2014: Will we see the death of the RFP?

overwhelmed by proposalsLet’s say you are a global IT firm in need of a partner to help develop a competitor to Apple’s iPhone. How will your requests to prospective outsourcing partners read? Will you ask for a smart phone designed to do exactly what the iPhone does (choice number one)? Or will you ask for a more open-ended proposal for a smart phone and simply require that it has to include specified capabilities (choice number two)?

If you opted for the second choice, go to the head of the class. Why? Prospective partners are likely to offer competitive designs for a smart phone that solve your problem and more: for example, you may see a design for features you had not yet thought of. What would the first choice likely achieve? Designs constricted by your parameters which may or may not achieve your business goal in the world of smart phone market share.

RFS vs. RFP

The Information Services Group (ISG) has written a whitepaper, The RFP Will Never Be the Same,  which essentially advocates for a Request for Solution—choice number two above—rather than the traditional Request for Proposal, choice number one above.

In today’s business environment, which places the highest priority on innovation, ISG redefines the RFP this way: “…the highly prescriptive nature of the traditional Request for Proposal is by definition anathema to true innovation and ill-suited to address the complex requirements faced by many clients today.” In other words, innovation is unlikely under prescriptive directions.

ISG suggests that the road to an innovative outsourced solution requires that businesses stop telling outsourcing partners how to do their job, and replace that with clearly describing outcomes the business requires. Only that approach will allow potential outsourcing partners “the flexibility to propose unique solutions.”

Datamark’s own whitepaper on business process outsourcing trends in 2014 says,

…under the RFS process, customers will describe the general characteristics of their operations, objectives, concerns and vision of the future state of the process. … ISG says the RFS model will encourage innovation and facilitate the trust necessary for long-term strategic outsourcing partnerships.

Talk about aligning all your business processes along the lines of design thinking! This disrupted and reframed outsourcing process looks a lot like design thinking, especially if your business thinks of the outsourcing partner as a customer.

Benefits of the RFS Approach

ISG lists two high-impact benefits of the RFS approach.

  • First, the RFS may “reveal” a solution that had not occurred to the business issuing the RFS. ISG claims this is especially true when attempting to “transform and standardize existing IT environments.” After all, the business issuing the RFS may not have the particular expertise or experiences that the potential vendor does.
  • Second, the solution(s) revealed by the RFS approach may save money for the business issuing the RFS. How so? ISG found that “prices are at least 10 percent higher when responding to complex RFPs.” An RFS takes that complexity out the outsourcing process, which “potentially eliminates a key cost driver of the provider’s solution.”

If your company is seeking an outsourcing solution for which there may be more than one right answer, then using an RFS may yield the best results in terms of an innovative solution and cost. ISG is careful to caution, however, that situations that are fairly straightforward may successfully stick with RFPs.

Clearly your business needs to look at an array of other factors when considering business process outsourcing.

  • labor, infrastructure, taxes and incentives;
  • skills pool and provider landscape;
  • environment—government, business, quality of life, and accessibility;
  • infrastructure—ICT, real estate, transportation, and power;
  • risk—security, disruptive events, macroeconomics, regulations, and intellectual property;
  • human rights; and
  • market potential.

Having these considerations in mind, take a step back and ask whether your business might benefit from employing the RFS approach to outsourcing. You may be surprised at the solutions that your RFS generates.

Today’s businesses increasingly rely on outsourcing for accomplishing aspects of their IT operations and even their product and service innovations. For more information and tools to meet the challenges of today, please contact us.

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