Once the only way to properly seek out potential vendors for products or services, the traditional Request for Proposal (RFP) and RFP’s sister, the Request for Quotation (RFQ), have come under increasing scrutiny.
The RFP process is no longer considered the best way to select a vendor, regardless of industry. Yet, remarkably, we still see companies relying on it when searching for a software development partner.
Let’s look at why RFPs became so popular, why they fell out of favor, and why delegating the task to a dedicated advisor is the best way to find an ideal provider.
Why Companies Used an RFP Process
In years past, the RFP was considered the gold standard when selecting a vendor for a new product or service. The rationale was that an RFP promoted transparency and objectivity, reduced risk, and established clear requirements.
Further, it was assumed companies that responded to RFPs represented a valid representation of the universe of suppliers. The customer who distributed the RFP, in turn, received an accurate understanding of the relevant vendors and the potential solutions in the marketplace.
Many companies conducted the process with earnestness and pure intentions. They expected – and sometimes found – a hidden gem of a vendor.
Others, however, distributed RFPs more cynically. It was a rigged game that allowed management to appear open-minded and impartial, when in reality the decision had already been made. Some companies unclear of their objectives even used RFPs as a tool to gather ideas, then would cancel the process and try out some of those ideas themselves.
The original intent was certainly admirable: to conduct a candidate review that was objective, impartial and efficient. But something went horribly wrong. RFP processes do not reduce risk for companies or increase their chances of success in finding a quality outsourcing partner
What Went Wrong with the RFP Process
RFPs no longer provide for the orderly, objective means of evaluating multiple candidates, as originally intended. Rather, companies have learned:
RFPs are time consuming
RFPs are expensive
The best software development companies don’t respond
The written requirements don't always accurately reflect the intended outcome
The selection methodology is flawed
The selection team doesn’t have the right members
The scope is too broad
It’s not just small or inexperienced companies who get caught out, either. One of our clients, who came to Accelerance for help after spending six months on a failed RFP, was a highly sophisticated operation with 1,500 employees, including 800 engineers, specialising in hyperscale, cloud-native development deployed straight into production with no staging area. If they found themselves in trouble, so could you.
RFPs Are Time Consuming
The RFP process takes too long. Companies usually build the requirements, evaluation methodology and potential bidder search strategy from scratch. Next, they must send out an invitation to bid to potential vendors and issue an RFP, then reply to questions about the RFP in an orderly manner. Finally, they must wait to receive and then evaluate the vendors’ responses.
Modern businesses need to be nimble. That includes the ability to deploy a development team for mission-critical software. B2B companies, for example, are usually part of a supply chain. No company in that chain can wait while other parts of the chain go through a lengthy vendor selection process – then wait again while the required software is developed. Too often, incumbent software development providers are chosen by default, because it’s the only way to get through a selection process quickly enough.
RFPs are Expensive
The RFP process is expensive to you, as the customer, because of your internal team’s time commitment to develop and evaluate. But RFPs are expensive to potential bidders, too. Have no doubt, vendor-incurred expenses will make their way into the price you pay for the goods or services you procure in an RFP.
Think about the math. If five vendors submit bid responses to your RFP or RFQ, only one wins your business, so 80% of total vendor time has been wasted, diverting in-house experts on the vendor side away from revenue-generating activity. That’s a double-hit for the losing bidder: wasted energy on a sale that didn’t transpire and the loss of billable hours.
You may not pay directly for the wasted time, but all customers pay indirectly. Vendors who participate in RFPs as a normal course of business maintain the overhead cost of bid-response teams.
The Best Software Development Companies Don’t Respond
“If you build it, they will come” just doesn’t hold water here. Putting out an RFP doesn’t mean the best provider will respond. You may never meet – let alone choose – the best-fit partner using a traditional RFP process.
A rigged game: Too many capable vendors are suspicious of the RFP process, so they don’t respond. Their attitude is, “Why bother?”. Unfortunately, some companies go through the motions of a legitimate RFP process when the selection decision has already been made. It may be a charade where the only real purpose is to provide what’s known as “column fodder”: a list of companies who will be reported as candidates under consideration but never really stand a chance of winning the business.
Inadequate search: With 8,000-plus potential software development companies to choose from, many who could be an ideal fit will never even know you’re on the hunt for a qualified partner.
The wrong vendors respond: In our experience, too many vendors who respond to RFPs are the exact kind of company you would never want to partner with! Some will make grand promises but don’t have the real experience or depth of technical talent to get the job done.
The Requirements Don’t Reflect the Intended Outcome
It might surprise you to learn the written requirements in your RFPs may not accurately support your goals. We regularly see companies that make these mistakes:
Describing the legacy system: Companies tend to create a specification that mirrors an existing solution. Rather than focusing on the business goals and partnering with an innovative software development team, the specifications in the RFP are tedious – and perhaps even restrictive – thereby disqualifying creative solutions before you ever hear about them.
