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TRY A LITTLE TENDER-LESS

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Businesses demand flexibility, innovation and agility from their suppliers. So why are we still sticking to cumbersome RFPs and lengthy tenders for critical IT services? Velocity’s director, Anthony Lamoureux, thinks there’s a better way.

I’m not knocking dating web sites. Lots of people use them to find true love. But the idea that the best way of finding a soul-mate, one who will open up your world, is to specify a series of partner preferences based on what you already like? And then apply those choices to a tiny universe of candidates? I’m not buying it.

And yet that’s exactly the approach the majority of companies apply when they’re looking for an IT outsourcing partner. The request for proposal (RFP) and tender process is a time-honoured way of describing what you want from a supplier. The paper trails and competitive bids are reassuring for management grappling with a business critical decision.

But it’s also a resource-hungry way of creating the illusion that you’re managing risk; that you’re tracking down the ideal IT partner; that you’re getting the best value for money; and that you’re buying in the services you need.

None of those are true of the traditional RFP in a world that’s changing at an exponential rate. No wonder 65% of outsource deals fail to meet their promises and finish early. So what’s gone wrong? And how do we fix it?

Box-ticking

The core problem is that an RFP is usually just box-ticking. The people involved are rarely at fault. Procurement experts, IT specialists, finance people, business leaders – they all want to, and can, add value. But the nature of the RFP keeps their contributions fragmented. Yes, it helps them ensure rules are followed. But it’s almost designed to rule out a coherent, strategic conversation with suppliers.

And although it’s decades since the phrase “no-one ever got fired for buying IBM” was coined, it’s still true. If your RFP turns out to be biased in favour of big brand suppliers – well, that’s a safe mistake to make.

But it’s still a mistake. Less prominent firms, the revolutionary consultancies without baggage around platforms and pre-prepared solutions, might offer approaches much better tailored to your business. Yet even if they’ve been invited to tender at all – and since many companies default to Gartner’s ‘magic quadrant’ for tenders, that’s not a given – there’s a risk they’re in there just to make up the numbers.

Time is (not) on our side

Then there’s the sheer grind of the RFP. We often see companies spending six to nine months just working out what they want to ask. That’s a massive amount of negotiation between business and IT decision-makers – before they even have the first meeting with the people who’ll end up running that part of their business.

Typically just 20% of the process will be spent with suppliers. So those tendering for the contract have a massive incentive to reply only to the questions in the RFP. With little time, why elaborate? If the decision only rests on only the RFP criteria, why innovate? In many tenders, suppliers are actually marked down for going off-piste. No wonder many major consultancies turn out boilerplate responses in tender after tender. It’s a percentage game to them.

(It gets worse: if you’re using a sourcing adviser who accelerates the process by transposing tender responses directly into the ultimate contract, you’re committing to work within that standardised and constraining boilerplate for the life of the deal.)

Where’s the strategy?

Any IT contract ought to have a transformative effect on your people and capabilities. That’s complex. And it relies on a deep relationship with suppliers and technology.

That’s particularly true now that disruptive technology is a defining facet for every business. Companies recognise the need to bring in technology experts to help them become agile. But the RFP is often more focused on a list of out-dated prerequisites than open-minded thinking in support of higher-level strategy.

The process ought to foster relationships designed around change. The adoption of cloud technology is a great example. It’s democratised IT at a speed that no conventional outsourcing deal could accommodate. (At Velocity, we scale our own business to meet any customer need using cloud apps – so we know it works.)

If the market flexes around a technology and you’re locked into an approach defined by an RFP set four years ago, you’re going to lose customers. The same is true inside the organisation: IT users now have high expectations. Poor user experience or inflexible approaches can cost you loyalty and productivity.

A richer approach

The alternative is simple. Locate a supplier who can understand your transformative journey. Find a project you can work on – something contained, but still meaningful to the journey. It should be deliverable relatively quickly, allow for innovation and have clearly defined service levels and maturity targets.

That way, instead of spending 80% of your time debating the RFP internally and just 20% with suppliers, you spend 10% of your time articulating what you need internally, 20% sharing ideas and innovating with the supplier and 70% actually working together. (It’s like flat-sharing with your partner before you get married.)

If the supplier doesn’t hit targets? Well, you’ve learned something about them, and about your own business. You’ll have experimented in ways no traditional RFP would generate. Both parties walk away wiser.

And if it’s working well? You can enhance the relationship with confidence. You’ve had meaningful time together – not just a few hours of tender pitches – to understand the personalities and see the deliverables. That’s much better than relying on the unsupported and often wild promises of a supplier in an RFP response.

Single sourcing isn’t without risk. There still needs to be discipline. Objectives and maturity milestones must be well articulated and aligned with strategy. You need to outsource solutions, not problems. And you need people to manage the supplier.

The win-wins of change

But our approach is more likely to be a win-win. With a traditional tender, you’ll often hear what we call the Big Lie: “we’ll save you 30% in lifetime costs and deliver that rebate to you on day one.” That feels like an instant win. But it’s usually just financial engineering – and promotes over-aggressive cost management, as well as off-the-shelf solutions. The RFP puts a ceiling on innovation and cost-savings for the client – and creates an incentive for suppliers to slash their own costs instead.

For us, win-win means innovative approaches, a clear upside for the business and smart cost management – not just a lower first-year cost line in the CIO’s budget.

The year-long RFP, like the dating site questionnaire, helps you tick some due diligence boxes. But a good IT service deal – like a good marriage – should be based on growing and learning together, not just trying to fix yesterday’s problems or play it safe. If you want real value and innovation, it’s time to revolutionise the RFP.

