Whilst cloud services are increasingly influencing the IT sourcing landscape, the majority of large-scale IT Outsourcing is still done via traditional RFx cycles. The process starts with defining the scope, creating the demand and selecting a long list of vendors to release your RFI/RFP to. This is where the customer creating the demand believes that every vendor will be keen to take their business and will jump at the chance to respond to the RFx.

In healthy relationships and first-time outsourcing, the above is often true, but care needs to be taken. The effort to create and run an RFP can be significant when dealing with multi-national companies, but an equivalent expense is also true for the vendors responding to the request. Each vendor will need to make a choice on which RFP’s to respond to because they also have a finite number of sales people and limited budget to do so. Vendors evaluate their chance of success, competition likely to be responding, market position and potential budget needed to produce the response (amongst other factors) before agreeing to respond to the RFP.

So far, so good. If the internal procurement team produced a long list of potential vendors that are keen to take the business, the RFx process continues and responses flood in enabling a first selection to be made and a short list of vendors to be produced. Of course, some vendors will try to circumvent the process, offering sole source opportunities, or incumbent providers may request the withdrawal of the RFx in favor of a negotiation. But now the stakes are higher! The vendors on the short list now realize that they have an increased chance to win and need to put their best team forwards, potentially increasing their costs to respond. Unfortunately, this also means that if they don’t win, they’ve just blown a more significant part of their budget in creating the response. This cycle should come to an end with what is known as the BAFO (Best And Final Offer). During the selection process, vendors may suggest alternatives and customers may choose to update the scope. I have often seen BAFO v2 and BAFO v3 being released to cope with such changes and new insights. Unfortunately, the BUFFALO (the chief architect responsible for making a proposal kindly asked me during a coffee if we could stop the latest BAFO because it was their Best & Ultimate, F*cking, Final, Absolutely, Last Offer) also exists and indicates that something is wrong.

Not only do repeated BAFO’s create a drain on resources on both sides, they also create frustration, which if not addressed, influences the appetite of vendors to respond to future RFP’s. I have seen vendors deliberately decline RFP’s due to the reputation of customers where RFP’s are notoriously extended, or contracts rarely concluded (a customer simply testing the market through the RFP process).

Customers need to be aware that such a process is a strong reputational indicator for vendors, and the RFP’s need to be conducted fairly and effectively in order to keep the market open for the customer in future. There is nothing worse than releasing an RFP to find that your preferred vendor doesn’t want to respond!

Avoiding extended RFP cycles and the Buffalo can be done through:

1. Extensive preparation prior to RFP release, including stakeholder buy-in whereby scope options and extensions are already discussed and decision paths pre-agreed.
2. Splitting an RFP at the point where potentially a multi-vendor approach is needed, or the scope extension is not sufficiently prepared, allowing the original scope to complete the cycle.
3. Taking the public sector approach and locking the scope.

It’s also quite common that the cost of the bid made during the RFP is recovered during contract period (if the vendor wins), so extended bids typically cause more pressure in the future relationship as the account manager is forced to try to recover additional margin. This also affects further scope adjustments made after contracting when the vendor is unable to secure additional so called ‘bid budget’ (to cover the expense of additional sales consultants), resulting in lower quality or slower responses as existing resources need to be used.