When for example a city is looking into a new online service, there are two ways to go. While RFP is a good solution in certain markets, there’s a bunch of reasons why free competition works much better for online services.
RFP (that is, request for proposal) basically means an agreement with one specific provider on a set process, price and delivery. Another way of finding a provider for a service is free competition, where the responsibility is handed over to several agents that operate in the same market each providing and developing their own product.
In this post, we’ll go through the benefits of open competition when it comes to apps, and the problems RFPs can cause when they are applied to tech innovations.
Monopolies trump tech progress and innovation
RFPs are great when it comes to physical structures or products, as there will be a finalized end product that is produced according to specific requirements. The product is static, the process is static, the price is static. For example, when constructing a building there can only be one building in the same place at the same time, so a monopoly is the only way – and when the end product (building) is ready, the process is ready. Online services, however, are anything but static, in fact they are pretty much just the opposite. There is no end product, just constant flux where the process never finishes but lives with the demands of the market.
If an online monopoly is created by one vendor, they will eventually lack the initiative to develop the service any further, as there is no competition to strive for building a better product and no threat from another, potentially better, provider. Monopoly position can be held by just one party at a time, so with the prospect of losing the entire market to another vendor at the end of a fixed-term contract, investments into improvements can be seen as unworthy. This kind of either-or situation doesn’t drive towards developing the product, because there isn’t immediate competition alongside another product.
Besides, choice, evolution and innovation are in themselves a beautiful thing and when they flourish, new things emerge. By introducing temporary “monopolies” through an RFP process, the evolution of high tech services slows down. It’s not the desired outcome of any service that’s created to aid people.
Free competition reduces risk and increases quality
Choosing a high tech service is not easy. There is always a ton of companies offering the “must” service today, so how is it possible to know which one’s right for you? It’s not – you have to let the market decide what best fulfills the user’s needs. Only then will you have a truly innovative solution that will continue to be useful as it evolves in order to keep up with the demand.
Online service providers are competing every day to satisfy their users. Companies are forced to innovate and follow customer needs in order to succeed. Technology changes constantly, and to keep up with it, there needs to be initiative from your provider itself to stay on top of it. And, of course, users will be happy because they get what they want.
Thus, ending up with the best online solution is only possible if you let your users decide, because they are drawn towards the one(s) that work the best.
The great thing is, you remain in a power-position, as you’re not dependent on any single service provider. If one company fails, other (better) ones will continue to offer the solution. This way the risk is spread out, and one failure doesn’t result in catastrophic consequences. The risk is reduced also in terms of pricing – without a fixed project price you cannot end up paying a ton for something that doesn’t work.
Better yet, there is no end-date either, so providers can basically develop their service indefinitely, for as long as the need is there.
Users enjoy, services flourish
There’s a time and place for RFPs, but the online service industry, which is booming, requires a whole other approach. In order to keep up with user desires and constantly strive for quality tech innovations, the process needs to support this.
Top-tier service providers understand the mechanism of free competition and see it as a chance to show what they’ve got. Introducing several operators into one market with open competition ensures a low-risk, innovative user-friendly solution that will grow along with the needs of users.
Open competition is suited for user-based online services because:
- It creates an arena for continuous innovation and developments
- It reduces the risk of failure by spreading between several providers
- It offers a user experience supreme because that’s what the service lives on