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Laptops, where RFPs happen

Is eSourcing Right For My Business?

eSourcing consists of using software to manage and collect suppliers across a variety of projects. But what does that mean for you and your department?

The Difference Between Sourcing and Procurement

Procurement is the sourcing, purchasing, negotiating and acquisition process but also includes risk management and sustainability. Sourcing is the component of the procurement process that deals with supplier selection and management.

eSourcing software will not solve your negotiation problems, your acquisition problems, or some of your more complicated contractual issues. It will, however, make it easier to coordinate suppliers.

So we have established that sourcing software will help you coordinate suppliers, but how does that translate into actual business advantages

A good sourcing software solution will provide:

Direct cost savings by improving the competitive process of supplier selection. Instead of being limited to two suppliers simply because your infrastructure can’t handle more communication, you will now be able to have a dozen (or more) suppliers competing for the same contract.

Greatly reduce cycle time by streamlining communication through visible dashboards, timely notifications, and contained file sharing to keep all relevant communications in the same place.

because the pricing, timeliness and other attributes of suppliers are saved and easily accessible for number crunching. Organizations can create evaluations of supplier performance and identify areas for improvement going forward.Laptops, where RFPs happenGreater transparency and integritybecause the pricing, timeliness and other attributes of suppliers are saved and easily accessible for number crunching. Organizations can create evaluations of supplier performance and identify areas for improvement going forward.

But is eSourcing right for my business?

Switching to using a software solution may seem painful, but a company should use a rigorous sourcing process whenever the cost of making a poor sourcing decision is likely to exceed the cost of the sourcing process.

Here is a thought exercise: If you owned a small Mom and Pop book store and you needed to buy paper, the cost of choosing the wrong paper would not be anywhere near the cost of investing in a software solution. But, if you were in charge of sourcing paper for a Fortune 500 company, purchasing the wrong paper could have massive ramifications across the corporation that would far outweigh the relatively low cost of the software. Of course, this is an extreme example and most companies will fall somewhere in between, but the point is that the majority of businesses will be impacted by the savings derived by using sourcing software.

If your company runs many purchasing and sourcing projects, the costs of small mistakes would quickly add up to the cost of the software. Sure, there are rigorous sourcing processes that are manual and would help reduce the risk of a large purchasing error, but the lower cost of running a rigorous process through sourcing software would increase the number of sourcing projects that could benefit from this process.

But if sourcing software has clear benefits, why are companies still using manual processes?

Hesitations to switching to sourcing management software generally fall into three categories:

The cost of changing our existing processes is too highgood solution should be designed to fit right into your existing processes. The software should not be designed to create a whole new strategy for your team, but instead developed to replace the manual tasks that rob your time such as team coordination, supplier communication, and document collation.

It is too difficult to train all potential stakeholdersIf you choose the right software, sourcing solutions should be as easy to use as any of the other applications we use in our daily professional lives. An intuitive software product is designed to simplify, not complicate the sourcing process. A good solution would consolidate and streamline the many manual processes that you and your team already undertake.

My sourcing is too specialized for sourcing softwareThis is a common concern when contemplating eSourcing solutions and it is best addressed with more questions. Would a mistake in your sourcing be expensive? Do you have manual tasks in your process that need little mental effort but require too much time? Are you limited to non-competitive suppliers because sourcing other suppliers seems like a monumental task? If your answer to any of these questions is yes, then it would be worth a small amount of your time to investigate possible sourcing software solutions.

eSourcing isn’t for every company… but it should be used by most companies. Bulky sourcing processes can affect the whole company. If you want to see an example of how easy it would be to implement a time-saving and intuitive software solution, sign up for Vendorful’s RFP Management Software.

RFPs can be stressful

Top 3 Benefits of Implementing RFP Management Software

The request for proposal (RFP) process enables buyers to compare features, functionality, and price across potential vendors. It is a crucial component of the procurement process. Accordingly, developing an effective RFP process creates alignment and streamlines the procurement process for buyers and vendors alike.

However, despite innovation seemingly permeating all facets of commerce, the corporate purchasing process has remained largely unchanged. It’s not surprising then, that when a process is complex and/or challenging, people are loathe to engage in it. The data suggests that this is the case with RFPs. In fact, a study conducted by Accenture, indicated that under 50% of spend is managed professionally. Many organizations skip the RFP altogether, relying on ineffective sourcing processes that lead to miscommunication, poor/unknown ROI or purchases of products and services that do not align with their business goals.

