When searching for ERP software there is a lot of information you need to know when discussing options and requirements. An RFQ (Request for Quote) and an RFP (Request for Proposal) are a part of a trio of documents that are sent to software vendors by a company looking for information regarding the system functionality, implementation, price etc. Each document requests different information but are sometimes used interchangeably or are all compiled into one “modified” RFQ if the company knows exactly what they are looking for and don’t require additional information. When sending out RFQs or RFPs, you will need to know how your company runs and operates from all aspects of the business. For large companies, having one person who knows all this information and has the time to do the research can be hard to find. This is where it becomes easier to send out RFQs and RFPs to multiple vendors and use this process to support your search. While this may be a good idea to some, to others it is a lengthy and cumbersome task for two reasons. 1: Someone in your company has to spend the time drafting these documents and for accuracy, it often has to go through multiple department heads for approval. 2: Vendors receive leads from multiple channels and it is time-consuming to fill out multi-page documents for every single lead they receive so they may decline to fill them out.
RFQ vs. RFP
RFQ stands for Request for Quote and RFP stands for Request for Proposal. As mentioned above, both are used for requesting information but the purpose of each is different. Usually, an RFQ is sent when a company has determined that the selected software vendor has all the required functionality and all they want to know is price. On the other hand, an RFP is used when a company is still filtering through potential software vendors and wants to consider multiple factors other than price before making a decision.
In some cases, companies will also send an RFI (Request for Information). These three documents usually lack obtaining information about the vendors’ company which is important when making any B2B transaction and developing a relationship. In some circumstances, RFIs, RFQs and RFPs make sense – especially for company’s that have very unique requirements and specific processes – but for many businesses, they result in extra admin work and can be very time-consuming. Let’s discuss each document and why they may not be ideal for everyone.
RFQ (Request for Quote)
An RFQ is a document you send to each vendor who you believe is a great fit. By this point, you’ve outlined the required functionality, project timeline, company background and more. Now it’s time to talk price and we all know that software is not cheap. Some large companies have the money to invest and spend a good chunk of their budget on new software but small and medium-sized businesses have to stay within the budget for good reason. If you’re following the RFQ process and find out the chosen software is way over budget, then you’ll find yourself in a bit of a pickle. You’ve spent all this time searching for the right ERP just to realize you may not be able to afford it. Having an initial discovery call with each of your chosen vendors can help you speed up the process of narrowing down your list by identifying ball pricing at the start.
RFP (Request for Proposal)
The RFP is normally sent out to the shortlisted vendors and will include project requirements and evaluation criteria. This could include project timeline and demo dates and length for example. To some, this is an easy way to evaluate vendors but to others, finding out some of the information this late in the process may stall your search.
Let’s say you have 5 vendors at this stage that you send an RFP to, but they all come back with one thing that just isn’t quite “right”:
Vendor A – Cannot implement within your required timeframe
Vendor B – Has to integrate a functionality as opposed to it being their own software e.g. Barcode Scanning
Vendor C – Outsources support
Vendor D – You don’t like the interface
Vendor E – Simply did not respond within the deadline
Now that you’ve sent your RFP and received your responses, what do you do with this information? Are you willing to delay your implementation or sacrifice a required function? Receiving “yes or no” type answers via a document does not help you build a relationship with any of the vendors – which can help you narrow down your options when there isn’t a clear winner.
RFI (Request for Information)
An RFI is a document that your company creates to send to vendors asking for details regarding the software at the very beginning of your software search. A typical RFI document will include a checklist of features and functionality that will be used to help the company compare different software options. While this might seem great for determining if a software system can meet your feature requirements, when you issue an RFI, you miss out on a knowledgeable conversation with sales reps where you can learn a lot more about the company and how important of a customer you will be to them. Most true ERP systems will have the same functionality you are looking for but how long are you willing to wait for a helpdesk ticket to be resolved? Or better yet, how many times are you willing to explain to a customer service rep who your company is and why you are looking for help?
When researching vendors, you should be able to find enough information on the company’s website to determine if it is going to be a good fit functionality-wise as a means to narrow down your options. Then, consider scheduling an in-depth personal conversation with your short list of vendors where you will be able to discover enough about both companies to determine if the fit is going to be right. You can then schedule further conversations to review features and functionality in more detail. This allows you to shortlist vendors without waiting days or weeks to receive answers from the RFI let alone the amount of time you will wait to receive answers to the RFQ and RFP.
Now that you know what each document is and the benefits and downsides to each, it’s time to really evaluate if it’s necessary to go ahead with sending that first RFI. Does it make sense for your business and requirements? Is there a better way to find and vet software vendors? Always remember why you are looking for a new system in the first place and be open to changing your processes. Most small-medium sized software vendors are just as knowledgeable as the big guys but can provide personalized services to get to know your industry and company but also you as an individual. You’ll be working with your vendor for years to come so a relationship with good communication should be at the top of your requirements list.
If you need help evaluating software vendors check out our guide: 6 Factors for Evaluating ERP Vendors