Choosing a qualified contractor is the basis for a successful partnership. in this guide, we will take you through the procurement process for a software development company – by introducing you to the key documents in the procurement cycle.
Procurement vs Purchasing – know your process
Many people use both terms interchangeably. However, purchasing is a simple transaction where organisations pay for and receive goods or services, agreeing on the quality/price ratio. By contrast, procurement defines an entire process of product/service selection, including research of providers, quality specifications, deadlines and milestones, contracts and negotiations, purchase of the product/service (processing purchase requisitions/requests and purchase orders), as well as further management or updates related to the company growth.
As procurement is a term that covers several core business functions, it should be considered a critical part of any organisation’s corporate strategy. In IT, it is often used to develop dedicated software through a technology partner, and continuously improve its features by taking into account current business needs – which are defined by the RFx and other procurement documentation.
RFXS – the basis of the procurement process
The primary goal of each Request for X (RFx) document – e.g. Request for Information RFI), Request for Proposal (RFP), and Request for Quotation (RFQ) – is to help you choose a perfect supplier and avoid risks connected to selecting a wrong vendor. By creating a systematic, transparent and fair purchasing process, the purchasing company reduces risk and avoids additional costs.
| Request for information (RFI) | Request for proposal (RFP) | Request for quotation (RFQ) |
| Used to obtain key information about the supplier and its services, tools and business approach. | Used to obtain solutions for a business need and / or project cost estimation. | Used to obtain a specific offer. |
| Asks for information and data to compare various providers (i.e. hourly rates, location, tech stack, experience, certificates). | Asks for a proposal to solve the problem using the specific tools/devices with an initial cost estimate. | Asks for the price of a specific product or service. |
| Includes open and closed questions about the provider’s organisation, owned technology and offered services. | Contains business goals of the project and specific requirements necessary to perform requested service. | Includes detailed specifications required by the buyer. |
| Allows the client to select appropriate suppliers for the inquiry. | Allows the client to get solutions available on the market, along with the estimated cost. | Allows the client to get a specific offer. |
Request for Information (RFI): ask the right questions
At the initial stage of the procurement process, you should start with sending a Request for Information (RFI), which gathers basic knowledge about potential software providers and helps you research the market and build the supplier base. It’s a perfect solution for those, who are early in the software development purchasing process, don’t have much experience in purchasing the service, or have unclear project requirements.
As the RFI is an explanatory document, both open and closed questions should be asked. It is usually highly structured and includes a list of questions in a table. Such standardisation allows for a later comparison of the reported software companies and the evaluation of each answer on a certain scale (i.e., 0-10 points). After you have received your RFI forms back from outsourcing companies and have shortlisted those that you would potentially like to work with, the next step is the comparison of your choices. We recommend you use our free tool for comparing and selecting IT outsourcing partners. Of course it will work best with this ready-made RFI template we prepared.
Building a trusted supplier base that meets your requirements and is willing to collaborate reduces misunderstandings and problems at later stages of purchasing. Consequently, with a relatively short time spent on each side, you can obtain a lot of knowledge needed to properly conduct the inquiry.
OUR TIP: More and more companies benefit from nearshoring – outsourcing development of the complex IT systems to the highly qualified remote teams located in Central Europe. Learn more about the benefits of nearshoring from here.
Download a free RFI Template. This editable request for information template is completely customisable to you and your business needs.
Software Requirements Specification (SRS): Specify your business needs
The key objective of the Software Requirements Specification (SRS) is to precisely define and describe business needs in terms of developing software – the more specific, the better. At this stage, you describe WHAT should be done, disregarding HOW it should be done (as the specific activities will be suggested by the development teams).
To properly develop requirements for an IT system, divide them into two groups – standard and non-standard. The so-called standard requirements are the ‘typical’ ones for the industry, including the functionality of the system, its limitations, connections with other IT tools, or main software features. We recommend you to put some extra effort in the description of the non-standard ones (i.e. goals), as they mostly determine the company’s market advantage; usually by providing the company with tailored bespoke software.
At this point, you should be able to generate a list of formal, yet measurable requirements – try to specify all expected results in an easy to verify way. Always group the requirements by category or function to find duplicates and correlation between them, as well as to confirm the completeness of the solution.
Try to prioritise the development of the features and decide, which components are crucial to your business right now.
If you need help with preparing an SRS document or prioritising the requirements, we encourage you to use the software requirements specification template, designed for companies, that are ordering a new piece of software. You can also get in touch with us and let our consultant help you with the paperwork right now.
