My Work Log

This blog posting primarily covers the process of vendors bidding for a project (mostly an IT project) from a customer organisation.  While we primarily give a lot of importance to RFPs (although it deserves that importance!!!) we need to see this as one of the thicker spokes in the wheel of winning a bid.  The other spokes are discussed in reasonable detail.  This is not a very elaborate exposition of the entire bidding process – but would serve as a good overview.

I would be dedicating a separate blog posting to the RFP process itself sometime later.  But for now this ………

Before we get down to dirty our hands with the bidding process – let us try to understand why customers choose to outsource and various other aspects of outsourcing which are decision drivers.

There are various reasons why customers outsource their work. Cost is not the only reason – although it is the most common one. Other reasons are:

• • Expertise, Skill Gap – The customer does not have the necessary resources with a particular skill/expertise to implement the project. Hence they would like to outsource.
  • Risk Mitigation – The customer’s core line of business is different from what the particular project/work demands. Hence the customer outsources as it is risky for the customer to do it himself as it is not in line with his core line of business. But giving out the work to a vendor would also have its own risks. This is where penalty clauses come into picture which would protect the customer from the risk of outsourcing to the vendor.
  • Time Constraints – The customer has limited resources and other priorities rather than execute a particular project.
  • Strategic Drive – There may be other strategic reasons why a customer may choose to partner with a vendor (or rather a very specific vendor).
  • Core Competency – Where the customer wants to focus only on his core competency and nothing else.
  • Bundled Offering – The customer bundles a lot of work to a vendor and keeps the main key work pieces only with himself. This way with a single vendor handling bundled work – the customer incurs some cost savings and it is less time consuming.
  • Cost Saving

While that sums up some of the drivers which makes the customer decide on wether to outsource or not ………let us now look at what a customer might look at in potential vendors while outsourcing.

1. Capability
   • Experienced
   • Demonstrated. In case the technology is new or the work is somewhat new then does the vendor company have a demonstrated capability to do it (need not have experience on it).
2. Track Record. Is this company longstanding
3. Stability. Has there been any bad publicity or turbulence within the vendor org.
4. Value Delivery. Is the organisations market share-value good. How much value does the vendor give to the client. How much importance is given to value addition.
5. Processes. CMMi and other value additions to the client.
6. Resources. Good quality resources. Certifications. Industry experience.
7. Culture Fit. The client company may belong to a different country like Japan and the vendor may belong to say Egypt – so there may not be a good culture fit.

Let us now look at the different types of Outsourcing:
1. Staff Augmentation. The client company requests the vendor company for x no. of resources for y no. of months. After that the vendor role ends. There is not much value add to either parties here.
2. Project Based
   • Time and Material
   • Fixed Bid
3. Annuity Based. A 30 million dollars for 5 years is 6 million annuity per year. Its more like a Fixed Bid where the price is fixed for 5 years. For a client the annuity based is more profitable. It’s a high risk project

The key decision makers at the customer end who decide on outsourcing have to consider the below mentioned specific parameters while preparing an outsourcing report to get a buy in from other stakeholders.  These are:

• Need Assessment
• Cost Benefit analysis
• Risk Assessment
• Industry Know-how – of both the customer and potential vendors.
• Political Influencers – like employee unions, local political parties etc. who may have a vested interest in not allowing the outsourcing to happen.

Now comes the main part of this blog posting which covers the processing of bidding and winning a project:

