This is a repost and reprise of a series that last ran (for the second time) in 2015. It’s as relevant, and important, today as it was then, if not more so, thanks to the I2O Hype and AI BS!

It’s that time of year again. Your budget is about to be approved — a few months later than you’d like — and you’re ready to begin the process of obtaining that Spend Analysis, e-Sourcing, e-Procurement, Source-to-Contract (S2C), Procure-to-Pay (P2P), Source-to-Pay (S2P), Supplier Management (SXM), Third Party Management (TPM), Intake-to-Orchestrate (I2O), or some other system you’ve been dreaming of that you believe is going to revolutionize your Sourcing and Procurement.

You think you know what you want, but you have to go through an RFP and, more importantly, you know that you’ve only had time to look at a few options while building the business case as you were doing it evenings and weekends on your own time because the project wasn’t approved. Now you want to go to market and either verify that you’ve identified the best solution or find the best solution to meet your needs. Since you are a sourcing organization, that process demands an RFP. However, this RFP is not like your RFP for direct materials or indirect spend. This is a very specific technology solution RFP for a platform to meet your needs and support all of the other RFP / sourcing / procurement / supply management processes of the organization. It’s crucial to get it right.

That’s what we are going to discuss in this series — the proper process and approach to acquiring the right Spend Analysis / e-Sourcing / e-Procurement / S2C / P2P (I2P/AP) / S2S / S2P / SXM / 3PM / CLM / & I2O solution for your needs. Furthermore, let us clearly state that this series is specific to the selection of technology and technology-based vendors to provide enterprise software platforms, and/or implementation services, back-office (processing) functions, or technology-driven consulting services for your multi-national organization. While some of the best practices contained herein should also apply to the selection of (strategic) suppliers for high-value and/or complex products and/or services, this series particularly relates to the selection of a vendor to provide an enterprise software backbone, and, in particular, a backbone for e-Procurement and/or e-Sourcing technology for your Supply Management organization. As one size does not fit all where RFX and category selection processes are concerned, no claims, express or implied, are made with respect to any other vendor selection process and, in fact, if you’re only buying paper and pencils, some of the best practices contained herein will, in all likelihood, be overkill.

Now that the preamble is out of the way, let us begin by noting that the traditional RFX processed is well understood, and well documented in many places, including in the e-RFx for Total Value Management wiki-paper, co-authored by the doctor on the classic e-Sourcing Wiki (now only available on the WayBackMachine) over seventeen years ago. And, in the wiki-paper in particular, the high-level process is still more-or-less correct almost two decades later.

As per the wiki-paper, you start with a two-stage RFI before an RFP, which is solution focussed (and not cost or contract focussed), which is issued before a final RFQ, which is when you collect quotes and start the actual selection / negotiation process. Specifically, the high-level process is:

1. RFI #0: Stakeholder Requirements (collected internally)
2. RFI #1: Vendor Interest
3. RFI #2: Vendor Pre-Qualification
4.    RFP: Solution Inquiry
5.    RFQ: Clearly-Defined Specifications

So what are you doing wrong, especially if you’re a Multi-National? To answer that, let’s look at how this is typically translated:

1. Product Needs, Service Needs, Preferred Vendors
2. Vendor Info. Request, Vendor Interest, NDA
3. Product & Service Capability Profiles
4. Solution Design Request
5. Explicit requirements, process definition, and bid request

See the problems?

1. Stakeholders typically don’t know what they need in a solution. They aren’t technology experts. They aren’t supply management experts. They are domain experts. And if you ask them what they want, you are just going to get whatever the vendor spending the most on marketing is saying they need, or whatever they can find in a “Free RFP” (and There are NO Free RFPs). It doesn’t matter what they think they need in a product or a service, it matters what problems they are having today. You need those solved, not an array of feature/functions that will never be used! You need to ask the stakeholders what the problems they need to solve are, so that you can ultimately select a vendor with the solution that solves as many of your stakeholder’s pain points as possible. (And if you need that translated into more technical requirements that the vendors will understand, you hire a neutral consultant who does NOT have any vendor partnerships and does NOT do implementations, specializes in Project Assurance, and whose sole goal, and continued compensation, is based on your success (not the vendor’s and not the implementation partner’s).
2. A preferred vendor is one that can offer you the best product or service from an organizational perspective, not from a single stakeholder / department perspective. For example, a stakeholder (team) might rate a vendor A+ because the representatives always responds quickly. But this is not necessarily indicative of great service (and is often indicative of desperation for a sale, which is never a good sign). If their answer to every system issue is always “we’ll get someone to fix that with 72 hours“, and you need the software up 95% of the time, that’s still poor service if the software crashes regularly because 3 days downtime every few weeks will not support an operational level of 95%.
3. Asking a vendor if they can provide you with the necessary functionality or service levels after you have shortlisted them as a possibility based upon a review of their collateral is not likely to get you anything other than a “yes we can”, especially if the vendor also offers consulting or “value added services” (or the rep desperately needs to make a sale to keep his job because the company took too much funding at too high a valuation and everyone’s job is on the line). One has to remember that most (big) consulting (and value-add) organizations are driven by partners with a strong desire for as many dollars as possible, and the associate’s job security is dependent on constant sales and up-sells, and the reps are told to always say yes and take on as much work as possible, leaving the question of how to get it done (if the organization is already stretched or weak in that area) until after the ink on the contract is dry.

Which brings us to the biggest problems with the current selection process, which we will discuss in Part II.