The request for proposal (RFP), RFI, RFP, RFQ, RFT is the standard practice in public sector and government organizations for purchasing professionals to source critical products and services. The RFP process provides a familiar, well-established structural approach for purchasing professionals of all experience levels, ability and market knowledge to make critical sourcing decisions according to their specification. However, when it comes to RFP process for technology related services, it lacks innovation, business focus and has critical shortfalls.
3 top critical flaws of RFP Process
Low Cost Options: It is common knowledge among business leaders that hard cost in IT Departments is minor cost compare to soft cost or technology impact on organization. However, procurement professional making decisions in IT department with RFP approach is usually around hard cost. Since most soft cost decisions i.e Risks, Productivity etc fall into management’s areas of responsibility, short sited decisions based on competitive hard cost numbers, drive soft cost much higher.
Decision from proposal: Most decision-makers would agree that the RFP process is cumbersome and consumes a lot of time and money, yet companies continue to hire third party advisors to create an RFP document and help them choose implementation vendors, citing the primary benefit of the process, which is comparing providers on equal ground. There’s usually a disconnect and almost no correlation in making decision comparing multiple well written proposal and getting business results from service providers.
Lack of business focus: The two critical items for any organizations should be payroll and revenue. Most business leaders are always concerned about negative impact of any IT services on payroll and positive impact on revenue. However, RFP process is never structured around these two critical business functions. And without measuring impact of any technology services on business-critical function, investing capital usually deliver lower return on business expectations.
Consider strategic partner vs commodity fulfillment engine
Business Results: All business decisions have financial impact on your organization. Business leaders understand that any wrong decision will result in high cost in both time and money. When making business decisions, leaders should focus on soft cost not only hard cost. Increasing soft cost with new technology improvements defeats the purpose of any investment in IT services.
Partner & Process: If a company is at the point of sending out an RFP, they are likely too late for innovation. The real value-add is creating the type of relationship with a company where leaders required an advisor they can trust. A partner that makes it easy on them by asking only that they establish what business outcome they are trying to achieve, and then comes up with a thoughtful and innovative solution to achieve that outcome. Invest time in understanding process required to achieve expected business results and impact on both payroll and revenue.
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Also review – Impact on Revenue blog
