Outsourcing and RFP: Striking a Fair Deal

August 6, 2009

The economic downturn has amongst other things has lead to an increase in the number of players in the outsourcing space, particularly in the legal and Intellectual Property arena. The rise in the number of the players, particularly new entrants, has perhaps lead to greater flexibility being incorporated in the outsourcing model.

The first sign of the flexibility is reflected in the Request for Proposal. A request for proposal (RFP) is an invitation to vendors, to submit a proposal on a specific commodity or service. The RFP process while being a reflection of the offerings desired, it accords structure to the procurement decision and allows the risks and benefits to be identified upfront. The RFP is often identified to be the best way to ensure that the solution chosen will suit the company's requirements.

In most outsourcing transactions, vendors compete with each other over the issuance of a ‘request for proposal' that contains business as well as legal terms and conditions and requires vendors to indicate their willingness to accept them. Though, as is customary, the leverage lies with the customers but recognized and proficient vendors have contracting policies that, while being flexible and subject to reconsideration on a case-by-case basis, limit the degree of financial and legal risk that they are willing to undertake.

In this regard, while the RFP may successfully indicate the objectives of the client, it is for the vendors to keep in mind their interests in terms of the pricing, project demands, scale and so on while making their proposal to a client. With new entrants in the space and cost playing a prominent role in determining an outsourcing vendor, players need to balance their interests sufficiently to meet the requirements of the RFP. While recent trends reflect the presence of price erosion, captive models being put under pressure and an emergence of hybrid models, it is necessary that vendors cater to the interests of the clients while also meeting their own agenda.

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