Shrinking the vendor selection cycle
 

Caught between a failure of communication from vendors and a failure of imagination among customers, the much-maligned RFI has somehow managed to keep its place in the international payroll vendor selection cycle. But is it time to put it out of its misery? 

Sending out a Request for Information (RFI) used to be a standard starting point for procurement cycles. It’s a way for a company to map out its business requirements and ask a selection of vendors to describe how they can help.  Some vendors will rule themselves out; you’ll disqualify others when you read their responses – and at the end, you’ll have a qualified list of providers to take into the next stage of the procurement cycle, the Request for Proposal (RFP). That’s the time when vendors submit more detailed responses and you can begin the cycle of shortlisting, interviewing, carrying our due diligence and selecting a winner.

The purpose of the RFI isn’t just to whittle down a list of vendors, of course – it’s also educational. When you circulate an RFI you get back a bunch of ideas from different vendors about how you might tackle your business problems. It’s a bit like advertising a job and asking applicants to give you three ideas about how they’d improve your business – you know you’ll only end up hiring one of them, but in the process you can pinch all the good ideas that everyone else comes up with.

That’s the upside – but in practice, RFI cycles are often disappointing. To start with, most vendors are far too overstretched and under-resourced to give RFIs the attention they merit. This is particularly true in the relatively young multi-country payroll field, where many multinationals are still struggling to understand the market and vendors often find themselves drowning in demands for information. Worse, vendors know that a lot of their effort is going to be wasted. The market isn’t as bad as it was a couple of years ago, when anecdotal evidence suggested that up to 40% of vendor selection cycles never actually ended up in someone buying something. Nonetheless, no vendor hires people to sit around on the off-chance that your RFI might pop into their inbox – so when you do send it out, it’s going to be competing for attention.

Secondly, a lot of vendors don’t take RFIs particularly seriously – in fact, some simply refuse to respond to them. So much has to happen between the day you issue the RFI and the day you sign a cheque that it’s sometimes hard for vendors to justify spending the time. Even the most conscientious vendor is likely to focus its efforts on the key points, give some bland answers to the rest, throw in a few brochures and hope they’ve done enough to keep themselves in the race when the full-blown RFP finally goes out.

So while in theory an RFI is a logical way of filtering out the most appropriate vendors, in practice there’s a danger that some well-qualified vendors won’t respond – and the ones who do will bombard you with vapid marketing collateral. Worse, you and your procurement team are then going to have to waste precious time wading through it all.

In an ideal world, this whole process would have been revolutionised shortly after the birth of the World Wide Web. Many of your RFI questions could be answered at the click of a button if vendors had the imagination to put meaningful information on their websites, rather than the ‘Global payroll powerhouse’ hype that characterizes many online offerings. But even without that, there are ways to make the process more efficient. A lot of companies now go straight to RFP after carrying out informal research, or working with independent advisors who know the market – certainly at Webster Buchanan, we typically expect to use our own research to enable consulting clients to skip the RFI cycle altogether.

Alternatively, if you do want to issue an RFI, keep it short and make sure it focuses on unique issues that will rule vendors in or out – the countries you operate in, any unique integration or functionality requirements, particular corporate complexities. Ultimately, you’ve got to pique the vendors’ interest if you want meaningful responses. Unless you’re in the happy position of being a blue chip client dangling huge volumes of potential revenue in front of vendors, in a market like multi-country payroll you have to sell your business to vendors before they start selling properly to you.

This column was adapted from an article that first appeared in Payroll World

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