Why Choosing the Cheapest Vendor Often Kills Digital Transformation

Introduction

I’ve lost deals before. Every founder has. Most of them fade quickly, you move on, focus on the next opportunity, and tell yourself it’s part of the game. This one didn’t.

Months later, I still find myself thinking about it. Not because we lost the deal, but because of what happened after and what it revealed about how decisions are made inside large organizations.

It started with a large life insurance company in India reaching out to modernize its incentive management process. From the first few conversations, it was clear this wasn’t a small upgrade. They managed incentives for thousands of advisors across multiple hierarchies under heavy compliance pressure, frequent plan changes, audit scrutiny, and very real consequences if something went wrong.

Incentives in insurance aren’t just numbers on a sheet.

They’re livelihoods.

They’re trust.

They’re motivation.

And they knew their current system, based on spreadsheets, manual reconciliations, and late-night corrections, was breaking under pressure. So they did what responsible enterprises do. They issued an RFP. They ran proofs-of-concept. They evaluated vendors. And eventually, they shortlisted two of us. We were one of them.

The Choice Between Comfort and Honesty

As a company, we’ve learned one thing the hard way: you don’t win long-term by pretending complexity doesn’t exist. So when we put our proposal together, we did it the only way we know how.

- We laid out the real scope.

- We spoke honestly about timelines.

- We priced the effort based on what it would actually take to make this work & not what would look good in a comparison sheet.

We didn’t try to be clever. We tried to be truthful. The other vendor took a different approach.

They sharply cut down the scope. They promised a 3-month go-live for a system that touches incentives, compliance, hierarchies, payouts, and reporting at scale. And they quoted a price that, if I’m being blunt, didn’t align with reality.

Everyone in the room knew it. So we raised the concern. Not aggressively. Not politically. Just factually. And that’s when the business team said something that I still think about:

“We know it’s not possible. But we had to send two names to procurement.”

That sentence told me more about enterprise transformation than any whitepaper ever could.

When Price Becomes the Only Language

From that moment on, the conversation changed. It stopped being about execution risk.

It stopped being about governance. It stopped being about delivery teams, capability, or long-term ownership.

It became about price.

Procurement did exactly what procurement is often measured to do: reduce costs. They chose the lowest number on the sheet. And just like that, the decision was made. We lost the deal as a consequence. At the time, I accepted it. That’s business.

What I didn’t expect was how the story would continue…

Why the Project Didn’t Go Live as Promised

Nearly a year after that decision, I heard an update. The project that was supposed to go live in three months…still isn’t live. Instead of stabilizing, the implementation dragged on, timelines blurred, and workarounds filled the gaps where solutions should have been.

One of the key business champions, who once believed deeply in the promise of this transformation, had already left, burnt out by delays and worn down by constant resistance. And the remaining team is now stuck. They know the current system isn’t working. But they had already invested too much time, budget, and political capital to walk away from their decision easily. This is the part people don’t talk about in digital transformation decks.

Once a project reaches this stage, it’s no longer just a technical problem.

It becomes emotional. Political. Human.

What This Taught Me About Why Digital Transformations Fail

Stepping back, this experience reinforced something I’ve seen repeatedly:

Most enterprise transformation failures don’t start with bad intentions.

They begin with misaligned incentives.

Business teams focus on outcomes, procurement is measured on savings, and vendors are driven to win the deal. And in that tension, honesty often loses to optimism.

Underestimating complexity gets rewarded. Realistic timelines get penalized.

The cheapest option feels like the safest decision, until it isn’t.

Incentive automation claims systems and policy platforms are not something you just “install.” They are systems you live with. And when they fail, the impact shows up in morale, trust, and credibility.

This Isn’t a Regret Story

I’m not sharing this because we should have won. We’ll win some deals. We’ll lose others. I’m sharing this because I’ve seen how a single decision made with the best intentions can set off a chain reaction that affects people, culture, and beliefs. Because the most expensive projects I’ve seen in my career were never the ones with the highest price tags, they were the ones that looked cheapest on paper.

If this story makes you pause even for a moment before your next transformation decision, then losing that deal was worth talking about.

Because sometimes, the real cost isn’t what you pay upfront…

It’s what you end up paying for much longer.