Why A Trillion-Dollar Enterprise Practice Desperately Needs Disruption

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Author Pratham Mittal is the co-founder of VenturePact, a marketplace that helps companies find and engage with prescreened software development firms; he previously founded Newsance, and worked in Product at Host Committee.

Here's an increasingly common scenario: The CTO of a Fortune 500 publishing company recently hired a consulting firm to come up with an Request for Proposal (RFP) to update their Drupal websites to 6.9. Unfortunately, the RFP took so long that before the firm finished it, Drupal released version 7.0, essentially rendering the whole RFP process somewhat moot.

Clearly, the age-old IT procurement bureaucracy is unable to keep up with current advancements in technology. CIOs spend time and pay hefty fees to draft nebulous RFPs and short-list potential vendors. The RFPs are then floated, in response to which service providers churn out long, flowery proposals where they pitch their track records and show examples of happy clients. The whole process can take anywhere from 4 weeks to over 6 months. But in the age of Watson and the Hoverboard, is this really the right way to build technology? Through my own software services marketplace VenturePact, I work with hundreds of CIOs who'd say it wasn't and have moved on from RFPs.

While RFPs might have been appropriate for more commoditized enterprise resource planning (ERP) implementations and terminal procurement, they don't make much sense today. Here's why:

  1. Emerging technologies are not a good fit for the RFP model: There are new technologies coming out every day that enterprises may not understand. For example, on our software services marketplace, we are seeing more and more requests for unique Google Glass and wearable apps. Now, it's difficult to expect an organization to create an RFP for that. Big companies need to collaboratively work with expert service providers to figure out how these can be used in their enterprise.
  2. Project sizes are becoming smaller: Gone are the days of large ERP implementations that cost billions of dollars. We've started seeing more projects that have a budget of only a few hundred thousand dollars. These cannot justify their own million-dollar consultants or weeks of an analyst's time.
  3. IT projects now live in other department as well: Interestingly, a good chunk of leaders who utilize our marketplace are not the CIOs or CTOs, but leaders of marketing and customer service departments. They are not conversant in the RFP process and usually have strict deadlines that require quick turnarounds.
  4. Software is taking over: The bottom line is that spending hundreds of thousands in the RFP process just doesn't make sense in the 21st century. Like servers, it will get consumed by the cloud.
  5. RFPs seem fundamentally flawed: If you think about it, organizations that float RFPs are actually preemptively predicting the solution. It's similar to seeing a doctor for treatment, but asking for a particular medicine before even talking to him. 

Most importantly, forward-looking developers have started ignoring RFPs. They feel that their proposals will not get a fair treatment, as they will probably get lost in the pile. Moreover, many developers despise the race to the bottom that is the bidding process and believe that their talents and creativity are not reflected in the heartless bid.

The kind of developers that today's CIOs and CTOs need are not looking for clients in RFP portals and and newspaper tenders, but on communities like Reddit and Hackernews. Increasingly, developers are pitching via twitter or showcasing their portfolios on Github and other open source portals. To find them and then to attract them, tech leaders ought to be hanging out in these communities as well.

Fortunately, to simplify search, Uber's "On Demand" model has infiltrated the software development industry as well. That was the idea behind our company, VenturePact, where you can hire teams to build niche tech products; meanwhile "on demand" designers can be sourced on marketplace-communities like Dribble and Behance allow developers to showcase their portfolios and compete on the basis of their talent (as opposed to just their sales skills).

The software industry is moving fast, and I believe that tech leaders have to keep pace with not only what is being built but also how it's being built. Traditional RFP processes can hurt timelines and delay mission critical projects. In a market where first mover advantage can be everything, a faster decision-making process can become a major source of competitive advantage.