Techscape: RFP is not the one for me

Another aspect of immense saving on both the customer and supplier sides of the transaction is the opportunity cost. For the customer, the RFP cycle can be cut from six-twelve months to 30 days or less. On the supplier side, the frequently small company doesn’t have to waste its staff, financial and marketing resources on every RFP which comes around the corner and can concentrate on mainly those client opportunities they can really sink their teeth into.

The revenue model these new types of service firms use doesn’t involve the customers paying them anything at all, which these customer companies like very much.

Others believe the RFP is a necessary part of the industry. Atul Vashistha, CEO of neoIT, a California-based outsourcing consultancy, says what works in the RFP process is that it is a good way for a customer to really understand a supplier’s capabilities and then get a good price. What’s broken? An RFP is inappropriate, when services are immature, he says. “When the product or service is mature, an RFP can be very helpful. If they’re not mature and a lot of customization is required on the project then an RFP can be a waste,” he observes, “for complex services RFPs should not be used for selection services—otherwise you’ll live in scope creep and contract hell for years.”

On the customer side, from the large IT outsourcing players the perception of the RFP is understandably essential. It is the tool whereby they can slant the playing field toward themselves and away from smaller and medium-sized competitors.

Steve Keil, CEO of Sciant, a Swiss company of 115 employees with their operations center in Sofia, Bulgaria is another vendor of IT services who feels the RFP process is badly broken. “In most of my jobs,” he says, “I’ve had problems with RFPs. When I was working for a network operations center, we competed with CSC and the big boys. What happens is the RFP provider simply works more closely with one vendor (whom they really want to win) so that, of course, that vendor gets the contract.”

An example of this was an RFP put out as an “open tender” by a Bulgarian company. “Later they issued an amendment saying respondents must have offices in every single one of the provinces within Bulgaria,” Keil said. Immediately suggesting that four centers could be set up for coverage of the entire Bulgarian state, Keil was then told that the supplier would have to have this vast network of offices.

As it turns out, only one IT services company in all of Bulgaria has offices in all the provinces — and they got the contract. “What’s the point?” one might ask.

This is certainly something for Keil to ponder: “I just realized something … in my 10 years of working for companies that respond to RFPs — I’ve never won one! And, I don’t think that’s because we suck.”

Why is it important to create the appearance of a organized and fair process when all that really exists is disorganized unfair chaos?

The ugliest usage for an RFP, is when the customer decides its want to grind it current service provider down on price. This usually begins with a statement something like this, “Mr. Vendor, we’ve decided to see what else is available on the market and what further cost-savings we might realize.” This bald-faced lie, specially-designed to take advantage of a supplier by falsely threatening to take the business elsewhere, is a particularly distasteful business modus operandi. The customer never has any intention of moving the business elsewhere but just wants a better price for the acceptable service they’d already been receiving. This is just bad business and a real red flag.

If you’re going to put out an RFP, it should at the very minimum be an honest RFP. This way you don’t waste the time of any hopefulswhile heaping degradation on one of your vendors. ®

Bill Robinson has appeared on CNN, PBS, Bloomberg and had his own segment on SKY News commenting on high-tech and marketing issues and has written columns and articles for FORTUNE Small Business, The Financial Times, Marketing Magazine (UK), Forbes.com, The Moscow Times, Cisco Systems iQ Magazine, United Airline's Hemispheres Magazine and Upside Magazine. Bill may be reached at: bill@relentlessmarketing.com