1. Request for Information(RFI). After the client decides to outsource they identify potential vendors in the industry who are capable of doing this work. The client org tries to understand the vendor by requesting the vendor to give information about themselves. This could include details on the working that the vendor org is doing/has done and the customers they have etc. The information that is requested is at a high level and they will not ask for details of how the vendor would go about delivering for a particular requirement.
2. Request for Proposal (RFP). The shortlist from the RFI process would be contacted for the RFP. The client company depending on its maturity would give a schedule to the vendors and in some cases also provide a standard template on which they can revert back. Once the vendors revert back – the client team would come up with some evaluation and scoring mechanism with a set of parameters in mind. They would use this to evaluate each response proposal. The proposal should be fairly in-depth with technical overview and timelines. SLAs are also brought up here.
3. Due Diligence(DD). In some client organisations they also ask the vendor org to come forward and do a due-diligence. In some cases the due-diligence at the client place would have to be done discretely so that people on the ground don’t realize that a particular work is going to be outsourced. This stage gives an opportunity for the vendor org to assess how well their proposal has been and to assess how complex the system of the client org is. Also risks, culture, environment, legal regulations and other parameters are assessed. Sometimes multiple vendor organisations do the due-diligence in parallel. The Due Diligence also gives an opportunity for the client organisation to get a feel of the vendor org and their culture fit.
4. Proposal Update . The proposal of the RFP is updated based on the DD stage. Most of the time – there will be some cost variation from the original RFP quote of the vendor.  The client org may not permit a huge cost variation from the RFP quote.
5. Proposal Presentation. This is where the vendor org would make the presentation to the customer org that going with them is the best bet for the customer. Typically senior people in the vendor organisation and technically very sound people who have exposure to the technologies involved and the work that is going to be done ………are the people who will make the presentation. In turn the client org will look for the confidence level and passion which the vendor team reflects in trying to meet the client teams objectives while implementing the proposal.
6. Reverse Due Diligence. After further shortlisting ……..the client team comes to the vendor organisation and checks their team, location, culture to see wether the are what they claim they are and they do what the claim they have been doing. At times here is where the client sees how much more you can give beyond the basic stuff like meeting SLAs etc. This process helps the client team to further shortlist.
7. Contract Negotiations. This is the last stage of shortlisting. Here various aspects of the contract, payment terms, payment schedule – what is non-negotiable point and what is negotiable point. The vendor teams which are involved in contract negotiations are the legal, finance, delivery units, sales, pre-sales
8. Contract Signing.

Each of the above stages is discussed in fair detail below

RFI Stage. The drivers for the RFI are:

1. Consideration Set: Here the client comes up with a list of parameters used to evaluate vendors and a set of vendors who are being considered for the bid (consideration set) is arrived at.
2. Company and Capability Information: Here the client tries to evaluate various potential vendors.
3. A high level profile match: The client does a high level match based on parameters
4. Screening: Weeds out vendors whom they think don’t fit the match
5. High Value/High risk projects: Some vendors may be capable but may not be able to handle a very high value/high risk project. So this is another parameter which is crucially considered while deciding on the RFI

The vendor role in the above is quite minimal unless the client company requests for some additional information.

RFP. The proposal aids in the following:

1. 1. Helps in shortlisting the consideration-set for further screening
   2. Approach to address client needs
   3. Assessing the ability of the vendor
   4. Provides for evidence of ability
   5. Technical Conviction from the vendor in implementing the solution. This is an important criterion for the vendor that the technical conviction flow through every page of the RFP.
   6. High Level Cost of the vendor for delivering the solution

From the vendor end ..a good RFP would cover the following areas:

1. The technical and business solution to the work which the client envisages
2. Clarity and Depth of the presentation
3. Evidence of value delivery. Without the client asking …how can we give them more value than what they ask for. This is important.
4. Client Testimonials. This is very important.
5. Strength and Longevity of other engagements. How many people have been involved in a particular project and for how long have they been with the vendor.
6. Maturity (how has the vendor approached the RFP)
7. Input to Bid. The vendor team might decide to bid or not to bid for the RFP due to various factors.

Some client organisations call RFP as RFQ (Request for Quote). When the organisation calls it RFQ then it means that they are leaning towards cost.

As I mentioned earlier – I will be dedicating a separate blog posting to RFPs alone ………..sometime later.

