Inside ASI-AP

Last month I had the chance to have dinner with Leon from NFP-IT (see www.nfp-it.com.au). Leon is a consultant that works with a number of our customers on general IT consulting including IT strategy – most recently AWA and IPWEA. Leon also works at organisations that are not customers, but are looking for new systems, and Leon helps with the evaluation process that customers go through – normally RFP's. It was this RFP process that Leon, and other consultants like Leon, oversee, that really got me thinking. And I let Leon know over dinner what I thought …

Basically, when consultants are engaged to help select iMIS, the customer is wasting money. Why - because we all do the same thing a number of times over the duration of the process! Let's take a typical example of the selection process using a consultant:

1. Consultant is appointed
2. Consultant conducts a review of the business requirements, working with all departments, capturing their needs and wish lists
3. Consultant produces a business requirements document and has it approved
4. Consultant produces an RFP document and attaches the business requirements normally
5. Consultant issues public or selected invitation RFP
6. Vendors all respond to the RFP
7. Consultant reviews and ranks all the RFP responses and establishes a shortlist
8. Consultant invites the short listed vendors to clarify responses and prepare for a demonstration of their product
9. Each vendor completes a 1-3 day demonstration of their product to the consultant and to the purchasing organisation (I'll call them the customer for ease of explanation)
10. Consultant assists the customer staff that viewed the product demonstrations with their rankings and prepares a report ranking the vendors from the staff opinions
11. Consultant makes a recommendation to the customer, and the customer accepts
12. Consultant assists in defining final scope of the project, establishing costs, resources and timeframes
13. Consultant assists in contract negotiations between the vendor and the customer
14. Contracts signed and vendor is engaged
15. Vendor – assuming ASI was selected now – starts a business process review phase, working with all key departments, capturing their needs and wish lists
16. ASI submits a business process review document and has it approved
17. ASI completes a project management plan – with final costs, resources and timeframes
18. ASI starts the implementation project
19. During the implementation project, as the customer gets a better understanding of what iMIS can do to add value to their organisation, changes are made to the implementation plan, sometimes adding time and cost, sometimes not
20. ASI completes the implementation project and the customer goes live with iMIS
21. A few months after being live, the customer sees further improvements they can make using iMIS to further add value to their organisation, and they implement those changes.

To give some time perspective to the above, steps 1 to 14 can take up to 2 years. So that when ASI starts on step 15, it is common for the requirements of the customer to have changed since they were first captured in step 2.

One point I want to make is that for this entire time, the customer is ultimately paying for everyone's work - the customer pays the consultant AND pays the vendors. True, they directly pay only the vendor that they have selected (ASI in this case), but indirectly they are also paying for the time of the vendors that lost the bid, because the time and cost of all the staff involved in bidding for RFPs and doing demonstrations for losing bids is made up for in winning bids. It costs ASI – staff time, travel, demo facilities etc. – on average about $30,000 to respond to an RFP and complete a demonstration step. And our customers are paying for that (no-one else pays us for anything but customers) whether we win or lose.

Using some simple assumptions, including that other vendors spend a similar amount on each response to ASI, and that 6 vendors submitted an RFP and 3 were shortlisted for demonstrations, and 1 was finally selected. The total cost of the above process up to step 17 is in the order of $210,000. Which is THREE TIMES more than the average iMIS license spend of $70k, and about equal to the average iMIS total cost of ownership over 5 years.

So the consultant-led selection process is expensive. But worse, once you look at what happens in each step, there is significant repetition! By the consultant, the vendors, and ultimately the customer (once they get into steps 19 and 21). I look back at each step and wonder where the value-add for the customer is at each point?

It really is a waste of money, and I believe ASI as the leading vendor in our market needs to take a pro-active approach to minimising this waste. I am not suggesting that consultants have no role to play (it may actually be the opposite; and we actually work with some great consultants), but rather that we work directly with consultants to find a better way for customers to evaluate and purchase iMIS. All of us have a role to play in supporting the NFP sector and keeping costs under control.

First, I need to convince Leon!