The TechNexxus Approach is a comprehensive process for organizing, conducting and closing transactions that capitalizes upon a firm understanding of the ways buyers and sellers profit and manage risk. We apply The TechNexxus Approach to accomplish two separate goals: first, to reveal the profit and loss drivers, to allow both parties (but, most importantly, our clients) to understand the sources of value in the transaction; second, to design the transaction structure to align the positive values and reduce the risks for both parties, such that the parties' incentives are mutually supporting. The TechNexxus Approach is a completely integrated process for conducting procurement transactions, and each step is mutually supporting to enhance the overall effectiveness of the process. At the same time, each individual step adds unique value. Therefore the process is completely modular, such that The TechNexxus Approach can be applied at any stage in the transaction with substantial positive benefit to the client.
The TechNexxus Approach can be broken down into the following stages:
1. Data Collection
2. Definition of Objectives
3. Financial Modeling
4. RFP Creation
5. Proposal Analysis
6. Negotiation and Closing
7. Contract Management
(a) Data Collection
The data collection stage is the most critical, and frequently most overlooked, stage in any procurement process or other transaction. In nearly all circumstances, the solution being procured, however innovative it may be, customarily replaces existing assets and resources that currently perform a given function. While vendors seek to highlight the value of their proposed solutions in absolute terms, from the client's perspective, a solution only has value in relative terms.
Is the new solution more efficient (from either an ongoing cost or productivity standpoint) than the products and processes that it replaces, and does that efficiency outweigh the cost of acquiring the new solution? If not, then the new solution is a negative value proposition for the client, and should be a non-starter. In order to accurately assess the relative value, one must have a clear picture of the cost/benefit relationship of the current products/processes. TechNexxus has unique and powerful process analysis tools that define the relevant business and technology functions and measure how well current capabilities support those functions. Our process, derived from years of assisting all sizes and all types of organizations, is database driven and completely interfaces with legacy data.
(b) Definition of ObjectivesOnce our clients understand their current situation, the next step is to define objectives for the intended procurement. As noted above, since value should be defined relative to current functionality, we assist our clients to define the objectives for the procurement relative to the existing situation, which we define as the "base case". By using the base case as a fixed starting point, we can help our clients define their objectives in clear, measurable terms. Those objectives will then be carried through the remainder of the process to ensure that whatever solution is chosen (including the possibility that no new solution is chosen) will provide maximum value.
(c) Financial Modeling
One of the most critical parts of calculating value is having a clear picture of cost. Unfortunately, most vendors organize their cost structures (i) to ensure that the vendor derives a profit (based on the vendor's cost structure) and (ii) to differentiate their solution from other potential vendors on a basis other than cost. Furthermore, vendor pricing generally only addresses the costs that must be paid to the vendor for the solution; the costs of the solution that are internal to the customer, such as the cost of business process change and the cost of dedicated customer employees and resources to the implementation, are excluded. The cumulative effect of these pricing strategies is that the cost figures provided by vendors are not related to the customer's cost drivers (they are based on the vendor's cost drivers) and are not objectively categorized. As a result, each proposal is essentially sui generis, and is comparable neither to other vendors' proposals (to determine the relative merits of the proposed solutions) or to the customer's "base case" (to determine the overall value of the solution to the customer).The TechNexxus Approach uses the customer's "base case" and objectives to derive a "total cost" financial model for the proposed transaction that incorporates all the cost drivers in the proposed solution into an objective format. The model is then used as a template for the pricing information to be submitted by vendors in their proposals, such that our clients are able to have a clear picture of the entire cost structure of each proposed solution, and an ability to accurately compare the costs of each solution.
