Explore Affordable Rfp Software Pricing for Procurement that Fits Your Needs

Rfp software pricing for Procurement

welcome to the art of procurement podcast [Music] my name is philip heyton a 20-year procurement practitioner former head of procurement and advisor to procurement leaders around the world i started out a procurement to help readers and their teams access the resources they need to increase their impact through insight-driven procurement you are listening to our flagship podcast where we pull back the curtain and shine a light on the strategies tactics and tools that reading procurement teams are using to align their impact with the needs of their business and today on the show i'm joined by chris mili the managing partner of software pricing partners i love talking to people with an outside perspective to understand the tricks of their trade their experiences of working with procurement and to learn how we can better collaborate for the benefit of our organizations and my conversation with chris today actually has two different parts to it first we discussed the art of pricing in the software industry in procurement pricing is often seen as a black box and especially in categories like software as a service where pricing is often value based rather than input cost based so we'll talk about fairness in pricing and how to understand if your supplier or a prospective supplier is just trying to extract as much cash from you as possible or if the offer on the table is in line with that that their other clients actually get charged as well and then secondly we deviated into a conversation about rfps from a sales perspective chris certainly has his own experiences to share but he also solicited the views of other sales professionals and there are two ways that you can listen to this first with a view that well a salesperson is telling me how to do my job so that it's easier for them to make more sales or with a really critical ear that helps you design a go to market approach whether that's using an rfp or otherwise that actually delivers the results that your business needs i thought it was a really insightful conversation so i definitely encourage you to to listen and to listen to kind of the finer details of it so with that being said let's go straight into the conversation so usually we start this conversation by asking folks how they got into procurement but we're going to come to today's topic from a slightly different angle and i know that procurement isn't your background so i wonder if you could just tell us chris a little bit about your current role and a little insight into the journey that brought you to this point well for mike first thank you for having me and my for my day job if you will i'm the managing partner here at software pricing partners so i spend my my days dealing with the executives of sas companies high growth publicly traded and privately held trying to help them more effectively monetize their intellectual property and that if you just this morning in the kitchen with my kids and their their teacher i was chatting with her about their school today and i was laughing because i always said you know hey pay attention in math and then my reaction in school was well when am i ever going to use that again and so you know here i sit in the center of pricing and math is a really big part of one of the big giant uh pieces of of pricing right it's the price point there's other things that go into it and so that's a lot of strategy a lot of ethical competitive intelligence a lot of sort of painting the mosaic together and my my journey here was that i uh started my career like you did we chatted beforehand that uh you were at one of the former big six back then it was anderson when i did it i was at ernst young started a software company migrated over into sas from on-premise software so before we had the cloud and all of that great stuff and i didn't know how to put that revenue model together and how we were going to make money so i ultimately hired software pricing partners they were the only game in town that had done b2b software everybody else was pricing sort of things you could touch plants trains and automobiles and it doesn't doesn't quite work that way with intellectual property and then uh after hiring them and exiting that in 2013 i had a chance to join the team over here and a lot of what we did was around turning monetization into a process rather than this thing called an event where you just build a great product and then figure out its price later i mean there's all kinds of decisions you can make along the way in the design stage of your product that makes a big deal out of that or a big difference in the outcome of that and i just became a really big believer after getting indoctrinated into this whole new discipline it's just a whole new field of expertise and if you'd asked me early on is there such a thing as a software pricing company i would have said i've never i've never heard no idea what you're talking about and turns out there are there's not a lot of them and we're we've been around since 82. it's the firm that started it all and i wanted to come to the source with all that history and knowledge to be able to learn it from the experts it's funny as a procurement professional you sometimes think that you know the software is priced at a point where what can we get away with you know like you say you built the product now let's think about pricing and what the market will bear as opposed to perhaps you know that going in but you're building a product to fit that market segment if you will and the pricing around the market segment from the get-go it sounds like that's kind of the approach that you recommend that companies take to pricing anyway yes but you do know that it's not always been that way i mean what's interesting in the software business is we are all uh and this is really kind of still true uh it's changing but it's not changing overnight but we're all indoctrinated in what we would refer to as a product market fit orientation and if you look at building a product first we would build it and hope they appear and then later we're saying well let's not do that let's really get into the customer's mind and and do mvps and get into agile and iterative development but it's all around building a great product and making the customer happy and a great ux user design and user experience and streamlining workflows etc and it wasn't really until relatively recently that that people began to realize there's a real science behind pricing and it's not just pricing it's how do you license and package and then ultimately how do you charge for your software and so what you really want to be able to do is design the product around its monetization strategy before we put put pizza under the door and get the code back right and so that carries