Budget Cuts Force Managers to Rethink RFPs Shrinking headcounts and tightening budgets are driving managers toward outsourcing and automation to sustain their sales and marketing operations, particularly when it comes to answering requests for proposals (RFPs), according to industry experts. A low-revenue environment has forced some firms to think more strategically about RFPs to make the best use of limited resources. “There’s not a business in the world that hasn’t been asked to do the same job they were doing with fewer people,” says John Laurino, CEO of Proposal Software, which sells RFP workflow tools to asset managers. The asset management space has seen several rounds of layoffs since last fall, with some big names cutting up to 10% of their overall staff amid plummeting revenue. Most firms say they hope to avoid losing portfolio managers and client-facing professionals, which suggests the deepest cuts may come from divisions that support sales and operations. But even without layoffs, sales and marketing teams are under stress. “I can tell you that they are being stretched and being asked to do more,” says Jillian Rudman, president and CEO of strategic consultancy J. Rudman & Associates. “It may not be a cutback in a particular department. It may be a cutback somewhere else that is affecting the group such that RFPs may now be only a portion of what they’re responsible for.” Search activity slowed to a trickle in the fourth quarter. But consultants predict it will pick up later in 2009, once institutional investors complete asset allocation studies. That could stretch sales and marketing teams even more in the months ahead. But Rudman says the current market environment poses a “tremendous opportunity” for firms to redefine themselves, once they achieve some stability. “This is an opportunity for firms to institutionalize their processes,” she says. “This is an opportunity to challenge every single assumption you’ve made about how you do things and why you’re doing them.” Indeed, managers facing budget constraints should be more selective about the RFPs they answer, says Donna DiMaria, president of the Third Party Marketers Association and CEO of Tessera Capital Partners. In bull markets, firms often bid for mandates when they don’t meet every requirement. That’s a luxury they can’t afford today, when every unnecessary response limits the amount of time firms can spend on more promising RFPs. “The public fund RFPs are a nightmare,” says DiMaria. “They’re huge, with lots of addendums, and usually they want them in hard copy with copies for everyone on the board. You just have to be more selective.” Rudman agrees. “Whereas before, firms were answering every single RFP that came in the door, now they’re being smarter about their strengths, which specific sets of clients are optimal for them and which areas have been hobbies that they’re no longer going to pursue,” she says. Both say managers are increasingly turning to automation and outsourcing to reduce costs. That’s created a boom for some providers, even as their clients face stalling profits. Proposal Software saw its revenue climb 88% in 2008, with its client base growing by about 70% and existing clients buying additional licenses. Half of the firm’s roughly 200 clients are asset managers, including 10 of the top 20 firms by asset total. “We’re seeing just tremendous demand, even thought it’s counterintuitive to think that anyone is buying anything in this market,” says Proposal’s Laurino. “The choices are: don’t bid – bad option; bid in a way that you’re not sure is 100% compliant – bad option; or put more people on the job – not an option.” Software tools that help to automate much of the RFP-writing process can save a large manager with 35 to 50 sales and marketing professionals more than 6,000 hours of work every year, says Laurino. That could save a firm the equivalent of three full-time employees, or it can make existing employees more productive and accurate in their jobs. Other major providers of RFP software for asset managers include Kadient and Sant. Many firms also offer fully-outsourced RFP-writing services. With smaller RFP teams, many firms are relying on more senior personnel to get the job done. “I can’t name names, but I can tell you that there are a lot of [division] managers who never really did proposals themselves every day, but who are doing them now,” says Laurino. Tight resources have also led firms to look to outside help. Large asset managers are increasingly outsourcing to third-party marketers to fill the void left by layoffs, says Tessera’s DiMaria. Smaller firms are looking to outsource, too, when they can afford it. DiMaria says many firms are renegotiating existing agreements with third-party marketers because they can’t even afford the retainer fees. “At the end of the day, it is a cost, and people are cutting costs all over the place,” says DiMaria. |
