CIOs Seeking Innovation – Should the RFP process be replaced by the innovative RFS?
There’s an innovative way to build and drive the RFP process as CIOs look to expand service capability and innovation but should the RFP be replaced with the RFS (Request For Solutions).
Many CIOs are tasked with replacing aging legacy systems and implementing efficient IT infrastructures and effective applications that can deliver an edge in a highly competitive business environment. Innovative IT outsourcing initiatives can address this challenge, but many businesses have failed to integrate supplier expertise and achieve real value or fresh ideas from their outsourced or technology relationships.
Rather than leveraging the skills and capabilities of third parties, CIOs find that their sourcing initiatives are often limited to staff augmentation, with suppliers essentially filling the role of pure order-takers and very little innovative ideas being brought to the table. For those corporations that are able to bring in relevant or specific or unique domain expertise, either through a third party or a captive operation, they are then faced with managing price which becomes an issue of unique skills value.
“For their part, outsourcers offer technical expertise but often lack the understanding of actual client business issues needed to offer a compelling solution that addresses a client’s hot buttons.” Comments Craig Ashmole, Founding Partner of London based IT Consulting CCServe. “This is largely due to a lack of understanding the business that their client sits in and looking to be a differentiator to new clients. There’s too much replication of services being provided, to utilise economies of scale.”
Ultimately, clients struggle to articulate their requirements and providers struggle to articulate their value proposition – the result is a lose/lose proposition. The art of really differentiating services is being muddied in the waters.
Part of the problem may also lie in the manner in which CIOs define their objectives and select service providers. In a traditional RFP, clients articulate a specific set of requirements, and vendors respond by filling in the prescribed blanks. Increasingly, all parties are finding that this approach can stifle innovation, as it essentially defines the solution to the problem rather than soliciting new ideas.
An emerging alternative – the “Request for Solution” – takes a more open-ended approach and invites providers to show their creativity. Consider this analogy: A CIO requires the cost of utility services like his BPO admin be outsourced to reduce costs. This is the basic dynamic that characterises the traditional RFP process.
Alternatively, a CIO provides a list of capabilities that need to be addressed with a set of broad criteria: Administration, HR, Recruitment, Payroll, Training and Disciplinary process review for a budget not exceeding x amount of dollars. In this scenario, the Vendor/Outsourcer has the leeway to be creative and offer a variety of solutions and even introduce innovation technology that could reduce staffing levels. This approach more closely resembles the RFS (Request For Solutions) process.
A similar re-think is taking place with regard to contracting. Rather than a highly detailed, voluminous document that take months to prepare, review and complete, clients are seeking more flexible approaches that allow both parties to test the waters and develop the relationship further if it’s of mutual benefit. In describing this concept of “Evolutionary Contracting,” ISG’s Tom Young, challenges the industry bromide that outsourcing relationships are like marriage, and that both require commitment over the long term. Tom argues that, rather than viewing their service provider contracts as wedding vows, clients should think of outsourcing as more of a dating game.
We are by no means suggesting that traditional outsourcing RFPs and contracts are becoming irrelevant. Indeed, they remain essential to initiatives aimed at optimising existing operational models. But we are seeing more and more situations where clients have transformational requirements and face problems that have more than one right answer. Many CIOs struggle to make the most of opportunities presented by mobility, big data and other emerging technologies.
Perhaps it’s time to give the RFS and Evolutionary Contracting a closer look.