In this episode of IT Leadership Insights, Jarosław Granat speaks to Lauren Tennant about the process of selecting an outsourced software development company.
From this video, you will learn about two different approaches for selecting an IT partner – the traditional, RFP-based process, and an alternative, workshop-based method developed by Lauren. Lauren will also reveal the best practices for selecting an IT partner through an RFP and explain which method is best for which type of company.
Lauren Tennant is the Co-founder of Horizon Seven, a fun, energetic and world class team of sourcing experts. A leader in the field of sourcing, Lauren is redesigning the way we buy and sell technology services. Leveraging her skills as a former Global Technology leader, Lauren combines pragmatic advice with the latest sourcing practices to achieve the best results for both buyers and suppliers.
Jaroslaw Granat is Future Processing’s Head of Client Engagement, working to ensure the highest level of services for the company’s clients. He is a graduate of Computer Sciences and Psychology in Business and has worked in IT for the last 10 years.
The transcript of the episode
Jarosław Granat (JG): Hello, my name is Jaroslaw Granat and I’d like to welcome you to this episode of IT Leadership Insights by Future Processing. Writing a Request for Proposal is not a quick or easy task as there are a number of things that must be taken into consideration. Thankfully, our guest today is Lauren Tennant, a specialist sourcing advisor from Horizon Seven who is just the right person to talk about this topic. Hello Lauren.
Lauren Tennant (LT): Hi.
JG: Lauren, could you please tell us a little bit about yourself?
LT: Of course, I can. So, I spent most of my career buy-side – buying technologies for big clients based out of the UK. And since then I’ve been working as an advisor to the market, helping global clients to buy services. Alongside that, I have done significant amount of research as a masters and now a doctor of outsourcing. So, I have spent overall crazy amount of time thinking about outsourcing.
JG: That’s perfect for today’s episode.
LT: I hope so.
JG: As a specialist, Lauren, could you please tell us how a typical vendor selection process looks like? Because from my experience, it’s sometimes a pain for clients, for buyers because they do not know what to expect, what to ask, especially if they are doing it for the first time.
LT: Of course. So typically, clients will use RFP request for price type process to buy services and it depends on the size and shape of the services they’re buying as to how long and the complexity of that process, of course. But it is typically very difficult for all concerned, the buyer and the supplier of the services. So normally a client will think about their scope first. So they will write a requirement specification, then they will think about sending that to the market. And many clients, especially in bigger procurement will use an RFI process to qualify the vendors that they want to then invite to the RFP process.
LT: So this can all take a long period of time and is a long-written document and typically done at arm’s length – so distance relationship. So then they will provide that to the vendor or vendors who will look at the writing of a long response. And that can be followed by a beauty parade, followed by a shortlisting exercise, followed by evaluation. And then typically only at the evaluation point is when the client will understand the business case around the proposal from the vendor, the selected vendor, and all of these things can cause some difficulty in the sourcing process because it takes a long time, is a long written document and a long written response, which can lead to some difficulties in expectations and understanding.
JG: All right. So the process definitely consists of plenty of phases, steps…
LT: Correct. Yeah.
JG: So, from your experience, what would be the best practices for following the process for the companies that are deciding to outsource?
LT: Sure. I think what’s really important is that clients that are looking to come to market for services understand what it is they’re trying to achieve from the product or services they’re looking for. So, what should the end result be out of the contract that they’re procuring, the services they’re procuring? So that they understand the value of that, that they understand the business case around making that decision, including whether or not they should have some things in-house, whether they should be a hybrid and also whether they should do nothing. Right? So to understand a robust business case really helps a client come to market with a full knowledge of what it is they’re buying and what it means to them so that the process later on doesn’t get upset by, delayed by or completely stopped by someone realising the benefit is not as great as they thought it was going to be or achieving the services is impossible for their internal resourcing.
JG: You also mentioned that a part of the process is to prepare a document that is sent to potential vendors. What do you start with when you prepare such a document?
LT: Well, I think typically clients will spend too much time writing too much input specification into an RFP document. That is trying to tell all the service providers what the solution should look like. And I think for me there is a benefit from avoiding that approach. So focusing more on the output specification. So inevitably you need to start with the scope. What is it that you are trying to buy? And we try and help our clients to think about that in outcome terms rather than input terms. So what are you trying to achieve? The scope should also include the parameters around volumes, geographies, etc. The other thing that I think is important to include in the early stages is the buyer’s view on the contract. So what kind of contract are you expecting and what are the principles that should be associated with that contract. What are you expecting the supplier to sign up to? Because often that’s left until the end. And then there can be a difficult conversation around the contract terms and how the supplier has priced the solution against the contract terms. And there’s obviously, often a mismatch there, right? So avoiding that can help to include that. And then I think the final thing that you should really include is around how you expect the relationship to work. So what kind of relationship do you want? How should the governance function? Is it an intimate relationship you need? Do you need to have a close ways of working? What kind of service metrics are you expecting to achieve? So that again, the supplier can write a solution that delivers those things and that it’s not a surprise later on.