OUR TIP: Download a free Software Requirements Specification Template for New Software. This editable SRS template is completely customisable to you and your business needs, especially if you want to start afresh with a system.
Is what you already have the best?
Don’t fall into the trap of sticking to the original concept without being open to possible modelling of the idea. The lack of such flexibility is one of the main reasons why more and more companies get behind the market’s needs.
Since the business changes, the IT system must keep up with the be change as well, to properly respond to new business needs. Try to find out how others have defined their requirements for a similar system. Ask what was crucial for them or simply use our software requirement specification template for updating an existing software. Use the template to make your new version of the system better, faster and more effective.
OUR TIP: Download a free Software Requirements Specification Template for Existing Software. This editable SRS template is completely customisable to you and your business needs, especially if you want to have a system that needs to be remodelled or upgraded.
Request for proposal (RFP): Define the main problem
A Request for Proposal (RFP) is one of the procurement process documents used when purchasing complex services and non-standard products such as software. Usually, the purchasing company provides chosen IT organisations with an RFP document containing a description of the business need with the expected result of its solution.
The potential suppliers, bounded by an NDA, present their unique proposal (using the knowledge and available technologies), along with a cost estimation. In this way, buyers get different strategies to solve the same issue that might have not been considered before.
But let’s dive deeper into the RFP document. Think about tailoring the software. Your company would need to decide on many factors including the software preparation, destination and additional features. The more data you provide, the greater the chance that you will get a transparent, understandable offer with a specific budget that you need to implement a given solution. Such offers are easy to compare, which greatly facilitates the selection of the provider.
If you’re wondering how to write an RFP to evaluate your potential suppliers right now, feel free to download our tool, created by comparing over a few hundred Requests for Proposal sent by clients from around the world. And if you need a personalised help on your business case, contact us and let our advisor conduct a detailed analysis of your business referring to the model of the organisation, your business goals, factors blocking its development, and finally, design of the dedicated solution, which should work with other existing software.
OUR TIP: Download a free RFP Template for Procurement. This editable request for proposal template is completely customisable to you and your business needs.
Request for quotation: Stick to the terms
The RFQ is the most precise document of all three procurement documents discussed. It includes detailed specifications, quantitative requirements, as well as formal conditions prepared by the buyer.
Keep an eye on communication
The quality of partnership between the parties depends on communication skills of both sides.
- Understand each other. Sometimes specialists in a given field use highly technical language. If you communicate that something is unclear to you, they will certainly present it in a more accessible way.
- Choose well. A software development team consists of professionals with extensive experience, who happily support your decision-making process, presenting the advantages/disadvantages of various options. Together you will make the best choice possible.
- Use examples. Is it hard for you to describe the effect you want to achieve? Try using an example! Maybe you saw a solution somewhere that would satisfy you? If so, be sure to introduce it.
No one will ever know your business as well as you do. And that – contrary to appearances is not necessary to prepare a system that meets your expectations. However, the IT outsourcing partner must be an implementation expert in a given industry. The more business cases from your field are in their portfolio, the better is their knowledge of typical business processes, and ways to efficiently reflect them in software.
I DO IT MYSELF: THE ISSUE OF IN-HOUSE DEVELOPMENT
Is creating software the core of your business? Besides, the declaration “we know what we want” may not be enough to design a useful IT system. Knowing your business needs is one thing, and the way the system is supposed to respond to them – is the other side of the coin. We recommend you calculate the hidden cost of in-house development with our dedicated, downloadable tool.
Implementing an IT system on your own means that you are left alone with this challenge in the future. If you decide to work with a proven software outsourcing company the concern of staying up-to-date with ever-changing technologies will not be only on your side. You, as the client, can count on regular software updates as part of the agreement. Furthermore, a trusted software development partner can also support you with all elements of IT projects that require regular monitoring.
SUMMARY
Nowadays, companies spend huge amounts of money on the purchase of IT services and solutions. Dedicated systems should be carefully designed to ensure that an IT outsourcing company provides the client with what they want and really need.
Before starting work on a project, an IT software house needs precise guidelines on what problem is to be solved. To provide such guidance in an appropriate form, take some time to create a software requirements specification, which could be used as the draft for a brand-new system or update suggestion for the existing one. The more accurate information is provided, the greater is the possibility that the created solution will meet your specific expectations.
Always compare the software outsourcing companies by its communication, willingness to cooperate, creativity, and expertise.
When writing an inquiry remember what its main goal is. It is certainly not simply choosing a new tool or system. The goal is to develop a solution that will support your business in the long term. If you need help along the way we encourage you to use one of our dedicated tools or to contact us directly.