Archive

Monthly Archives: May 2012

Everyone knows that it costs money to tender a bid, due to wages, hardware, travel, etc. used when setting up the bid. This is just another example of “spending money to make money” in business today.

However, without rigidly defined needs from the outset, both the bidder and the customer are wasting money.

If the customer-company doesn’t know what the end-result should look like, the tender process will become a mess. The resulting contract (if one is even agreed) will not cover all the bases and the whole thing will become a project that is mired in “we need this/you never said that” blame games.

When starting a tender process for a single product, the needs from that product will usually be well-defined (or should be), and the tender can be put to manufacturers of those kinds of products (e.g., SaaS accounting software). This is something that we do every day when, for example, buying a new TV. We know that we want Freeview/Saorview and HD (and 3D) capabilities, thus allowing us to disregard the ones that do not meet those requirements.

However, when starting a tender process for a system, there is a very good chance that no one company does the whole system that will be required. This means that each bidder will be a partnership of smaller companies, each with their own product. In this case, it is possible that no bidding partnership will be a good match for the required project. Furthermore, if an agreement is reached, the needs post-tender may not match those that were originally stated during the bidding process, which will lead to professional services costs for the customer, and possibly a lower ROI for the bidder.

At some point, the ROI of a bid will no longer be worthwhile, leading to a reduced number of bidders in the process. The bidders who are left either (a) do not understand “bad business” or (b) are really expensive due to massive margins that can cover the costs of drawn out tenders. In case A, the risk is that the bidder will run out of money and the project will never be finished. In case B, the customer-company will end up paying far more than they should.

For that reason, when starting a tender process for a project, it is far better to approach a consultant or systems integrator. While these people may not be “product agnostic“, they will have a much better ability to adapt to changing requirements in any project, and will have been through the process a number of times before. Additionally, they will be adept at needs identification, leading to a “best possible” solution for the customer.

For example, if the accounting software portion of the system was suddenly required to be an on-site solution rather than a SaaS solution, the consultant can very easily eschew one vendor in favour of another. The costs incurred by the customer-company of such a change will be the hourly rate of the consultant, while the costs incurred by the vendor will be the opportunity cost of not having an on-site solution and the cost of the salesperson finding out that a customer was no longer one of their target customers.

So, while it is possible to “skip the middleman” in business, in some cases the middleman adds a whole heap of value. In fact, the middleman can be the difference between a project that comes to a successful conclusion, and one that never comes to any conclusion, staying mired in red-tape, professional services, and good ol’ fashioned feature creep.

TLDR; Know what you need or know who to ask about what you need.

Advertisements