Buying enterprise software is an expensive and risky endeavor, which is why software buying teams need to understand the subtle differences between a request for information, a request for proposal and a request for quote.
Each document -- a request for information (RFI), a request for proposal (RFP) and a request for quote (RFQ) -- has a distinct purpose when undertaking a significant project, even if some overlap exists. While it's possible to issue all three types of requests for a single project, buying teams will typically only issue one or two of them, given the overlap.
Why are RFIs, RFPs and RFQs important?
Making a large software purchase has consequential considerations, such as whether the vendor is reputable, and whether the software meets requirements, is cost-efficient and the final price meets the budget. To reduce the risk and manage costs, companies often streamline and standardize the procurement and sourcing processes.
Depending on the company's size and type of business, there may be a dedicated procurement team charged with following detailed guidelines on when each type of document is required and the processes that they must follow to make sure purchases are unbiased and defensible.
What is an RFI?
Software buying teams use a request for information when they want additional information from vendors before finalizing the RFP or RFQ. The buying team may lack clarity on requirements, want more information on available options in the market or need details validated, which the vendors' industry experts can do.
When reviewing a request for information, vendors may tailor their responses to highlight their available options so gathering RFI responses from multiple vendors is critical. The RFI may identify high-level cost estimates, but in practice, the document can provide a better understanding of the project's scope and requirements of the project.
Some vendors might not reply to a request for information unless there is a clear understanding that the company intends to move forward with the project due to the level of effort required to complete the RFI.
What is an RFP?
A buying team may issue a request for proposal when they have a good understanding of their project's requirements. This document may follow an RFI, but the organization may skip that step and go directly to the RFP if they have the internal resources to determine the company's requirements.
The RFP will list the requirements in detail, provide a recommended timeline and request pricing from the vendors. The buying team might ask specific questions about the vendor, such as the length of time they've been in business, completion proportion of similar projects, annual sales and number of staff. The RFP response may have mandatory terms to follow, such as a submission due date and other critical information. Buying teams may disqualify a vendor from submitting a response if it fails to meet the RFP's mandatory requirements.
A vendor's response to an RFP may include additional items that could be a value add. It's an opportunity for the vendor to differentiate themselves from competitors. Vendors may also partner with one or more additional vendors to meet the RFP's obligations. Usually, this situation occurs when the primary vendor can't meet all the requirements on their own. In this case, the RFP response will include information about each vendor and detail how the combined effort would work.
The RFP response should indicate any of the project's associated fees. These fees may include implementation costs, ongoing maintenance and support costs, pricing details for change requests and hourly rates for different roles on the project. As an example, a project manager may have a certain hourly rate whereas a technical architect has a different rate. Fee negotiations can begin after selecting a vendor, but it's an opportunity to identify each vendor's different financial requirements.
What is an RFQ?
Buying teams use a request for quote when they know exactly what they want and are looking for vendor quotes. In an RFQ, organizations give vendors all the needed information to competitively price the contract.
This type of petition is well suited when the requested work is standardized and there's little room for the vendors to differentiate themselves, such as when buying hardware or off-the-shelf software.
The vendor response will focus on the software price and any ongoing costs, such as annual licensing fees. Vendors don't need to provide alternatives to meet buying teams' needs. Vendor responses will also include the proposed timeline.