May 8, 2013

Supplier Information Management: Insightful RFP Questions

Over the years, we have received many solicitations from organizations seeking to gain further understanding of the providers within our market space, find areas of differentiation, and score the various solutions.

Among the cornucopia of questions, there have been some insightful gems. The lions’ share, however, are rather standard that I would expect most providers would not struggle in their response. These are basic feature-function related, such as: does your system provide an ability for suppliers to enter their own information; or, can users create their own reports?

The gems? They have dug straight to the core – whether on the viability of a provider, or a foundational issue within the platform. I would like to share some of these here, with brief commentary.

 

The first category of questions are focused on the stability of the provider

Financial stability:

  • Please confirm whether the company has changed trading names in the last 5 years, whether part of the company is formed following a merger with, or takeover of, another company. If applicable, please confirm the name of the subsumed company.
  • Please explain any VC series, with the valuation and purpose.

Commentary:

The market has gone through some recent consolidation and providers that have traditionally focused on one area of expertise are, in many cases, suddenly dealing with a different environment. Some have even found themselves, mid-cycle, dropping a whole product line. As such, it is logical that if a change in company direction occurred, or is planned, that there needs to be an understanding of your exposure.

What I find even more intriguing is the venture capital question. It can be very revealing, not just in whether outside investors have control of the company and can force sale at any time, but based on the healthiness of the investment. For example, investors are often concerned when a company has raised too much money in too many rounds, as it may be a sign of delayed progress, or change in direction. Subsequent rounds often follow these rounds, as the cash infusion is needed to keep the doors open – and these “down” rounds lower the ownership percentages of existing investors, as the pre-money valuation drops. As such, it is valuable to differentiate between a, point in time, healthy balance sheet of cash, and the reasoning behind the funding.

Employee stability:

  • What staff reductions has your company had over the last three years? Please explain.
  • What turnover has your company experienced, at the executive level, over the last three years? Please explain.

Commentary: I am confident that this is self-explanatory. What does it suggest when there are three staff reductions in a short period of time? What does it suggest when there is turnover at the executive level? What skillsets, and knowledge, was lost – and what was gained?

Customer turnover:

  • Please explain all contract cancellations your company has experienced over the last three years.
  • Please explain any contract non-renewals your company has experienced over the last three years.

Commentary: In my experience, it is very rare that a customer cancels a contract, unless the company overpromised and seriously under delivered. Sure, I have seen it under other circumstances, such as financial distress by the customer, or due to an acquisition. This breach of commitment is often the fault of the provider, however – and it is the reason many no longer trust providers (and especially sales). If there is attrition, it is worth digging deeper into the cause.

Competition:

  • Please list your top three competitors, and detail where your organization has a competitive advantage over each.
  • What is your company doing to stay competitive in the market?

Commentary: What I find interesting about these questions is not so much learning whom they compete with, but learning how well the provider understands their own market. If they specify areas where they feel they have a competitive advantage, but it is proven to you otherwise by their competition, how viable will they be moving forward? Further, if there are proven competitive differentiators, and they weren’t thought of in advance within the RFP, maybe this question can provide further insight into which provider would be the best fit.

Dependencies

  • What 3rd parties is your company dependent upon to deliver your offering (software, implementation, hosting, etc.)?

Commentary: Oddly enough, this is rarely asked in RFPs. The business model of the provider can have consequences. What if they are dependent upon a software provider that goes out of business, changes their price, or mandates some change (e.g., storage space)? What if they are dependent upon a 3rd party for implementation? Ironically, in the purchase of a SIM platform, many overlook the same resiliency principals that they seek to manage through the SIM platform they are purchasing.

 

The second category of questions are focused on the foundational aspects (not features and functions) of the software

Deployment:

  • What are the deployment options (hosted, non-hosted, hybrid, etc.)?
  • Can the supplier portal reside on a separate server?

Commentary: There is no question that multi-Tenant SaaS environments are useful for software providers, so that they can leverage a single source of code; however, these environments are not always welcome within global organizations. In fact, this is often prohibited (e.g. – corporate governance, state laws, etc.). Electing SaaS (deployment ease and reduced operating costs) or on-premise (security, operating flexibility, and peace of mind) should not be a decision removed from your control. Further, these questions reveal an additional insight: is there a blended model, and is it possible to have further control of where systems reside?

Data model:

  • Please explain the platforms’ data model.
  • Please detail capabilities, and limitations, of your data model as it relates to: parent-child relationships, business relationships, location functions, commodity/item-level detail, and transactional information (e.g., PO, invoice, payment, etc.).
  • Please describe how your platform supports multiple addresses and multiple banking entries.
  • Please describe how our organizational structure would be represented in the data model – and what is necessary if/when reorganization occurs.
  • Please detail any limitations of data that can be imported into the platform “out of the box”, or as defined by a business user.
  • Please describe any limitation on exporting our data.

Commentary: Net-net, the data model controls everything. If the model is broken, how can one build upon it? If the model has limitations, will it grow with your needs? This is, too often, an area overlooked, but it should not be taken lightly and may be the cause of a failed project. We have seen these questions from those that have experienced failure in the past, but learned from them.

Processes:

  • Please describe how local users create, and deploy, initiatives specific to their position in the organizational structure.
  • Please describe how scope is defined for new initiatives.
  • Please describe the process of changing workflows, as well as what is needed for those suppliers in a current process.

Commentary: Tied very closely to the data model is the ability to capitalize on workflow / process control, as it should apply specifically to your organizational structure and needs. Can they fit your model? How are they scoped? And, since few organizations never change… How do the processes handle change?

Master Data Management

  • Please describe our ability and limitation of uploading new master data.
  • What capabilities exist to handle duplicates upon a new upload?

Commentary: It should go without saying, but… if a provider struggles with this area, there will be many functional limitations that will prevent effective, and efficient, management of suppliers – and the supplier master may eventually resemble your current ERP environment (multiple entries of the same supplier, multiple supplier masters, etc.).

Integration:

  • Do you have native integration with SAP? Oracle? If not, what license rights will we have (e.g., protection on price increase, etc.)?
  • Do you have standard Dun & Bradstreet integration?
  • Please describe how your system can integrate with other portals our company leverages.

Commentary: There is value in a stand-alone supplier management system, but there is power in a system that is synergistic with your environment. How well does the provider understand integration? How do they handle and validate data between systems? And, how integrated is integration (irony?) within their core platform, versus being “bolted-on”?

Version Updates:

  • What is the process for version updates to the system? Are we in control of when an update is applied?

Commentary: Do upgrades always go smooth? Are they always applied without needing some reconfiguration? Can you be assured of this? The reality is that applied updates will sometimes alter how an existing, stable system works. If not, maybe the updates are merely maintenance releases, versus leaps forward. If you do not have control of timing and testing of these updates, your organization may be in for a wild, and unwelcome, ride.

 

Last, but certainly not least, implementation services

Staffing

  • Who would be responsible for implementation (you, us, subcontractor, etc.)?
  • If utilizing a subcontractor, please detail the relationship and options if we choose not to utilize the subcontractor.
  • Please detail your project methodology.

Commentary: Sometimes overlooked during the excitement of acquiring new functionality, the implementation team is core to the success of the project, as well as a significant contributor to the TCO.

 

The reality is that if you seek improved Supplier Information Management, the process of selecting the appropriate solution provider is not easy. The providers have gone through many, many buy cycles, where, often, the buyer is going through it for the first time. The questions to ask are not always obvious, but I hope that some of these will be of benefit – and I would encourage anyone in the process of selecting a provider to take their time, dig deep, and ensure that the choice you make will result in a long-lasting, successful partnership.

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