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With SaaS SCM Solutions Offering Speed, Agility and No Tie-ins It’s Time to Leave the RFP Behind

Nov 3, 2014 4 min

RFP’s Are Not Applicable for SaaS Solutions

Running a Request For Proposal (RFP) process has traditionally been the way software purchases have been run, especially in larger enterprises. The main aim has been to completely and exhaustively list the requirements needed in a solution for a specific business purpose, and then to select the solution that best matches these requirements. The RFP process has been used as a safeguard to prevent businesses choosing the wrong software and finding themselves locked into it for many years. The investment horizons have had to be as long as the investments are big and thus return on investment commonly takes several years.

These software purchases also fight for priority against other capital projects, often getting delayed to the detriment of the business, though this is understandable given that only a set capital budget is available. Even though the RFP process will probably still be needed in large, and ‘infrastructure-like’ software solutions being used in many areas of a business, best-of-breed business solutions, delivering big measurable benefits for certain targeted processes, are a different story.

The RFP Process Is Not Well Suited for Selecting SaaS-solutions for a Number of Reasons:

  • A thorough RFP can easily take longer and cost more than implementing a best of breed SaaS solution especially if you use consultants in building the RFP, as is the norm.
  • The payment structures of SaaS solutions often mean return on investment happens in as little as a few weeks. Spending too much time in running a lengthy RFP process leads to losing both significant amounts of money and time, time that could have been used to learn how to run the process better.
  • Implementation investment levels are so low that heavy safeguarding is not necessary. It makes no sense to invest more money in safeguarding against a poor investment decision than is at risk in the potential investment itself.
  • The RFP process takes time and resources, and delays the return on investment. Often the cost of negative decisions or delayed decisions is greater than the cost of the project.
  • It is always paramount with any solution that it fits its purpose and use – the whole operation is several orders of magnitude higher than the pieces of functionality that are listed in the RFP. With SaaS and vendors with a ‘try and buy’ model, you can try the solution out and measure the business value. If you are in doubt about which is the best, try out several.
  • You are not tied to the decision. Most SaaS vendors offer possibilities to start on short contract terms. So if you later think you could choose a better alternative, then you can change – that is just fair play. By starting quickly you have been able to achieve considerable business benefits with the new solution, and after learning more about how to run a process with new technology you are also in a better position to implement and enjoy the benefits of the new solution.

The difference is big. As one of our customers’ IT Director said in thinking whose responsibility it was to present the decision to the board: “This is a business investment. Traditionally IT investments have been technology focused and the return on investment has typically been measured over a period of seven years and might only be achieved if everyone in all sides of business used it. This is more on how the business will see the solution bringing the estimated value. And the risk is so low. It is like turning on a water tap, and the solution flows from it. If we want to get rid of it later, we turn the tap off – we’ve already enjoyed the benefits, but the costs stop when we stop using the solution.”

The Process of Selecting a SaaS Solution for Your Business Needs

Figure out your business needs by talking with users, managers of the users, by searching for material and news for best practices, and by scanning solution vendors’ material on the web. Talk to potential vendors and try to identify those who understand your challenges and what you need. Choose a few vendors to go forward with to look at how their solutions would fit your business processes and goals. In supply chain / forecasting and inventory management the steps to review their offering might look like the following:

1. Look at a general demonstration handling all demand and purchasing areas you have

  • Normal, product intros, short lifecycle, full-truck, promotions…

2. Select a few to work with your data

  • Ask the vendors to model your desired process to their solution with your own data
  • Ask the vendors to show how the process would be run and the views people would use
  • If possible ask the vendor for an estimated business case, and you can even ask whether they are willing to stake their own contract/compensation on that
  • With the practical process implemented you have visibility of how the solution would work in practice

3. Then try out the best fit(s) – generally the top one or two in practice

  • You can feel the system and measure business value in real-life
  • After that the decision should be easy

If a vendor is not able to model your process and handle your data with moderate workload and cost then probably at least the one of the following is true:

  1. They do not know the problems of the business area well
  2. Their solution and working method is not flexible

In practice this means a long, hard, expensive and laborious implementation project. However, if the vendor can demonstrate a good understanding of your needs using your data in the process, and possibly even teach you a thing or two about your most pressing business challenges on the way, you can largely rest assured of a successful and smooth implementation. To summarise: Quick to implement best-of-breed expert solutions are the future – and that means that RFP processes are largely a thing of the past. If you want to carry out an RFP, please include something as close to a live trial as possible in the evaluation process – it is the only way to measure solution value in practice.

Written by

Mikko Kärkkäinen

Mikko Kärkkäinen

Co-founder & Group Chief Executive Officer