right for us, but let me introduce you to another plant that might be a better fit"
11.9 Building Strategic Partnerships vs. Being a Vendor
The Partnership Mindset
Table 11.15: Vendor vs. Strategic Partner
| Dimension | Transactional Vendor | Strategic Partner | How to Become a Partner |
|---|---|---|---|
| Relationship | Arm's length; formal | Collaborative; trusted advisor | Invest in relationship; regular QBRs; proactive recommendations |
| Communication | Quarterly status reports | Weekly check-ins; transparent about challenges | Over-communicate; flag issues early; no surprises |
| Scope | Narrow (e.g., "implement MES") | Broad (e.g., "help us achieve operational excellence") | Think beyond the SOW; identify adjacent opportunities; bring ideas |
| Time Horizon | Single project | Multi-year relationship | Deliver on first project; earn the right to next project |
| Pricing | Negotiated hard; low margin | Fair value pricing; bundled deals | Don't lowball; demonstrate value; align incentives |
| Innovation | Deliver what's specified | Bring new ideas, technologies, best practices | Share industry trends; invite to conferences; co-innovation |
| Problem Ownership | "That's out of scope" | "Let me see if we can help" | Be flexible; occasionally go above and beyond |
| Success Sharing | Celebrate go-live; move on | Celebrate business outcomes; continuous improvement | Track and report ROI; quarterly business reviews; continuous improvement initiatives |
How to Transition from Vendor to Partner
- Deliver flawlessly on the first project: Nothing builds trust like successful delivery
- Invest in their success: Provide free training, industry insights, introductions to other experts
- Be transparent: Share what's working and what's not; own mistakes
- Align on outcomes: Tie your success to their KPIs (OEE, quality, cost)
- Expand relationship: Start with one plant; prove value; earn multi-plant rollout
- Executive engagement: Build relationships at multiple levels (operators to C-suite)
- Quarterly Business Reviews (QBRs): Present ROI achieved; recommend next steps; align on roadmap
- Customer advisory board: Invite them to provide product input; co-innovation
- Long-term contracts: Multi-year managed services create partnership incentives
- Advocacy: Turn them into references who evangelize you
Chapter Summary
Table 11.16: Chapter 11 Key Takeaways
| Topic | Key Insight |
|---|---|
| Procurement Process | Expect 6-12 months from RFP to contract; stages include RFP, demo, POC, references, negotiation. Manufacturers use rigorous processes to minimize risk. |
| RFP Response | Tailor to their needs; be honest about gaps; lead with outcomes; answer every question completely. Generic boilerplate loses deals. |
| Evaluation Criteria | Manufacturers score on functional fit, technical fit, domain expertise, team, price, references, and support. Price is 15-20%, not 100%. |
| Differentiation | Compete on value, not just price. Show better TCO, lower risk, faster time-to-value, better outcomes, and strategic partnership. |
| Demonstrations | Tailor to their use cases; use realistic data; prove integrations work; engage operators; quantify value for every feature shown. |
| POC/Pilot | POC retires technical risk (2-8 weeks, $10K-$50K). Pilot proves business value (3-6 months, $100K-$500K). Define clear success criteria for both. |
| Reference Checks | Manufacturers call 3-5 references and may visit sites. References often swing close deals. Prep your references; choose relevant matches. |
| Negotiation | Be flexible on structure (capex vs. opex, payment terms). Don't negotiate just price. Walk away from bad deals (too risky, unprofitable). |
| Why Vendors Lose | Top reasons: poor references, failed POC, wrong team, overpromising, not addressing concerns. Prevention: deliver great results, be honest, assign A-team. |
| Strategic Partnership | Vendors are transactional and replaceable. Partners are trusted advisors with multi-year relationships. Transition via flawless delivery, transparency, and value creation. |
Discussion Questions
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Price vs. Value: If you're 20% more expensive than a competitor, what value drivers do you emphasize to justify the premium?
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POC Failure: What do you do if your POC doesn't meet success criteria? Rework? Walk away? Renegotiate?
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Reference Strategy: How many references should you maintain? How do you keep them engaged and willing to speak on your behalf?
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RFP Qualification: When should you walk away from an RFP (e.g., if you're being used as "column fodder" to validate a preferred vendor)?
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Partnership Transition: How do you move from project-based vendor to strategic partner? What does that relationship look like?
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Negotiation Red Lines: What contract terms are non-negotiable for you? Where are you willing to compromise?
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Competitive Displacement: If you're the incumbent being displaced, how do you defend your position? Can you win back the deal?
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Post-Loss Strategy: You lost a big deal. Should you maintain the relationship? How?
Further Reading
Books:
- SPIN Selling by Neil Rackham (consultative selling)
- The Challenger Sale by Matthew Dixon and Brent Adamson (navigating buying committees)
- Getting to Yes by Roger Fisher and William Ury (negotiation)
- Strategic Selling by Robert B. Miller and Stephen E. Heiman
Articles:
- Harvard Business Review: "The New Sales Imperative" (value selling)
- Gartner: "How to Win the Consensus Sale" (multi-stakeholder decisions)
- McKinsey: "The B2B Digital Inflection Point" (changing buyer behavior)
Industry Resources:
- APQC: Procurement best practices
- ISM: Strategic sourcing processes
- Procurement Leaders: Vendor evaluation frameworks
What's Next?
Chapter 12: IT Service Models for North America explores how to structure your service offerings for the North American manufacturing market:
- Staff augmentation vs. managed services vs. outcome-based models
- Onshore, nearshore (Mexico), and offshore delivery models
- Pricing structures: T&M, fixed price, milestone-based, subscription, outcome-based
- Service level agreements (SLAs) and operating level agreements (OLAs)
- Delivery models for multi-plant, cross-border manufacturing operations
- How to scale from boutique to enterprise services firm
Understanding the buyer's selection process (Chapter 11) and how to structure compelling service models (Chapter 12) completes your go-to-market strategy.