Due Diligence:

• Done to have a greater understanding of the customer requirements
• The vendor demonstrates his ability of approach, technology and capability at the customer location while studying the system
• The kind of people who go to the client location to do the due diligence is important as that reassures the customer of the kind of investment we are prepared to do to win the deal.
• The approach that we use during the due diligence is important. If we use a value approach wherein the customer gets the idea that we have more to offer in terms of value add to the customer – then they would be more interested.

• The vendor role is significant in that it involves:
  • Validating with the customer the solution that we propose is what fits the requirement
  • Fine tuning the approach where needed
  • Presentation (clarity and approach). How the vendors present themselves and carry themselves – so that it builds a good professional impression with the customer as also helping in building a good rapport with the customer
  • Personnel skill: It is important for the vendor to establish a solid working relationship with key personnel of the customer so that this can be carried forward right into the working of the whole project.
  • Finally the lessons learnt have to be carried into the proposal and it would have to be updated suitably.

Proposal Presentation – Drivers:

• Conviction – Is the solution convincing
• Robustness – Will the proposal fall apart with some deep questioning on the solution and its technical features. Will the solution scale up.
• Understanding of the requirement and its subtler aspects.
• Approach. Sometimes a proof-of-concept might help to demonstrate how we might do this.

The team involved would be:

• Technical team which would most likely to implement the solution
• The senior people in the vendor company, the sales people would also be there in the presentation

Reverse Due Diligence:

It is generally done by the customer at the vendor location. The key objectives are:

• Validation of what the vendor claimed to be true
• Understanding the vendor setup and environment
• Get a feel of things at vendor location
• Assess the risk
• Check wether there is any culture mismatch
• Build a relationship and identify the key people with whom the interaction base would have to be built.

The vendor role here is to

• Facilitate validation
• Risk mitigation. When the customers perceive a certain risk – to address it and try to mitigate it as much as possible.
• Evidencing capabilities
• Build a rapport with the customers.

Contract Negotiation. The key points that are considered here are:

• Risk assessment. Which factors pose a risk to either parties in executing the deal.
• Stress Points. Which factors on either side are stress areas
• Breakpoints. What are the stretch limits in some factors which could sabotage and break the deal
• Key drivers of the entire deal
• Risk mitigation. What needs to be done to mitigate risks
• Conflict management. How do we handle areas of conflict.
• IP aspects. What can be reused and what cant. What are the safeguards around IP and what could be the penalty factors.
• A contract compliance monitor is established so that all key parameters of the contract are monitored throughout the engagement.

The people from the vendor company who would be involved here are:

• Contract negotiation team
• Legal team

The vendor teams mentioned above would take care of SLA information in the contract and performance factors related to systems and value adds which we have added in the proposal

Post Contract Signoff:

Once the contract is signed off and the project kicks off then the following key aspects would have to be taken care of

1. A monitoring and reporting mechanism has to be arrived at and the frequency of reporting and content of reporting has to be mutually arrived at.
2. SLAs have to be adhered to. This also is part of the reporting framework.
3. A value register has to be created. All small and big value additions have to be recorded here as and when they are created.
4. A risk assessment and mitigation has to be arrived at. This is also linked to the reporting framework.
5. Cost Benefit analysis. This has to be worked out both for the customer and for the vendor. Periodically the cost benefit analysis has to be done to track the cost.
6. The contract compliance monitor is constantly updated.

The vendor responsibility is primarily the following:

• Ensure a defect free delivery
• Follow a value driven approach
• Constant risk assessment and mitigation
• Records and MIS has to be continually updated

Broadly that covers the entire process of bidding and winning a project.  Before I wrap up I would like to summarize the list of various teams involved from the customer and vendor end who would be part of the above process.

Various functions involved in overall process:

1. Sales
2. Marketing
3. Advisory Agencies
4. Research Firms. Some vendor organisations have their own research bodies which identify opportunities in various industries.
5. Pre Sales
6. Finance
7. Contracts cell
8. Legal
9. Compliance
10. Delivery Teams
11. HR/CS/Training
12. Other units like BPO