There's nothing like a few Microsoft Excel horror stories from Fortune 500 companies to make you question everything.
In business we tend to exalt Excel as the ultimate calculation and organizational tool. But what about when our functions break or worse, we input the wrong data? These real-life spreadsheet nightmares from household name companies show just how much risk we take for granted every time we use Excel for our crucial business processes -- like issuing RFPs.
(This post focuses on Purchasers issuing RFPs, if you're a vendor get your RFP tips here.)
Risk #1 Human Error
Awhile back Forbes posted a great article entitled Microsoft's Excel Might Be The Most Dangerous Software On The Planet.
In it they shared a particularly terrifying story about investment bank JP Morgan and Excel horror story:
To translate that into the vernacular, the bank, JP Morgan, was running huge bets (tens of billions of dollars, what we might think of a golly gee gosh that's a lot of money) in London. The way they were checking what they were doing was playing around in Excel. And not even in the Masters of the Universe style that we might hope, all integrated, automated and self-checking, but by cutting and pasting from one spreadsheet to another. And yes, they got one of the equations wrong as a result of which the bank lost several billion dollars (perhaps we might drop the gee here but it's still golly gosh that's a lot of money). [Emphasis added.]
As if that weren't enough to scare us, here's more true horror stories of faulty spreadsheets that lead to a $100 million error and a lawsuit.
Upon further examination, Tibco and Goldman discovered a key document – a spreadsheet – had overstated the number of fully diluted shares. This dreadful situation meant that the implied equity consideration was $4.14 billion instead of $4.24 billion. Moreover, this spreadsheet error led to a miscalculation of Tibco’s equity value, a $100 million savings for Vista, and a slightly lower payment to Tibco’s shareholders. The mystery regarding who created the $100 million spreadsheet error has yet to be solved. [Emphasis added.]
While Excel is inarguably an extremely powerful tool it still relies heavily on human input, meaning it's fallible, and that's something we need to take more seriously. Especially when it comes to critical data like financial or vendor information.
Just because Microsoft Excel is familiar, doesn't mean it's effective or even safe.
Risk #2 Emailing Your Excel Spreadsheets
Okay, so we can all agree that when we use Excel for crucial business processes we're risking broken formulas, human error, and incorrect data.
But what about the risks in how we're sharing our data?
That same spreadsheet nightmare article cites a Schwab Retirement Plan Services email disaster that affected 9,400 participants.
A spreadsheet containing personal information belonging to participants in a company-sponsored retirement plan serviced by SRPS was accidentally emailed through a secure channel to a participant in another retirement plan serviced by SRPS. Included in the spreadsheet were the names, addresses, dates of birth, Social Security numbers, dates of termination (when applicable), employment statuses, division codes, marital statuses, and account balances for each of the 9,400 participants. - Source [Emphasis added.]
Again, just because we might be defaulting to emailing spreadsheets back and forth, doesn't mean it's actually secure. On the contrary, most email platforms allow for few permissioning settings and little visibility.
Making a strategic investment in a more secure and transparent environment will help you avoid putting sensitive vendor data or internal information at risk (learn more about moving to The Cloud here).
We've accepted our need for dynamic, cloud-based solutions for most of our key processes (Salesforce, CRM, analytics, etc.) why not then for some of our most critical information -- RFPs?
Risk #3 Time
"Time is money" is the mentality we should all have when it comes to investing in business optimization. I've had the pleasure of working with several different types of consultants (Operations, Sales, Marketing) and no matter their particular expertise they've all helped us with one thing: figuring out where we needed to automate.
They justify the price of the tool/solution/software based on one of two things: A. the amount of revenue it will generate and/or B. the amount of hours it will save.
They rightly see anything that wastes your time as both a profit loss and a risk to the business. Which is why the third risk of using using Excel for your vendor selection is wasting time:
- Manual vendor score tabulations: not only does manual mean there's more opportunity for a miscalculation, but it can also be a huge time-suck.
- Reinventing the wheel: any time your team spends looking for information, copy & pasting, or recreating work is time you're not spending on core business.
- "Crashing": Need we say more? You're working and then suddenly, inexplicably, the system crashes. And since Excel doesn't have an auto-save, your hours of effort are completely wasted.
In other words, if your purchasing managers are routinely completing tactical tasks (like calculating scores), it's probably an opportunity for better tools and more automation.
In a fast pace technological age, none of us can afford the luxury of wasting time.
Conclusion: the Key Risks and What to Do About Them
Key risks of using Excel for vendor selection:
- Risk 1: human error. Every time you manually key in data or copy and paste something from one file to another, is one more opportunity for breaking formulas or misconstruing data. This article by Selerant said it well:
"Typically, vendor data is received by several different ways, such as spreadsheets, emails, and actual paper communication... manually entering all of the data creates several issues, not the least being data accuracy. One error can lead to a significant cascade and can result in non-compliance, serious cost controls, delays, and quality control.'" [Emphasis added.]
- Risk 2: emailing spreadsheets. Sharing spreadsheets via email isn't secure, it's just not. Not only may your server be unsafe, but it makes collaborating, effective file tracking/versioning, and transparency next to impossible.
- Risk 3: wasting time. Manually computing vendor scores takes time. Recreating work takes time. System crashes wastes your time. And you have better things to do.
First and foremost we need to be aware of the risks, so the fact that you're still reading means you're ahead of the crowd.
Second, you may want to consider solutions that negate or help mitigate the risks. So if you're ready to rethink your Excel strategy and start looking for more dynamic RFP-specific solutions, Capterra (a software review site) is a great place to start shopping around.
Also, know you're in good company. Several of our customers told us they came to us specifically because they were looking to "upgrade from Excel." Because they knew manual processes just weren't cutting it anymore.
What’s been most helpful about using RFP365 is the automated scoring. Before, when using an Excel template, we would have to go through each category to ensure there were no errors from all the copy and pasting; the Excel formulas would often break in the process, it took a lot of time to reconcile...
Using RFP365 enables a more structured and standardized process. When using email or spreadsheets it’s easy to make an exception for vendors. RFP365 helps us be more consistent and meet deadlines. The new electronic process ensures full transparency. If there’s ever a question of how we came to decision about a selection, we have a full record of the event.
Read the ihouse case study here.
RFP365 saves us a tremendous amount of time with countless day to day job efficiencies, freeing us up to be more available and truly consultative with our clients. I also have more confidence in our information now. Not having to manually compute Excel matrices not only saves a lot of time, but it also means more data integrity. Before it was so hard to keep vendor information up-to-date, using spreadsheets and legacy software. But now we can see our vendors activity and data in real time. As a result, our client deliverable is much stronger.
Intrigued? Here's a GIF of how our RFP software automatically compiles vendor scores and notes so you can easily compare responses side-by-side and share feedback with your team.
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