No expression of vision and business objectives: The software solution you ultimately want developed should be aligned with a larger company vision and business objectives. If you can’t express these, you aren’t ready to send out an RFP. A good vendor partner will want to understand the “why” behind your company’s RFP. Your business objectives should result in measurable outcomes (benefits) your organization receives from successfully developed software. RFP requirements must describe these expected outcomes.
Boiling the ocean: Companies will also try to cover every conceivable base of current, future, and potential future need: trying to “boil the ocean” with their requirements. If a bidder can respond with a solution, it will be far more expensive than what is really needed. Some very innovative software development companies with exciting new ideas simply cannot afford to respond to big RFPs. The result: your company may unintentionally exclude the potential perfect-fit vendor.
Too restrictive: Be careful not to make your solution parameters too narrow – especially architectural requirements. A key reason your company may choose to outsource software development is to tap into expertise that doesn’t exist within your staff. Give RFP respondents the flexibility to describe creative solutions to your needs. You may be pleasantly surprised!
The Selection Methodology is Flawed
Effective vetting has science behind it. You would never think of writing your own IQ test – why would you try to cobble together a vendor evaluation by yourself? We see first-hand that company employees who write code well don’t necessarily know how to create a good vendor assessment.
You need to know what questions are relevant to your decision-making process, rather than creating a check-the-box exercise. A numerical scoring system for the responses may seem practical; however, it can mask the true value of a potential partner.
Relying solely on the vendor’s self-assessment of their abilities or business situation is also a poor way of evaluating them. “Trust, but verify” was a phrase used by former US president Ronald Reagan – and it’s good advice here. It is far better to see and assess your prospective vendor’s capabilities in person.
The Selection Team Doesn’t Have the Right Members
You would never develop a mission-critical software solution without business stakeholders and subject matter experts to help design the system and then certify it through User Acceptance Testing (UAT). Yet, many companies put on blinders when developing a team for building and running a successful RFP process. For a better understanding of whose input is important, ask yourself:
Who needs to be involved in the decision-making process?
Who holds important intellectual capital that must be infused into a system design?
What group(s) would a software development outsourcing team interface with?
Should they be actively involved in an RFP process or just have input on areas relevant to them – or perhaps a vote on the final decision?
Shared involvement will help ensure you make the right decision, and will ultimately pay dividends in commitment to the software development project when it commences.
The Scope is Too Broad
We often advise our clients to “start small” with a new software development outsourcing relationship. Even if you have larger aspirations, there’s wisdom in modestly sizing your initial project so you can learn how to work together effectively without the pressure of an “all hands on deck” initiative. You may discover your company needs to adjust key objectives or assumptions for future work, based on what you learn in your first joint project.
What You Can Do Right…
If you do decide to go it alone and handle the outsourcing process in-house, here’s how to increase your chances of an RFP producing a good result:
Address risks inside your company: It is not enough to assess partners simply with a list of technical requirements; it is equally important to evaluate your organization’s internal readiness to outsource. This includes working through a list of potential risks that could derail your initiative, even if you find a quality group.
Create a custom selection criteria: When outlining your selection criteria, picture what success would mean to you. What might the relationship look like in the next 12, 24 or 36 months? If you build a great team, how might it grow over this time? Could you see your partner potentially taking ownership of a dedicated project?
Define your values: In these tumultuous times, businesses are realising it’s more important than ever to know what they stand for, especially when working across distributed teams. What are the values that shape your culture? How would you describe the dynamics within the organisation and your working style? Only by communicating this clearly and authentically will you identify the right partner.
Align your best practices: Remote partners will have their own recruiting methodology when it comes to building a team. Ask each candidate to clearly describe their processes to see how closely they align with your own.
But There is a Better Way
A traditional RFP can be time consuming, expensive and ultimately flawed… leaving you with the wrong partner for your needs, or the wrong approach.
Most companies take five months to identify the best-aligned software development provider, with the expertise and other attributes required. By leveraging an established global network of certified partners, you can cut that search to a fraction of the time normally required.
That’s where Accelerance comes in. We have already vetted more than 8,000 software development companies around the world – and will send a shortlist from the top 1% straight to your inbox.
Our RFP as a Service (RFPaaS) begins with an evaluation of your company’s readiness to outsource, including critical business and management aspects. Next, we review the project under consideration, establishing a roadmap for your software partnership to mature and scale, and identify key criteria around your company culture.
This assessment is conducted in a workshop involving key stakeholders and participants, with findings summarized in a detailed report. Accelerance then matches your profile against our global database of certified partners to find the perfect fit.
With Accelerance as your guide, there’s a whole world of talent to choose from. And because we’ve already done the hard work for you, it’s much faster, cheaper and more effective than it’s possible to ever achieve on your own.
It’s time to kill off your outdated RFP process and embrace a better way.
In his role as Managing Director, Mike advises technology and technology-enabled companies on effective strategies when building high-performing, global software engineering teams. He is a highly accomplished executive, with proven ability in innovating and implementing business-building strategies for recognized Fortune 500 companies. He seeks to foster a culture of continuous improvement as well as maintaining adaptable and responsive practices that meet changing market conditions and business demands