with it a very different orientation and we would call that a product market profitability fit orientation and that is still relatively new phenomenon and i think that's part of you know today's conversation around the rfp you know it emerged at a time probably when people were kind of making up the price and seeing what they could get and it doesn't take a lot of rocket science to get on the phone and call around and realize that charles and david who bought the same thing pay two different prices and bingo now we you know now we have a feeling as if we're buying a used car yep you know is is it fair to say that pricing is more related to the the customer segment um you know the value that's being created as opposed to the input costs that go into creating that software it is so there are the costs to both build and deliver especially in the cloud inside their infrastructure and there are economies of scale there everybody knows that however the value that you're creating is what the software company wants to be paid fairly for and if they are paid fairly then they get to return that back into the investment into the product right and so if we have a orientation where everybody's trying to get the least possible price and we're compressing all that down hey don't be surprised if the roadmap of what you're going to get next year is half of what it should be right i mean there is a reality to the economics of the business model however when you're charging for the value the the every pricing strategy has a philosophical underpinning that often is never talked about and there isn't an adherence to a philosophy and so we would tell you that that philosophy should be built on something called market fairness and i think there's a really big misunderstanding in the world of pricing and so when we talk about customer segments we inherently begin to think about well if i'm selling in manufacturing and then i'm selling in oil and gas manufacturing you know they have really tight margins in oil and gas they seem to be killing it when we violate market fairness we take that same product at a list price of a thousand dollars and a thousand dollars for manufacturing becomes ten thousand dollars for oil and gas and then no one ever really thinks about the ceo of the oil and gas company and the ceo of the manufacturing company going to the same golf club and playing golf this weekend which they do right here you know in my hometown i mean that that happens right and then people compare notes and so this idea of market segmentation is horribly misunderstood in pricing because it's almost as if they're trying to charge not what the market will bear in aggregate adhering to fairness but rather what each customer would pay maximum regardless of if they bought the same thing and that's the problem that that's that's the that's the core misunderstanding that exacerbates rfps and this feeling that everybody has that when i bought buy software i'm i'm going to get be taken advantage of i don't want to be the guy that buys a million dollars in software only to find out that somebody else paid 250 000 for the same thing i bought and so now we gear all these processes and procurements and pressure and and this whole game has emerged because this philosophical underpinning of treating customers fairly uh is just non-existent and i think that that is not by design i think that is symptomatic of how pricing has emerged more slowly as a discipline over the decades you know you can understand it you know obviously an organization looking at how they can maximize their revenues based on the product they're selling but i think that drives a lot of mistrust you know when it comes to the procurement community because as you said the the ceos kind of go to the golf course and talk about it well so do the procurement professionals and that's where they start to understand well i'm paying three times more i mean i've heard of ten times more whatever the number is um i'm being taken advantage of and then that just immediately erodes our trust and it not just in that provider but in the industry itself which i'm sure you know leads to and we talked about the rfp process and we want to talk about the rfp process today um using tools like that as a way to um put pressure on price only and look at price only because there's the trust doesn't exist that you're not being taken advantage of well in the in to put a fine point on that the trust would be there if there was a structure and design up front that enabled consistency as that strategy flowed down to let's say 100 reps spread across you know seven different countries on the globe selling the software but if that structure and discipline wasn't there if the if the pricing sort of evolved more organically and people were kind of copying competitors and kind of maybe the founders were making it up when i had my software company now i can tell you when it came to our pricing i literally made it up and and that's what you did and that's kind of how it rolled and then son of a gun you sold it and you tried it a little bit larger next time a little bit larger a little bit then you get big enough and people start comparing notes right and it was funny because i in my journey we had erp like software in the remodeling and construction industry and we had i don't know 40 different accounting systems we talked to half a dozen different design systems and then inside of the erp you had all these different configurations of the modules that you could pick and then on top of that you would carry all kinds of catalogs of interior and exterior products and i would tell everybody look and i was very kind of uh egoic about it i think i was like look you know what what are the odds that two people are going to compare the price i mean we can kind of do whatever we want here right and then we had this event and it was called the fast track dealer summit and it was here at the richard petty's driving experience and they took 30 customers all hand-picked and uh her name was julie and and his name was john and they were in different states and son of a gun if they didn't use the exact same design system the exact same module configuration the exact same interface with quickbooks and they carried all the same catalogs and one compared price to the other and i was getting out of the car doing the the drive around and i caught julie's face sitting next and they just i didn't design it that way they just happened to sit serendipitously at the same table and i caught her expression and i knew and you know we never got that customer relationship back i mean it was just such an a it was such an eye-opener for me to destroy trust like that in such a moment i just thought oh my gosh we got to do something different yeah how do you get out how do you get out to that one and i guess the answer don't you don't you