How to Evaluate IT Vendors

A Pensacola manufacturing company spent three months evaluating a new ERP system. They demoed five vendors. They checked references. They negotiated pricing. They signed a two-year contract.

Eight months in, they discovered the system couldn't actually handle their workflow. The vendor knew this during the demo. The references were cherry-picked. The pricing model they sold didn't match what they delivered.

This is a common story. Here's how to avoid it.

The evaluation mistake most SMBs make

Vendors are salespeople. Their job is to make their product look good. They'll show you the features you want to see, connect you with happy customers in ideal situations, and downplay anything that might cause problems.

Your job is to look for the problems they're not showing you.

A good evaluation process isn't about finding the best vendor. It's about finding the vendor whose problems are problems you can live with.

What to evaluate

Financial stability

This matters more than most SMBs realize. An IT vendor that closes suddenly leaves you stranded.

Ask:

• How long has this company been in business?
• What's their revenue trend? Growing, stable, declining?
• Are they profitable?
• Do they have insurance?

For smaller vendors, this is awkward but necessary. A two-person MSP in Destin might be perfect for your needs, but if they're one health emergency away from closing, that's a risk.

Support capacity

A vendor can have great products but terrible support. Or vice versa.

Ask:

• What's your current client-to-staff ratio?
• How do you handle overflow when your team is busy?
• What are your response time SLAs, and do you actually meet them?
• Can I talk to a current client about their support experience?

Get specific numbers. "We answer calls in under 5 minutes" is better than "we prioritize client support."

Technical approach

Different vendors solve problems differently. Their approach affects your lock-in, your security, and your future options.

Ask:

• What platforms and technologies do you specialize in?
• Do you recommend cloud, on-prem, or hybrid? Why?
• How do you handle security? (They should have a real answer, not "we take security seriously")
• Who are your upstream vendors? (Your IT MSP probably uses other vendors for some services)

Exit path

This is the question most SMBs forget to ask.

Ask:

• What happens if we want to leave?
• How do we get our data?
• Do we keep our credentials and documentation?
• Are there termination fees?
• What's the transition process?

Vendors who get defensive about this question are vendors you should be suspicious of.

References (how to actually check them)

Don't just call the references they give you. Ask for references from:

• Clients they've had for 2+ years (not just new clients)
• Clients in your industry (if possible)
• Clients of similar size

Ask references:

• How did they handle a problem you had with them?
• What's something you wish they'd done differently?
• Would you sign the same contract again knowing what you know now?

The demo problem

Vendors show you their best in demos. It's natural. But demos are also where problems get hidden.

What to do:

• Bring your own scenarios. "Show me how this would handle [specific thing we need to do]."
• Ask to see error states. "What happens when this fails?"
• Watch for "that's configurable" answers. "Configure it right now. Show me how."
• Request a trial with real data. Not a sanitized demo environment—your actual data in their system.

What to watch for:

• Constantly deflecting to "we can customize that"
• Demo environments that differ significantly from production
• Features that "weren't included in this demo but are in the full version"
• Refusal to connect to your existing systems

What it costs

Vendor evaluations don't cost money, but they cost time. Plan for:

• 2-4 hours per vendor for initial calls
• 2-4 hours preparing your own evaluation criteria
• 4-8 hours for deep dives with finalists
• 2-4 hours checking references

For a significant purchase (anything over $10,000/year or a major project), budget two to four weeks for evaluation.

What can go wrong

You picked a vendor that closes. A Gulf Coast business ran their entire operation on software from a vendor that went under in 2024. Eighteen months of data. No recovery. They rebuilt from paper records and memory.

You ignored the lock-in signals. You signed a contract with long terms and unclear exit provisions. Now leaving costs more than staying. The vendor knows this and has raised prices twice.

Your references were too similar. You called the references they gave you. All three were startups that had been clients for six months. None of them had been through a real crisis with the vendor.

You didn't test with real data. The system worked great with demo data. It fell apart when they tried to import actual customer records from their old system.

Vendor questions (copy/paste)

Ask every vendor:

• "How long have you been in business, and can you share your growth trajectory?"
• "What's your client-to-staff ratio, and how do you handle support overflow?"
• "Can you connect me with 2-3 references who've been clients for at least two years?"
• "Walk me through what happens if we want to leave. Data export, credential release, transition support."
• "What would cause our contract to be terminated, and how much notice would we get?"
• "Show me a real example of how you handled a client's problem—not a success story, but a difficulty you worked through."
• "What's your approach to security, and do you have any SOC 2 reports or security certifications?"

When to hire help

Hire someone to help evaluate vendors when:

• The purchase is over $30,000/year or involves major infrastructure changes
• You're making a decision that will be hard to reverse
• Your team lacks the technical background to evaluate proposals
• You've been burned by vendor decisions before
• The vendor is unwilling to answer your questions

An independent evaluation consultant costs $1,000-$5,000 depending on scope. For a $100,000+ purchase decision, that's cheap insurance.

The real evaluation

The best vendors welcome scrutiny. They have references who'll speak honestly, contracts that hold up to close reading, and explanations that make sense.

Vendors who resist evaluation—who pressure you to decide quickly, who won't share references, who get defensive about contracts—are vendors telling you who they are before you sign anything.

Listen to them.