Making Better Choices – Unique Challenges of Software Vendor Selection in Retail Energy

By Jonathan Clites

We’re seeing a concerning trend starting to form in the Retail Energy industry over the last few years; Retail Energy Providers (REPs) are increasingly making poor vendor selections that they quickly come to regret. To clarify, ‘software vendor selection’ is the process of choosing a new piece of off-the-shelf software and associated vendor services which can be something like a new Customer Information System (CIS) platform. 

When a retailer initiates a selection process, we see many of the same errors in judgment that plague most industries:

  • Unrealistic RFP response timelines. The quality and thoroughness of vendor responses is directly proportional to the amount of time you allow them. Saving a week on the response timeline at the risk of choosing the wrong vendor is penny-wise and pound-foolish.
  • Too much focus on the cost of the product/service. This comes at the detriment of functional, technical, implementation, or vendor organizational requirements.
  • No vendor selection at all. A full-blown RFP isn’t always needed. However, sticking with the familiar solution you’ve used before or one that was simply referred by a colleague isn’t a good idea.
  • Not engaging all the right stakeholders in the selection process. Survey your entire organization and make sure all impacted groups are represented.
  • Choosing the wrong selection effort leader. You need someone who can balance all organizational requirements, execute the selection as a project, and delay judgment until the appropriate time.

Frequent M&A activity, extremely tight margins, small budgets, and ever-changing regulations add up to create a challenging and unique environment that REPs must operate within today. These challenges drive different issues that we see regularly in REP vendor selection projects.

  • Not having a complete shortlist of vendors. New vendors have been rapidly entering the Retail Energy industry over the last few years. Unfortunately, there is no quick way for REPs to find a full list of available options. Conferences, your network, and other industry experts are a great way to create your short list. 
  • Ruling out a vendor too early or choosing an immature product. Most vendors in this industry didn’t exist 10-20 years ago. Also, with vendors rapidly expanding their offerings, make sure to use the latest info on a vendor’s current capabilities and that the system is a fully developed product (e.g. it is not Vaporware).
  • Too narrow of a focus. Smaller retailers rarely have a full view of their enterprise architecture and a roadmap for its evolution. Optimized choices take the view that every selection is just a component of that roadmap and the right choice might not be a one-for-one replacement of an existing platform. 
  • Retailer resource experience gap. This occurs because of outdated technical skills, outsourced business processes, or an immature or non-existent Project Management Office (PMO). REPs need to devote time in the plan to gain the necessary knowledge or supplement the team to close gaps.
  • Focusing on vendor provided references. Tap your network or ask around at conferences for other vendor references. Understanding a vendor’s reputation and past failures can save you future headaches.
  • Not getting into the detailed questions. Very large projects like CIS or CRM implementations can contain thousands of requirements. It is critically important to get to that level of detail in the selection process. You never hear someone say, “I wish I had asked fewer questions.” Consider using an expert partner that brings existing perspective, experience, and readymade materials to leverage.

This list is by no means exhaustive. Retailers that start with these considerations and implement an iterative process to learn from each selection will ultimately improve their decision-making consistency and improve the odds of successful implementations.

_____________________________________________________________________________________________

Jonathan Clites is a Managing Principal and the Retail Energy Practice Lead at Capco Energy Solutions