4 Red Flags When Evaluating AI Vendors

High-level Overview & Key Takeaways:

• There is risk inherent in any vendor evaluation process–choosing the wrong vendor can lead to a loss of capital investment, months of time wasted on change management, operational risks, employee alienation, costly errors, and even reputational harm.
• When it comes to evaluating AI vendors, the barriers are even higher than when selecting a new software vendor. Many organizations are implementing AI for the first time to teams who may be skeptical or intimidated by the idea of trying AI, so it’s important to pick the right partner that can win their trust.
• The market is flooded with untested “solutions”: As venture capital rushes to invest in the tools that will power a new era of AI-driven work, you’ll find many early-stage vendors touting tech platforms and making promises they’ve yet to realize. Proceed with caution.
• As you move through a vendor evaluation process, you should be wary of the following “red flags”:
  
  • The vendor isn’t able to show product functionality live on a call
  • The vendor doesn’t have a deep bench of engineering talent
  • The vendor doesn’t have the proper security and safety protocols
  • The vendor isn’t able to provide customer references

Red Flag #1: The Vendor Cannot Show You Key Features on a Live Demo

Be skeptical of curated or overly scripted demos. Unless you see a product working live with your data, it’s hard to be sure that it actually works and can handle your specific workflows.

For example, for a demo of a sales order entry product, come prepared with real purchase orders and ask the vendor to process them live. If the vendor is reluctant or says, “Share them with me and I’ll send you the results in an hour,” that’s a clear red flag.

In a podcast interview with Modern Distribution Management (MDM), Canals co-founder and CTO Erez Arnon advised distributors on how to choose the right AI tech partner. For those evaluating automated order entry software or invoice process automation tools, his advice is particularly salient: "Evaluate things that you can verify, and don't trust anything that you can't verify."

"Evaluate things that you can verify, and don't trust anything that you can't verify."

To hear all of Erez's advice on selecting AI for the industrial supply chain, you can listen to the full interview here:

What you should look for

In the case of purchase order management software, for example:

• Bring your own purchase orders to the demo (Same goes for any accounts payable software) 
• Present them on the spot and see how the vendor reacts 
• If the product functions as advertised, the AI vendor will instruct you to upload your own purchase orders live to demonstrate the product’s capabilities

Red Flag #2: Their Engineering Team Lacks Relevant Depth and Expertise

Handling the messiness of data required to automate workflows in wholesale distribution, construction procurement, and invoice automation is a demanding technical challenge, but building technology is not the same as maintaining it. An AI workflow automation platform needs the full attention of advanced engineering experts to stay up, running, and performant every day to support the hundreds of customers using it. 

A small team or a team of junior engineers isn’t going to cut it. When it comes to your critical business workflows, you want a team of experienced engineering experts to rely on. 

What you should look for

You can evaluate an AI vendor’s engineering team right from your phone or desktop. Log on to LinkedIn and visit the AI vendor’s business page. Navigate to the People tab and search for their engineers to learn:

• How many engineers they employ
• How much experience those engineers have
• If those engineers have worked for reputable tech companies in senior roles

Whether you’re evaluating invoice automation for the plumbing industry or HVAC sales automation software, when comparing multiple AI vendors, note the breadth and depth of each vendor’s engineering team in order to choose the platform with the best support.

Red Flag #3: The AI Vendor Lacks Third Party Data Security Validation 

According to research by IBM, the global average cost of a data breach was about $4.44 million per incident in 2025. Compromised data costs more than money–it wastes time, damages your brand reputation, and erodes trust in your business.

According to IBM, the global average cost of a data breach was about $4.44 million per incident in 2025.

That's why carefully vetting any AI vendor's data and security practices is so essential. When you partner with an AI vendor for use cases like purchase order or invoice automation, you are granting that vendor access to critical data about your pricing and customers.

What you should look for

Any vendor can claim they take security seriously. Look for independent, third-party verification and specific controls that go beyond marketing promises. For example:

• SOC 2 Type II audited security controls
• Secured access through SSO (single-sign on), MFA (multi-factor authentication), and PoLP (principle of least privilege) 
• An engineering team with a background in highly regulated industries
• Layered network defenses with isolation, firewalls, and abuse control
• Third-party penetration testing and automated security checks
• Service agreements that protect customer data

What is SOC 2 Type II attestation?

SOC 2 Type II is an audit framework created by the American Institute of Certified Public Accountants (AICPA). A SOC 2 Type II report is performed and issued by a licensed CPA firm that evaluates whether a company’s controls meet the AICPA’s Trust Services Criteria, including:

• Security
• Availability
• Processing integrity
• Confidentiality
• Privacy

You may be wondering how a Type I attestation differs from a Type II. While a SOC 2 Type I audit evaluates whether controls are properly designed at a specific point in time, a Type II attestation verifies that those same controls operated effectively over a period of time (typically three to 12 months).

Red Flag #4: They Don’t Have Glowing Customer References

Every serious AI vendor publishes customer logos and case studies on their website, and those can be a useful starting point for understanding which customers and industries a vendor has previously served. If they can't demonstrate a track record of successful deployments, that alone should give you pause. 