Unfortunately, even organizations that adopt best practices for procurement often suffer for their diligence. Indeed, the most common way RFP library management systems are handled is via ever-growing email threads with Excel and Word documents attached to them. While that method has few enthusiastic supporters, it beats some of the alternatives, which includes:

  • Shipping responses on a thumb drive.
  • Firing up the fax machine.
  • Printing, binding, and mailing physical copies.

Do you rely on any of these for your sourcing process?? Or worse yet, does the overhead inherent in these methods prevent you from running a process at all?

It is likely time to reevaluate your current workflow and tools in order to save time and money, as well as to avoid operational inefficiencies throughout your organization. RFP management software optimizes outcomes for both buyers and vendors, improving the overall quality of purchasing decisions.

Check out the top three benefits of implementing RFP management software: 

1. Consolidation of Information

If you are dealing with sourcing projects, it is likely very difficult for you to keep everything organized and at your fingertips while using outdated technology. Ensuring that all of your information is centralized and organized is game changing. Papers and email can often get lost or buried in a bulging inbox, making it difficult to determine:

  • Which of the invited vendors has/hasn’t responded?
  • Are the stakeholders able to access all of the information they need?
  • How do vendor responses compare to each other?
  • Where are all of the attachments the vendors sent with their responses?

Managing the cascade of information from your RFP process in a single location is the best way to make sure that everyone involved in the process has access to the data and documents they need.

2. Increased Internal Stakeholder Engagement 

While procurement departments may drive the purchasing process, stakeholders are often the group that determines which vendor ultimately gets selected. However, rounding up people to participate in a sourcing effort has been compared to “herding cats.” It is clear, though, that increasing stakeholder engagement in the RFP process improves the evaluation process and ultimately drives better ROI. A good RFP software solution should make it easy for team members across the organization to participate in the purchasing process, driving increased engagement and therefore better outcomes. RFP management software allows you to:

  • Solicit input regarding requirements, market info, and more.
  • Leverage subject matter experts for key parts of the evaluation.
  • Open up the scoring process to the stakeholders who will ultimately be impacted by the vendor selection.
  • Surface discrepancies and build consensus.

The right tool will not only drive engagement, but will also increase accountability and transparency for purchasing decisions across departments.

3. Time Savings

Time is money, particularly when engaging in a procurement process pulls stakeholders from doing their primary job. By reducing the time stakeholders need to invest in the RFP process, organizations save money. Evaluate how long your current process is taking by thinking about:

  • How much time does it take to organize all of the vendor responses for distribution to stakeholders?
  • What happens if it needs edits?
  • Is the process itself optimized for simplicity and speed?

Absent the right tools, every step of the RFP process can introduce costly delays and confusion.

By leveraging RFP management software, organizations that suffer from low levels of spend under management can position themselves to turn things around. At the same time, organizations that have implemented the right processes can benefit from newfound efficiencies and further improve ROI by implementing RFP management software. It’s never been easier to do things the right way.

Are you ready to reevaluate how you handle procurement within your organization? Sign up for a free account on Vendorful to see how an RFP management solution can improve your sourcing process!

vendor giving you a vendor-written rfp

A vendor wrote your RFP. You won’t believe what happened next.

Corporate purchasing is hard. People who don’t make purchasing decisions probably don’t realize what a challenge it is. How hard can it be to shop for things? We all shop for things, don’t we?

But buying (say) cloud hosting is a lot harder than buying a pair of shoes. For one thing, when you buy shoes you don’t have to worry about how those shoes will affect dozens of other stakeholders; you just have to worry about how they affect you. For another, you know all the right questions to ask about your shoes: are they comfortable, do they look good, and are they the right color?

Odds are unless you are a hardcore IT expert you have no idea what questions to ask a cloud hosting provider. If you’re an executive of a mid-sized e-commerce business, you just want to make a decision and get back to your day job. If you’re a purchasing manager at a large enterprise, you have dozens of other outstanding purchasing requests demanding your attention and don’t have the time to focus on becoming a cloud technology expert in a matter of weeks.

You want to run an RFP to compare multiple options, but you don’t know where to begin. So what do you do? You call up a salesperson and start asking them questions to educate yourself. Before you know it, they’re offering to give you their own vendor-written RFP! Problem solved, right?

Wrong.

scoobie doo smh at vendor-written rfp

It’s tempting. Oh boy, is it tempting! After all, they are domain experts. And if they include anything that biases the results towards their own solution you’ll surely catch it, right?

Actually, you probably won’t. Not because you’re not smart and capable, but because a subtly biased question can sound so reasonable if you aren’t deeply educated in the domain.

Let’s consider a specific example in cloud hosting. Suppose that their vendor-written RFP includes a question about supporting virtualized instances of Linux and Windows servers. Sounds fair, right? I mean, shouldn’t your hosting provider support Linux and Windows servers?

