8 Red Flags When Evaluating AI Vendors

A Tampa accounting firm signed a $36,000 annual contract with an AI vendor after a 30-minute demo. Twelve months later, the tool handled 40% of what was promised, the "AI" turned out to be mostly if/then rules with a chatbot wrapper, and getting out of the contract cost another $8,000 in early termination fees.

The AI vendor market is crowded and hard to evaluate. Many products do real, useful work. Others repackage basic automation as AI and charge ten times what the underlying technology costs. These eight warning signs show up consistently in vendors that underdeliver.

1. Guaranteed ROI Numbers

"You'll see 300% ROI within 90 days." Any vendor who guarantees a specific return before understanding your data, your team, and your existing processes is selling, not consulting. ROI depends on your adoption rate, data quality, and how well the tool fits your workflow. None of those are under the vendor's control.

A legitimate vendor will show you case studies with ranges: "Clients in your size range typically see 15-40% time savings on this workflow." That's honest because it acknowledges variation. A specific guarantee means they've either never measured or they're using the number that tested best in their sales emails.

2. No Pilot or Trial Option

If the only way to buy is a 12-month contract, ask why. Good AI products offer a 30-day pilot, a free tier, or at minimum a money-back trial period. The vendor who insists on annual commitments upfront knows that once you're locked in, you're less likely to leave even if the product disappoints.

Counterpoint: some enterprise AI tools require significant integration work (connecting to your CRM, training on your data), and a 30-day trial genuinely isn't enough time. In that case, ask for a phased contract: pay for the integration and first three months, then convert to annual if results meet agreed benchmarks.

3. Black-Box Explanations

"Our proprietary AI engine uses advanced machine learning." If a vendor can't explain what their product actually does in plain language, that's a problem. You don't need to understand the neural network architecture. You do need to know: what data goes in, what decisions the AI makes, and what it does when it's wrong.

Ask: "When the AI gives a wrong answer, how do I know? What does the correction process look like?" If the answer is vague ("it learns over time"), the vendor either doesn't know how their own product works or doesn't want you to know.

4. No Data Ownership Clause

Read the contract's data section. Who owns the data you put into the system? Can they use your data to train their models? What happens to your data when you cancel? Some vendors retain the right to use your business data for "product improvement," which means your customer information, pricing data, and internal processes are training their AI for your competitors.

The clause you want: "Customer retains all rights to data uploaded to or generated within the platform. Upon termination, all customer data will be exported in a standard format and deleted from vendor systems within 30 days." If the vendor pushes back on this, walk.

5. Vendor Lock-In by Design

Can you export your data? In what format? If you've spent six months building prompts, training the AI on your processes, and customizing workflows, can you take any of that with you? Lock-in happens when your data is stored in proprietary formats, your customizations can't be exported, or the switching cost is deliberately high.

Ask about data export before you sign. Request a sample export from a demo account. If they can't produce one, your data is going in but it's never coming out clean.

6. Timeline Promises Under 4 Weeks

"You'll be up and running in a week." For a simple chatbot or email drafting tool, maybe. For anything that touches your core business processes, a one-week timeline means they're installing a generic product without customization. Meaningful AI implementation requires understanding your data, integrating with existing tools, testing with real scenarios, and training your team.

Realistic timelines: simple standalone tools (2-4 weeks), integrated workflow tools (6-12 weeks), custom AI solutions (3-6 months). If the vendor's timeline is less than half of these ranges, either the product is simpler than they're advertising or they're not including the work that makes it actually useful.

7. Ignoring Your Existing Stack

A good vendor asks what you already use before proposing a solution. What CRM? What email platform? What project management tool? Where does your data live? A vendor who demos their product without asking these questions is planning to sell you a standalone tool that doesn't connect to anything you already use.

Standalone AI tools create data silos. Your AI chatbot answers customer questions but doesn't update your CRM. Your AI email writer drafts responses but doesn't log them in your support ticketing system. The time saved by the AI gets spent on manual copy-paste between systems.

8. "AI" That's Just Rules

Some vendors wrap basic if/then logic, templates, or keyword matching in an "AI" label and charge AI prices. The test: give the product an input it hasn't seen before. Not a variation of its demo data. Something genuinely new. If it can't handle novel inputs, it's rules-based automation, not AI.

Rules-based automation is fine for many tasks. It's often more reliable than AI for structured, predictable work. The problem is paying $500/month for something you could build with Zapier for $20. Ask to see the product handle edge cases. If the demo only shows perfect-path scenarios, the edge cases probably break it.

Questions to Ask Before You Sign

Before any vendor meeting, prepare these five questions. The answers tell you more than the demo.

What happens when the AI is wrong? What does our data export look like if we leave? Can we do a 90-day pilot before committing annually? How does this integrate with [your existing tools]? Can you show me a customer who cancelled and why?

That last question trips up most vendors. A company confident in its product will tell you about a customer who left and what they learned from it. A company that deflects or says nobody ever cancels is either too new to have churn data or too dishonest to share it.

The full vendor evaluation framework gives you a scoring system for comparing proposals. The guide to choosing an AI consultant covers the consulting side if you're hiring people rather than buying software. And the AI budget guide helps you understand what things should actually cost so you can spot overpriced proposals.