know you you you take your learnings and we had a defection and it was terrible it was terrible i mean that was a wonderful customer relationship that we destroyed now you obviously see a lot of um buyers buying software is there a typical buying journey that you see you know i think before a potential customer a prospect is in conversations and then after they talk to procurement and does kind of that intentional journey change when procurement gets involved well i think that the stories that get repeated the most tend to be with the larger organizations whose weather procurement was designed this way or organically evolved this way is relatively and highly disconnected from the business so it's a bit of a department of redundancy department in the sense that the salesperson kind of has to start over there's no real communication it's almost like a a gate gets closed and and now you're sort of stuck with a new uh a new uh owner here and that owner doesn't really have the interest level to understand value you know they're going to be driving for a certain price point that they're going for and in comes the pressure and incomes the frustration they don't understand what the budget is they don't understand the the driving factors of how decisions are made and there's a real lack of information for them the sales team to even have any sort of guiding nuggets by which to respond and this exacerbates very long struggles and discussions and frustration to where if you then took that sales team and went behind the door and talked to the founder you know you're getting conversations like let's just withdraw this isn't worth the time you know this is a huge distraction and and the unfortunate part about that experience is those that make it through and become a customer i think the relationship is is sort of permanently altered yeah and this wonderful relationship you had with the business side where everybody wanted to go out of their way and help everybody now becomes a little bit more toxic and you know this affects the success right this affects you know if if boundaries are given around a deal that are so tight and so constrained and now we run into a hiccup on the project you know it is going to be a change request we're not going to go figure out this little data conversion mess and solve it it's a it's a different relationship that turns less into driving superior results and everybody sort of getting behind the flag of wanting to do the right thing to this company's really positioning for advantage and and now they have to have their guard up and every time they call in you have to be careful they're not consuming too much time it just it inexorably changes the nature of the relationship and i think that that that you know i i remember someone told an adviser told me once you know you can tell a lot about a company by how they treat their legal so something as simple as somebody sends you a one-sided nda in today's world if it's not a mutual nda watch out right like there's signals that are sent all along the way and i worry sometimes that inside that rfp process and that procurement process the signals that get sent to the software company create a relationship that both parties would be disappointed if they were able to describe in words what each side was feeling yeah you know we the signals i think you're spot on because you look at the the continuum of what a supplier relationship can be from the collaborative on one end to completely transactional on the other um and you know one of my pet peeves in procurement is is calling um partners vendors and i'm sure folks on the show and watch the events and things like that is sick of me talking about this no no that's one of those words that you're just uh triggers me well it triggers all sales people to me any sales person that senses are being treated as a vendor especially in large enterprise or more complicated uh uh installations or implementations you're watch out yeah because it's that's it signals that you're nothing more than like the hot dog vendor on the street where you'll go to another one on the next corner if you don't get what you want to me um and so when you're doing that you know you're you're going to go into that mindset as well like you just talked about and it's funny you know when you're in um often when you're a procurement professional certainly in larger organizations because i've been there you know you think well you know i've got a big wallet and so that's all that matters and um if they if a provider is committing to do something then you know i've got the power of my wallet again to make sure they do it what a lot of folks don't realize is what you were talking about before you know you're always looking at how can i reduce my cost to serve um you know if i have the opportunity to go above and beyond where am i going to do that with i'm going to do that and put the best resources on the accounts where i think there's more benefit for me of doing so and so while all these things may never be openly admitted in court um you know that is essentially how you look at delivery um based on the how you've got to where you are and and you know the signals and the messages that your your buyer has been sending you you know it's interesting to hear you uh talk about you know transaction verse collaborative and it it makes me think about again what is the nature of intellectual property versus what is the nature when i buy a static thing like a vehicle or a capital piece of equipment and the fundamental difference with intellectual property especially with software is it's always changing and so if you treat it as a transaction the thing that i think is often missed is behind the scenes at the software company you know there's a thing called the road map and there is a plan of future capabilities that that software product is going to do because you are investing in a product in its future and it's not necessarily today's value it's tomorrow's value as well and so when you treat it as a transaction something as simple as the the software company that has competing needs across many different customers that drives that roadmap you know if you happen to be the the more collaborative you're going to have one heck of an input into that roadmap and the prioritization and there might be a set of features and capabilities that get prioritized pretty heavily because the relationship is honorable and it's healthy and it's collaborative and everybody loves everybody right we all sit around the campfire it's never like that but you get the idea if if what comes out though is more of a transactional vendor highly uh or maybe any sort of toxic like output that triggers this response then all of a sudden the the the product the transaction is the transaction and and the roadmap you know starts to veer over to the other more collaborative