Monthly Archives: January 2009

Help! I’m Out of Content! What Do I Do Now? (Part III)

Two weeks ago, not being able to imagine what it would be like to be out of content, I culled a top 15 list of ideas of what to do from my fellow bloggers. But they weren’t very entertaining, so last week I outlined ten great ideas that you could use to entertain your readership if you were truly out of content. But I left out my favorite idea — write a satirical, slightly sarcastic, self-deprecating tune. To illustrate this suggestion, I give you “Spend Content Free”.

The following lyrics are to the tune of Consequence Free by Great Big Sea. (Lyrics)

Wouldn’t it be great? No one would ever got offended.
Wouldn’t it be great to show there’s nothing on my mind!
I have always said ‘my blog posts are just space-filling,
And if I just said nothing, would that be such a crime?

I wanna be spend-content free.
I wanna be where nothing needs to matter.
I wanna be spend-content free.
And just write Na Na Na    Na Na Ne Na    Na Na

I could really use, to lose my vendor conscience.
Cuz I’m getting sick of telling the truth all the time!
I won’t abuse it, cuz I’ve got good intentions.
Just a little bit of gossiping, but not the hurting kind.

I wanna be spend-content free.
I wanna be where nothing needs to matter.
I wanna be spend-content free.
And just write Na Na Na    Na Na Ne Na    Na Na

I didn’t miss a wink last night,
cause I have nothing on my mind.
I’d like to post a thought sometimes,
but you know it’s not that easy.

I wanna be spend-content free.
I wanna be where nothing needs to matter.
I wanna be spend-content free.
And just write Na Na Na    Na Na Ne Na    Na Na

Wouldn’t it be great, if sponsorships never ended.
I could miss a post and I would never hear last check.
I wouldn’t need to worry about approval or commission,
I could – run off the track and never worry ’bout the rent.

I wanna be spend-content free.
I wanna be where nothing needs to matter.
I wanna be spend-content free.
And just write Na Na Na    Na Na Ne Na    Na Na

The Eightfold Way of B2B 3.0

Last August, I introduced you to B2B 3.0, which promises simplicity for all, in the inaugural Sourcing Innovation Illumination that also explained how B2B 3.0 was the first technology to enable true B2B e-Commerce which consists of simple, fast, low-cost transactions at true market prices. Then, in the follow up Illumination, I explained how B2B 3.0 simplifies B2B for suppliers and that this is revolutionary because simplifying B2B for suppliers enables buyers and lowers costs for all. Then I brought it back to basics and explained how B2B 3.0 elevated e-Procurement to a new level and finally delivered on the promise e-Procurement providers have been failing to deliver on for a decade in the third Illumination. I also penned posts that explain how B2B 3.0 solves the supplier enablement problem, how B2B 3.0 enables an agile supply chain, and how B2B 3.0 is the foundation of Integration-as-a-Service.

In short, I’ve given you a number of Illuminations and posts that describe B2B 3.0 and the benefits it brings but I have not yet given you a post that outlines the essential requirements of a B2B 3.0 technology … until today. In this post I will describe the eight requirements of a B2B 3.0 technology, illustrated with examples from companies that offer B2B 3.0 solutions, and explain why they are important. Just as I gave you the absolute requirements of a true strategic sourcing decision optimization solution in the wiki-paper, these will forever be the absolute requirements of any B2B 3.0 solution.

1 User-Driven
Self service capability, consumer-like usability, and no training required.
Like Coupa‘s On-Demand e-Procurement platform which, based on open-source, was the first platform to truly bring e-Procurement to the masses. (For more information, see Coupa Cabana Cafe Open for Business, The Coupa Sunflower Starts to Blossom, and The Sourcing Maniacs 2008 Vendor Tour.)

