The Uptime Blog
For software vendors like Enigma, doing business in the aviation industry – with OEMs, airlines and MROs – almost always means answering RFPs (Requests for Proposal).
The scenario is a familiar one. Business and IT managers decide it is time to check what is the “latest and greatest” out there. They sit down (or pay a consultant to sit down for them) and fill out dozens of Word pages and Excel spreadsheets specifying all the requirements and features they would like – real and imagined. They send the RFP to several companies, usually a mix of loosely connected software vendors and systems integrators. Even though the process of writing the RFP will take them months to complete, they will invariably ask the RFP recipients to submit their responses within a ridiculously short time frame, say two weeks. The process then typically entails on-site workshops with shortlisted vendors, followed by several months of back-and-forth discussions about requirements, scope, commercials, terms and conditions, etc. A year or so down the road, assuming internal budgets are approved the two exhausted parties – customer and vendor – finally sign a contract and kick off the project. By this time, strong imaginative acumen is necessary if one is to find strong resemblances between the original RFP requirements and the project SOW (Scope of Work) document.
Can things be done differently? This article, recently published in Inc. Magazine, suggests a radical approach for vendors who receive an RFP: just say no. The article lists seven reasons why companies should walk away from RFPs, the more salient ones being:
- Diluted differentiation. Because the RFP goes out to vendors whose solutions and value-adds differ widely from each other, the result is an “apples vs. oranges” comparison that is doomed to fail. By responding to the RFP, vendors are thus agreeing to be judged almost exclusively on price.
- Playing by the customer rules. Yes, the customer is king. But does the king always know best? Most of the requirements and features are, at best, “nice to have” and in many cases totally unnecessary. To get to the short list, vendors answer “yes” to essentially all of the requirements, knowing they will find a way down the road to eliminate or modify them.
- Most RFPs are rigged. This might sound a little harsh, but even if they are not rigged, in many cases a vendor close to the customer lent a “helping hand” in shaping the RFP requirements and conditions to favor its own solution. This requires the other “competitors” to jump through hoops just to qualify through to the next stage.
So what is the alternative to answering the RFP? The article suggests sending a short, polite letter to the customer extolling your solution’s value and proposing a direct discussion. Chances are, concludes the article customers will circle back to you after failing to implement the cheap solution they selected in the RFP process.
Can this approach work in the aviation industry? Can software vendors ignore RFPs from OEMs and airlines, placing their faith solely in the merits of their solutions? A colleague of mine pointed out that this approach is wishful thinking when it comes to the conservative aviation industry. Innovation is slow, regulation is binding and procurement rules mandate the issuance of an RFP. For a vendor to win business in this industry, RFPs are the only way in.
I agree. It is indeed almost impossible to do business in the aviation industry without answering RFPs. But after many years of selling into the aviation industry (and countless hours working on RFP answers), I believe vendors should adopt a more sober approach to RFPs. Gone are the days when customers would issue an RFP for an IT system and expect software vendors to jump to attention and do their bidding, costs be damned. In these harsh economic times, when customers expect heavy discounts and concessions from vendors, the “my way or the highway” approach no longer works. Vendors simply cannot afford it. Too many vendors have been driven out of business because they had no choice but to play by the rules dictated by the RFP processes. No more.
A sober approach to answering RFPs means qualifying directly with the relevant stakeholders if this is a real opportunity or just an exercise in knowledge gathering or idea fishing. It means stating clearly in the RFP answer which requirements are nothing but fantasies that will cost a lot to implement but will deliver precious little benefit. It means scheduling more online demos and conference calls and fewer on-site visits. It means not caving in to terms and conditions that guarantee financial loss in project implementation. And, most importantly, it means knowing when to walk away from an RFP and nurture direct relationships instead, thus foregoing the immediate (and probably imaginary) opportunity for a future (and more real) opportunity.
I know; easier said than done. As writing and receiving RFPs remain an inevitable part of aviation maintenance business, I urge you to download our free RFP sample, here: MRO: Requirements for Maintenance, Repair and Overhaul, to make the task less formidable.
What’s the state of the automotive parts market these days? In a recent blog post Carlisle and Company, a leading consulting company for automotive and heavy equipment, says that the aftermarket is on the upswing: “North American Auto Parts Sales Seem to Be in Solid Recovery.”
According to the author, “The service parts market is in recovery, the IAM [independent aftermarket] has not launched a secret market share stealing weapon, and, due to 2009 cutbacks and capacity tightening, the OEMs are all under-realizing the potential of these market conditions. That is the unintended consequence of conservative forecasting. Hundreds of millions of dollars have been left on the table.”
He goes on to write, “Overall US parts and accessory sales are still gaining momentum. For some OEMs it will be in the double digits – growth in the same ballpark as year-over-year vehicles sales.”
