Media technology suppliers have been complaining about the tendering and Request for Proposal (RFP) process for a long time. Many of their grievances have been well documented subtly in blogs and more firmly in anonymous market surveys like this one.
Regardless of the considerable industry advancements in technology and operations over the last decade, broadcasters and media operators have continued to favour this approach when selecting technology providers. It’s easy to see why – the written RFP response enables due diligence (paper-trail) requirements to be (apparently) met, allows points-based scoring against evaluation criteria and, most importantly, doesn’t cost them anything. Until now.
Whilst the actual cost of responding to an RFP is largely born by the responders the true cost in an actual and business sense has shifted from the supplier to the client – the operators just haven’t noticed, yet.
The Real Cost of RFPs
Because the RFP process – and much of the content in some of the accompanying documents – has hardly changed in 25 years, it’s easy to see why operators may still believe that this approach still serves their needs, when it’s actually costing them time, leading to wasted opportunities and potentially damaging their reputation.
Approximately 1/3rd of RFPs never turn into actual implemented projects. This is partly because some operators are using the tending process to test business hypotheses rather than to select vendors for greenlit projects. Typically, these hypotheses relate to cost and benefits realisation – and this approach has increased significantly in the era of the cloud and consumption-based pricing. If the modelling provided by the vendor during the tender process reveals issues with the operators’ assumptions, they just cancel the project. From an operators’ perspective it’s no loss because the vendors bear the costs of the tender. In reality, however, media companies are wasting their own team’s time which could be better spent understanding the problem to be solved or business opportunity to exploit. And time spent is a tangible business cost.
Aside from misspent time there is also the opportunity cost to consider. In the past, vendors begrudgingly participated in RFPs because the risk and reward profile was manageable. The number of vendors in the running defined the odds and the reward (a large CAPEX-based project) was sufficiently substantial to justify the effort. Over time there were enough technology refresh projects to hedge the overall risk.
In a SaaS world, project revenue can generally be described as a ‘gentle trickle over time’ rather than a nice ‘big chunk of cash’. This shift in revenue model has many benefits for vendors but it alters the risk / reward ratio, so fewer vendors can afford to invest the time necessary to complete an RFP. With fewer vendors participating, there’s a good chance that the most appropriate business solution isn’t even considered by operators – because the smaller, more agile companies have been priced out of the process or simply don’t take part . Operators could be left paying for solutions that aren’t entirely fit for purpose, or funding and owning the risk for extra development to create capabilities that may already exist, at a lower cost, from other providers.
For vendors in media technology the realistically addressable market is probably twenty times larger than just 15-20 years ago. This has changed the market dynamic significantly. Vendors are able to be more selective about the opportunities they pursue, with alignment of approach and operator vision taking precedence over cash value. While no-one likes to see a project fail, vendors who feel like they’ve been unfairly treated during an RFP process might not be keen to step in and help plug the gaps if the chosen solution fails to deliver on its promise. Equally, vendors who’ve been awarded a contract after completing an intensive RFP process, only to have the project pulled due to uncontrolled scope and budget miss-matches, may not choose to participate when the project is rebooted at a later date. Media Companies that conduct irresponsible RFP practices may soon find themselves struggling to find vendors interested in participating in the process at all (some would argue they already are.)
A Simple Solution
And it’s all so unnecessary. In an age in which it is possible to ‘spin up’ viable and fully operational workflows in a matter of days (at low cost) there is simply no need for the paper-based approach of the RFP.
Surely it would make more sense for operators to take the money they’re wasting on a broken RFP process and instead, invest it in paid proof of concepts? Establish a simply-defined vision for a project with three high level, measurable, objectives and engage in a short initial assessment. Look at the market, talk to contemporaries in similar operations and chat to a handful of likely vendors. Pick one or two that you think you can work with – perhaps there is a shared view on approach – and commission a PoC. If any of the providers you’re considering can’t deploy a viable set of test workflow in a few days, then they are probably not the right choice.
This way, concepts can immediately be put to practical test and approach to implementation assessed. Delivering ROI value quickly is the essential acid test of SaaS solutions and a short POC will significantly de-risk a project, even if there are a number of unknowns at the outset. The learnings from a well-structured proof of concept implementation outweigh what can be learned from a paper exercise ten-fold.
The RFP / tender approach simply does not deliver robust business value in the modern age – for the media company or the supplier. Worse still, RFP’s can mask issues that do not present themselves until it is too late.
A Post Script for SaaS Vendors
If an old school RFP lands on your desk it possibly means that a paper-trial is being created to justify a foregone conclusion, or the operator truly believes that this method is the most suitable way to select a supplier. Either way, it’s probably not for you.