2 Content-Driven
The solution is structured around the content which is at least as important as the functionality.

Like Vinimaya‘s B2B Search engine that helps companies create “virtual Internet supplier networks” where they can view products AND prices from different suppliers off of the supplier’s own websites side-by-side in real-time. (For more information, see The Next Wave in PCM, The B2B Search Engine, and The Sourcing Maniacs 2008 Vendor Tour.)

3 Community-Driven
The solution enables and simplifies collaboration among the user community.

Like Aravo‘s Supplier Information Management platform that centralizes all supplier information in an organization, allows everyone (with rights) in the buying organization and the supplier organization to access and maintain it in a collaborative fashion, and allows buyers to define initiatives, such as sustainability, based on the information. (For more information, see The Arrival, Supplier Information Management, and The Sourcing Maniacs 2008 Vendor Tour.)

4 Knowledge-Driven
The solution is capable of self-perpetuating improvements.

Like Apriori‘s Virtual Product Environments that allow users in the buying and supplying organization to collaboratively model and improve the VPE as time progresses to accurately monitor the capabilities of the supplier, market prices for raw materials, and overhead costs. (For more information, see The Introduction and The Sourcing Maniacs 2008 Vendor Tour.)

5 Distributed
Users, content, and functionality can be shared across the community which can accomplish tasks in pieces.

Like‘s new marketplaces that allow users to locate suppliers, use and refine standard part RFQs, share feedback, and come together to discuss issues in forums. (For more information, see A Community in the Making, Exploding onto the Scene, and The Sourcing Maniacs 2008 Vendor Tour.)

6 Internet-Centric
The solution is designed to leverage the connectivity, content and community of the Internet with no redundancies.

Like Arena‘s PLM Solution which is built on the core internet protocols, employs an advanced security model that allows you to control access down to the IP address, supports a wide array of standard data formats, includes an ever-growing library of on-line training about PLM and the Arena solution, and allows buyers and suppliers to interact, securely, through the same platform. (For more information, see The Introduction.)

7 Services Architecture
The solution can be extended, augmented, and integrated with other service-oriented solutions quickly and easily.

Like Co-exprise‘s Direct Sourcing Platform that was built from the ground-up to leverage the interent and all of the inherent capabilities it has to offer, to support and interact with over 1500 file formats, and to plug-in to standard office and manufacturing applications. (For more information, see Kick-Ass Direct PLM Sourcing Part II, Sourcing Lifecycle Management II, and The Sourcing Manaics 2008 Vendor Tour.)

8 Innovative
The technology goes beyond the “same old, same old” and the provider is constantly innovating to make it better.

Like BIQ‘s industry-leading data analytics that goes so far beyond your average “spend analysis” solution that it doesn’t even fit in the same category anymore. As many cubes as you want – which can be built on transaction sets of up to ten million transactions in a few minutes of real-time on your laptop. Dynamic(ally derived) dimensions. Built-in statistical analysis and measures. Schneiderman diagrams and innovative tree-maps. Etc. (For more information, see New Horizons I, New Horizons II, and The Sourcing Manaics 2008 Vendor Tour.)

A Great Guide to Outsourcing Risk Management, Part V

In Part I we discussed the starting point of your outsourcing project and how you go about selecting service providers to issue RFPs to. In Part II we discussed proposal evaluation and in Part III we discussed the dispute resolution process that needs to be addressed up-front in the contract. Then in Part IV we discussed the service level agreement. Today we will discuss what you do after the deal is signed, and remind you to check out the full series on outsourcing risk management by Alsbridge, as printed by, that the first four parts of this series is partially based on as well as 4 dimensions to managing your service provider that today’s post is partially based on.

Now That The Deal Is Signed, What Do You Do Next?

You manage the relationship. It’s important to remember that risk management is a continual process of planning, monitoring and control that will last the lifetime of the project. It might seem intuitive, but a lot of companies believe that once the deal is signed, it’s the vendors problem. It’s the vendor’s responsibility, but it’s still your problem as it’s still your liability. You’re the one that can be fined and imprisoned under SOX (like poor old Fox) if you file incorrect financial statements, fined and imprisoned under IEEPA if you buy or sell the wrong kind of product from or to a denied party, and fined or imprisoned under a host of other import and export control and financial acts.

