This answer is provided by Mike Brandofino from Department60 as part of a longer interview posted at LetsDoVideo.com. Please click here to read the full interview.
Having been on both the vendor and customer side of a Request-for-Proposal, my experience taught me that all too often, the RFP process results in missed expectations, poor communications, and disappointing deployments.
Sometimes bid documents and the evaluation process are not explained adequately. They do not properly describe the business vision of a solution, use-case requirements, and separate any desirable, but maybe optional, features and capabilities.
If you look at the financials behind preparing a formal vendor bid:
For the Vendor…
In most cases responding to a RFP requires a Senior Level Business Team, including Engineers, Business Management, Sales, and Marketing department support.
If the team spends a total of 80 man hours on each RFP at the opportunity cost of (let’s say) $100 per hour, and if the company chooses to respond to 75 bids per year, the vendor will adsorb approximately $375,000 in additional selling costs just in responding to the opportunities.
And with the Customer…
Larger companies might have a team of folks who are required to be involved in the creation of a formal vendor bid for technology. Then either a single leader or leadership team manages the RFP process and vendor selection process. When the bid is awarded, legal gets involved, potentially additional procurement, I.T. and facilities employees might get more involved.
It is quite a time consuming effort for the customers to manage any formal RFP process. So conservatively speaking if we assume an average-sized RFP, the team might spend 1,000 combined man-hours with an average cost in productivity of about $75 per hour. Just putting the RFP out and processing it might cost a company $75,000. And that cost does not discriminate between a small business and large Fortune 100 company.
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