“If you were to step back and look at the output of all these companies’ RFPs, I think what you are trying to get as procurement is not these wonky proposals. You’re trying to engage in a very dynamic conversation, because even in software, the way in which we configure and support and train are all really better had as a live dialogue.” – Chris Mele, Managing Partner at Software Pricing Partners
For many suppliers, the RFP process is a source of friction and frustration. The time and resources spent answering requests for proposals is often compounded by genuine concerns over privacy, transparency, and a general sense that the traditional RFP model places more constraints on the seller than it gives opportunities.
In a recent podcast, Philip Ideson interviewed Chris Mele, Managing Partner at Software Pricing Partners, who explained why RFPs are such a sore spot for suppliers. He suggested some amendments to the standard process that procurement could implement to yield better outcomes for buyers and sellers alike.
Here are some of the most common pain points suppliers have with RFPs:
RFPs are free consulting in disguise
When responding to an RFP, “it’s no secret that sellers can craft very innovative, creative, and thoughtful approaches to really thorny problems,” said Chris, “so the RFP process then becomes the production of a range of approaches that buyers can use for free.”
This is a common complaint among sellers, he says, where the buyer curates the best strategic recommendations in the RFP process and then ultimately decides to execute on the solution in-house, terminating the RFP. From the seller’s perspective, this is an underhanded co-opting of their intellectual property, and “it grates on the seller’s nerves so badly because it feels as if you were taken advantage of.”
Suppliers are attuned to this approach, and it often puts them in the uncomfortable position of having to be very careful about what they reveal in the RFP, which can cause a lot of internal friction and back and forth. From their point of view, holding back can weaken their proposal and hurt their closing rates; conversely, revealing too much is akin to giving the buyer a free roadmap with no guarantee they’ll win the contract.
By adding things like a privacy clause for participants’ IP or even constructing a compensation model for submitted proposals, procurement could give a much-needed sense of assurance to a seller that their strategies, data, and recommendations won’t be hijacked, ultimately building more trust within the buyer-seller community.
Winning an RFP can comes with its own set of challenges
For many suppliers, the satisfaction of winning an RFP is quickly dulled by the reality that they have to convince a whole new set of stakeholders of their value and strategic plan. This occurs most often when there is poor internal communication from on the buyer’s side and procurement ends up disconnected from the business case. For suppliers, this can feel like starting over from scratch, because they are tasked with justifying and explaining their value all over again.
Well-meaning questions turn into leaked intel
It is standard for RFPs to include a clause that allows any questions asked by the seller during the process to be shared with all other participants in an effort to level the playing field. This can raise a red flag for sellers who worry that this kind of “cross pollination between direct competitors” gives away their intellectual property or offers competitors insight into their strategic approach.
“If you are a leader in your market space and have differentiated value,” Chris said, “we ask questions that are very different. Do you think that we would want our questions to be shared with our direct competitors? It wouldn’t even be worth the risk of giving them a tip off of what we’ve been up to.”
Anonymizing questions here can help assuage concerns that a seller will compromise themselves by speaking up, but even anonymous questions, Chris fears, can often be so unique that they are easily traced back to a particular supplier. Perhaps it is time to dispel the notion that it ever was or will be a level playing field, nullifying the need to share questions at all.
RFPs prevent real dialogue
One of the biggest challenges sellers experience when answering an RFP is the lack of real, interactive dialogue between the buyer and the seller. This is true for services in general, but particularly true for SaaS.
“Written dialogue isn’t as effective as an actual dialogue,” said Chris. Instead, the standard RFP process forces participants to make assumptions, keep questions close to the vest for fear of tipping your hand to competitors, and, in general, puts constraints around the seller that impact the eventual quality and outcome of their proposal.
When you’re answering an RFP, “you have to make a bunch of assumptions, and then the more assumptions you make, the more errors you might have. And before you know it, you’ve thrown in 50 hours worth of homework, and you’re down a rabbit hole,” explained Chris.
He points out that the best conversations typically happen after the winner is selected, but, particularly for software suppliers, “the way in which we configure and support and train are all really better had as a live dialogue.” Having dynamic conversations as early in the process as possible will likely lead to much better selection outcomes for both parties.
Should we rethink the RFP model altogether?
In some cases, the RFP process is misaligned with the needs of buyers and sellers. For procurement, a new approach could start with making sure you have a deep understanding of the category and engaging with suppliers in that category in a kind of structured, round-robin model. The key here is having live, dynamic dialogue with the seller and structuring the elimination/selection process around those conversations, rather than just written submissions.
“You can still run a structured process without an RFP,” says Chris. “You could still satisfy the requirements with a dynamic process, a rewarding process, one that respects everybody’s uniqueness, one that respects it is not a level playing field – that it never has been – and one that interacts in dialogue.”
Let’s rethink the “RFP” altogether, says Chris, in favor of “a request for a dynamic discussion and exploration of products and services with the intent to buy, by professionals who will respect everyone’s time.” It might not fit into a nice acronym like “RFP,” but it’s a concept every seller can get behind – and one that procurement should be able to benefit from.
Subscribe to Art of Procurement
Apple | Stitcher | iHeart Radio | Email
Links & Resources
- Chris Mele on LinkedIn
- “A Sales Perspective on Software Pricing and the RFP Process” with Chris Mele
