ERP implementation projects can be daunting, after all it will be the software used to run the business and, in most cases, will do so for many years. Understandably then, companies spend serious time planning and searching for the right solution. As a veteran in ERP implementations for manufacturers in the US and Latin America, I’ve seen hundreds if not thousands of ERP selection processes that start with a comprehensive RFP (Request for Proposal).
But, is this historic procurement process suitable for any industry? For any project or as in this case any large investment? Does it ensure the selection of the best, most innovative, most disruptive solution?
One of the main arguments why executives are saying RFP’s are no longer serving their purpose of accurately communicating complex outsourcing requirements to vendors, is that even though RFP’s capture market information, most of the time if not all they concentrate in a myriad of feature/function used to compare different tools, which in itself does not guarantee companies are buying the most innovative or accurate solution for their business.
In the specific case of an ERP implementation, the software itself, the implementation process, and the implementing partner are all critical for the project success, and more and more the partner/vendor needs to see far beyond the go live date and purely the after sales support. Big question I have never seen in an RFP: Are you VendorX capable of enable innovation processes in my industry or line of business? If so, how?
Clearly, in the last few years the traditional dimensions of vendor selection have morphed as customers have become much more demanding around ROI, business impact and growth. Therefore, RFP’s lose focus evaluating the best partner for the task under the new set of parameters. Even if the software selected is the most suitable for the business in functional or technical terms, partner strengths in key areas like innovation, digital transformation, digital leadership, digital culture, technology adoption, etc. is also one of the most important aspects to assure the implementation goes not only according to budget and schedule but that leaves behind the foundation and the cultural alignment to help set the business up for exponential growth.
“We often hear complaints that RFPs strangle innovation because they are very prescriptive,” said Young. “They are not dead by any means, they are just not the growth in go-to-market solutions.” (Young, 2012) Due to its dogmatic nature of prescribing the exact formula for the solution, Young suggests that RFP’s are like telling someone the answer you want to hear, leaving no space for innovation and real insight of vendors on transformation.
There are cases where companies decide to hire a consulting company to guide the RFP process, which in turn only slows down and complicate the transformation process, since most selection consultants are not equipped to truly support a transformational process, their methodologies are unfortunately in most cases outdated.
It wouldn’t be right to say that a consultant perspective is not needed, on the contrary, we believe it is one of the most effective ways to bring value from a fresh, external perspective. It is the slow and artificial process of selection applied by most selection consultants to justify a complicated decision is where we disagree. This is to say, for example the unreasonable break down of providers. At first, for example, they will present to the client in search for a new ERP, 32 ERP providers, to then narrow the list to 12 and then to 4 providers. These 4 providers are probably the ones consultants knew from the beginning that were going to be finalists, especially when focusing on world class software vendors and in most cases good consultants know from the very beginning what the right system, they believe the customer needs.
So, what could companies do different to have a procurement process not as rigid as the RFP?
Our first suggestion is to hire a consultant at the right time. Do not hire a consultant the day after management decides to invest in an ERP implementation project, but when internally the company understands what is looking for, a tailored ERP considering their business needs and objectives and very important that fits their industry.
We recommend to first browse the current market solutions suitable for your business size and industry, then do a selection of 4 to 5 ERP providers, anybody from the company is able to perform a quick search as they are the ones that know best the business and the industry, they are in. After you have an idea of the top 3 or 4 players for your specific business you can bring in a consultant.
The consultant will then assess if there is one important player being left out and continue the evaluation with those providers that passed the “fit test”, further evaluation such as compare pros, cons and pricing follows even if it’s in a traditional fashion, however, a Digital First approach as we said before adds new dimensions that leaders need to understand and include so the technology is aligned to their business strategic imperatives and not only or mostly into solving current pains.
Looking from the inside out perspective MIT’s research article “How digital leadership is (n’t) different” evaluates if business leaders need to develop new skills or if the traditional leadership handbook is enough to face the particular demands of digital disruption. One of the top three capabilities mentioned is adaptability. According to the article, leaders need to be innovative and have a mindset that can change course if the technology and markets evolve. This holds proof that in such a fast paced and turbulent environment, implementing a new ERP solution takes on a new significance, as technology interoperability is the foundation to deliver true transformation. Therefore, this critical selection needs to be evaluated across many departments and at different levels that go further than an RFP.
A really disrupting way of thinking when it comes to business solutions-“It’s really not that important if the experiment succeeds or fails; it’s what they learn from it. Good, bad, or indifferent, it is intelligence that they can lay claim to” (Kane, Phillips, Copulsky, 2019) A best practice that these authors suggest is the culture of experimentation. The importance of motivating teams to try out their different theories and do things differently. Companies with a “failing forward” culture will most likely redesign obsolete procedures such as the RFP process. No wonder why the most disruptive companies today do not use this traditional RFP approach. To be sure keep in mind we are talking about innovation of the selection process and not the actual tryout of ERP projects!
Last but not least, according to article “Out with request for proposals and in with request for solutions”, RFS (Request for Solutions) are becoming more popular in the innovation arena, as this evaluation process is much less specific than RFP’s, but still have requirements. “RFS approach is more suited for programs that have ambiguity or strive to be transformative” (Young,2012)
In conclusion, RFP’s are and will always be important for the proper definition of the company needs, however a much looser and collaborative RFP approach may yield more flexibility for the market to propose new solutions and transformative change. More important than reviewing the RFP’s, leaders need to be clearly articulating the value their digital strategy is going to bring to the business. Or analyzing which areas are going to be impacted and what needs to be change in order to transform obsolete processes into more efficient ones; to create a more agile and adaptable organization.
Furthermore, the deepest dive occurs through discussions, collaborative contracting, demonstrations, proof of concepts, ROI analysis, coupling your core strategic goals with technologies that fit your size and the nature of your business rather than long documents (average ERP RFP is thousands of lines/questions). Most of the time the extremely complex RFP questionnaires are forgotten after the project has started to focus on a discrete, achievable scope anyway, this we have seen almost in every case over the last 20 years.
Nonetheless, companies need to fully explode the potential of their solution and I suspect that due to the intense focus on processes, such as the RFP and other old fashioned tools and practices, they are delaying the exponential growth opportunities available to them for a short period of time and exposing themselves to unnecessary risk while the world and the competition pushes forward .
1. Young, Tom, (2012, July 3) Out with request for proposals and in with request for solutions. Retrieved from https://www.nearshoreamericas.com/outsourcing-request-for-proposals/
2. Kane, Gerald; Phillips, Anh; Copulsky, Jonathan; Andrus, Garth, (Spring 2019) How digital leadership is (n’t) different. Retrieved from https://sloanreview.mit.edu/.
3. Kleiner,Mirko; (2017, July 7) Does the RFP process need a major upgrade? Episode 1: The History. Retrieved from https://www.lean-agile-procurement.com/blog-1/2017/7/7/does-the-rfp-process-need-a-major-upgrade-episode-1-the-history