An outsourced function requires continual oversight and change management. There should be weekly oversight meetings between project managers and immediate escalation of any issues that can’t be amicably resolved within the allowed time-frames, and issues should be primarily identified on an exception basis. The meetings should only focus on issues and yellow and red-light metrics — anything green and going well doesn’t need to be discussed. In addition, all information on issues to be discussed should be made available on the corporate intranet well in advance of any meeting so that all parties can be briefed on the issue before hand and the meeting can focus simply on resolution.

After Months and Months of Work, Your Outsourcing Project Finally Hit ROI. Now What?

You keep monitoring, you keep managing, and, more importantly, you look for ways to improve the initiative. You didn’t spend weeks defining and negotiating that iron-clad contract with extensive SLAs, Change Management Provisions, and Staged Milestones for nothing. You put all that effort in up-front so that you could continue to extract better and better returns on the back-end. So look for areas of improvement, streamline the processes, and move it forward.

So How Do You Manage the Relationship?

Carefully. The first thing to remember is that vendors work for other people’s shareholders. To gain the payoff while minimizing costs and risks, vendors must be carefully managed, otherwise the full ROI will never materialize. The next thing to remember is that vendors feel they are getting paid to deliver results as fast as possible, not to manage the life-cycle their work product is part of. Some vendors are more than willing to sacrifice quality for “quick results”, especially if they believe they are only being paid for the latter or that they won’t be around to deal with the eventual consequences of cutting corners.

It takes a lot of time to manage outsourcing. In addition to the usual technical guidance, you also have to manage the HR issues. Not only might you find yourself in the position where you have to hound them to fill vacanacies, but you might have to pressure them to replace staff if the staff they assign you aren’t good enough. Then you need project manager buffers to keep the more aggresive service providers at bay who will be all over you to outsource even more activities or start new projects. And your compliance and legal staff will have to constantly monitor their performance with respect to the contract to make sure that they are holding up their end of the agreement. The reality is that everything you were monitoring before still has to be monitored, and probably has to be monitored more regularly. Plus, you will need to review their performance on a regular basis against every function they are doing for you. That’s why you only outsource functions that have associated economies of scale. For example, invoice processing in a mid-size or larger organization that requires ten or more staff to process the invoices is a good candidate. Invoice processing in an organization that only keeps three full time staff busy is not, because they’ll still need to retain one or two people to monitor throughput and handle exceptions and you want the cost of the monitoring resources the organization needs to maintain to be less than the savings obtained from outsourcing the function.

Essentially, for each function you outsource, you need to retain at least one person internally who did that function to monitor the perfomrance of the service provider and help resolve issues as they arise. And then they have to pass on any issues that go unresolved for more than a minimal amount of time to the project manager to get resolved at the next meeting. Outsourcing can pay off where there are economies of scale to be had, but only if you remember to monitor it carefully and help the vendor improve their performance year-over-year and quarter-over-quarter. Otherwise, you’re better off just hiring more people internally to tackle more strategic sourcing projects and increase your savings that way.

A Great Guide to Outsourcing Risk Management, Part IV

In Part I we discussed the starting point of your outsourcing project and how you go about selecting service providers to issue RFPs to. In Part II we discussed proposal evaluation and in Part III we discussed the dispute resolution process that needs to be addressed up-front in the contract. Today we will discuss the service level agreements, and remind you to check out the full series on outsourcing risk management by Alsbridge, as printed by, that this series is partially based on.

So What Do You Need With Respect to Service Level Agreements?