However, prewritten testimonials only tell part of the story. The most valuable insight comes from direct conversations with the vendor's existing customers.

What you should look for

The best way to gain confidence in an AI vendor is a customer reference. Ask the vendor to connect you with customers whose organizations resemble yours—those running the same ERP, operating in a similar industry, or navigating comparable challenges. A strong vendor will welcome this request and have a deep bench of referenceable customers ready to speak on their behalf.

When conducting a reference call, ask questions like: 

• “How long did implementation take?”
• “What is the integration process like?”
• “Have you been able to quantify your ROI?”
• “Is there anything that could be better?” 

When speaking with references, ask direct, calibrated questions like "on a scale of one to ten, how strongly would you recommend this vendor?" and pay close attention to the difference between a seven or eight and a perfect ten. You want a vendor earning rave reviews, not polite ones. When the stakes involve transforming your business operations, set the bar high.

How Canals Delivers on Functionality, Reliability, Security, and ROI

Put your own purchase orders to the test live in a Canals demo

At Canals, we encourage everyone who requests a demo to bring their own documents to test, because the only way to verify purchase order automation is to see it with your own eyes in real time.

Canals’ engineering talent bench is deep

Canals employs 60 engineers (and counting!) to build, expand, and support our products every day. Our engineers are specifically recruited for their expertise in matching accuracy, platform reliability, technical enablement, and solutions engineering, with many hires coming from companies like Google, Meta, Amazon, Microsoft, Uber, and Lockheed Martin.

The engineering team at Canals includes six former CTOs, CIO, or Heads of Engineering from startups that were acquired or are still operating, as well as a dedicated Product Matching Manager who teaches a course on AI and Information Retrieval to ensure Canals’ matching functionality stays industry-leading.

On top of our engineering team, each customer account is assigned a Customer Success Manager to oversee your platform usage, enable your team on the platform, and action any feedback.

For Canals, this engineering talent translates to the reliability and scalability of our purchase order management software and other products.

• We maintain 99.9% API uptime with less than a 0.1% error rate
• The Canals platform completes 95% of requests in less than 500 milliseconds
• Canals processes 95% of purchase orders within three minutes
• Containerized microservices with dynamic horizontal scaling
• Canals uses AWS (Amazon Web Services) databases, queues, and people power to handle traffic spikes automatically

Canals is SOC 2 Type II attested for data security and data privacy

At Canals, we treat SOC 2 Type II as table stakes, and beyond securing your data, we govern how it's accessed and used to ensure it remains yours with enterprise-level controls like:

• Secured access through SSO, MFA, and Principle of Least Privilege (PoLP), including RBAC (role-based access controls) 
• Layered network defenses with isolation, firewalls, and abuse control
• Third-party penetration testing and automated security checks
• A dedicated Head of Security who previously managed Platform for Yahoo!’s entire advertising business unit
• A significant proportion of our engineering team (30%) comes from companies with strict regulatory requirements such as fintech and healthtech
• Service agreements expliciting stating that customers retain full ownership of their data and that their data is not shared with any third party

Canals makes sure your data stays yours

Not only do Canals’ service statements give customers all rights to their data, but for any customers who terminate their contract, their data is deleted from Canals 30 days following a termination. Canals also goes a level deeper to keep data private: Customer data is never shared with, exposed to or used to train machine learning models for other Canals customers–we create a custom model for each customer. 

Canals has industry validation

Canals has already established a reputation for trust and reliability with over a hundred distributors across every major vertical. The platform has processed over five million sales orders, seen over $5B in payables submitted, and serves over 8,000 users.

Thanks to the breadth of our customers, Canals has solved thousands of edge cases across critical, real-world workflows in sales, accounting, purchasing, and receiving, so chances are if you have a problem, one of your peers has already solved it using Canals.

The teams using Canals have proven ROI

We hear feedback from customers every day telling us the value they’re getting from the platform. Here’s just a small cross-section of what we hear:

“On a scale of 1 to 10, our satisfaction with Canals is a 12.”
- Jim Warshauer, Warshauer Electric Supply

“Right now, 57% of Canals transactions turn into orders, when our average is closer to 20%.” - Brian Fitzgerald, SVP of Digital Operations at Turtle (Read the case study)

“One of our automation guys sent over a project with 100+ line items in a spreadsheet. I ran it through Canals and had it back in 20 minutes. He called me and said, ‘How is that even possible?’ That would’ve taken a CSR group all day before.” - Brett Turner, Regional Operations Manager at Kirby Risk (Read the case study)

“Canals continues to impress me with all the added features and willingness to work with us.” - Dustin Hoffman, Standard Electric

“We’re not having to learn Canals. Canals learned us.” - Julie Miller, Inside Sales Rep at Kendall Group (Read the case study)

Get started evaluating AI vendors for workflow automation

To speak with a Canals expert live and test functionality with your own documents, request a demo today.

One of our customers put it best: “AI is moving fast. We’re not naive. Everyone’s going to have to jump on the bandwagon—first, not last.” Now’s the time to supercharge your team with operational efficiency only an AI vendor can help them achieve. The key is to choose the right AI partner to ensure success.