Monthly Archives: July 2007

Catching up with Ketera

During my recent trip to the San Francisco Bay Area, I had a chance to catch up with Ketera (acquired by Deem), who have been working hard on improving not only their next generation spend analysis solution and on integrating their solution with Hyperion, as discussed in my March post, but on improving their catalog management, contract management, and invoice management integration, their reporting capabilities, and their supplier enablement solution.

Although they have one of the larger supplier networks, with over 115,000 users, it was a breath of fresh air to find out that Ketera understands that a supplier network in itself has no inherent value and that the real value is in supplier enablement. After all, if you’re a fortune 3000 company that’s been in business for tens or hundreds of years, you know who your suppliers are and who their competitors are and the supplier discovery mechanisms touted by supplier network providers really aren’t all that valuable to you. The value of a supplier network is the ability to electronically communicate with your suppliers, automatically send and receive purchase orders, goods receipts, invoices, and payments, and enable your suppliers to new levels of integration and productivity. Thus, the maximum value is obtained when all of your key and large-volume suppliers are connected to the network, and this requires a solution that is standards based, open standards browser compliant, easy to use and adopt, and capable of supporting the information that both you and your suppliers need.

To this end, Ketera is working on improving its supplier on-loading processes and solutions, adding interfaces to common back-end systems used by its customers (to complement its newly acquired SAP Netweaver Certification), and streamlining it’s document exchange protocols, mechanisms, and management tools. Ketera is also working on extending it’s catalog capabilities and punch out support and integrating price cross-checking with its contract management solution to improve compliance across-the-board.

Although I don’t expect any new releases or major announcements from Ketera until the fall, they’re certainly a company to keep an eye on. Not only are they one of the few companies in the space to offer integrated sourcing and procurement solutions on-demand, but one of the few companies that understand the benefits of helping their customers with whatever solutions they need and playing nice. For example, although they offer best-of-breed spend analysis, RFX*, and contract management solutions, their event management solution is weak and they don’t offer modern reverse auctions or decision optimization and they recognize that some customers will need these solutions. To this end, they partner (and re-sell) Iasta‘s solution to insure that customers that need the full range of eSourcing tools have them at their disposal. Combined with their fairly extensive e-Procurement offerings (which, from a basic cycle perspective, is only missing direct integration with leading payment providers and tax reclamation software integration), this provides users with one of the most extensive solutions in the marketplace from an integrated end-to-end e-Sourcing and e-Procurement cycle perspective.

Furthermore, I expect that before the end of the year, they’ll reach a point where they could start working on some very advanced and very interesting predictive cost baselining and modeling solutions that can only be built once integration is achieved to the point where holistic analytics become a possibility. This would allow companies that don’t have the extensive data required by Akoya (acquired by I-Cubed) or the physical process planning knowledge required by Apriori to tackle cost modeling and cost estimation in a way that they are unable to today. In other words, there’s still room for lots of innovation in the space, and Ketera is one of the few companies that I’ve talked to that might really break it open in the next few years by introducing new capabilities that can be used by the masses.

* Please read the comments! This was a typo. When their RFX capabilities are augmented with Iasta’s through their partnership reselling agreement, they compete with best-of-breed RFX solutions but, as Jason Busch points out, they do not on their own. My apologies.

Supply Chain Merger and Acquisition

In AMR’s (acquired by Gartner) “M&A: Designing the Supply Chain Response”, AMR presented a checklist on where to get started as an M&A approaches, with questions to jump start the process. The checklist can be summarized as follows:

  1. Before it happens, identify synergies.
  2. Carefully analyze opportunity against risk.
  3. Build capabilities.
  4. Design the supply response.

While a good article, and a great checklist, it seems to imply that the role of supply chain comes after a merger or acquisition has been defined, not before. For any M&A activity to be successful, there needs to be alignment between both the business goals and the business operations of the companies considering the M&A activity.

With regards to business operations, there needs to be alignment in sourcing activity, production activity, distribution activity, marketing activity, and day to day operations. With respect to day-to-day operations, there needs to be alignment between organizational culture. After all, the two companies are going to have to work as one.

With respect to sourcing, distribution, and cultural alignment, which department is better to judge alignment than supply chain management? Smooth operations are all about flow, inflow, people-driven process flow, and outflow – and flow is the domain of supply chain. Thus, supply chain should be involved in the process before a merger or acquisition is decided upon and the synergy identification and opportunity analysis should take place well before the decision is made.

Denali Delivers

Recently I had the opportunity to sit down and talk with one of the partners and co-founders of Denali (acquired by WNS Procurement) in their new headquarters, one of the few boutique consultancies specializing in supply chain with over ten years of experience in strategic sourcing. I was impressed with what I heard. Although the Denali V4 (Volume-Velocity-Value-Vehicle) “triangle” may not go very far in conveying the value they offer, the customized category framework approach they take to sourcing assignments is one of the best approaches I’ve analyzed from a consulting firm.

Even though they have a very good sourcing cycle (essentially your five-step process), they recognized that successful strategic sourcing is about more than just e-Sourcing – sometimes its about supplier development. If you conducted a well-run strategic sourcing event in the last few years, if market prices have remained relatively stable, and if your suppliers are still delivering quality merchandise, then you might already have the right supply base. In this situation, the best way to increase savings is to develop your suppliers and split the savings. After all, there are costs associated with a sourcing event, both for you and your supplier, and any new supplier is going to factor in their amortized costs of always responding to e-Sourcing events in their price.