players and and that's really unfortunate because in the act of how the participants inside of the ones issuing the rfp are responding and acting really sets the stage for the access to future development and capabilities that could be serious competitive advantages for them and that's the whole idea of the rfp is to take down a competitive advantage but yet if we come out of it in a transaction toxic way we don't get what we want and it's sort of like this self-fulfilling prophecy so there are real ramifications that like you said aren't going to come out in the court of law i mean it's like my grandfather used to say you can have every contract you want but at the end of the day people still buy from people right so that sometimes is missed it's funny you say that i always tell folks that a contract uh if if you ever have to look at the contract past the day that you signed it there's a problem that's right because you know it should be done and dusted and never worked out ever again um i want to talk about the rfp process so what are some of the software industry's concerns then with the rfp process well so i did i did a lot of homework before before this and so i i think they largely center around uh a handful of themes and i'll start with one and by the way just for my background i mean i've sold software in the millions of dollars all the way down to 19 a month when we started with our cloud edition in the crm world and uh no stranger to being on the receiving end of rfps and and also you probably in full transparency should know that any of our customers in the software community that want to procure pricing services if they were to issue a formal rfp we withdraw we don't even participate in those and so that's kind of gives you right there a bit of a sense of my personal experience right with with the process now every person's rfp process every company's rfp process is different and maybe i had a little bit more toxic ones but i think that as a sales person you know from my personal perspective and from the perspective of many of our customers the process is so opaque and so hidden behind this curtain you know it and and it's it's expected that things would be confidential and and i think most sellers understand that but you know the participants the the selling participants the vendors who are all vying to be partners you know we want to know how many others are participating how will these decisions be made when and how will the end users the business side be involved is there a connection back or not you know we're trying to understand is is it worth it right you know what buying priorities are the most critical what's going to drive the decision and none of these are typically shared in any sort of detail and and i've even had people on the phone be so brazen as to say why can't i can't tell you who else is involved and i'm thinking well if you know we're all familiar with the alternatives in the market space if you're selling you're in competitive situations all the time but as a seller who who values the buyer's time and has a philosophy at least me personally of helping them buy and it's okay to say no it's i'm not high pressuring anyone if you educate me on the choices that are in the choice set i can help highlight the differentiated value that you're going to want to focus on but if you don't share any of that with me i'm a bit in the blind and so i think this this opaqueness is really unfortunate and i i actually have a suspicion that it's driven more from a power dynamic than from an rfp requirement confidential confidentiality requirement perspective um yeah in my experience i would say that you know an rfp can be a really powerful tool and it can drive really um positive outcomes and outcomes where the procurement person is a real advocate of you based on the relationship that they had through the rp process but they have to set up the rfp in a way that actually enables that and that's where i think a lot of the challenges are is that a lot of the rfps that that you'll come across and that it sounds like you have come across are very much um i'm in control and i can't tell you anything um and that is in my experience at least from my from doing this myself earlier in my career is is there's two reasons one is is definitely the power dynamic of you know um procurement is the gonna be the one that is in control of leading the decision-making process and um you know kind of using a we need to make sure that everything is an apples to apples comparison and we don't want you talking to our stakeholders and there being unfair advantages and all those things but when you're doing that it's like you bang a you know of a drawing um and you're buying something that assuming that something from company a is exactly the same as company b and price is the only thing that matters which you know in 95 percent of rfps it isn't the the in fact most rfps it's not the single biggest decision making factor but we treat it like it is so i think there's the power dynamics is one of them and the other is um and again this is from my own experience of running my own rfps before anyone else jumps on me is the lack of market knowledge so a lot of us in procurement are not subject matter experts in what we buy um now we may have a little understanding of the category i think in software to be honest there are more experts in the its space managing i.t rfps than there are in some of the other more general services spaces in procurement but using an rfp kind of protects us against that lack of market knowledge because we can use the rfp process to get the insights that we need to then use to as leverage to negotiate later on in that process and if we don't necessarily know what we're buying then there's that vulnerability an rfp helps in some cases to cover that vulnerability if i think about again my own personal experiences interesting the the second uh issue and i've got probably maybe four i think in total here phil um i think there's a general disrespect of the seller's time you know rfps typically come in you know in high speed tight time frames unrealistic deadlines sometimes yeah and there's a bit of a of a mustering of the troops you know rfps sometimes aren't a one-person response job i mean it's a big lift for the software company to read through the material and and come up with an approach and and then like once the deadlines are met you know the rfp issue issuer doesn't doesn't seem to have to honor the committed response times all of a sudden things just kind of go dark a lot of sellers report deadlines that you know maybe we're supposed to be next week that get extended into weeks or months despite you know commitments to the contrary and this idea of gathering the information and i think going back to this opaque hidden curtain you know the process after the responses go in and