By Jeff Lucchesi, COO, Taos
Is the RFP process effective? A year after I select the service, will I be better off than I was before I selected my partner? Will I have the partnership I envisioned during the RFP process?
When I ask potential clients these questions, at least two out of three will answer no. In most cases, all three answers are no. So do IT organizations perpetuate the RFP process in order to satisfy their Purchasing department or do most IT leaders believe it is effective?
A case in point – many companies are looking to Managed Services companies to outsource part or all of their operational functions. In order to do this effectively, there needs to be real clarity from the leaders of the organization about what they want and what model fits their company best.
The most successful relationships are when there is a true partnership between IT and their Managed Services vendor, but how do you find this out during the RFP process? When the rubber hits the road, will the vendor meet the contractual requirements but neglect the business relationship? ? Most of these relationships fail between the lines of the contract. For example, the vendor is hitting SLAs, but your costs are growing at an alarming rate because of change orders. You thought there was pricing clarity but there were wild cards in the contract which caused you to have to buy the tires in order to drive the car. Even the best third parties who work with IT organizations on selection can miss items that turn out to damage the working relationship between the vendor and the customer.
The models for managed services are also very different. Do you know the difference between the one-to-many model, developed during the beginnings of the SaaS era, and the dedicated model which has been in place since the 1970’s? They are very different, but this critical question has never been in an RFP we have seen and most clients are stumped on what the differences are. One may be a great fit for your company and the other one may fail, depending on your needs.
Who is the active executive sponsor and, along with them, who is the partner managing my account who is up to date on what is happening? Why is this important? There will be issues which are gray areas in the contract and may be open to interpretation. Having a vendor who is truly customer oriented and an executive from the company who will work with the customer to ensure their satisfaction is critical. Most vendors have a day-to-day management system set up, but is the person managing the account a true Operations person who can answer most technical questions? Or is he or she actually a salesperson who, once the deal is sold, isn’t current and doesn’t know the answers to technical issues which may arise?
Are you able to update old technologies during the life of the contract? This is another big gotcha question that many RFPs don’t ask. Many companies charge additional fees for swapping out technology, but what company doesn’t do this during a multi-year deal? This question is not often addressed in an RFP and can be very costly.
There are other areas which are important, depending on whether the client makes a pure cost based selection or a value added selection. A company motivated to drive ticket volumes down, automate, perform detailed analytics, and make recommendations is more value oriented. During an RFP process, how do you determine which vendor is transformational as opposed to a pure cost savings model? Some RFPs we see cover parts of it, but critical areas are missing which don’t give the organization a clear picture of different value propositions. It is difficult to walk through an RFP and show transformational behavior with the trends we have seen.
So each organization pondering service RFPs needs to ask the question, “Am I really going to get the vendor I need after going through this time consuming process?” The answer to that is best left up to the organizations to think through and decide.