1-Identify potential vendors
You will be amazed at how many software vendors want your business.  Your biggest challenge will be to identify the relatively few vendors who will most likely meet your needs (the long list).  Once you have gathered information from the internet, it is time to talk your colleagues and industry associates to find out what software they use, whether it fits their needs and whether or not they are happy with the vendor support of the product.  If the timing is right, you may want to attend a trade show to talk informally to a number of vendors. 

2-Issue a Request for Proposal (RFP) and Evaluate Proposals
Use your RFP to communicate the requirements you formulated in Phase 1 uniformly to all of the vendors you are considering. Ask specific questions about cost, project timeline, technology platform, vendor support and customer base.  Answers to these questions will help you cull your list of possible vendors down to a short list, which should be no more than 6 vendors.  It is a lot of work to evaluate each vendor on the short list so you will not want to select too many vendors to go to the next stage.

3-Invite selected vendors to Demonstrate their software
Invite the vendors to visit your location and present a demonstration of the software.  Make sure that all members of the core team are in attendance at every demo.  Some vendors will want to demo the software over the internet.  If you are talking about purchasing a very expensive software package, you have every right to insist that the vendor visit your location so that you are able to meet with and evaluate the vendor in person.  Beware of vapor-ware. Vapor-ware is some part of the software the vendor is trying to sell you that is really not there.  It is a "picture" of something that they would like you to believe is part of the functionality of the software, but, in reality, has not been developed yet.

4-Call references
Interview references as rigorously as you would interview a new employee. It is best to call the reference and set-up an appointment for a conference call with the members of your core team. Have a checklist of questions that you ask every reference.  Schedule some time immediately following the reference call to discuss the responses among the core team members.

5-Make sure that the proposed system will meet your specific needs
By now, you should be able to select a final list of vendors.  Select no more than 3 (too much work) and no less than 2 (no competition among vendors).  Bring the vendors into your offices to do a proof of concept using your data and your workflow scenarios. Create a script which goes through a day in the life of your organization.  Make sure you identify important business processes, documents and reports. This is a time consuming task for the vendor and for you, but you will only be going through this process with the vendors who are most likely to get your business. If you are asked to pay a vendor for the proof of concept, make sure that you get a fixed price quote for the work before you decide to go ahead with the vendor. 

6-Make sure that you know the total cost of ownership for each system
Understand all costs associated with the software.  The original license fee is not the only cost.  There are recurring costs as part of all software purchases including yearly license fees, implementation costs, support costs, hardware, networks and communications costs.  Know these costs for each software candidate before making a decision.

7-Negotiate price and contract terms

Do not accept the vendor's original quote as the final price.  Negotiate.  Make sure that the vendor believes that there are at least two software systems that will satisfy your requirements. Never let the vendor know that you have definitely selected their product until you have negotiated the best possible deal.

8-Install the system
System installation and configuration is the joint responsibility of you and the vendor.  You will have to agree on a timeline for the project to ensure that your system is up and running when you need it.  Make sure that you are happy with the way the vendor proposes to assign staff to your installation project.  Also, don't forget training.  The vendor is responsible to ensure that personnel in your organization know the capabilities of the system and how to operate it. Make these issues part of the contract.

Congratulations!! It's been a long process!!  The system is installed and you are ready to use your new software tool to accomplish your work more efficiently!!