The Carlisle and Company blog post presents several reasons for the uptick in parts sales, but a key factor is this: after delaying service during leaner times, consumers are finally bringing their cars in for maintenance and repair. Carlisle says there are “solid gains” in maintenance and light repair and that it seems to be a sustainable trend, rather than being “reflective of a common wave of consumer fix-it-up behaviors.” The author seems to be saying that car owners are bringing their cars back into dealer service bays and that OEMs have the opportunity to capitalize on the opportunity by selling more parts. The industry data presented in the Carlisle blog supports this conclusion. However, it’s hard to miss the point that even with the aftermarket rebound, OEMs are still leaving “hundreds of millions of dollars” on the table. Clearly Carlisle believes that OEMs could, and should, do more to capture that parts revenue.
At Enigma, we’ve been anticipating an upturn in the aftermarket (see a blog post we wrote 18 months ago on Where to Invest). During the recession, most OEMs tightened their belts, and delayed investments in IT systems that support their aftermarket operations. It was our opinion that such a strategy was a mistake; that by doing so, the OEMs would lose out on an opportunity to quickly capitalize during the inevitable turnaround. Some OEMs however, did make IT investments during the downturn, some are doing it now, and some are still thinking about it. There are many companies currently pursuing profit strategies that are tied to improving aftermarket IT. From our perspective, since Enigma introduced a full-function, hosted EPC solution about six months ago, we have noticed a dramatic rise in OEM discussions regarding how to improve their service parts business. Whether that's a function of the new SaaS EPC product or a general rebound in OEM aftermarket initiatives remains unclear. (For a list of key functionality that should be part of any aftermarket-based profit strategy, download our sample EPC RFP here)
The interest in aftermarket optimization goes beyond automotive OEMs, including construction/agricultural, energy, medical, semiconductor and oil/gas equipment. For many of these OEMs, spare parts generate less than 10% of revenue, but more than 25% of profits. Therefore as sales of new products begin to rebound, OEMs shouldn’t overlook the opportunity to improve aftermarket operations and lock-in this recurring revenue stream. Using the proper technology, OEMs can decrease the cost of aftermarket operations and increase their market share for parts and accessories at the same time. Enigma’s OEM customers report increased part sales, improved customer/dealer satisfaction and greater accuracy for parts and service orders (read some Enigma case studies on automakers).
Yesterday would have been an ideal time for OEMs to invest in their aftermarket operations; but if they were bound by fiscal limitations in the past, then today is the time to act.
The complexity of maintenance repair and overhaul systems is a common theme in aviation maintenance trade publications and conferences; it’s sometimes described as “overwhelming.” (While this discussion focuses on aircraft maintenance, it really applies to any complex piece of equipment.) I’ve seen the question posed in online forums; “why are MRO IT systems so complex?”
The simple answer is, because the documentation to fix complex machines is, by its very nature, complex. It requires vast amounts of data, it comes from multiple OEMs and vendors, it’s stored in multiple databases in multiple formats, and it has to be acted upon by multiple departments and organizations. People that perform line maintenance and base maintenance (field and depot), planning and engineering, tech pubs, IT and parts logistics all need to communicate about service and parts information, and practically every department has its own set of business systems that must share data, whether a tech pubs authoring tool or an ERP system.
In brief, airlines and MRO shops need IT tools to do the following:
- Manage various content types (manuals, catalogs, best practices, etc.) from multiple sources (OEMs, field engineers, suppliers, etc.) across different business processes (maintenance, procurement, planning, etc.)
- Manage ongoing content publishing and updating cycles and distribute approved content to multiple channels and devices with a click of a button
- Control system and user processes, content flow in the organization, access rights and personalization
- Integrate technical content with ERP, maintenance planning and enterprise IT systems.
Given these multi-faceted needs, whenever an airline or large MRO shop decides to upgrade its IT systems, it can be a long, painful process to decide which tools are necessary, which ones will work with legacy systems and data, and which ones will work with future applications. Can it work well with new and emerging data specs (like S1000D)? Does it integrate with current and future ERP platforms? How much of the process should be automated (e.g. digital task cards and sign-offs)? What features are needed in an illustrated parts catalog (IPC)? Can it process technical updates from the OEMs (revisions and service bulletins)? Will it improve maintenance planning and scheduling?
These questions, and many more like them, are what drive MRO IT decisions. To help companies ask the right questions, and hopefully get complete answers, Enigma has created a sample RFP for the MRO industry. It is based on almost 20 years of experience in turning complex documentation into usable information, and includes the most requested and important functionality and requirements, as defined by airlines and 3rd party MRO shops. While it is written in the language of aviation, we hope this document will also prove useful to customers and prospects in all industries as they seek to improve their aftermarket service and support processes.
Click here to download the RFP Sample.