As a provider of technology solutions for financial services firms small and large nationwide, I frequently come in contact with investment firms of diverse dynamics and decision-making processes. I am, of course, familiar with the process and discipline of getting
three separate quotes for goods and services, but even after decades of bidding on projects, it is still unclear to me what investment firms actually do with this information.
In some cases, it seems like the decision has already been made and prospects are just going through the motions to fulfill the expectation to follow a procedure and process established by their firm. Gut decisions sometimes overrule common sense.
One of my clients actually adheres to this discipline for everything and, if the rumors are true, even gets three prices for paper clips. In my own experience with them, they did, in fact, get three quotes for a single piece of computer equipment that cost about $75. Considering current wage and consulting rates this arguably may not be a good use of time or money. Perhaps it’s a more altruistic goal of keeping our economy competitive that drives their policy.
Opportunity
Recently, I was contacted by a firm looking for assistance with some Axys report modifications. One of our competitors provided them with a quote for the work they needed. The prospect felt that the price was too high and they solicited my opinion. I never saw the quote from my competitor, but heard from the prospect that they wanted 3-4k up front and expected it would cost 7-8k. In another conversation, I was told that there was also a local company bidding on the work. That made sense to me – three bids.
I was provided with a detailed specification of what needed to be done and asked to provide them with a quote. The firm was looking to make some modifications to the Axys report that generates Advent’s performance history data and stores it as Net of Fees (PRF) and Gross of Fees (PBF) data. Though the requirements seemed complicated initially, it eventually became clear to me that the job simply required filtering of a couple REPLANG routines, and some minor additions.
I shared my impression with the prospect and ball-parked our bid at 3k (a 12 hour block of time) less than half of our known competitor’s bid. I explained that the actual work was likely to take three to four hours, and rest of the time would be spent on testing, support and maintenance. My expectation was that we would get the work done in a half day to a day at most and the remainder of our time could be used for any required maintenance or modification later in the year.
Follow-Up
After about a week, I called to follow up and found out that the firm was strongly considering having the work done by their local vendor, who told them it could be done for seven to ten days. “Excuse me,” I said. “Don’t you mean seven to ten hours?”
“No,” he replied. He further explained that they really like using the local vendor and would probably use them for the job, which I fully understand. I have, no doubt, benefited from this sentiment in Boston for years. At that point in the call, I was thinking that it was more like seven to ten lines of code, but thankfully I didn’t start laughing. I waited until the call ended.
No Risk, No Reward
In the end, your firm’s decision to select one bid over another is a personal one, similar in some respects to the one that dictates an investment adviser’s success attracting new clients and retaining them. It’s about trust, performance, and the ability to continually communicate that you are worthy of one and capable of the other. To succeed long-term in the financial services business, you need both. Through good performance, we gain a measure of trust. However, without a measure of initial trust or risk, there is no opportunity to perform.
About the Author: Kevin Shea is President of InfoSystems Integrated, Inc. (ISI); ISI provides a wide variety of outsourced IT solutions to investment advisors nationwide. For details, please visit isitc.com or contact Kevin Shea via phone at 617-720-3400 x202 or e-mail at kshea@isitc.com.