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The Importance of Competitively Sourcing Your Network Infrastructure Services

Posted by Ben Fox

Feb 28, 2018 9:15:00 AM

The importance of competitively sourcing your network infratructure dealsCompetitively sourcing your network infrastructure services can be regarded as something to be avoided.  Conducting a competitive Request for Proposal (“RFP”) process can be complicated and time consuming, all when the normal day job already keeps you far busier that you want to be.  Furthermore, a prevailing view can evolve that the benefits from changing vendor as a result of an RFP will never be large enough to overcome the cost, effort and heightened operational risk of executing the vendor change.  And regardless, your existing vendors always seem to give you a good deal when you extend their contracts, award them additional business, or conduct the annual benchmarking process…

But all of that misses the real value of RFP processes.  RFPs are change agents – the change delivered may be a change of vendor, a change of technology, a step change in cost/pricing, or some or all of those combined.  But without engaging the market, achieving transformational change and improvements in capabilities and performance is much harder to achieve, and realizing true step changes in the competitiveness of the pricing for the services you consume simply doesn’t happen. 

Your existing vendors have limited incentive to offer, never mind deliver, transformational change.  They profit from the status quo of the entrenched services and technologies they are delivering, so why risk the security of that by pro-actively presenting new technologies and services that would likely cut their revenue, and even worse may instill ideas about wider changes that could decimate their revenue?  Vendor account teams are incentivized and motivated to grow their business with you into new areas and new services, not cannibalize their existing services.  Hence you need competitive pressure on their existing services in order to drive transformational step changes – competitive RFPs deliver competitive pressure more effectively than any other sourcing strategy. 

But it’s not just about applying competitive pressure on incumbent vendors.  The nature of network infrastructure services means that all large companies have a heterogenous supply chain, with multiple service providers in place to provide the full complement of network infrastructure services required globally – from technology manufacturers, to value added resellers, to carriers, to cloud providers, to service integrators and beyond.  The majority of service providers that operate in these spaces span multiple disciplines, and thus most of your incumbent vendors will be able to offer services in areas where you are likely not currently using them.  Thus, competitive RFPs provide opportunities for your incumbent vendors, as well as threats.  And since vendors are so motivated to grow their revenue with their existing customers, presenting your incumbent vendors with RFP opportunities to achieve their revenue growth goals actually helps forge healthier vendor relationships. 

The final nail in the coffin of the “we don’t need to RFP” mindset is that without regularly engaging the market in a formal process it is impossible to keep up with the pace of change in the network infrastructure services marketplace.  As new entrants and best of breed niche specialists rise to provide credible alternatives to the established “big vendors,” as disruptive technologies and approaches become mainstream, and as the resultant price erosion becomes increasingly pronounced, the only way to take full advantage is by engaging this ever-evolving market in an RFP process.

So, don’t regard an RFP as a necessary evil, but rather as a vehicle and tool that helps you to deliver on your core responsibility of providing market leading technologies, performance and total cost of ownership to your customers and users.  RFPs do require an investment of time and money, but done properly an RFP will return that investment many times over.

Successful RFP Strategies

Successful RFP programs are founded on a successful sourcing strategy, and the first step in developing a sourcing strategy is to establish and agree on the key objectives of the RFP.  For example, reducing costs, improving network performance, assessing new technologies, addressing and resolving existing pain points.  Existing pain points can be a good place to start – by capturing existing issues and areas where stakeholders want to see specific improvements, the sourcing strategy and RFP can be tailored to specifically address such items. 

But it’s also important to capture the strengths of the existing services and vendors – it is easy to fall into the trap of only focusing on problems that need to be fixed, which will certainly result in fixing those issues, but can also inadvertently and unwittingly introduce new issues in areas that were taken for granted and so not adequately covered in the RFP process.

Developing the scope of the RFP is also crucial.  A surgical assessment of the services and scope is recommended, rather than a “let’s put everything in and see what happens” approach.  For example – align the geographic scope of the services to be included with the prospective vendors that the RFP will be issued to and the competitive market for those services.  There’s little value including services for which there is essentially no available competition, or where many of the bidding vendors won’t be able to provide a bid (e.g., local in-country voice services).  Indeed, it’s often better to run multiple RFPs (or have multiple RFP modules in a single RFP program), that each focus on specific areas – e.g., having separate RFPs for mobile services, and for data network services. 

This development of the RFP scope and structure is a key factor in the ultimate success of the RFP process.  Striking a balance between maximizing the scope to maximize leverage, and keeping the RFP from becoming unmanageably large (for you, but also for the prospective vendors) is crucial.  The larger and more complex the RFP, the longer vendors will need to respond, and the longer it will take to evaluate and negotiate responses, make decisions and thus realize the benefits from the process.  As mentioned above, breaking up the RFP program into multiple RFP modules can help make the process more manageable and less unwieldy, allow you to focus individual modules on individual market segments and types of vendors (such as carrier services; managed and outsourced services; different geographical regions; different technology towers).  Allowing and encouraging vendors to only respond to the modules that represent their areas of greatest strength also helps best of breed vendors that specialize in specific areas to succeed in your RFP; conversely, inflexible RFPs with very large scopes tend to favor the large, generalist, traditional service providers, and can shut the door to the new market entrants and best of breed niche specialists that you may be trying to attract.

