Login
Register
The fundamental problem with the RFP process is that in a fast-paced technology environment, where cloud and software are fast becoming preferred options, it is difficult for CSPs to describe in lengthy, written documents what they want and need.
Mark Newman, TM Forum
Evaluating current procurement processes
Download the related report Time to kill the RFP? Reinventing IT procurement for the 2020s: Volumes 1 & 2 for further insight. Research for TM Forum’s Digital Transformation Tracker shows that most communications service providers (CSPs) and their suppliers are dissatisfied with the request for information and proposal (RFI and RFP) processes. In a survey of 160 executives from 66 unique CSPs and 76 executives from 39 unique supplier companies, two thirds of CSP respondents and a full 81% of vendor respondents agreed that the processes are no longer fit for purpose.
Significantly, most of the respondents who said they are dissatisfied also admitted that they do not know how to improve the processes. The respondents most accepting of existing practices included procurement teams within CSP IT departments and very large vendors groups that tend to believe procurement processes are necessarily time-consuming and longwinded, even though they also see room for improvement.
The fundamental problem with the RFP process is that in a fast-paced technology environment, where cloud and software are fast becoming preferred options, it is difficult for CSPs to describe in lengthy, written documents what they want and need. The processes are simply too complex and cumbersome to support modern, Agile methods of working.
A second challenge relates to the financial health of the telecoms business overall: Profitability is declining for CSPs and vendors because of competition and declining growth. This has resulted in job cuts, with remaining staff stretched to complete day-to-day tasks. Finding time to produce all the documentation required in an RFI or RFP is becoming very difficult – not least because of the large number of stakeholders who must be consulted or are required to contribute to the process, many of whom who don’t see the requests as a short- or even medium-term priority.
Says a solution architect for a CSP in Asia: “You don’t get to do this stuff when you have time; you get to do it when you don’t have time.”
Finally, the scope of work for CSPs’ IT teams is increasing with the demand for extracting, normalizing and making sense out of the huge amounts of data that operators are generating and storing. This is all happening against backdrop of continuous restructuring of operators’ businesses resulting from mergers and acquisitions.
CSPs and their supplier partners point to a handful of specific issues dogging the procurement process, which can be expressed in terms of their financial impact on the business:
From creation of the internal strategy document to the signing of the contract, the RFP procurement process typically lasts at least a year and can take two or more if negotiations with suppliers prove difficult or if an operator wants to change course during the process. This is particularly frustrating for CSPs that are using Agile software development. Indeed, many are opting to use Agile and DevOps only for projects during which they are doing all the software development themselves rather than for projects relying on suppliers But it is not only the length of the process that frustrates CSPs and suppliers. They also lament the fact that they must spend so much time and effort producing strategy documents and RFPs rather than working together on new solutions and capabilities. Says the CTO of a company supplying cloud-based network functions: “An RFI for a Tier 1 [CSP] can often contain 2,000 to 3,000 questions. We have a good tool for this which provides lots of boiler plate answers, but even with this we need a large team of dedicated full-time people to work on the process. We have sales engineers that have to be dedicated to specific customers – 30 to 40 of our 900 staff are dedicated to the RFP process.”
The process of normalizing bids often forces vendors to describe their capabilities in a narrow and inadequate way so that by the time a contract is signed, it may not be clear to either party precisely what they have signed up to. Says the CTO of a large IT software vendor: “The procurement team doesn’t understand what they’re getting. Everyone is confused. You’ve got hundreds of pages of contract material. I’ve known of operators who are only discovering six months into the fulfilment of a contract that there are IT systems which need replacing but weren’t included in the contract.”
Contracts are supposed to cover the entire cost of implementing a supplier’s solution, but the true final cost often ends up being considerably more than planned, sometimes as much as two or three times the agreed amount. Cost overruns are a result of ‘change requests,’ which are adjustments requested by CSPs that sit outside of the terms of the contract. Changes are necessary when requirements have been left out of the initial contract or because the CSP needs to modify requirements due to changes in management, personnel or strategy. We conducted a short survey of the companies participating in this report, and 6 out of 10 CSP respondents said that they are unable to predict the total cost of working with the vendor during the contract period using current procurement processes (see graphic below). The same number agreed that change requests are costly, unpredictable and result in a poor relationship with vendors.
Many of the vendors we interviewed for this report said distrust between operators and suppliers during the RFP process is increasing. They said that operators increasingly view the RFP process with suspicion because they are becoming frustrated by what they perceive as aggressive tactics by vendors and hard-line approaches to charging for change requests. Indeed, several of the CSPs we interviewed said they believe that some large vendors are prepared to enter into unprofitable contracts knowing that they will make money from change requests. Because of this distrust, even the vendors who are prepared to make changes to their systems without charging additional fees often feel that they are losing out. Says the CEO of a mid-sized software vendor: “Procurement teams are harsh on vendors who are helpful, and it actually becomes self-defeating.” Still, the CSPs we interviewed said they do, indeed, want to work with vendors and would like to have frank discussions about how their products and services could deliver value. For their part, suppliers are hugely frustrated with an RFP process that makes it extremely difficult for them to demonstrate their capabilities and explain why their solution is better than the competition. Says the CTO of a company that provides virtual network functions:
“We would like to be asked questions that allow us to put our best foot forward. Instead, you are given a binary choice of whether to tick hundreds of compliance boxes. If you tick enough boxes, then it just comes down to price and a reverse auction. There is no weighting of other intangibles.”