JG: Let’s pause for a while with the RFP because I know that you’re a huge supporter of an alternative approach as well.
JG: Could you please share some insight about that as well?
LT: Yeah, so we have come up with a process that we call Visionary Sourcing. And that’s different because it takes away the need for the arm’s length, written RFP process. It’s not easy. It’s not a shortcut to a solution, but it’s based on all of the research that I’ve done over my career around the things that become difficult later on in the relationship as a result of some problems with the sourcing process, using the arm’s length RFP and the time it takes to do that. So, we take out using the RFP and instead we do face to face, co-design piece of work to come up with a solution. Other things that are different about our Visionary Sourcing from a typical RFP process based on what I just mentioned is moving the business case to the front of the process.
LT: So we work very closely with our clients to articulate what that business case looks like, to do some testing in the market to say what we will achieve from going to market for this solution. So that we’re very clear about that as we go into these workshops with the suppliers. And to do a workshop-based approach, you need to work with a fewer number of suppliers. So we shortlist at the beginning of the process. And we can do that because we really understand what we’re trying to buy and what’s important to us. So actually we can very much narrow the market at the beginning instead of going to 12, 15 or more vendors, than having to do all the work to review long documents that can be 300 or more pages.
LT: We focus instead on three, maybe four, carefully selected providers working face to face in design workshops. And those are the fundamental differences. And the last thing that’s different is, we parallel run our contract negotiation with those three or four vendors whilst we’re in these workshops. So, the idea is, that we come to the end of that instead of having what we would say, comparing apples with apples, very many similar solutions that the RFP will drive. We in fact have three or four very different solutions with a contract that goes with it, that’s right for that solution. And that typically takes four months end to end instead of 12 plus months, which you can take during an RFP process. But I emphasize it’s not easy. It takes a lot of effort. And if you’re not able to do that kind of process or you’re not able to employ an external advisors to do it, sticking with a very good FRP process is still good, right? So, it’s not either or, it’s a choice that’s right for you.
JG: Okay. So, here’s the question because I can imagine then there are different groups of businesses and people with different needs. So probably some people and companies would prefer the RFP process and some the Visionary Sourcing. So, who do you think are the target groups and what advice would you give to each group of people?
LT: So, I think, companies that are looking to follow a more traditional approach of comparing price with price for the same solutions should absolutely stick to an RFP approach because that’s what it drives. I think I would still look at the advice I gave earlier around the business case, moving that forward, etc, because the RFP process itself can be improved by those things. So taking that advice and being really strong about the process, I think it’s also really important to think about your own internal capabilities of running an RFP. So we work with a lot of clients who accidentally extend the timelines because they have set aggressive timelines, they miss their own deadlines or they in fact try and squeeze the vendor, responding vendors into too short a time to respond effectively. So I think it’s important to plan the process out, respecting your own capabilities to deliver on time. And as a buyer, it’s important to maintain a good perception with the vendors that you can achieve your own timelines. So those are the things I’d say about doing an RFP. I think it can be anybody. Any type of client, in any type of sector that’s not important. What’s important is, what type of outcome you’re trying to achieve from the process. So price and solutions that are the same come well from an RFP.
LT: If you’re looking for something that’s more complex that needs some work on the design of the solution and that coming up with three or four different options is a good thing to have, then Visionary Sourcing is a good alternative and will create those things much better than RFP possibly can. The other thing that it does is give us the opportunity to work together with your potential vendors before you start work. Which is a great thing to do because you know if you can work with them and you build a relationship from the beginning, okay? So, if that’s important, if it’s a critical piece of delivery, if it’s a complex thing then Visionary Sourcing, I think is far better than an RFP for that purpose. But again, I also will give you a health warning, it’s not a shortcut and it’s not easy. It requires a lot of focused work in a short amount of time. So again, you have to be ready with the internal resources to do that and I think you really need external support to make that happen.
JG: All right. Thank you for that summary and for the whole conversation, Lauren.
LT: It was my pleasure, hope it was useful.
JG: And thank you, the viewers for watching this episode of IT Leadership Insights. Again, if you liked that and found it useful, which I’m sure you have, please do not hesitate to share it and recommend it to your friends and colleagues. And at the same time, if there is anything you would like us to talk about in the future episodes, just let us know. Once again, thank you and see you in the next episode.