Vague, optimistic promises of a happy life together may work for some personal relationships, but they don’t work between two companies. Creating a well-defined SLA to define your organization’s needs and expectations has many benefits, including the:

  • provision of a common understanding of exactly what service is being provided (how, when, where, when, by whom, etc.)
  • definition of common realistic expectations
  • simplification of complex issues by focussing on what is important
  • reduction of conflict by eliminating what’s not important
  • clarification of the bonuses for exceeding SLAs and the ramifications for failing to meet delivery requirements
  • framework for later modification and improvement as the need arises

When deciding what to measure, remember that you shouldn’t measure anything that shouldn’t be quantified. For example, use phrases like “99.99% uptime” not “make our customers happy”. The first is objective and a measurement can be clearly defined. The second is subjective, and there’s no way to objectively measure it. Response time is important, but instead of saying “respond rapidly to customer inquiries”, define a maximum hold time of 10 minutes and then you can define a penalty metric if more than five calls per week exceed the maximum hold time.

Also be sure to clarify your responsibilities and the support a provider requires to meet their metrics. For example, if they are expected to investigate any issues that arise relating to the integration of their external systems with your internal systems, you must ensure that they have the right level of access at all times. Otherwise, they can’t be held responsible for missed delivery targets.

And make sure the number of metrics tracked is reasonable. Too few, and you can’t really measure how well the provider is operating (or define penalty clauses if more than a certain percentage of the metrics are missed in an evaluation period, since 20% of the metrics will always be missed every time the provider misses 1 metric if you only track 5). Too many, and the bookkeeping requirements are too costly and onerous for both parties. Somewhere between 10 and 20 is usually just fine if you focus on the right metrics. (And if you’re not sure what metrics to select to diagnose a sick patient, call the doctor.)

Finally, don’t forget that you need a baseline period. Typically, the first quarter is used to define a baseline and the provider is then measured starting in month four. (It typically takes two months of “transition period” where control is shifted to the provider and the “kinks” are worked out before you can extract a solid baseline in month three.)

When it comes to defining bonuses and penalties, you need to be somewhere between a new mug and a vacation in Hawaii for the former and somewhere between a slap on the wrist and the electric chair for the latter. Bonuses that are too trivial won’t entice the provider to step up their game, but bonuses that are too extravagant will end up costing you dearly as the provider will go out of their way to insure they do everything in their power for free money. Similarly, if all the provider gets is a slap on the wrist, they’re not going to care whether or not they hit a performance target or not. But if you threaten the electric char, if the provider even signs the agreement, you can be sure the fees for the service level guarantees will be exorbitant as they will have to build in a financial safety net. Be fair, and you’ll get the best possible deal.

In the next, and final part, of this series, we’ll talk about what you do after the contract is signed.

Dead Company VI: New SI Offerings

As my fellow blogger astutely pointed out last week in what is by far the best rant he’s ever penned, supply and spend management companies are approaching the recession in one of two ways. The minority camp is taking the correct approach and aggressively ramping their marketing, human capital acquisition, and new product development efforts — seizing the unprecedented opportunity the recession provides to a company that can actually save its customers money and deliver rapid ROI. However, the majority camp is taking the exact-opposite dead-wrong approach and bunkering down until the downturn is over. They’re razing marketing to the ground, aggressively slashing headcount starting with the highest paid (and, often, the best performing) employees, and killing all new product development. As I explained in Part II why you’re not going to last if you’re hoarding cash, they’re digging their own graves.

When you cut marketing, you cut visibility. As a result, the pipeline starts to shrink and before you know it, your sales people are wasting 90% of their time doing cold-calls, desperately trying to find the smart minority who are salivating for the type of product you are offering. Even worse, by the time they’ve identified a customer, there’s a good chance the customer, anxious to see savings and ROI in this economy, has selected a competitor’s solution, because that was the only one they were aware of.

