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Top tips for tender process success

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26th Feb 2015
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In today’s business world you have to be flexible, innovative and agile in order to survive. So why then do organisations refer back to a restrictive, time-honoured tradition of the request for proposal (RFP) process in an attempt to discover what they can receive from a supplier? asks Anthony Lamoureux, director at enterprise IT transformation consultancy Velocity.

Paper trails and competitive bids might be reassuring for management grappling with business critical decisions at the point of RFP and tender processes. However, finance professionals need to ensure they are managing risks, getting the best value for money, and that their teams are buying in the correct services without overspending.

The core problem is that an RFP is usually just a box-ticking exercise. The people involved are rarely at fault. The finance department want to, and can, add value to the process. However, it’s often the nature of a major RFP that requires involvement from multiple departments across the business - and that keeps contributions fragmented.

The CFO and their finance team make up an integral part of the governance team that signs off the deal, helps structure the business case and are often involved in the financial criteria of the RFP selection, which means they have a crucial role in understanding the “real” true cost of ownership and return on investment, if the deal is successful; along with the never talked about financial implications if the deal fails to deliver on its aims.

So what can financial teams look out for in order to shake up the process?

1) The cost of the tender process and the ‘time to market’ to determine value from the outsourced provider – companies often spend six to nine months just working out what they want to ask! That’s a massive amount of negotiation between business and IT decision-makers. This is before they even have the first meeting with the people who’ll end up running that part of their business. In many tenders, suppliers are actually marked down for going off-piste. No wonder many major consultancies turn out boilerplate responses to tender after tender. It just becomes a percentage game – where is the true business value in that?

2) The value of the outsource deal in reducing operating costs, not just within IT but for the wider business – with a traditional tender, you’ll often hear what we call the ‘Big Lie’… “We’ll save you 30% in lifetime costs and deliver that rebate to you on day one.” That feels like an instant win. But it’s usually just financial engineering and promotes over-aggressive cost management, as well as off-the-shelf solutions.

Win-win means innovative approaches, a clear upside for the business and smart cost management – not just a lower first-year cost line in the CIO’s budget

3) The ability to be flexible to change in the market and in technology – today companies recognise the need to bring in technology experts to help them become agile. But the RFP is more focused on a list of out-dated prerequisites than open-minded thinking in support of higher-level strategy. The process ought to foster relationships designed around change. The adoption of Cloud technology is a great example. It has democratised IT at a speed that no conventional outsourcing deal could accommodate. If the market flexes around a technology and you’re locked into an approach defined by an RFP set four years ago, you’re going to lose competitive edge and customers

4) The success of the contract to make it to term. If it can’t make it then there is another tender to run, with even more cost – the project should be delivered relatively quickly, allow for innovation and have clearly defined service levels and maturity targets. That way, instead of spending 80% of your time debating the RFP internally and just 20% with suppliers, you spend 10% of your time articulating what you need internally, 20% sharing ideas and innovating with the supplier and 70% actually working together. If the supplier doesn’t hit targets? Well, you’ve learned something about them, and about your own business. And if it’s working well? You can enhance the relationship with confidence. You’ve had meaningful time together to understand the personalities and see the deliverables

5) OPEX versus CAPEX – normally tender activities and the transition from one supplier to another is often assigned as an OPEX cost; all cost, no benefit to the business. However, there is an opportunity for the outsource deal to not just transition between suppliers but also create new business value through the introduction of new technologies and transformation which create real asset value and be assigned as a CAPEX expense

All of these elements mean that financial assurance of ‘true value’ can be a real opportunity and remember that a year-long RFP, like the dating site questionnaire, helps you simply tick some due diligence boxes.

A good IT service deal should be like a good marriage - based on growing and learning together, not just trying to fix yesterday’s problems or play it safe. If you want real value and innovation, it’s time to revolutionise the RFP process.

Anthony Lamoureux is a director at enterprise IT transformation consultancy Velocity.

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