In addition to their five-step sourcing processes, they also have a six-step process for supplier development. Furthermore, they embed change management into all of their processes to make sure the results they achieve are implentable, manageable, and sustainable – which is key since negotiated changes don’t hit the bottom line until they become realized savings.

Furthermore, they understand that in order to be successful as a boutique, you need to be able to be profitable off of small engagements, especially with smaller companies. To this end, they only hire experienced, senior sourcing professionals and operate virtually to the greatest extent possible, with sourcing professionals scattered all over the U.S. This allows them to effectively tackle projects with teams as small as two-to-three consultants and service these projects successfully with a relatively local contact point. Furthermore, with a highly experienced staff in e-Sourcing, they can tackle very large projects with under ten professionals, whereas a Big-5 consultancy, bursting with newly minted MBAs, might need thirty professionals to do the same work. And since their virtual model means they don’t spend a lot of money on over-priced office space, their rates are still very competitive.

Furthermore, they’ve progressed beyond just a simple supply chain consultancy to a full-ranged operation that now offers their clients marketing intelligence, training, and staffing services – which means that they can leave your organization in an effective position to follow through and deliver the savings they negotiate after their engagement is over.

Just this year Denali launched their subscription-based service offering, Denali Intelligence, which consists of three levels of Total Sourcing Intelligence market research services specific to sourcing and sourcing professionals. Their category-specific marketing research consists of category market reports, updated semi-annually, monthly market updates for key market indices, and weekly updates that highlight relevant news and events – covering over 150 spend categories across nine different portfolios. They also offer supplier profiles and specialized market research services. All of this is available through their intelligence portal that users of subscribing organizations can log in to whenever they like.

Typical contents of a market report included commodity definition, supply category description & context, category overview & background, demand update, supply base characteristics, key cost drivers, price changes, trends, forecasts, insights, and best practices. More-or-less everything you need to do to augment your sourcing processing with the information you need to develop the right strategy, target the right suppliers, and negotiate the right contract. Some also contain information on industry regulation, risk outlook, and market news, where appropriate. The report I reviewed, on distribution transformers, also analyzed the supply category in the context of Porter’s Five Forces Analysis and included interest rate forecasts.

This Market Intelligence offering is in addition to their SupplyStaff staffing and recruiting services that they use to help their clients hire full time employees and short-term and mid-term contractors as well as augment their staff on a temporary basis for specific projects. Unlike other staffing services, like their consultancy, they only focus on supply chain staffing and this is a big plus for firms who need more than just someone who’s been processing purchase orders for the last twenty years.

All-in-all, they’ve got a great sourcing process and you should definitely consider inviting them to the table next time you are looking to take your sourcing to the next level. They’re just aren’t that many boutiques out there that compete on their level. If you’re in manufacturing, you’ve also got providers like Aptium Global and ThreeCore, if you’re in a services industry, you’ve got the Provade (acquired by Smart ERP Solutions) solution, but if you need help across the board, you just don’t have many choices. I hope to highlight more as the year goes on, but when you consider the relatively small number of experienced senior sourcing professionals and the very large need for these people (whether your company recognizes this need or not), you know there aren’t that many.

CombineNet X: The Jay Reddy Interview

Those who know me (and those who have taken the time to read the about posts) know I worked at MindFlow where Jay Reddy was CEO for most of its existence and that I had my fair share (ok, more than fair share) of quarrels with Jay Reddy, but these were almost always centered around, or related to, technology development (selection, management, integration, people, etc.). However, on the sourcing side of the equation, especially from a strategic perspective, I have to admit Jay Reddy really knows his stuff – including where and how to best apply existing and emerging technology to solve your sourcing problems and improve your end results. (There is a big difference between knowing how to build technology and knowing how to use technology. I find that many great developers know the first, many great business minds know the second, but that very few people clearly see both sides of the picture.)

Thus, I would strongly encourage you to check out Parts I and II of Paul Martyn’s Jay Reddy Interview over on CombineNotes [WayBackMachine] for Jay’s insights.

Software-as-a-Service and the Need for Speed

RSAG Research recently released their first annual “Software-as-a-Service and the Need for Speed” Benchmark Report 2007-2008 that found that retailers are feeling the “need for speed” when it comes to delivering new IT-enabled capabilities. This desire is driven from both internal and external pressures; customers are demanding better service from retailers (particularly for multi-channel customer order management), while the internal IT department is challenged to keep up with demands both from within and outside the company.

RSAG classifies retailers as winners, average, and also-rans. Whereas 34% of respondents “don’t know” what the value of SaaS is to their companies,

winners, defined as retailers with sales above the industry average sales growth of three percent, only 19% of winners are unsure what the value of SaaS is to their organization, and 41% of winners have “moderate” or “high” expectations from SaaS implementations over the next two years.

There are additional, subtle differences in how winners view SaaS as an option. Whereas average and laggard companies view SaaS as a “Fix”-It solution to do more, do it faster, and do it for less, winners view the SaaS delivery model as a way to accelerate value. Winners are also more influenced by their desire to meet the needs of their customers and trading partners then they are by IT’s capabilities or the cost of systems acquisition and integration.

It’s nice to see that at least in one industry, the majority of “winners” are starting to see the value of the SaaS delivery model and how it can enable an organization in weeks or days, and not the months or years it often takes to install behind-the-firewall enterprise-wide solutions.

In addition to a lot of great statistics, the report offers some good bootstrap recommendations for finding candidate SaaS applications for companies in general.

  • Examine the IT backlog and pick a target application with relatively low risk but demonstrable value to start, remember that
  • ROI wins, and be sure to
  • ensure top-executive support.