Well, if you really want a virtualized server running one of those operating systems so you can install a bunch of software yourself, then yes they should! But what if what you really want is just for someone to host your website without forcing you to get into those details? The truth is you probably shouldn’t care about the underlying technology. But as it turns out, the company that “helped” with your RFP just so happens to provide virtualized servers running the OS of your choice. By including that question from their RFP template, you’ve guaranteed that you’ll get a “no” from (for example) Google, Microsoft, and many other excellent hosts. And you’ll get a “yes” from the company that gave you the RFP!

Or perhaps they suggest a question on whether classroom training is available. Training is important, isn’t it? Of course! Sounds reasonable! But does training need to be delivered in person, as a lecture, in a group setting? Is that an efficient use of time for your company? There are many ways of efficiently delivering product training these days, and the best hosting solution for your company’s needs might offer training in a better way than this vendor-written RFP leads you towards.

These subtle introductions of bias towards a single vendor add up over the course of a long RFP and are a major contributor to the first touch problem. (For more on that and other problems relating to corporate purchasing, check out Corporate Purchasing Is Broken and the RFP Is a Horrible Thing.) You want to find the best solution, not just the first solution. That’s why it’s much better to lean on community expertise – rather than vendor expertise – when looking for help with an RFP. Rely on the wisdom of other buyers who have been in your position! And use the aggregate expertise of the vendor community, not the single opinion of a biased salesperson.

To get started with an unbiased RFP template, join Vendorful today!

The Vendor Dating Game (Corporate Purchasing is Broken)

Matchmaking is a big business. Even if we limit the market to online dating services in the United States, we’re looking at a market that generates roughly $2,000,000,000 per year. In a given year, over 90% of American singles use online dating services. For the vast majority of people, finding the right romantic partner is an incredibly important endeavor.

While actual in-person dates may still play the deciding role for assessing chemistry, moving the “partner discovery process” to an online system where potential suitors can be filtered by specific attributes has radically changed the way people find their matches. You like tall? Short? Athletic? Literary? Religious? Non-religious? Never before has it been so easy to target the person who — at least “on paper” — is right for you. And since the Internet has made it so easy to aggregate huge numbers of people, online daters don’t identify a single persopost-imgn, but rather a sizable cohort of individuals who meet a particular set of criteria. Then, and only then, does the dating begin?

We’re not talking about a single date here. No, we are talking about dating — a process that results in high highs, low lows, and amazing stories for your friends. (“OMG, his picture must have been ten years old!” “She kept texting her ex and then would laugh maniacally.”) The idea is to make sure that the person to whom you will commit is a good match for you. I mean, you’re not seriously going to stop looking after you meet the first person. So this begs the question, how many people should you meet? When is it time to settle down? Fortunately, some romantic mathematicians have invested time into solving this problem for us. The most common suggestion is that you shift your mindset to commitment after you’ve gone through 37% of the pool of potential mates. (If you want to actually see the math, take a look at “The Sultan’s Dowry Problem.”)

If you’re wondering why you’re reading about online dating on a b2b website, you are probably not alone. However, since you’ve stuck around this long, you are about to be rewarded. This is the part of the post where we’re really going to ratchet up the sexiness factor. We’re going to shift from searching for romantic partners to searching for the best vendors for your business. We’ll pause for a moment so you can catch your breath….

Vendor selection should be easier than dating. There are all sorts of places where you can find very detailed information about the vendor. It’s not considered inappropriate to contact the vendor’s other “conquests” to inquire about the experience. (In fact, most vendors will encourage you to do so; it’s corporate polyamory.) And you’re not penalized by a potential future vendor for “playing the field” while you move toward a decision. Given all of these opportunities to optimize the outcome of the vendor selection process, why is it that ”50% of buyers choose the vendor that responds first?” We call this the “first touch problem.”

The problem can manifest itself repeatedly as businesses have vendors of all sorts, from landlords to office supply companies to cleaning services. IT spending, just one component of a business’s needs, represents $3.5 trillion (yes, that’s trillion with a “t”) globally. If it’s too hard to wrap your head around that number, let’s focus on something far smaller, corporate travel for US companies. Are you ready for it? That relatively small part of corporate spending is still a $300 billion market.

Let’s circle back to the question of why businesses are so receptive to the people who contact them first. The answer: it’s easy. If you’re an employee in a small or medium-sized business (SMB), you likely have a full plate with your day-to-day tasks. In many (most?) cases, there’s not going to be a procurement department. There might not even be a formalized purchasing process. Your focus is solely on doing your job, and if you need something that’s going to help you do it — cloud hosting provider, plane ticket, rental car, hotel room, CRM system, or anything else — there is significant value in arriving at a decision quickly. Put simply, the most expedient decision might be the right decision when you include the costs of what could be painstaking deliberation. So if you can find something that checks the boxes well enough and get back to doing your job, it feels like a win. Imagine applying the same logic to dating. “Brown hair, college degree, and a non-smoker. I’m all done looking.” Sounds ridiculous, right?

