If you have ever been involved in selecting or influencing the purchase of any high value product on behalf of your company, no doubt, someone suggested getting the candidate suppliers to respond to a request for proposal (RFP). RFPs offer a number of advantages for buyers. Typically, buyers will justify the RFP as a way to get to a fair and accurate comparison of several products.
Unfortunately, some buying organizations use the RFP for other purposes. Specifically, they will use the RFP to serve as justification for a decision that has already been made. Vendors are increasingly reluctant to commit time and resources to an RFP process that they may suspect of being less than genuine or truly open in nature.
I have seen RFPs with anywhere from a few hundred to eight thousand questions. I’ve seen RFPs arrive in the afternoon mail with a response deadline set for the next day. In both cases, you are waving a red flag that is essentially telling the vendor that they have no chance winning this competition.
In our discussions over the next few weeks, we’ll be looking at the RFP process as it relates to ERP systems, vendor evaluations and selections. We will explore what the RFP process can do for you, how you can maximize the value of the RFP for your own enterprise and how you can encourage vendors to seriously compete for your business using the RFP as a tool.
What do you expect to accomplish?
The first question to answer is what do you expect the RFP to accomplish for you? Is it just an information collecting device? Are you simply getting estimates of cost for next year’s budget? Are you using the RFP to help make the final cuts for your vendor short list? Are you collecting high-level pricing data to put together an initial vendor list for an ERP selection project?
ERP selection processes frequently involve committees of people who come from all levels of the organization and also cross many functional borders. If the incumbent ERP system has been in place for quite a while, most people on the selection committee will have little knowledge of what type of ERP functionality is available. The RFP can serve to fill in many informational blanks not only about specific vendor solutions, but also the state of the ERP product market wide.
Fifteen years ago, the world was consumed with Y2K and moving apps off of Mainframes onto one of several alternative platforms. Much of the talk and development activity in those days was focused on those issues. If your experience in evaluating ERP solutions is based on migration strategies from mainframe to Client/Server architecture, you probably won’t have a clue about relevant discussion points for current ERP offerings.
ERP RFI – Request for Information
Using the RFP format, but making the mission more aligned with an RFI, Request for Information is a great way to get specific information about various aspects of the product in general or specific product.
An early selection cycle RFI might request information from vendors about things like
- User Experience – Include questions about the interface, screen designs, dashboards, user customizable features
- Integration Strategy – Does the application make use of third-party functionality, how well does the app integrate with existing solution that will remain in place, how are third-party functionalities licensed, paid for and kept current?
- Business intelligence (BI) capabilities – What kind of reporting is available, what kind of data mining is built into the base product? Is data available in real time?
- Role-based architecture – How are roles defined? Are roles fixed in advance or are they tailored around the actual end user and her job?
- Platform – On-premises, Cloud, hosted?
Long Form RFP for ERP
As the selection process moves forward, your information requests can become more tightly defined. Perhaps you are building a budget for your project for the coming fiscal year. RFPs can be issued that are specified as non-binding but still will provide you with useful information about costs. These RFPs might include:
- Pricing and Licensing – How are products licensed and how is scalability reflected in fees charged? Is the license priced by seat, by functionality used, or per server? Are all users priced the same?
- Implementation – How is implementation handled? Included in license, third party? Is it fixed price or pay as you go?
- Bundled or un-bundled – Can the functional units of the offering be purchased or licensed separately?
- Ongoing fees – Is maintenance included in the annual fee? What is the support process? Is user support included?
All of this information can help you add or remove certain vendors or products from your long or short lists. In the end of the process, you will likely have one to three finalists. These are the companies that should receive the “long-form” RFI/RFP. These are the companies that have a reasonable chance of actually winning your business.
The long-form RFP should literally cover everything. Identifying it as the best and final cycle will incent your vendors to do their best in terms of completing the questions and offering decent prices.
Using the RFI and RFP process with multiple iterations of shorter, more focused subjects will deliver more useful information to you quicker and more completely. It gives you an opportunity to see how responsive various vendors are. You’ll likely get to know the local folks associated with each vendor.
This is very important because you will have to work with these folks when it comes time to implement and go live.
Evaluating ERP vendors? Download our free whitepaper: “Making the Smart Choice: A Practical Guide to Evaluating ERP Systems and Vendors,” which provides tools to help you address the business goals of your enterprise and to mitigate the risks.