IT Management: What’s Your Customer’s Sourcing Model?

Let us for a minute envision the following situation. A typical enterprise customer like a Nike or Cisco has released a RFP (Request for Proposal) and sends it to multiple service providers. These service providers are typically major global sourcing and IT services companies who are part of the customer's strategic vendor list. More often than not, the bid team starts working in 10th gear, responding to the RFP. All the questions are answered as asked by the customer. A solution is put forward, appropriate pricing is laid out and proposal is then submitted. And eventually in most cases, the customer comes back delivering a major shock. They could not find any uniqueness in the value proposition put forward. The services selection criterion came down to a few handfuls of factors: price, brand name, references etc and the customer went with a familiar brand. The service provider keeps wondering what went wrong. The customer keeps wondering if there was any use to spend all the time and money in creating the RFP process.

Most of us sales executives have fallen victims of responding too tactically at some time or the other. One of the biggest mistakes a service provider makes on getting an RFP is start immediately answering the questions in it. We believe in a three-step sourcing-model analysis process for all Big Deals.

Read the RFP - As soon as the RFP comes in, all the core team members should read it in entirety. As trivial as this sounds, most of the time not all the core team members read the whole RFP. People tend to zone in on the bits and pieces relevant to themselves.

Analyze the provider wish list - It is extremely valuable to know what you want out of the deal. You may have to change your "want" position as you go further down the deal, but it is important to have this as a start. Many bid teams use a four-step due process in this segment. First, sourcing strategy is defined, followed by sourcing initiation and then enhancement; finally, sourcing governance is put in place. Once the bid team has gone through a series of questions (as defined in Figure 1.1), they will have a good understanding about what they want to achieve from this deal as a service provider. So the provider wish list analysis needs to be a group exercise among senior people from the business units and the deals group. This discussion should happen face-to-face if possible. Obviously, when you are discussing these answers, you need to bounce the ideas off the RFP to ensure that you are not completely off-track. For example, if the RFP asked for all work to be done onsite and you present an engagement model that is highly offshore-centric, then you are simply wasting time. But pushing the envelope is OK. If the customer asked for offshore quotes from Malaysia, don't hesitate to show China quotes as an alternative.

Figure 1.1: A Recommended Four-Step Process for Analyzing the Deal Wish List
 

Understand customer sourcing tolerance - Understanding a customer's sourcing tolerance stems from the amount of intelligence you have about the customer. Your account team members for this customer should give you information on the customer's psychology. Take the time to understand the preferred or tolerated sourcing model of the customer. Is your customer the type that believes they can do it all in a cost-effective way and do not need a provider? Or are they the type that believes the provider can do it all? Most large customers fall somewhere in the middle, where they want to share the work with the provider. Figure 1.2 simplifies global sourcing models from a customer's perspective. Once you have an idea of the global sourcing preference of the customer, it's time to verify again if that sourcing model can support what you want on the basis of the findings on the wish list of your organization. If the answer is yes, or if you can create a negotiated position that works for you, go forward with creating the engagement model for the customer.

Figure 1.2: Global Sourcing Model From a Customer Perspective

In summary, we can safely say that taking a step back in responding to a RFP will actually help you take a step forward in the right direction.


References:
Anirban Dutta and Hetzel W Folden, "Winning Strategies: Secrets to Clinching Multimillion Dollar Deals", pages 90-93, (Singapore: Wiley, 2010)