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Sunak to raise business tax to pay for COVID-19 support – The Sunday Times

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Sunak to raise business tax to pay for COVID-19 support - The Sunday Times 1

(Reuters) – British finance minister Rishi Sunak is set to increase a tax on business to pay for an extension to COVID-19 support schemes in the budget next month, The Sunday Times reported https://bit.ly/3ujaBcU.

Sunak, in his speech on March 3, will announce he is increasing corporation tax from 19 pence in the pound and will outline a pathway where it rises to 23 pence in the pound by the time of the next general election, the report said. The move will raise an expected 12 billion pounds ($16.8 billion) a year, the report added.

According to the report, at least 1 pence is set to be added to the bill for business from this autumn, at a cost to business of 3 billion pounds, with further rises in subsequent years.

Allies of Sunak clarified he would not increase corporation tax higher than 23%.

These measures will be helpful in paying for an extension to the furlough scheme, VAT cuts and business support loans until at least August.

Unlike the 2010 Conservative-led government, which pursued spending cuts to rebalance the economy after the global financial crisis, Sunak is expected to defer most of the toughest decisions about how to pay for that support in his budget speech.

“The corporation tax hike will be higher than expected and the extension of the support schemes will be longer than most people expect,” the newspaper quoted a source as saying.

Insiders indicated the stamp duty holiday on property purchases would also be extended in line with the other coronavirus support measures, the report said.

Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.

($1 = 0.7136 pounds)

 

(Reporting by Vishal Vivek in Bengaluru; Editing by Lincoln Feast.)

 

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Foxconn chairman says expects “limited impact” from chip shortage on clients

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Foxconn chairman says expects "limited impact" from chip shortage on clients 2

TAIPEI (Reuters) – The chairman of Apple Inc supplier Foxconn said on Saturday he expects his company and its clients will face only “limited impact” from a chip shortage that has rattled the global automotive and semiconductor industries.

“Since most of the customers we serve are large customers, they all have proper precautionary planning,” said Liu Young-way, chairman of the manufacturing conglomerate formally known as Hon Hai Precision Industry Co Ltd

“Therefore, the impact on these large customers is there, but limited,” he told reporters.

Liu said he expected the company to do well in the first half of 2021, “especially as the pandemic is easing and demand is still being sustained.”

The global spread of COVID-19 has increased demand for laptops, gaming consoles, and other electronics. This caused chip manufacturers to reallocate capacity away from the automotive sector, which was expecting a steep downturn.

Now, car manufacturers such as Volkswagen AG, General Motors Co and Ford Motor Co have cut output as chip capacity has shrunk.

Counterpoint Research says the shortage has extended to the smartphone sector, with application processors, display driver chips, and power management chips all facing a crunch.

However, the research firm predicts Apple will face a minimal impact, due to its large size and its suppliers’ tendency to prioritise it. Apple is Foxconn’s largest customer.

Foxconn is looking at other areas for growth, including in electric vehicles (EVs), and Liu said their EV development platform MIH now had 736 partner companies participating.

He expected it would have two or three models to show by the fourth quarter, though did not expect EVs to make an obvious contribution to company earnings until 2023.

Liu also said the company was still looking for semiconductor fab purchase opportunities in Southeast Asia after not winning a bid to take over a stake in Malaysia-based 8-inch foundry house Silterra.

(Reporting by Ben Blanchard and Jeanny Kao; Writing by Josh Horwitz; Editing by William Mallard and Ana Nicolaci da Costa)

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EU seeks alliance with U.S. on climate change, tech rules

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EU seeks alliance with U.S. on climate change, tech rules 3

By Sabine Siebold and Kate Abnett

BERLIN (Reuters) – Europe and the United States should join forces in the fight against climate change and agree on a new framework for the digital market, limiting the power of big tech companies, European Union chief executive Ursula von der Leyen said.

“I am sure: A shared transatlantic commitment to a net-zero emissions pathway by 2050 would make climate neutrality a new global benchmark,” the president of the European Commission said in a speech at the virtual Munich Security Conference on Friday.

“Together, we could create a digital economy rulebook that is valid worldwide: a set of rules based on our values, human rights and pluralism, inclusion and the protection of privacy.”

The EU has pledged to cut its net greenhouse gas emissions to zero by 2050, while President Joe Biden has committed the United States to become a “net zero economy” by 2050.

Scientists say the world must reach net zero emissions by 2050 to limit global temperature increases to 1.5 degrees above pre-industrial times and avert the most catastrophic impacts of climate change.

The hope is that a transatlantic alliance could help persuade large emitters who have yet to commit to this timeline – including China, which is aiming for carbon neutrality by 2060, and India.

“The United States is our natural partner for global leadership on climate change,” von der Leyen said.

She called the Jan. 6 storming of the U.S. Capitol a turning point for the discussion on the impact social media has on democracies.

“Of course, imposing democratic limits on the uncontrolled power of big tech companies alone will not stop political violence,” von der Leyen said. “But it is an important step.”

She was referring to a draft set of rules unveiled in December which aims to rein in tech companies that control troves of data and online platforms relied on by thousands of companies and millions of Europeans for work and social interactions.

They show the European Commission’s frustration with its antitrust cases against the tech giants, notably Alphabet Inc’s Google, which critics say have not addressed the problem.

But they also risk inflaming tensions with Washington, already irked by Brussels’ attempts to tax U.S. tech firms more.

Von der Leyen said Facebook’s decision on a news blackout on Thursday in response to a forthcoming Australian law requiring it and Google to share revenue from news underscored the importance of a global approach to dealing with tech giants.

(Additional reporting by Foo Yun Chee; editing by Robin Emmott and Nick Macfie; editing by Jonathan Oatis)

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