how the decisions are made and the steps afterwards are not just opaque but they just seem again to be a little bit more of the power dynamic i'm in control i need this stuff next week and then you know if i can if i need to sit on it for two months that's my prerogative and that i think is is is the beginning trigger for the some of the toxicity of the sales person who busted their butt you know worked over the weekend and they're waiting for a response and then you forget that that person has to go into the sales meeting and then they got to talk to their sales manager and the sales managers go to go back and talk to the vp and the vp has to go talk to the chief revenue officer and you know there's only so many selling hours in the day and that organization the software company is deploying those selling hours in the smartest way that they can think of and the these questions start to come up that isn't just the question on this rfp but tucked behind the leadership thought processes should we even be involved in rfids like is this even part of our sales motion anymore and that toxicity is uh unfortunate yet so powerful when these things go dark yeah it goes into a black box doesn't it and um then you have to justify why you even got internally why you ever did this and used all these resources in the first every week that goes by the conversation starts to you know and then if you don't have any information what do you start doing you start crafting your own story well they were just trying to get our approach well they were you know we were up against another competitor but they wouldn't share who it what you know they're probably going to end up buying this or building it on their own anyway yeah and i uh when i think about that again from my personal experience it's probably because we we want we need to be in control of the timing the process and so and there isn't necessarily a lot of thought that goes into everything that needs to go in from a supplier side to put a presentation and to respond to an rfp so you know it's like let's get let's let's get as quickly as possible all the offers on the table and then we can kind of come to that in our own time based on what our internal stakeholder is needing now oftentimes time frames are pushed back because of budgets you know stakeholder will say sure i've got the budget and it turns out well maybe they didn't quite have the budget um so you have to go through a whole approval process for that but um it's definitely i certainly recognize that that challenge with an rfp all right you ready for the next one go for it uh once you're in the rfp process and let's say you didn't win from the black box there's just no feedback so you know why were you not selected what kind of gaps were perceived how might you know my set my team my sales team do better in the future it's it's such a black hole there's no feedback loop it's basically all or nothing and and this concept of all or nothing is really important because if you go through the rfp process and you get no information you end up with nothing you literally just lost everything there's no value upside unless you win it's all or nothing so you get this giant loss of your selling hours and of course guess what happens to the participants that lose you know now we had a black box a few hundred hours that got tanked we have no idea why and then that gets reported back through the chain all the way up and and that's a real missed opportunity because i think you know in the world of win-loss research which is part of our customer research function that's really valuable stuff i i don't think any sales person would tell you you know i i don't mind if we lose but man it's a real treat when you know why what did you not see what part of the value prop did you not get was it you know what aspect of this services product or your experience in the sales process didn't resonate or you know is our messaging kind of off a little bit because it does tend to drift if a software product's always changing your your messaging sometimes does get off but in the rfp you get nothing i remember a personal story just as a quick side note we spent hundreds of hours on rfp this was years and years and years ago at my uh previous software company and i said you know what we're gonna blow this up we're just gonna do this and we're gonna win it and we just went all in did the whole thing and of course we had modules and all these other things and we had a beautiful approach and we said look this is a this is a range and the range i think back then was like 200 to 600 grand we can play in this range and we can put up a certain number of stores or all the stuff and and the rfp uh issuer um and there was a system we had to use and all this stuff said well you got to put a dollar amount in there it won't accept a range we're like well we'll put it in the pdf and then we'll put the dollar amount and they said and guided us just put the larger dollar amount and i said okay great then it goes into black box and and forever later we we don't get selected which of course you can kind of guess because that much time and we asked why and they said well in the preliminary discussion we disqualified you because of price because we had to disqualify you on something and i said well but we had a range and they're like well but we only had the 600 grand number in the system and that's why you and i just thought you know what a joke right this is this is terrible totally terrible um yeah you know that feedback's invaluable isn't it and like for any procurement folks listening that feedback is well it's a you know a distant um benefit of going through an rfp process and losing um it is still really invaluable because it can inform your product strategy it can inform pricing strategy it can inform positioning um and it doesn't really take much to give it after you have gone through the entire after a potential provider has gone through the investment of time that they have to get that far in an rfp process so i always really encourage um procurement folks listening to do that and i will say you know a personal anecdote is you know i look at all the relationships that i built with um sales folks as i was a practitioner in procurement and probably the greatest relationship that i built with somebody on the other side the table was for an organization who didn't win the business but we had a transparent process and we fed back and you know that led to building a relationship and as people move on those relationships stay and it came to benefit me you know later on in my career in another organization and him himself so there's there's benefits you might not see today but if you can you know advocate for at least sharing as much information as you possibly can it will come back and benefit you later i think that's a really important point and