Larger organizations are wise to this problem and have taken steps in an effort to address it. They will typically have a procurement process, which is designed in large part to make sure that vendor selection is well considered if not well orchestrated. In fact, they will often have a whole department devoted to purchasing. In some ways, this can be incredibly helpful. Jane from IT who needs cloud hosting can go to the procurement specialists and let them know what she requires. Ostensibly, Jane is now free to turn her attention back to her day-to-day responsibilities. However, unbeknownst to Jane, she may have made a Faustian bargain. The purchasing department is populated with people who are experts on purchasing and beholden to corporate policy. They are not necessarily experts in cloud hosting. In fact, Jane from IT — the very person who issued the purchase request — is the expert in cloud hosting.

Jane can choose to cross her fingers and fully delegate the purchasing decision to the procurement team, which has two to three weeks to develop expertise in cloud hosting. They’ll use this newly acquired information to

    • select 12 vendors to participate in the RFP process
    • review the responses
    • build a shortlist of 3 vendors
    • enter into negotiations with the finalists
    • sign a contract

It might be tempting for some companies to bring in domain experts to craft the RFP. In addition to adding a layer of cost, the time it takes to identify and engage the experiments can materially impact the outcome of the product. (I know what you’re thinking…. “Issue an RFP to find the domain experts!” Perhaps experts should be engaged to find the experts and so on, creating an infinite loop!) This is a time-consuming process that can take months from start to finish. In certain domains, the world can pass you by at that time.

The CTO of a Fortune 500 publishing company recently hired a consulting firm to come up with a Request for Proposal (RFP) to update their Drupal websites to 6.9. Unfortunately, the RFP took so long that before the firm finished it, Drupal released version 7.0, essentially rendering the whole RFP process somewhat moot. (You can read more here.)

Given the time, effort, and cost it takes to prepare an RFP, procurement teams can forgo doing a lot of the research and simply enlist a likable salesperson from a candidate vendor to provide an RFP to them. And what vendor, when asked to write the RFP to which they will be responding, will say “no?” The problem is that the playing field for the evaluation will no longer be level. In effect, by allowing a vendor to provide the RFP, we come back “first touch problem.” The vendor who provides the RFP clearly has stacked the deck in its favor and is most likely to get to the finish line, no small factor in why the first sales touch wins almost 50% of the time.

If Jane is uncomfortable keeping her fingers crossed for three months, she may elect to participate in the process. Given corporate policy, this might involve her writing the questions for the RFP, selecting the vendors, reviewing the responses, etc. If she is to bring her subject matter expertise to bear, why bother delegating the purchase process at all? She has to do a ton of work and probably wouldn’t get to enjoy the perks of hanging out with salespeople and their flush expense accounts earmarked for dining and entertainment.

We can assign blame to the corporate process, but the process is totally understandable. Organizations want to enforce a policy that compels people to justify purchase decisions. It’s probably more appropriate to blame the RFP, a three-letter acronym that might be more appropriately renamed to the CYA. (If the “first touch” problem isn’t actually being mitigated by the RFP, doesn’t this really amount to a “Cover Your <Ahem>” operation?)

As poor a process as this is for buyers, it might be even worse for vendors who feel obliged to complete RFPs whenever they come in, despite knowing the odds are good that a competing vendor strategically placed the RFP in the purchaser’s hands. Questions vary from RFP to RFP and even when there are similarities, the nuanced differences often make copying-and-pasting a dangerous proposition. Invariably some of the questions seem to be unrelated to the product or services they provide; ad hoc teams of people are often tasked to respond to questions that run the gamut from product/service capabilities to historical financial data to support policies to HR guidelines. All of this time and effort is expended while the vendor expects to close the deal, not on the relative merits of its offering, but because a competitor is sitting in the catbird seat.

Our goal is to fix this. We’re aware that corporate purchasing isn’t sexy (although some companies might be buying Lamborghinis, jet packs, and Dom Perignon in which case…well, sign us up!). But that doesn’t mean it should be this painful. In fact, we think that corporate purchasing should make you feel good. Good that you’ve chosen the right vendor. Good that the process to do so was easy. And good that the product/service that you’ve purchased helps your business. We want you to think of purchasing like a beach vacation ― boring but great. Learn more about our strategic sourcing and vendor management services.