While clients always expect the best deal on an outsourcing bid, they may not always offer enough information during the RFP process to help vendors meet their needs, especially in the case of less mature clients. Consultants weigh in on how vendors and clients can work together for a better RFP process.
The request for proposal (RFP) process can be fraught with hurdles, especially if the requirements are unclear. So how can vendors and immature clients navigate the waters of an uncertain RFP process together?
Esteban Herrera, a partner at Information Services Group (ISG), explained that immature buyers should consider a third-party adviser. “Not only do they bring objectivity, discipline and speed to the process, they work with all the service providers on a daily basis and understand the information they need and expect to get in order to submit a compelling, complete proposal,” he said. Herrera added that providers can suggest to their prospects that they work with such a company to get the process “unstuck” when struggling to provide precision and appropriate direction.
Herrera warned that neither buyers nor providers should confuse flexibility with incomplete information. “Almost every outsourcing relationship that starts with the phrase “we will figure that out later” ends badly,” he said, adding that the parties are stuck with each other at that point, so anything less than complete agreement yields friction and distraction.
“I always tell companies on both sides to prepare for how to handle potential scenarios and build those expectations into the deal and the governance structure,” Herrera said. “While it’s impossible to predict the future, performing this robust scenario exercise up-front will help set a precedent for how both parties will behave when the unexpected occurs.”
While Herrera said that clients can and should request best practices from their providers, he acknowledged that even in the fairest of situations, human nature and self-interest will be at play. “Part of the reason outsourcing deals are complicated is that there is asymmetry in the information both parties possess,” he said. “Service providers do this work every day, so they should know how to ask for the information they need. However, their immature clients may be reluctant to share that information for fear of compromising leverage, or may not even measure things the same way.”
Recognize the importance of the early stages
Bryan Eaves, a partner at Sourcing Business Solutions, a company that works with companies to prepare and complete RFPs and negotiate with suppliers, said that sometimes service providers ask questions too quickly after scanning the RFP. “Occasionally, the answers are clearly within the RFP and a more detailed review of the RFP would have made the reviewer look better. However, if details are omitted that will be needed for you to provide a valid quotation, contact the sender of the RFP and ask for more information,” he said.
Eaves also suggested giving the client a sample RFP in anonymized form. “This will create instant value to the client and they will remember you for providing that value during or before the RFP process starts,” he said.
Eaves also suggested asking the client to include a draft copy of the contract that they intend to execute with the final service provider. “Getting this started with the client early could give you more time to assess any legal hurdles and, more importantly, give you plenty of time to respond to the RFP and work towards an agreement with the potential client. If the client does not have a draft copy of the intended contract, use one of your own to start the process with more favorable terms on your side,” he said.
Understand whether an RFP is even necessary
Wes Higbee, President of Full City Tech Co., said: “Business at this scale, with outsourcing and nearshoring, isn’t like buying a prepackaged candy bar; this business is about relationships, so you have to start planting the seeds of trust from day one.”
Higbee added that, as a provider, if you have an RFP that doesn’t “measure up,” use that as an opportunity to start a conversation. “RFPs are a bad way of doing business. Why perfect what shouldn’t be done in the first place? RFPs are just as useless as resumes: nobody reads beyond the bullet points and they’re used by people that have no authority beyond screening applicants. The decision maker is never going to see your RFP.”
Higbee warned that if the decision maker does not have the time for you until you have been screened, that is a red flag that you need to pay attention to. “Chances are you’ll never meet the decision maker if you ‘win’ the bid, and that person will most likely be pulling the strings along the way, creeping scope until you’re bled dry,” he said.
Prepare for the long-term business relationship
Herrera noted that no matter the size of the purchase, the seller wants to maximize profit and the buyer wants to minimize price. “That is hardly unique to outsourcing, but relationships matter in this business, so getting past the barriers of trust and transparency is the only way both sides win—and it takes a long-term perspective,” he said.
“It is unrealistic for service providers to expect their clients to want anything less than flexibility, high value, and great rates. It is also unrealistic for clients to expect service providers to give away margin, especially when facing uncertainty. That is why a rigorous, unbiased RFP and selection process protects both parties. It also helps to have people focused on building a relationship rather than executing a transaction,” concluded Herrera.