CIO Straight Talk - Issue 4 - 41
3. Turning the RFP on Its Head
Historically, the outsourcing request-for-proposal process
was a highly prescriptive affair. Buyers would describe, in
great detail, what they wanted and how they wanted it. The
similarly detailed service provider responses enabled
buyers to make a clear apples-t0-apples comparison, based
largely on cost. It was a fairly risk-averse approach, says
ISG's Franz, with the solution determined from the start by
the buyers - for better or for worse.
But what if it was the wrong solution? Time and again,
buyers found that "they got the solution they asked for, but
it may not have been right for the environment," says Franz.
That's beginning to change. While outsourcing clients
are still looking to control costs, they are also interested in
taking advantage of the latest and greatest technology
advancements like mobility, cloud computing, and big data
analytics. And they don't know what they don't know. So
some are turning to a much less prescriptive RFP process.
It's a welcome change for service providers. With the
traditional approach, "they end up having to artificially
construct a solution that's not differentiating for them and
ultimately costs them and the buyer more," says Franz.
"The less prescriptive approach enables them to do something in their sweet spot."
For clients, it's quicker and less costly than the customary process. They spend a week or two drafting an engagement document versus three months on an RFP. The
approach also narrows the field of competing vendors
significantly, says Franz.
It requires a more mature and trusting client, he says.
"[Buyer and supplier] are going on a journey together
versus buying a bunch of widgets." Governance, likewise,
has to be taken up a notch. "It's much more evolved and
really requires strong engagement on both the service
provider's and the buyer's behalf," says Franz. While there
still are traditional KPIs, everything from the procurement
process through delivery is much more collaborative. That
requires more frequent meetings to test the solution and
make changes as needed, says Franz.
And the governance process must be stipulated in the
contract, including who is involved, what the guiding
principles are, and the methods of escalation. "All of those
have to be front and center," Franz says. While it's unlikely
to take hold in the government sector, this less prescriptive
procurement process could become the norm in industry.
"There's so much new technology available," says Franz.
"And clients want to adopt and adapt to that technology in
Partner, Global Head Execute Services,
Global Head Technology,
Information Services Group
"Clients are looking for
something, but they're not
quite sure what the answer
is. So they are better off
environment and the
problem and asking
suppliers for their
4. Commercialization to Fund Innovation
Cost containment is still top of mind for CIOs, so some are
getting creative about how they fund their transformational
work. One option is the commercialization of the outsourcing relationship - that is, the bundling and marketing of
systems and processes that an IT service provider initially
develops for one client. Some clients see an opportunity in
selling their assets to their service provider in order to
finance other projects in the near term and potentially
generate a revenue stream in the long term.
45 CIO Straight Talk