It is also important to focus the RFP on those services and technologies that there is serious interest in, rather than bloating the RFP with requests for information and pricing for services for which there is very limited appetite and desire to purchase – it seems easy to include such requests in the RFP, but ultimately it distracts the vendors from focusing on the services and technologies that you are truly most interested in, and also generates additional work for the customer to evaluate those aspects of the responses.  For the same reasons, avoid including services that aren’t truly “awardable” – e.g. that are locked in under existing contracts for the next couple of years – just to obtain market pricing data.

Successful RFP strategies are also careful to pre-qualify potential vendors before including them on the bidder list.  Issuing your RFP to every known vendor in the market is a recipe for failure – you’ll receive more bids than you have time to comprehensively evaluate, and end up wasting time on vendors that aren’t suitable for your requirements in the first place.  By pre-qualifying the vendors to which you issue the RFP you’ll keep the RFP process manageable, and be able to give the RFP responses the review time and attention that you’ll need to make robust decisions.  Additionally, when vendors know that they have been purposefully included on the list of RFP recipients, they will take the RFP considerably more seriously and devote their best bid teams and resources to it.

RFP Team and Stakeholder Management

The output from the RFP sourcing strategy should provide the terms of reference for the RFP, covering the RFP objectives, the scope and structure of the RFP, the vendors that the RFP will be issued to, and the expected timeline and workplan for the RFP program. 

Documenting the terms of reference for the RFP, and gaining approval from the relevant stakeholders and management, is important to minimize the risk of decisions being questioned and revisited later in the process, and thus the RFP process being derailed and delayed.  E.g., gaining buy-in for the list of vendors and scope of services that are to be included, and, even more importantly not included, in the RFP process, is crucial to deter later additions to the services scope and bidder list.  The process of gaining such approvals will also help to ratify and secure buy-in to the RFP objectives, so that the agreed objectives can be referenced and referred to throughout the RFP process, not least as supporting rationale when making key vendor and technology decisions.

It’s also important to gain buy-in to the RFP timeline, and to make sure that the RFP workplan provides the time necessary to conduct a robust and diligent sourcing process.  At the start of the process, the time needed to develop the RFP documents, for the vendors to develop their responses, for the evaluation and negotiation of proposals and contracts can seem lengthy and daunting.  Yet trying to rush the process, including squeezing the time provided to vendors to develop their responses, is always a false economy, and will result in missed opportunities and issues arising later on.  So, setting expectations upfront on a realistic, efficient yet not rushed, timeline at the start of the process is important, and helps avoid unrealistic time pressures being imposed later in the process.

The final key ingredient for a successful RFP process is the RFP team.  The team should include a core team that will be involved in all aspects of the RFP process on a day to day basis, with support at critical junctures from a wider extended team of subject matter experts (e.g., to help develop the RFP documents, participate in the evaluation of vendor proposals and vendor presentations).  It is crucial that the core team includes both sourcing resources and resources from the network/IT team.  It is equally crucial that the core and extended team members all commit the time to the project necessary to make it a success, which can often mean being granted some flexibility in relation to their other responsibilities.

Summary

Impeccable preparation of the RFP project and documents, and flawless execution of the RFP process, will come to nothing without having the willingness to embrace change.  Whether that’s a change in technology, a change of vendor, or both, embracing and seeking out transformational change remains the most important ingredient for a successful RFP project.

But also of great importance, and often overlooked, is devising an RFP and an accompanying process that allows vendors to deliver innovative solutions and proposals.  There is a natural tension between an inherently highly structured RFP process, that mandates requirements and if not careful can become a box checking exercise, compared to allowing vendors a more free-form approach that can very easily swing too far the other way and result in proposals that vary far too widely and cannot be compared on a like-for-like basis.  Any RFP that is seeking transformational solutions should anticipate and expect an element of discovery to the RFP process, to explore and assess different presented solutions and approaches, and to collaboratively refine those solutions with the bidding vendors.  But if the process slips too far into multiple rounds of discovery and solutioning with multiple vendors, then the RFP timelines will inevitably slip, and the success of the RFP process will be put at risk.

So, finding that balance between the two ends of the spectrum, resulting in an RFP process that delivers fit for purpose proposals that can be readily compared and selected between, yet still allows vendors to present innovative, custom solutions that present the best alignment between a vendor’s capabilities and your needs and priorities, is the ultimate measure of success for your RFP.  


For more on this topic, join us at CCMI’s Negotiating Network & Infrastructure Deals conference in Washington D.C., May 6-8, 2018, where industry leaders from TC2 and LB3 will be covering a range of best practices and advice for sourcing and negotiating network infrastructure deals and contracts - www.telecomnegotiationsummit.com.

Ben Fox is a Managing Director of TC2, a global IT and networking consultancy that works with the world’s largest companies to develop and execute technology transformation and sourcing strategies that maximize investments in communications services, networking technologies, managed services and outsourcing, plus a range of related IT infrastructure and services.  Ben can be reached at bfox@techcaliber.com.

Topics: RFP, network services, Network Services Procurement, competitive sourcing, RFPs, Ben Fox, TC2, Telecom Summit, networking deals, infrastructure deals, vendor proposals, RFP documents, stakeholder management

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