uh so often missed opportunity because the rfp requires an audience of participants that aren't kind of over time saying i'm not doing this anymore and so that feedback loop is a wonderful i guess the way i would think about it is you know the rfp issuer is beholden and relying on the free participation of the sellers and so in a sense it is a service yeah right and the more that you think about it as a service the more that i think you'll start to realize there's opportunities to keep the participants happy even if they don't win and keep them informed throughout that and it and it can and if it's treated more as a product or service offering to the community i think i think that would actually change a lot of a lot of viewpoints right there that might really position things very differently in the in the mind of the rfp creators you know there's some um consumer product companies i've worked with in the past where they look at everybody who participates in an rfp as a and really anyone who interacts with procurement or their organization as a potential customer because at the end of the day everyone's a consumer and so taking that perspective really changes how they communicate and interact um and you know looking at those folks is not well it's a dispensable you know the time doesn't really matter we just want some data so we can use it to do an apples to apples comparison across a few different suppliers but if we treat them badly then that's going to hurt our sales and we don't want to do that on the flip side if we treat them well that could actually help us from a revenue perspective well said so number four i think fourth one to hit me with yeah i might have even more we could do a part two if you want um so this one i think is just more of a mechanical item and and i hear this one a lot too but sometimes the way the rfp is constructed they have sort of these questions that create gradients that are hard to interpret so for example one in particular our enterprise uh chief revenue officer uh share with me from their enterprise team is uh the the it was framed as a do you have this capability and the answers were yes or in development or not in development but on the roadmap or not on the roadmap at all and and the problem with this is it lets participants live in the gray areas and it and it really does encourage overstating and exaggerating for example if i don't have the capability um it's not that sales people flat out lie but they can certainly stretch the truth and if called on the carpet with it there's all sorts of rationale well we you know was on the road map but you know then it was taken off the road map and and i think that if you're early on in your rfp participation as a seller you maybe start a little bit more idealistic and you answer those questions very honestly and accurately and then you learn really quickly that when you do that you're at a horrible disadvantage for the quote on quote pros who are just like check check check check check and they're just getting through that process knowing full well once you get into implementation and the gap appears too late right and so this this really erodes i think the integrity of the process and it just allows too many people to live in that in that gray and then if you combine that back with what you mentioned earlier where the person uh in procurement doesn't have what i would call you know fluency or comfortableness or expertise in the area of the software well now now we have uh quite the rodeo so i sense uh i know we teed up before there i sense that based on your experience there may be a few more examples and i'm actually asking and continuing to go down this line of questioning because i think it's super insightful for procurement folks are listening and you're not to see this as well this is you know somebody on the sales side saying that they hate rfps because they didn't win the business but more getting the perspective and the insights of somebody who is receiving the rfps that you're sending and how that influences how they may be responding to it because ultimately that as a procurement person is going to impact the results that you get from an rfp process and how it ties and aligns with what a stakeholder actually needs um so are there any more on your hit list there are and i think from from the perspective you know what i'm sharing here is a shared perspective it's it's obviously some derived from my personal experience but dealing with you know the executive teams over these sales organizations for software companies you know these are these are common uh things that come up and in the prep for this podcast you know i reached out to about a dozen of those leaders and these are very large companies and also very high growth sas companies and these are the things that came up and this next one is one that i think is very very problematic and that is that the rfp is pretty susceptible to manipulation and many listeners i'm sure have heard of this thing called the column a vendor and in sales you want to be the first person in because we know that the procurement professional who's crafting the rfp usually in combination with the business may not be familiar with the category so if it's a new category we can frame the decision-making criteria to align with those capabilities that we provide and column a refers to the spreadsheet where typically you would have on the uh on the columns yeah you you would have all your capabilities down the rows and of course the first column is usually kind of psychologically your favorite and then you add in columns b and c for vendors two and three but column a vendor helped you frame the criteria that it needs to have an api layer and it needs to have a hipaa compliancy and by the way it needs to have a workflow engine that does this thing and that thing and an ai engine or whatever it is the problem is that for the other participants when they receive the rfp remember they're experts in their field and they see this this you know in our world it's called a willingness to pay survey which there's no academic basis that you can ask anybody what they're willing to pay for software and get any sort of accurate response because as soon as you do that people assume higher price higher pay or higher quality and lower price lower quality it's just a completely bogus but yet if and i can't tell you over the years how many rfps i've seen that say you know how do you do conduct your willingness to pay survey well right away as a selling team our sales team knows they must have been talking to a competitor that offers that service and so we know that we're not column a and that's an easy withdrawal right and so if you think about the savvier sales teams when they read those rfps they're looking to see who got in first and they can tell based on those uh requirements and so the questions