Brian Jackson - Fotolia
Choosing the right vendor is key to a successful ERP implementation. That means one of the most important decisions project leaders and evaluation teams need to make is whether to use an RFP procurement process or skip it for a more flexible selection process.
Understanding what each involves is the first step of that important decision.
What is an RFP procurement process?
In an RFP procurement process, a project leader documents all the project's requirements, timelines and details, and vendors that wish to be considered submit a formal proposal.
Vendors submit only requested information to keep the process aligned and transparent. For example, a vendor wouldn't include extra information such as charitable donations.
What is a non-RFP process?
Some companies prefer to simplify the process and avoid using RFPs altogether. Instead, their project leaders conduct their own research and identify vendors who they believe are best positioned to meet their needs.
Vendor interactions, detailed requirements and published timelines are less formal. There is also less emphasis on making the process transparent and more on identifying the best ERP system for the job at hand.
In some cases, the decision to go with an RFP process vs. a non-RFP process is clear-cut. For example, a company may require RFPs for all projects or those over a certain dollar amount. But where the decision is murkier, it's important to understand the pros and cons of the RFP procurement process as well as the pros and cons of skipping a more formalized ERP selection process.
Pros of the RFP process
In addition to the cost and time involved, an ERP implementation often has an impact on the day-to-day work of employees across multiple areas of the organization. That's why the formalized RFP process offers a number of benefits. Here are a few.
Offers a level playing field. The RFP procurement process limits interactions with vendors prior to their submissions and any vendor is allowed to submit a proposal. All vendors have access to the same information, including the initial RFP and any subsequent clarifications and the company must use the same criteria to evaluate all vendors. Since the RFP process typically includes an evaluation committee, there is less chance of bias.
Enables a focus on specific criteria. The project leader can direct the evaluation committee to focus on specific information. This ensures that the evaluation committee won't be influenced by other information that is not needed to compare one vendor's platform to another.
Offers potential to discover new vendors. Although it's often quicker to sign a new agreement with a vendor the organization has already used, the RFP process can potentially identify a new -- and perhaps better-suited -- vendor.
Cons of the RFP process
Although the RFP procurement process has a number of benefits, it also has some downsides.
Can be lengthy and disqualifies potentially good vendors. In some cases, there are specific requirements listed in the RFP that must be followed to the letter, such as how the proposal must be submitted. Vendors who don't follow the set guidelines exactly will be excluded from the process -- even if they're qualified. Also, some vendors won't submit a proposal because they find the RFP process too cumbersome and expensive.
Prohibits relationship-building. Members of the evaluation committee are typically prohibited from speaking to vendors and the only communications allowed are the official ones that go to all vendors. This is meant to ensure a fair process, but the downside is that the evaluation team doesn't learn details that might indicate a good company-vendor fit.
Precludes potentially important vendor benefits. A vendor may offer services that the company might benefit from, but if they aren't included in the RFP the vendor won't see them.
Pros of the non-RFP process:
Skipping the RFP process and allowing for a more organic process can be a good choice for a number of reasons.
Allows handpicking. The evaluation team isn't required to consider all of the vendors. If the team knows that they don't want to work with a certain vendor, they can cross that vendor off the list before the evaluation process even begins.
Allows for more information and vendors. Vendors are allowed to include information -- such as charities or causes they support -- that's prohibited from the RFP process. The evaluation team can bond with the vendors and form a network of vendors to consider for upcoming projects. A vendor may also list additional modules or integrations that may be beneficial to the company -- even if they aren't required for the project.
Simplifies the evaluation process. The project leader can limit the number of vendors to review and the number of committees and reviewers to involve. She can also simplify the vendor communication channels.
Permits flexibility. The evaluation team may discover new requirements while discussing the project with vendors. This may change the evaluation team's criteria enough to alter the list of qualified potential vendors. Unlike with an RFP process, a new vendor may be considered for the project at any time during the evaluation process.
Cons of a non-RFP process
For all its rigidity, an RFP procurement process -- or another formalized process -- can provide standardized benchmarks as well as other benefits. In contrast, skipping an RFP for a looser software selection process can mean missing out on important benefits. Here are a few downsides of a non-RFP process.
Invites nepotism. Personal relationships may influence the evaluation process instead of how each vendor meets the requirements. For example, the head of the evaluation committee may select a vendor because a friend or relative works there.
Difficult to defend in lawsuits. The non-RFP process is not stringent -- in particular, the rules for communicating with vendors are lax. As an unintended result, it's entirely possible for a company to give one or more vendors preferential treatment. An evaluation committee might also reject a vendor due to bias, such as on the basis of an employee's race or sexual orientation -- which can leave the company vulnerable to a lawsuit.
Overlooks good vendors. If the evaluation committee members don't have preset guidelines or adequate knowledge of the industry, they might not identify vendors who offer a platform that meets the project's requirements.
Prone to delays, skipped steps and missed requirements. In an RFP, a set schedule is laid out for responding vendors. With no strict schedule to follow, vendors may unintentionally cause delays in the project. A less formal process may gloss over -- or even skip -- important steps, such as clearly defining the project's requirements or getting feedback from a wide enough user base. Rushing the project forward could result in an over-eager member of the evaluation committee speaking to vendors or receiving proposals before the project receives approval.
Misses out on representative views. The evaluation committee may only contain employees from a specific department or team. As a result, the committee may be unaware of how their decision affects other employees. In a worst-case scenario, the committee may even ignore the feedback from affected employees.
Regardless of which approach the evaluation committee selects, there are ways to ensure an unbiased process. The evaluation committee should include employees from different departments, such as finance and IT, and an executive sponsor should oversee the whole project.