What's the ROI on a bid management solution?

Why do we need a bid management platform? We are already running our deals using spreadsheets, emails and document software. What is the value-add? Is there a ROI?

Let’s start with the last question first!

Let’s say you are a Rs 100 Cr ($ 13.5 mn) solution provider. You submit 50+ proposal/bids p a with 5-7 people working on every bid. Your win rate with net new accounts is a healthy 40%. And margins are at an industry standard of 10%. What are the areas where you can expect a comprehensive bid management software score over using office productivity suites. Can we quantify the benefits?

1. Productivity improvements - Bid management is a multi-party (bid manager, approver, contributor, reviewer), multi-step (estimation, costing, review, approval) process where each participant works on a part which has certain dependency on other parties/processes. With manual processes and lack of synchronization/integration inefficiencies arise. E.g. the bid manager asks the participants to develop the pricing in a certain format, but the participants took some liberties. Or the approvals did not include the Quality function, etc.

A single integrated Bid Management platform can eliminate such inconsistencies and provide productivity improvements in the areas such as faster processing, lesser follow-ups, automated integration. More work accomplished by the same number of FTEs.

How does this translate into dollar value – assuming 5 people working on every bid cost the company Rs 0.25 Cr p a. A 20% improvement in efficiency or reduction in FTEs translates to benefits of Rs 0.05 Cr p a.

2. Historical analysis – Data is generally omnipresent. But information is scarce, especially when needed. It is spread across people, systems, laptops and folders. A centralized bid management platform not just keeps the data together but also accumulates historical data. Thus, enabling trend analysis related to pricing, discounts, margins, etc. Similarly, information can be analysed by territory, account, BU, and vendors. And lastly performance analysis in terms of no. of bids supported, TATs, etc.

This probably is the biggest value-add of having a bid management application rather than scrapping data from XLS, ERP, CRM .. and notebooks. Such analysis can help us take better pricing decisions. Not to mention the analytics it can drive. So, if we are able to secure better priced deals by 5%, this can translate into Rs 0.5 Cr margin benefit.

3. Version management – This is probably a tactical point but when solutions involve multiple contributors (both internal and external) one can visualize several files flying towards the Bid Manager at frantic pace, especially closer to the submission. The time pressure and multitude of tasks/re-conciliation leads to pricing and technical inconsistencies. Of course, a smart Bid Manager handles it all with ease .. but that is not always the case. It’s not uncommon to see wrong pricing version being considered while doing the final calculations.

Only to realize at the contracting stage, that there is a deficit between the price approved and the price being contracted. Who will bear it? Why? Eventually such negotiations lead to financial damages for the concerned parties as its difficult to have the customer make any concessions.

Proper version control and event-based notifications can ensure that the Bid Managers are on top of everything and do not lose sight of the accurate/relevant versions.

Even if one such error is avoided across the 50 submissions p a, this could be a benefit of Rs 2 – 5 lakhs.

4. Lower risk – Deal risks are always visible but often ignored. Sometimes unintentionally, sometimes discreetly. But always with the same result – red projects down the road. If the risks are highlighted and agreed to be tolerated then it’s a business decision. But if they are ignored, supressed or neglected, they come back to haunt in the form of poor or negative margins.

A Bid Management suite will enable all participants/contributors including those with oversight roles such as – PMO, Quality, Risk, Legal – to register their observations, comments. If provisioned-for these risks can be managed at an account or BU or territory head level with only a minor impact to the project. Assuming a 10% average margin, clear visibility and tracking of risks can easily have a Rs. 0.25-0.5 Cr benefit to the bottom line p a.

5. Higher win rate – Well .. this is the elixir for sales professionals! And while many elements contribute to this outcome, a bid management software providing capabilities like analysis, tracking, synchronization, should ultimately earn higher/better win rates for the organisation. One deal more than the previous year, in this scenario can give a top line boost of Rs 0.2 Cr.

There are other benefits which probably can’t be quantified as accurately but still have an important bearing – tracking, communication, visibility, business controls, and process adherence.

Did you add it? Conservatively, this totals to Rs 0.9 Cr ($ 120K) of benefits p a.

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Comments and observations welcome at hello@pricebid.co.