are already stacked against them it's already rigged and so the savvy ones will withdraw and if you reflect on this phenomenon and really think about what happens you'll realize that that rfp process as a symptom of its current design actually maximizes the buyer's risk at a time when they're really trying to pursue all options available they have inadvertently explored very little of the domain because of this column a phenomenon and that's really at odds with the rfp purpose which is to invite everybody in to open up the playing field to see on the fringe and what because you're seeking a competitive advantage if you're taking in technology usually and so you want success and success is other options but that actually reduces options right now as a sales person are you trained and i use the word trained loosely more is it something that you are really looking out for um whether it's obvious that you're there just to make up the numbers um oh for sure and i don't think you're trained you're this is called the school of hard knocks you only have to participate on few of those before you realize real quick if you're if you're that one and and that that therefore remember also if rfps take a lot of time and you happen to be in a space where there's a lot of those you can't respond to them all anyhow you're i mean consulting organizations maybe can because you have consultants that are sitting on the bench but right in a software company you know you're not really sitting people on the bench everybody's very busy doing their job and so you might have to choose which ones to invest your time into and that's going to be an easy disqualify yeah because i know that i mean for better or worse it happens a lot you know you'll have a stakeholder who comes to you and they want to go with one particular provider um you have to go and and i use air quotes to say test the market but you know it's nothing more than getting competitive intelligence to try and use against the folks that are already the shoe-in um that's right or you don't get an opportunity to talk scope you know it's very this is what you'll buy um this is what we will buy and we don't really care if you have other ways to solve the problem now now going back to taking this a little bit further for for our our next topic which is uh i would tell you stepping back and looking at this rfps really do discourage innovation and what will happen over time now using this example i was talking about in our space a willingness to pay study well i could easily then say well gee whiz all these rfps are coming in and they're asking about this willingness to pay study and now i got to get on the phone and educate people that even in all the top schools harvard mit whatever i mean nobody does any of this willingness to pay stuff because it doesn't work and so that's a really hard battle why don't i just come up with a service offering that does a willingness to pay study then i can just sneak on through with everybody else and i don't have to worry about it well now over the years if you reflect on that process i'm sort of converging to the mean rather than differentiating with a service that provides high value and in our rollout process really does explore willingness to pay in a very unique way i may not want to continue to do that because it just isn't getting me where i need to for example through rfps and for the revenue generation now thankfully we don't have that issue and we've got the proper leadership to keep pushing in that direction and differentiate but you can see the problem right and i can't tell you how many times i can hear our software executives say well if that is coming up a lot then just put that feature in the software well now all of a sudden you know we've got this software bloat that does a million things you know 25 percent of which is just because we can check the box and i mean it's just such a silly game right so i i know that um we could probably talk about some others that you have on the list and maybe we need to get do this again and get together and continue to uh um to kind of peel back the onion on what it's like to respond to an rfp but i do want to we've only got a few minutes left and i do want to end a little bit on like what can we do about it i mean we've gone through and i think for certain a lot of things that you talked about procurement um professionals listening today can really take a lot of insights into how they can make their rfp process um you know assuming that they're using an rfp process one that's actually going to derive or have a a greater likelihood of deriving the results that they want to drive now let's go outside the rfp process and i know i'm asking um this from a um you know asking a salesperson what how they prefer to sell to a company um but but how i mean what's going to help this relationship or what's going to maximize the outcomes in a way that still protects the procurement teams from that trust issue that we talked about all the way at the beginning of how do i know that supplier uh that that i'm not getting charged 10x what another supplier is just because that's what the perception is that i will bear well i think the the biggest fundamental switch is the philosophical component so just like in pricing i would tell you if you subscribe to market fairness treating customers equally that that bears with it a way of solving your licensing packaging and pricing challenges differently versus if i buy into the fact that i need to optimize by customer segment and i'm okay with two customers paying differently for the same product you know i might implement technology to automate that disastrous process right and so so i think philosophically if you buy into or can adopt that the participants are really our customers that's that's that's the that's the fertile ground that's the foundation of all of this once that happens now you begin building the appropriate future so i think that if you can't cross that bridge you know it's probably not worth talking about all the other things right now when we get to this idea of uh some of the issues that we talked about here well if i'm a customer and participating now all of a sudden i can get a better communication i can maybe have a better connection with the things that are driving the decision and when we talk about mechanical items about manipulating the rfp you know rather than than being so concrete maybe there are discovery components in the rfp process maybe before we you know there is such a thing as an rfi you know maybe we do need to do a little bit more of the homework to understand the category and the differentiated value and the different approaches and then we begin to invite participants in in a broader way so that we can see the different approaches rather than maybe being so concrete up front and so tactical up front that we