Rethinking RFPs: Do they really serve their purpose?

Carey Ransom is a SaaS entrepreneur, executive, investor and advisor. He is president of Operate and managing director of BankTech Ventures, a strategic investment fund focused on compelling technologies for community banks—founded and funded by leaders in the community bank ecosystem.

My hot take: get rid of RFPs.

In today's fast-paced business environment, the traditional Request for Proposal (RFP) process should come under scrutiny. RFPs have long been considered a cornerstone of organized procurement and vendor selection, but they represent a waterfall-based approach that feels increasingly outdated in our agile, dynamic world. Not only do they mask deeper organizational issues about decision making, but they also create unnecessary constraints on both buyers and suppliers while forcing modern businesses to operate at a slower pace than they should.

The hidden costs of RFPs

Conventional wisdom suggests that RFPs bring structure and clarity to complex purchasing decisions. However, this assumed benefit often comes with significant hidden costs.

RFPs can serve as just a Band-aid for poor internal communication. When different departments contribute their requirements to an RFP, they're essentially using the procurement process as a substitute for regular, meaningful cross-functional team collaboration. This approach may create artificial barriers between stakeholders who should communicate directly, leading to requirements that are symptoms of internal misalignment and resulting in solutions that address surface-level problems rather than root causes.

Today, innovation happens at a pace that makes traditional RFP timelines obsolete; market conditions and needs can shift dramatically, all while a lengthy RFP process is still in progress. When organizations lock themselves into rigid requirements through an RFP, they risk missing opportunities for innovation and may end up with solutions that are outdated before they're even implemented. 

What are better alternatives to traditional RFPs?

Traditional RFPs often lead to rigid, siloed decision making processes that fail to meet businesses’ needs in today’s evolving landscape. Instead, forward-thinking organizations should embrace more dynamic approaches — ones that foster collaboration, flexibility and real-world validation of vendor capabilities. 

1. Collaborative discovery workshops

Instead of issuing formal RFPs, organizations can consider bringing potential vendors together with key stakeholders for structured discovery and planning workshops. This approach enables real-time discussion and collaboration while allowing for immediate clarification, ideation and requirement refinement, truly building a space for innovative solutions to emerge organically.

2. “Crawl-Walk-Run”

A phased, iterative approach to vendor selection — starting small and scaling strategically — can also provide organizations with greater confidence in their vendor decisions. It breaks large initiatives into much smaller, manageable pieces, starting with pilot projects to test vendor capabilities and overall compatibility with the organization. At a time when technology adoption requires more agility, traditional RFPs simply don’t provide the level of flexibility needed for many organizations embracing a "crawl-walk-run" approach. 

3. Problem-based engagement

Rather than presenting vendors with detailed specifications upfront, share the core business problems you're trying to solve, maintaining flexibility to adapt as needs evolve. In today’s business environment, with AI becoming more prevalent in software solutions, it is especially important to focus on outcomes rather than prospective requirements and to give vendors the freedom to share best practices and propose innovative solutions. Allow for multiple solutions to the same problem, and use more holistic decision making processes to choose the best offering. 

4. Proof of concept (POC) first

Rather than relying on upfront documentation and theoretical commitments, businesses can shortlist potential vendors by investing in small-scale proof-of-concept (POC) projects, providing tangible insights into a vendor’s solution. By assessing actual results, organizations can make more informed decisions about which solutions best address their problems, ultimately leading to stronger partnerships.

When traditional RFPs may still make sense

While I think other approaches will often prove more effective, traditional RFPs may still be appropriate in certain situations. For example:

• Regulatory requirements mandate formal procurement processes

• Purchases that involve significant public funds requiring detailed documentation

• Complex multi-vendor systems that require well-defined interface specifications

• High-risk decisions that need extensive due diligence

What do we do next?

Decision making is already challenging in a complex, multi-functional organization, and while RFPs attempt to gather everyone’s input and requirements, most organizations need to move faster to keep up with today’s market. 

As someone who meets hundreds of new fintech startups each year, my advice for organizations looking to work with innovative vendors is to assess their current procurement processes honestly to become better buyers, determine when a traditional RFP is the best option versus when it is not, experiment with alternatives on appropriate projects, and document and share success stories as they occur.

In order to truly adapt and remain relevant and competitive, businesses should strive for nimble, flexible and iterative approaches that reflect the rapid pace of innovation and modern expectations that fintech startups are driving forward.