(d) RFP Creation
The RFP is an often misunderstood stage in the procurement process. While most procurement customers understand the role of the RFP to describe the substance of the proposed solution, they fail to utilize the RFP as a method for defining the process of the procurement. The RFP process is a zero-sum game. The RFP is an opportunity to communicate as clearly and precisely as possible the objectives, limitations and decision criteria of your procurement to your potential vendors. The more information, and the better the quality of the information, that a customer can give to the bidding vendors, the closer those vendors will be able to match their proposed solutions to the defined objectives. Unfortunately, the less information and guidance that a customer gives to the potential vendors, the greater the probability that the vendors will substitute their own objectives and define the remainder of the process in their own terms. The undesired effects of a poorly designed RFP are reduced value of the transaction to the customer compounded by a reduced ability of the customer to understand the value drivers of the proposed solution.The TechNexxus Approach uses the RFP as a roadmap to define the entire procurement interaction between the customer and the bidding vendors, including the technical, commercial and legal elements of the transaction. The RFP sets the ground rules for the remainder of the process, forcing the vendors to organize the information contained in their proposals in a standardized format that permits the customer to objectively analyze each solution, comparing it to other solutions and to the existing "base case". The TechNexxus Approach requires that the vendor respond to the technical specifications set forth in the RFP; provide pricing information in a format derived from the "base case" financial model; and also includes proposed contractual terms and conditions in the RFP, such that the customer can understand any legal limitations inherent in a vendor's proposal that are often not evident until after a finalist is chosen and all negotiating leverage has been lost. The information obtained from the vendors is exactly the same; The TechNexxus Approach, however, empowers our clients to maximize the value of the information in supporting the procurement decision.
(e) Proposal Analysis
The TechNexxus Approach uses several tools to analyze the information contained in the vendor proposals. Based on the organizational structure of the RFP, we assist our clients to categorize the RFP information into three categories: technical, commercial and legal. Using standardized analytical tools, we assist our clients to understand and compare each of the proposals submitted. Critical to this effort is the open flow of information in both directions. While the RFP is intended to provide a comprehensive description of the substance of the solution to be obtained, complex solutions often require an iterative approach that relies on a constant information exchange to develop the best overall solution. Vendors frequently must conduct due diligence to ensure the accuracy of information. Frequently vendors must perform some form of customization on their products to strictly comply with the technical requirements set forth in the RFP; communicating the level of customization and implications requires open dialogue among the relevant subject matter experts.
The TechNexxus Approach uses a structured process to ensure that any interactions between a vendor and the customer efficiently promote the maximum flow of information, and that information is properly organized and disseminated to ensure its appropriate consideration in the analysis of the proposed solutions. Our analytical tools then put that information to maximum effect to provide a clear picture of the relative merits of the proposed solutions compared to each other and compared to the customer's "base case".
(f) Negotiation and Closing
The TechNexxus Approach is designed to maximize our clients' leverage in negotiations with vendors to ensure that the interest of the parties are properly aligned and that our customers obtain the maximum value from the transaction. The TechNexxus Approach results in a set of finalized documentation that captures all the technical, commercial and legal issues in an integrated whole, ensuring that the rights and responsibilities set forth in the contract documentation accurately reflect the "business deal" struck between the parties.(g) Contract Management
The TechNexxus Approach is designed to maximize the overall value of the sourcing process to our clients. Value, however, is not defined solely by a transaction; the implementation of the procurement is equally critical. To ensure that the vendor's implementation matches the promises made in their proposals, The TechNexxus Approach incorporates powerful performance measurement and enforcement tools in the contractual documentation, and we continue to support our clients after contract closing to measure the vendor's performance and enforce our client's rights in the event of any deficiencies. The TechNexxus Approach uses innovative software tools to measure performance independently from the vendor, to ensure our clients have access to "unvarnished" information about vendor performance.
In addition, The TechNexxus Approach incorporates communication and dispute resolution processes directly into the contract structure. We realize that no contractual arrangement can anticipate and prevent all problems and disagreements; our goal is to negotiate and document a transaction that incorporates mechanisms and processes that anticipate unforeseen problems and address any conflict in a constructive, beneficial manner.