When you cut talent, you cut capability. In a technology-based offering, your biggest asset, and most valuable offering, is your people. Technology advances rapidly, and anything you build can usually be copied AND improved upon by a new start-up rather quickly. Customers look for providers who can help them. Customers look for providers who have done this before. Customers look for providers who understand where the market is going and who are actively working on solution enhancements that will meet their future needs. Those capabilities lie in your people, not your platform. Furthermore, when your competitors are shedding talent, this is the best opportunity to acquire talent, because it won’t cost you thousands of dollars in recruiter fees, signing bonuses, and raises to acquire them. Top performers want to perform. They want to work. All you have to do to attract them is to match their most recent salary and give them a challenge, and they’ll start tomorrow. (Alternatively, you can wait until the next upswing and then try to lure them from a competitor … but it will cost you a lot more to do so, even if you’re successful).

When you cut new product development, you give away your edge. Smart customers — precisely the customers who are buying in this market — know that it usually takes at least a year to bring a new kick-ass product to market, by the time you get through design, market need verification, initial development, alpha testing, tweaking, beta testing, and release. They know that any company not actively developing the next version or next solution now will not have what they need next year when the market moves forward. And smart competitors won’t want to be left behind. As a result, even a weaker competitor who is actively working on solution improvement will look much better to them than you. And you’ll lose more sales.

But if you’ve been paying attention, you know all this. And the reason you’re not spending is because, as my fellow blogger pointed out in his rant, and as I have come to understand, your venture capitalists have lumped you together with the rest of their underperforming portfolio because they don’t understand that downturns are precisely when sourcing and procurement firms shine. They see the rest of their Web 2.0 portfolio flailing (as it should, because, unlike B2B 3.0, Web 2.0 offers no value in the B2B maretplace) and therefore they assume that you will start flailing, too. They cannot differentiate value-add technology from valueless technology.

So, to help you convince your VCs otherwise, I’ve decided to offer three new services.

VC-ED Service #1: Why <Your Company Here> is The Future
Cost: $7,500 plus expenses
I’ll spend one day reviewing your product and solution offerings, one day on a marketplace competitive analysis, and one to two days putting together a customized 1-2 hour presentation explaining why your VC firms need to invest in you now, backed up with a full report on your uniqueness and market opportunity, and I’ll deliver the report in person at your (North American or Western European) Headquarters.

VC-ED Service #2: The Time for Procurement/Sourcing/Supply Management is Now
Cost: $500 plus expenses
I’ll join you in a one hour conference call as an independent market expert while you attempt to explain that your opportunity is now and that, if you miss it, you may not be around long enough to experience another. (And if you like, I’ll explain why I think anyone who doesn’t invest in the opportunity now is missing the boat. As you’ve probably figured out by now, I have no problem being passionate on this point.)

VC-ED Service #3: Pre-paid Corporate Obituaries
Cost: $1,000
OK, so this is my little joke. Nevertheless, if marketing, consulting, and headcount has been slashed across the board, you probably don’t have $7,500 lying around for VCED Service #1 (really just a light-weight version of my Total Solution Assessment, as described in What Does the doctor Do … For You). There’s also a good chance that your board is not interested in hearing any viewpoints that contradict their own views, so while you might be able to raise the $500 for option 2, you probably won’t get any commitment of their time. Thus, I am offering a pre-paid corporate obituary, because there’s a good chance that the VC’s “cash saving initiative” won’t allow you to hold out long enough for revenue to start flowing again*. However, you deserve to be remembered in style — hence, my pre-paid corporate obituary service. I will do an in-depth post on SI (and archive it on the resource site) covering your solution offerings, their value, and why you will be sorely missed if your doors close forever. You are free to use this material when you try to fire-sale your company, and maybe, just maybe, there’ll be one last lifeline from a smart VC firm who’ll see the value you have to offer.

*It will be at least a year from the time the VCs allow cash to flow again before sales pipelines, new product development, and new hires get on track. Since the recession will last at least a year, if not two; since it will be six months after that before the ultra-conservatives in the VC firms let cash flow again; and since most VC-backed companies in this space don’t have much more than a year or two of cash in the bank, there’s a strong chance that many companies just won’t make it.