only end up with a few rfps and a very uh limited range of approaches that we can look at um in the in the solutioning of anything having built product i think that the before you do any of that making a list of the issues and the problems and getting people to gel around the problem that you're trying to solve is really that first step and if you can get that list to be very concrete then you know well now we've got all kinds of solutions that can that can that can come to bear but i think if if i had to say one thing it's that philosophical piece that is missing from so many buying processes now that being said you know what there is a question that's often missed in the rfp and that is explain to me the rationale of the logic of how you came up with your price right and that's not me taking your price and we all know this game right the buyer says well give me everything and then you give them everything we'll take this out and take that out and put this back in of course they're trying to see if it adds back up and of course sometimes it doesn't and then we have that rodeo but but this is tell me your philosophy you know do you subscribe to market fairness or not um and also tell me the rationale tell me how you built your pricing how how it came to be you know because if you are buying from somebody who's gone through that process and has a methodology and a framework and a structure well then that's like so much easier to dialogue you know if i take this out and put it back in i know that it always heads up to the same price so i don't need to do that i can just take that whole stream of my rfp part out of the process and things can be very efficient but if i'm coming from an environment where it's all homegrown and you know it it doesn't quite make a lot of sense or it's really convoluted to describe then i i'm up against a different problem now that's really interesting because my last question was actually going to be on that and you may have answered it because i um i really like the idea of asking how um how you derived your pricing from a strategy perspective because you know my question was going to be for a procurement professional then how can we be confident that the um software provider is actually abiding by market fairness you know and that they're not trying to 10x me because i think i'm a bigger company with bigger a bigger wallet you know are the flags to look out for in the way they respond to the rfp is there things to look for on the website like what should we be looking for to give confidence that i know that while there may be some debate around the margins i'm not getting taken advantage of versus other people who are buying this product well it reminds me of a great customer story of ours so this was about three and a half months after we built their new uh pricing and this was in the regulated and retail utility space which is heavily heavily rfp driven and there was a uh a company a buyer a procurement team uh it was in the midwest and they brought in the rfp participants so clearly this was well before covet and everybody sat down and they did their normal song and dance around their process of displaying and of course now the participants can see the participants and i think there were like five or six of them that had been selected highly highly competitive uh environment and uh at about lunchtime the procurement uh team the buying team said listen we have a surprise session um we're gonna do a working lunch we're gonna spend 30 minutes and each of you are just going to walk us through the logic and the rationale to your pricing how was it you know constructed and you know sort of what was the underpinning like just walk us through that and our customer uh walked with a three and a half million dollar deal they were the only ones that could do that yeah and i think that's that's the key right because you know that pricing is becoming a fast discipline monetization more broadly a fast discipline at software companies and and the more that they can describe the logic and that rationale the the more that you'll have that trust and the underpinning because you know we've all heard the story of you know the the oracle uh days where you know somebody comes in and and they see you drive up in a nice car and all of a sudden the million dollars of software i mean heck we'll just go above list it's not a million it's two million and for the guy that you know drives in and afford and and a poor pair of shoes you know he gets a 250 grand deal and so you know those days are are gone i think there are probably still selling teams out there that think that those days are not gone but my understanding is you know procurement teams are very sophisticated and capable and i think that the underpinning of the structure of the of the of the pricing is is is arguably the most important nugget you need to be extracting and of course that comes in three forms right it probably comes in today's use case what does it look like if i solve my problem that i want to solve and then it comes in the form of well what does it look like for my pilot right because i don't know you and i need to do something to mitigate maybe risk if i feel like i need to do that and then like what does this thing look like in year three when i roll this out you know across the rest of the country or across the rest of the divisions and you know that that should all tie together yeah well really interesting advice i know i know that there's a lot of our community are also on the software provider side as well so i'm sure there's lots of tips that they've taken away from our conversation as well as the folks who are on the the buying side um the last question which i always say in my podcast is the easy one is if listeners have really enjoyed the conversation they want to learn a little bit more about what you do or they want to go and find you where would be the best place for them to do that softwarepricing.com okay then i will put a link to softwarepricing.com in our show notes i'll also just add in your linkedin profile as well for folks to check you out personally and those are all just going to be if you go to art of procurement.com podcast you're going to see all of our interviews right there including this one with chris um chris uh final wrap-up i just want to thank you so much for your insights today uh lots of a fascinating conversation i think and i think a lot more to explore in the future so i really appreciate your time thank you for having me i want to thank you for listening to today's episode of the art of procurement to go deeper including access to transcripts and actionable outtakes from the podcast join the free level of our aop mastermind community to learn more go to procurement.com mastermind and to find our entire back catalog of almost 400 episodes go to art of procurement.com podcast