By reaching an agreement before settling on a statement of work, buyers may save money while providers get an opportunity to broaden their scope of services.
Vaporware refers to unfinished software offered commercially for licensed use, but in RFPs, this could be a document that sets up pre-approved contractors with pre-approved terms and conditions without a binding statement of work (SOW). It’s a request for information (RFI) on steroids. While there are many potential benefits, careful planning, negotiation, and management are necessary.
Enterprise customers have pushed the envelope of the service procurement function by aggressively using vaporware RFPs. Deals are cut without a fully crafted SOW, which follows once the customer gets its hands around its actual needs and selects portions of its HR and other operations for selective outsourcing. Providers sign vaporware RFP deals to qualify for some future SOW.
The enterprise customer can use this sourcing strategy to pursue dual strategies of cost management and quality improvement through outsourcing.
- As in any variation of strategic sourcing, HRO through the vaporware RFP permits senior management to focus on major problems. This process gives the HR department a chance to deal with real problems requiring C-level attention: an aging workforce, design of strategies and policies for hiring, training, career path development, workforce re-skilling, and globalization of the enterprise to get closer to customers and new sources of talent. By preparing for eventual issuance of work orders under existing MSAs, senior management can be more tactical in the allocation of out-tasking and outsourcing and be more strategic .
- Second, the vaporware RFP is a powerful business intelligence (BI) tool. By establishing a contractual relationship, it enables ongoing communications relating to confidential business plans. Through the vaporware RFP, the enterprise customer can tap into the best practices and knowledge base of service providers through a limited universe of pre-approved providers. In this phase, the enterprise customer can effectively preserve its intellectual property rights before going to full-stream implementation of its entire outsourcing program.
- Third, vaporware RFPs can improve the quality of the SOW development process. The enterprise customer can use the skilled recommendations of multiple service providers in the design of the SOW. This can optimize the quality of services to be performed, the service levels, and the relationship of the provider to the retained client personnel. Also, the details of the SOWs can now be refined to take into account strengths of the pre-approved individual service providers.
- Fourth, the vaporware RFP improves internal sourcing management. It crystallizes the internal political leadership and resulting enterprise mandate for strategic sourcing. Armed with executive leadership, sourcing departments can then sell the strategies to line managers.
- Fifth, the RFP serves as a real-life pilot to test and hone the enterprise’s outsourcing management capabilities. Early lessons learned can be used later.
- Sixth, the vaporware RFP improves timing opportunities for strategic sourcing, effectively applying "just in time" procurement strategies. It accelerates the eventual selection process in many ways. The vendors are pre-approved. The eventual SOW can be issued and negotiated quickly.
Pricing is more transparent because the providers know that pricing can be the differentiator because each pre-approved provider knows that its competitor(s) is forced to focus on price.
With service providers willing to work under negotiated terms, conditions and pricing, the only question left for the purchasing department is where and how to best allocate low-value tasks such as transaction processing for recruitment, labor law compliance, and administration of pension funds and employee benefits.
Service providers can achieve many benefits, too. A vaporware SOW gives mindshare at the customer. This can help cross-sell multiple silos of services. The sales process can push deeper across multiple user communities, promoting “mix-and-match” SOW development across HR, business analytics, call center services for customer relationship management and customer care, paralegal and litigation support, technical support, finance and accounting, and other central administrative functions.
Outsourcing lawyers need to reprogram their toolkit for vaporware SOWs. The vaporware exposes both parties to potential deadlock during the negotiation of SOWs. Any “agreement to agree” is not binding, unless objective decision parameters are defined.
Creative managers and their legal advisors will recognize these and other issues. The key is to identify innovative solutions for achieving enforceability and reasonable allocation of risks so the parties can, hopefully, enjoy the ad vantages of the “vaporware RFP” variant of outsourcing.