AI Vendor Selection Guide¶

For Australian SMEs, "build vs buy" for AI tools usually means "buy." Pre-built solutions are faster, cheaper, and lower risk for getting started.

But choosing the right vendor matters enormously. A good vendor partner accelerates your AI adoption. A bad one wastes money, creates security risks, and undermines staff confidence in AI.

This page provides practical guidance for evaluating AI vendors and tools, with specific considerations for Australian businesses.

Who this page is for¶

This page is for:

Technical decision-makers evaluating AI tools
Procurement teams assessing vendor options
IT managers responsible for integration and support
Business owners making build vs buy decisions
Anyone responsible for vendor selection and contracts

If you're asking "How do we choose between AI vendors?" or "What should we look for in an AI tool?", this is for you.

Build vs buy for first AI uses¶

Before you evaluate vendors, confirm that buying is the right approach.

Almost always buy for first uses¶

Why buying makes sense for SMEs:

Faster to pilot: Weeks vs months to get started
Lower upfront costs: Subscription fees vs development costs
Easier to change: Cancel subscription vs abandon custom code
Vendor handles updates: Security patches, model improvements, compliance updates
Proven in market: Other organisations have tested and refined the approach

Typical cost comparison: - Buy: $200-3,000/month subscription + setup fees ($500-5,000) - Build: $30,000-100,000+ development + ongoing maintenance costs

For first AI uses, buying is almost always the right choice.

Consider building only when¶

Building custom AI tools might make sense if:

Your use case is truly unique to your industry and no off-the-shelf options exist
You have existing development capability with spare capacity (not hiring contractors)
Off-the-shelf tools have been thoroughly evaluated and genuinely don't fit
You're past the pilot stage and have clear, proven requirements from successful vendor tools
You have budget for both initial development and ongoing maintenance

Reality check: Even large organisations with substantial tech teams often buy rather than build for AI tools. The technology is evolving too quickly, and the effort required to maintain custom AI systems is significant.

Red flags when evaluating AI vendors¶

Be cautious if a vendor exhibits these warning signs:

1. Can't explain how their AI works¶

Red flag: Vendor gets defensive when asked how their AI makes decisions, hides behind "proprietary algorithms," or can't explain it in plain language.

Why it matters: You need to understand AI behaviour well enough to know when to trust it, when to review outputs, and how to explain it to regulators or customers.

2. Makes unrealistic promises¶

Red flags: - "100% accuracy" - "Fully automated from day one" - "No human oversight needed" - "Works perfectly out of the box" - "Guaranteed ROI in 30 days"

Why it matters: AI systems have limitations and require tuning. Vendors making unrealistic promises either don't understand their own technology or are being deliberately misleading.

3. Dismisses your concerns¶

Red flags: - Brushes off questions about bias with "our AI is unbiased" - Treats privacy concerns as paranoia - Dismisses error rates as "not a real problem" - Suggests your requirements are unreasonable

Why it matters: If vendors won't take your concerns seriously during sales, they definitely won't during implementation or support.

4. Can't provide Australian customer references¶

Red flag: No Australian customers, especially in your sector. Only provides international references.

Why it matters: Australian regulatory environment, business practices, and language nuances matter. Vendors without Australian experience may not understand local compliance requirements or business context.

5. Unclear about data handling¶

Red flags: - Vague about where data is stored - Can't clearly explain who can access your data - Unclear how your data is used (training their models? shared with others?) - No clear data export or deletion process

Why it matters: Data sovereignty, privacy compliance, and vendor lock-in risks all depend on clear data handling terms.

6. Heavy lock-in with no trial period¶

Red flags: - Requires 12+ month contracts with no trial option - High switching costs or data export fees - Proprietary data formats that make leaving difficult - No clear cancellation or data extraction process

Why it matters: You need room to learn and adjust. Long lock-in periods create risk, especially for first AI uses.

7. No relevant security or privacy certifications¶

Red flag: No ISO 27001, SOC 2, or industry-specific certifications relevant to your needs.

Why it matters: These certifications indicate basic security and privacy practices are in place. For sectors like health or finance, specific certifications may be required.

Key questions to ask vendors¶

Before committing to a vendor, get clear answers to these questions:

Functionality and limitations¶

What exactly does the AI do, and what are its limitations?
What decisions does it make, and which require human review?
What happens when it's uncertain or makes an error?
Can you show us a realistic demo with our type of data?

Australian compliance and data sovereignty¶

Where is data stored? (Australian data centres preferred for sensitive data)
How does the tool comply with Australian Privacy Principles?
What happens to our data if we cancel the service?
Do you have customers in [your sector] in Australia?
How do you handle Australian regulatory updates?

Integration and support¶

How does this integrate with our existing systems? (Microsoft 365, Salesforce, etc.)
What support do you offer for Australian customers? (time zones and response times)
What's included in training and onboarding?
How long until we can run a pilot?

Transparency and control¶

Can we audit the AI's decisions or see how it reached a conclusion?
Can we adjust the AI's behaviour or rules?
How do you handle model updates? (testing before production)
What visibility do we have into system performance?

Costs and contracts¶

What's the total cost including setup, training, and ongoing fees?
What's the minimum contract term? Is there a trial period?
Can we pilot before committing to a long contract?
What are the exit costs or data export fees?

Using the SafeAI-Aus vendor evaluation template¶

The AI Vendor Evaluation Template helps you score vendors consistently, track your evaluation process, document decisions, and share assessments across your team.

The template covers technical capability, Australian compliance, integration and support, transparency, costs, and references. Customize the weighting based on your priorities – not all criteria matter equally for every use case.

Connecting vendor selection to broader adoption work¶

Before selecting vendors: Review Safe AI Adoption - Getting Started to confirm you're choosing appropriate first use cases.

During evaluation: See AI Change Management – vendor support quality affects adoption success enormously.

After selecting a vendor: See AI Implementation Roadmap for guidance on running pilots and scaling.

Key takeaways¶

Build vs buy: - Almost always buy for first AI uses - Building makes sense only in specific circumstances - Pre-built solutions are faster, cheaper, and lower risk

Red flags to watch for: - Can't explain how AI works or makes unrealistic promises - No Australian customers or unclear data handling - Heavy lock-in or missing security certifications

Critical questions: - Functionality, limitations, and error handling - Australian compliance and data sovereignty - Integration, support, and transparency - Total costs and contract terms

Use the template: - Score vendors consistently - Document your evaluation - Share assessments across team - Customize weighting for your priorities

Remember: Vendor selection is not just about features and price. Support quality, transparency, and alignment with Australian compliance requirements often matter more than marginal technical differences. Choose a partner who will help you succeed, not just a tool to license.