Collaborative partnering is on the rise as the global IT outsourcing market continues to grow at a CAGR of 7.7% and is expected to reach USD 937.6 billion by 2027. Companies all over the world are seen teaming up with IT vendors to close their expertise gap and accelerate time to market while decreasing expenses.
Choosing a suitable provider of software development services, however, is a whole new endeavor. While offshore and nearshore outsourcing working models offer the optimal balance in terms of quality and costs, the lack of face-to-face communication can impede the procurement process. But how do you collect the required information about potential vendors and their capabilities?
That’s where RFx comes into play. RFx is a catch-all term used to describe a “request for” type of document. One of such requests is RFI, or request for information, that we have discussed in detail in our previous article. Then, there is also RFP and RFQ. And although many use these terms interchangeably, they are not the same. Moreover, an inappropriate approach will not only slow down the vendor selection process but you will also miss any negotiating advantages.
So, what is the difference between RFI, RFQ, and RFP? And when do you use them to achieve the best results? Let’s dive right in.
RFI
Request for information (RFI) is an exploratory stage that usually happens early in the procurement process. RFI is designed to collect high-level information about the competitive landscape, vendors’ capabilities, and industry in general.
RFI is particularly useful when a customer has limited experience or is altogether new to the industry. Take an ERP solution as an example. If a company has never used an ERP system, an RFI would help gain a better understanding of the available options before making the decision.
There is no universal RFI format to fit every organization. But understanding your specific qualification requirements will help you assess potential suppliers and filter out those who don’t meet your criteria.
Key takeaways
- The RFI’s goal is to gather information or to prove conducted research
- Start your RFI with an introduction section to describe your company and give the project context
- Include open-ended questions to encourage meaningful and complete answers
- Prepare questions that would help you compare vendors later (core expertise, ramp-up capabilities, etc.)
- And remember, you are not awarding any contract, you are just testing waters
RFI is like a wide net. And when done right, a company has a list of potential vendors and can move to the next step.
RFP
RFP, or request for proposal, is a document that provides project details while soliciting bids from contractors wishing to complete the upcoming project.
As the name suggests, RFP is a creative way to invite vendors to propose solutions to your problem. That’s why it’s great for complex challenges that you are not sure how to tackle. An RFP also allows you to consider different strategies as all vendors have their unique approaches to solving a problem at hand.
But to get solid, clear-cut responses, you need to be very specific. By clearly communicating your needs as to a particular skillset or project timeline, you’ll be able to narrow down your list of vendors to the most qualified.
Key takeaways
- RFP needs to be written by main stakeholders in the project to make it as specific as possible
- Make sure to include information about your internal processes, needs, and goals
- For a weighted decision, ask vendors to provide case studies, examples, and testimonials
- Learn how a vendor tackles project management and budget control issues
- At this stage, you need to be ready to move into commitment
Very detailed, RFP offers a side-by-side comparison of vendors, helping you assess their capabilities and find the right fit. The secret to a smooth-running project is partnering up with a vendor that not only has mature tech professionals on board but also skilled business analysts to ensure effective requirements management, visual prototyping, and post-release quality control.
RFQ
Short for request for quote, RFQ is used to invite select contractors and vendors to submit price quotes for implementing a specific solution for a specific problem. It is also known as an invitation for bid (IFB). Besides pricing, RFQ may include other details like payment terms, submission deadline, and the like.
RFQ works best in strategic sourcing situations when a company knows exactly what it wants — whether it is the procurement of hardware or support and maintenance services.
Key takeaways
- RFQ is used if you have a list of prequalified vendors who can deliver services or solutions you need
- You are looking to buy off-the-shelf products that do not need customization
- RFQ is focused on vendor’s capabilities and payment terms
- Price is the most critical factor that influences your decision
As we’ve already mentioned, RFI, RFP, and RFQ all serve the same ultimate purpose — select the most suitable vendor. But there are nuances to each type, the knowledge of which will help you streamline the procurement process and solicit more competitive bids from suppliers.
Preparing a high-quality RFx document takes time and effort. But even if you don’t have an RFx ready yet, an experienced IT vendor can help you find the optimal strategy for your development project. Elinext offers comprehensive IT consulting services to help companies determine the right engagement model and establish effective project management processes to reach the best results.
The bottom line
Outsourcing software development is no easy task. RFIs, RFPs, and RFQs are the tools that can make the process much easier. At Elinext, every RFx is thoroughly considered by technical professionals, expert BAs, and PMs. We take time to provide detailed feedback, whether it’s a prototype concept or a detailed development roadmap. We also pay attention to quality — our team of mature QA engineers performs end-to-end testing to ensure stellar quality of your solution.
Want to learn more about our approach to software development? Feel free to drop us a line.
