3 1/2 RFP rules.

While outsourcing IT processes and services might seem like a sure solution, locating, evaluating and securing qualified service providers can be a difficult and time-consuming task. The process of finding the right vendor usually starts with a request for proposal (RFP). Developing an RFP can be a daunting process for anyone, and an inaccurate RFP could lead to an unsuccessful outsourcing engagement, or even worse, have a negative impact on the company. What follows are three (and a half) rules for building an RFP that will ensure the best response from the target group of vendors.

Rule one: Write an RFQ instead of an RFP. A request for proposal invites a vendor to focus on its marketing pitch. A request for quote (RFQ), on the other hand, is a statement of need from a company that mandates vendors focus on balance of pricing, service levels and contract terms they can offer to meet the needs described.

The RFQ should be phrased in precise, technical but vendor-neutral language, with requirements clearly separated from optional components. Be sure to identify the pricing model that suits the business best. For example, most content-delivery contracts and some IP bandwidth deals have the option of charging for the size of the pipe or for the total amount of data that flows through it. When in doubt, companies should ask vendors to provide multiple pricing models, with the option to decide on the optimal one later.

Rule two: Explicitly communicate expected growth. An RFP/RFQ should always give vendors a reason to believe that, regardless of usage today, the company will be a key account by the time the contract expires. Future expansion projects should be outlined and companies should request quotes for upcoming growth to demonstrate they are serious about plans and are willing to remain with the same vendor throughout their continued growth.

Companies should ask vendors for pricing under conservative, average and aggressive-growth scenarios.

Rule three: Write your own service-level agreement (SLA) and business terms. By not knowing guaranteed service levels for its engagements, a company exposes itself to abuses, hidden charges and lack of recourse against service degradation. Companies should identify and filter out vendors who are not willing to customize the contract. There should also be consequences significant enough to compel compliance with provisions outlined in the contract.

Some specific clauses companies should think about include: uptime, availability; response times and latency (with monetary penalties for non-performance and loss of business); termination-for cause, convenience and vendor stability issues, especially financial ratios; and reporting and monitoring (details, timeliness, third party versus vendor-provided and transparency subcontractors).

And a half: Get educated or get help. Implicit in all of the above guidelines is the idea that companies have the necessary knowledge to navigate the process from start to finish. Some basic information will be needed, such as: a detailed list of requirements; segmentation of needs by region, usage type, uptime/latency/response requirements and other relevant characteristics; a requirements definition in vendor-neutral, precise language, including preferred pricing model; market pricing for services the company is buying and target price levels for conservative, average and aggressive growth scenarios; a list of qualified vendors, rank-ordered by non-price characteristics (e.g., financial stability, favorable references, historical network uptime); and industry-standard and market-best SLA and business terms.

Three sources of external information have proven the most useful: traditional IT consultants for requirements gathering from business users and quantifying growth scenarios; specialist sourcing advisors for determining price and SLA targets, and managing the buying process to create RFQs, evaluate vendor capabilities and negotiate market-leading contracts; and analyst reports and expert presentations, which need to be supplemented with advice specific to the company.

Michael Hoch is vice president, operations, for RampRate Sourcing Advisors, Santa Monica, Calif.

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