Choosing an Software or an IT Vendor is like choosing a helmet for your next off-road biking and the selection can't be based on just - choose the cheapest one. It deserves a little more in-depth study to select the best suitable one for your requirements. This is a serious task and if done rightfully, the result will be a successful enhancement to your business operations. The steps below may help you in selecting a good Software Development Partner/Vendor.
Understand your project requirements: First step is to understand your own requirements in as much details as you can. You can prepare a functional specification document, decide on tentative time-line of the project, decide which are important milestones of the project. Besides, also assess if you have skills on communicating your requirements over Internet phone, emails or other written communication platforms. Once you have this documented, check to see what work can be done in-house and what has to be outsourced. Is there a way to divide your requirements in Phases? Dividing the requirements and development in phases have many benefits - Reduced initial investment, gives you time to assess the vendor, you can see immediate results, you learning from first phase can make next phases better etc.
Payment: Decide a budget for your project and don't hesitate to share your budgetary constraints with your development partner, as it helps both of you to make appropriate development choices. Decide what will be the payment terms and how will you pay them & at what stages of the development. Generally, there are two payment options - Fixed rate or hourly rate. As a rule of thumb if you are a very technically sound professional then you can choose hourly rate OR you should choose hourly rate option when there is no continuous flow of work to the development team, which generally happens in case of maintenance. Even with a fixed cost option, cost may vary if you change your project requirements after the cost is fixed.
Use multiple Channels: As You have already outlined your vendor Profile, it’s time to go to the job boards. First of all check with your Linked In connections, the members of your professional organizations if they know any good IT vendor. As word of mouth is always a great way to find a vendor. You can also use various forums/methods to find a suitable IT vendors like - Google search, putting your requirements on Bidding websites, inviting tenders, recommendations etc. Make sure while sharing the feature list you have already made a category of “must have features” and must have skills, this will help you eliminate vendors who may not have right skills for development.
Shortlist: As you’ve posted your requirements and are waiting for replies, you should also prepare a response to send to anyone whose post interests you. Usually select 5-7 best applications. Now, you should sign a Non-Disclosure Agreement (NDA) with the developer before you reveal all information about your project. At this stage, you have to give little more details about your project, as well as your contact information, and ask for some good time to set up a Skype chat (or any other Internet based communication tool) for an interview. Always suggest 2 -3 time slots that work for you.
Ask what you understood: You can ask the potential vendor to explain what has she/he understood about your requirements. If possible ask the vendor to come up with a simple Proof-of-Concept and demonstrate it to you, this is another opportunity for the vendor to educate you regarding the operating assumptions of the software, and for you to provide them with more insight into your needs. Also it is an opportunity to know the capabilities of your vendors from the skills view point.
At this stage, your vendor selection process will almost be complete, with one of the vendors clearly identified as the best option.
Prepare and Sign a Contract: Once the vendor is shortlisted then prepare a scope of work (SoW) or a contract which also should cover the confidentiality aspect about your business along with the payment terms etc. Once the contract is signed, you are ready to work together.