The Hidden Dangers of an RFPThe Hidden Dangers of an RFPThe Hidden Dangers of an RFP

Selecting a new business management system is one of the most critical decisions a company can make.

The investment of money, time and change in processes that come with a software implementation has a profound impact on any company, making it imperative that the right product and service provider are identified during the selection process.

The RFP Process

The Request for Proposal (RFP) is one of the most common practices used in the early stages of the software-selection process. In the world of business management software, the process typically begins with an invitation for vendors to submit a proposal based on a structured series of questions and requirements.

The responses are then reviewed and a short list of vendors (typically 3-4) is invited to provide a demonstration and a more detailed proposal. For some companies, the RFP process is required. For others, it is seen as due diligence in making a critical decision.

The RFP can be enormously valuable when it comes to the purchase of a commodity (i.e., software only). It allows you to compare features, functionality, capabilities and pricing. Essentially, the RFP provides you with a standardized process to conduct an “apples-to-apples” comparison of the products, allowing you to weed out those that don’t fit your needs.

The Risky Business of RFPs

But when it comes to services (i.e., implementing/supporting the software), relying on the RFP process can be a risky proposition. Without proper discovery and a true understanding of your business, the consulting firm will essentially be making an educated guess about your requirements. The result is a range of recommendations and pricing that will likely change.

If you are determined to go the RFP route, there are hidden dangers lurking into this time-tested practice that can provide flawed, costly results.

Top Six Hidden Dangers

1) The Best Company for the Job May Opt Out

The odds of winning an RFP are not weighted in a reseller’s favor, especially when 6-10 solution providers are invited to bid. But it is more than just the odds that cause many in-demand companies to opt out of the bidding process; it’s the sheer cost to respond.

Many of today’s accounting software resellers do not allocate resources specifically to RFPs. Instead, a reseller will need to invest time from the sales representative, the solutions architect, an applications consultant and the services manager to respond to an average 25-page RFP.

A conservative estimate of a reseller’s time investment for
a 25-page RFP would be 46 hours. At a fully-burdened rate
of $100 per hour, a reseller will invest $4,600 in cost of sale
plus missed billable time to bid on a project via RFP.

In-demand resellers will opt-out of the RFP process immediately. What you’re left with are companies that have either assigned resources to manage the process like a Tier-1 solution provider, companies that need the business and are willing to take the risk, or companies that have streamlined a library of RFPs that can cobble together a reasonable response (although not specific to your needs).

2) Your RFP can limit you.

During early selection stages, it’s not always well understood what solutions are going to be the best fit or what budget range these solutions will fall in. Companies often create an RFP with detailed criteria including platforms, server compatibility, industry-specific processes, references and more for release to a wide range of vendors. This is a way of testing the waters to see what might work.

However, being too tied to current hardware or a specific way of doing things may eliminate solutions that would be more cost-effective or efficient in the long run.

3) You’ve wasted more time and money than necessary.

There are also significant costs on the client side to manage the RFP process. From internal meetings to document requirements, managing vendors and notifications, to reviewing the vast library of materials that are returned, it’s a time-intensive and costly process. If the RFP process only functions to create a shortlist, then there lies additional work in further documenting requirements and solution design.

4) Your understanding didn’t translate to their understanding.

RFPs without face-to-face communication equal danger. Another flaw comes from putting the RFP first in the selection process as a short-listing tactic. Paper-based processes by definition are open to interpretation, misunderstanding, and cannot be specific enough.

5) Independent consultants aren’t always independent.

Hiring an independent consultant can be a smart move depending on your time and resources. However, their knowledge is usually specific to one or two solutions. Ultimately, they do what comes naturally to them based on their knowledge, which is to design a solution for your processes based on the technology they know.

6) RFPs Cannot Compare Service Teams

An RFP is a good tool for an apples-to-apples comparison of a commodity such as a server or software features and functions. But it cannot do an adequate job of comparing service teams and the implementation partner is the No. 1 factor that will make or break your project. Be sure to dedicate adequate face-to-face time to understand how their team and methodologies fit with your organization.

Keys to Running a Better Buying Process

So what to do? It is possible to run a successful buying process. While components of a great buying process sound a lot like the RFP process, it is important to take the cost out of the paper-based RFP that results in wide and shallow answers.

Instead, one must streamline the paper trail to take the same time and money you would have invested in the classic RFP process and focus it on a deep requirements definition.

  1. Document the important stuff. Your requirements list should contain only the major functional and operational requirements. The rest will fall into place.
  2. Send out the list to determine which vendors can cover your “majors.”
  3. Call references before you narrow down your list.
  4. Armed with these streamlined answers, you can then narrow it down to three solutions that you know can cover the ground you want to cover.
  5. GO DEEP. Spend time after short-listing by bringing each of your three choices in to meet your department heads and dive deep into your functional requirements. This is critical to helping your potential services company truly understand your requirements and demonstrate how well their methodologies will fit your needs.
  6. Understand that it’s the services that make your project a success. An RFP is good for a commodity, but it’s the services that make an implementation project a success. A world-class system that is implemented badly is an expensive paperweight.

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