Software companies submit an average of 156.2 Requests For Proposals (RFPs) per year.
But, their average win rate is only 38%—which is the lowest out of 14 industries surveyed in Loopio’s RFP Management Benchmarks and 2020 Trends report. 😱
If you work in software, this may make you want to put your hands in the air and say “That’s it— we’re not answering any more RFPs!”
However, before giving up on RFPs, you should know that they can still be a significant revenue driver. Our research shows that RFPs can make up to 41% of total sales revenue. Plus, 38.8% of survey respondents stated that RFPs impact their customer retention efforts—which is particularly important for cloud and subscription-based software solutions.
The research also found that most software companies can achieve RFP success—if they make a few small process adjustments. In this piece, we’ll share research-backed best practices that will help software providers drastically improve RFP win rates.
What Software Gets Right: RFP Ownership, Writing & Submission Rates
Win rates for software companies are below the average. Research shows that organizations win an average of 53% of the RFPs they bid on—while the software industry sits at 38% on average.
From the outside looking in, software companies can get several RFP best practices right:
1. They have a clear process owner
Organizations that have a dedicated person or team to manage RFPs perform better. Those with an owner are 9% more likely to feel as though their process is efficient; 5% more likely to complete more RFPs; and 8% more likely to be ‘very satisfied’ with the quality of their RFPs.
Software vendors are 10% more likely than average to have a clear process owner than other industries.
If your organization doesn't have a dedicated proposal team, consider asking sales team members to oversee RFPs as they are the second most common owner group (17%), according to our study.
2. They spend more time writing responses
When companies spend more time writing their RFP responses, our research found they have slightly better win rates.
Almost a third of software companies (29%) are spending an average of 70+ hours writing or filling in answers for a single RFP. The average time spent writing an RFP across industries is 23.8 hours—meaning a large portion of software providers are outperforming the benchmark.
For those in the software industry struggling to invest more time into their RFP content, consider engaging internal stakeholders to help with content creation, or seeking external expertise and support. The right RFP automation tools can also save time in the response process—meaning teams can spend more time crafting winning answers.
3. They submit a high volume of responses
When asked how many RFPs they submit a year, 42% of software companies respond to over 500 annually. For comparison, the average organization responds to 147 RFPs per year.
How are they handling such volume? It could be because a whopping 96% of software respondents use dedicated RFP software—and those using RFP software responded to a third more RFPs than those who don’t.
Software industry teams who haven’t yet adopted RFP software may be missing out on higher submission rates. It’s in every organization’s best interest to adopt tools that help to increase the efficiency of the response process—and those who rate their tools as ‘extremely effective’ are 10% more likely to use RFP software.
Big Areas for Software Industry RFP Improvements: Response Rates & Tracking
So, what factors are negatively impacting RFP win rates?
1. Higher response rates to RFPs received
While the software industry is responding to many more RFPs than average, they’re also responding to a higher percentage of the RFPs they receive. When asked what percentage of RFPs they respond to, 37% of software companies stated they respond to 90-99% of the RFPs they receive, which is more than double the average across other industries. (Only 15% of other companies respond to 90-99% of RFPs received.)
While answering more RFPs correlates with better win rates, there is a need to balance volume and quality. Software teams may want to be more choosy about which RFPs they answer. This way, they can focus on only bids they have a high chance of winning vs. spreading their resources too thin across many—which may explain their lower than average win rates.
2. Track key metrics
Software teams are below average when it comes to tracking revenue sourced from RFPs with only 27% of software industry professionals are tracking overall revenue sourced from RFPs, compared to the total respondent average of 45%. Also, 40% of software respondents being unsure of what percentage of their overall sales revenue was generated from winning RFPs, significantly higher than the total respondent average of 18%.
This is important because there is a relationship between tracking revenue metrics and the percentage of RFPs won. In fact, 68% of those who win 70% or more of the RFPs they bid on track overall revenue metrics. This is in stark contrast to those who have win rates of 40%—of which only 36% track revenue metrics.
Software professionals should prioritize better baseline metrics tracking in order to improve their win rates.
Why Software Companies are Satisfied with Longer RFP Timelines
The average timeline for an organization to complete an RFP—from the day it is received to the day it is approved and submitted—is 10.5 days. The software industry comes in higher than that: nearly half of software respondents (44%) state that it takes their team anywhere between 11-14 days to submit an RFP.
While investing more time into creating RFPs is generally good, longer timelines can mean more internal bottlenecks. Interestingly, 25% of software industry respondents were satisfied with the time it takes for their organization to complete responses. This is likely because their higher rates of technology adoption and dedicated ownership make the process feel more efficient.
If longer timelines mean higher quality responses, then software companies may not want to speed up their response timelines. However, if software teams struggle to collaborate with subject matters experts and find the right answers quickly (which was the biggest challenge among survey respondents), they should re-evaluate internal processes to find efficiencies.
Software Industry RFP Outlook for 2020
RFPs will likely continue to become more prevalent in the buying process. In fact, 18% of respondents in the software industry say their company plans to increase the number of RFPs they respond to in the coming year.
Yet 39% of software respondents stated that they had no resource increases planned for their RFP processes. How then are they planning to handle an increase in RFP output?
Of those software companies who are planning to make investments, 27% stated that they are looking to hire an outside agency or consultant, and 16% of respondents plan to increase training for existing team members.
Interestingly, high-performing organizations are investing in more staff vs. training or outsourcing. Those respondents with a 90-99% win rate are 36% more likely to be hiring more staff in 2020, and those submitting over 500 RFPs a year are 17% more likely to be hiring more senior staff this year. So, while software teams are making investments in outsourcing and training, they may want to consider if more senior, in-house expertise will be more helpful in the long run.
Continuing to respond to RFPs frequently, and using a dedicated RFP tool, are behaviours that will continue to serve software companies well. However, investing in metrics tracking, better internal collaboration, and being more selective about which RFPs they respond to are likely to help software teams win more.