Chief Digital Technology Officer & SVP
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RFP Extinction? New Techniques for Vendor Selection
I recently went to the World BPO Forum where one of the discussion topics in the Outsourcing 2.0 session was quite provocative: Should you do an RFP or not when selecting an outsourcing vendor? There were two distinct perspectives:
1) You should select a group of vendors/partners you want to work with first and get them all to agree to the terms of doing business with your company. Then, you should select which partners from the selected group work on which projects based on their specific competencies.
2) You should prepare your scope of work and distribute in an RFP format to a wide range of potential companies to make sure all vendors are competing fairly.
Not conduct an RFP? I first found the suggestion startling. I have been in IT for about 20 years, and the RFP methodology has been deeply ingrained into our industry's vendor selection process. That said, I felt myself quickly agreeing that it is time for a change. Businesses, both vendors and clients, are losing too much time and money in complicated, long RFP rituals.
A better, faster way is needed for both clients and vendors and here is one of the best practices I have seen in vendor selection today. Just recently Harvey Nash began work for a Fortune 100 investment firm in New York that has set up an internal storefront for all vendors. Every company must go through the online storefront in order to become a vendor, and the storefront process includes signing terms and condition agreements, pricing terms, as well as completing a capability matrix that highlights core competencies. Once a vendor has successfully completed the online entry process the pricing structure is disclosed to the hiring managers.
The nice thing about this approach is the efficiency. A hiring manager simply goes to the Web site, picks the top three vendors of choice and can then narrow down the selection process from there. They have eliminated the time-consuming 40-50 page RFP response, which rarely gives an accurate depiction of a business' capabilities. How can 40-50 pages be wrong? Many organizations use external consultants to prepare their RFPs. These consultants tend to feel that the larger the RFP, the better it is at representing the organization. This assumption too often means lots of information containing only small amounts of valuable substance related to the specific RFP need. The result is a system in which companies are judged by the number of trees they have killed in building their RFP rather than by their competency and experience.
During the discussion at the Forum, it was also suggested that the maturity of the company seeking an outsourcing vendor is a key determinant in whether an alternative vendor selection process will succeed. If the company is experienced in outsourcing, then an alternate route is easy to implement. But, it was said, companies with little outsourcing experience need a formal RFP process to level the playing field.
Here I must strongly disagree. Experience in outsourcing does not dictate vendor selection competence. An RFP, or any other selection process, requires due diligence and research, no matter how rich the company's outsourcing background is. Any company going through a selection process should carefully interview vendors and speak to their references. These two simple practices usually tell you far more than any RFP response, no matter how long it is.