Monthly Archives: February 2009

Software Acquisition Insider Tips, Part I

Don’t Get Blind-Sided by IT
How many times has this happened to you. You identify a new software program that will make your life easier and deliver ROI to your department, but just before you sign the deal, IT steps in, in a very public way, and says “we already have a product that can do that and we have lots of extra licenses“, even though the product doesn’t do what you need it to, doesn’t deliver ROI, and, to top it off, makes your life harder than it would be if you had no solution at all!

This doesn’t have to happen. Especially since you’re all on the same team and the only reason you want to buy the product is because it solves a problem that no other product in your arsenal does. To avoid this scenario, be sure to make your ROI case with the IT department first and get them on board. That way you can make sure that none of the solutions available solves your problem and present an even stronger case to management.

This will also address the slightly less common but still problematic “we can develop that for you and it will cost less and take less time than implementing yet another solution” when you know, based on past performance, that they damn well can’t because their skills are implementation, integration, maintenance, and support — not customized new supply chain management product development, which is an area they don’t have the requisite expertise in, to start. As any good software architect knows, many applications looks easy from the outside, but turn out to be much tougher to implement once you fully understand everything they must do in order to be useful. Then there’s all the effort it takes to “optimize” the code-base so that it’s as quick, efficient, and robust as possible. And let’s not forget QA, Beta Testing, and “tweaking” time. It all adds up. There’s a reason why the majority of internal development efforts fail, having wasted months of effort, accomplishing nothing, and wasting budget that should have been applied directly to an existing solution in the first place. (And if you can’t convince them, then you have time to bring in an outside consultant [like the doctor] who can evaluate the situation objectively and determine what the best solution is for your particular situation.)

Watch Out for the Big Lie
Some software vendors will lie and say “yes, we have that capability” even if they don’t have it at all and there are no plans to incorporate it in a future release, and many software vendors will give you a resounding “yes, we do” if they only have part of the capability, or have a similar capability that they believe is “close enough” to land the sale. And then, as per the urban legend, if you insist on it, they’ll price the missing feature really high in hopes that you will decide that you can’t afford it and / or don’t need it anyway. And they’re usually right (although I have heard of a few cases where the customer actually “bought it”; needless to say, those relationships didn’t go very well).

That’s not to say that you should not trust a vendor who claims they can produce a new feature they currently don’t have. Some can, and you have to give credit to any vendor who owns up to missing functionality and treats you honestly and fairly. But you should check them out before signing on the dotted line, as there is an easy way to assess the credibility of the claim. Ask them for a history of all new features added to the product over time, by release number and release date. If releases occur regularly, with significant new features being added every three to twelve months, they probably deserve the benefit of the doubt. However, if the change history looks suspiciously void of new functionality, especially over the past year or so, or if there haven’t been many changes or bug fixes, then the product is probably “walking dead”, and being phased out, and you should be skeptical of any claims of significant enhancement.

To understand why, you have to understand software developers and the nature of software. Software developers live to develop software. In fact, given the choice between a high paying, legacy support job and a low paying, exciting new development effort, the vast majority would choose the latter. As a result, when software isn’t under active development, key developers quickly move on to other projects, and often to other companies.

Furthermore, the nature of software is that the IP exists not in the code, but in the head of the developers who wrote it. Even though C++ (C, or C#) is a standardized language, and many programmers know it, the nature of a programming language is that there are many ways, often dozens, of accomplishing the same task and many acceptable programming styles. As a result, code is nowhere as easy to read as it is to write. And since your average enterprise software product will have hundreds of thousands, or millions, of lines of code, you can imagine how difficult it is for a new developer to lean an established code-base. It’s almost impossible for your average developer to learn the software well enough to add a significant new feature without breaking some key piece of functionality.

As a result, once software developers move on, so does most of the IP, and changes inevitably slow to a crawl. “New features” are reduced to minor bug fixes, eye candy, and cosmetic “enhancements” that add no new capability and mean nothing from an ROI perspective. A slick new user interface is just another form of “big lie”, and reviewers that avoid the hard-work of understanding the true value proposition of the product simply propagate the lie. (Unfortunately, some companies will get taken in by these cosmetic changes. I know of more than one situation where the vendor simply re-did all the application pages with a new color scheme and layout, and convinced the customer that the “new” application was “much better”, even though no new functionality was added. This happens in B2C software too. Take the Microsoft Ribbon, for example. There’s no value — all it does is eat your limited screen real estate and irritate those of us who know how to use a word processor. [There’s a reason the doctor moved to Mac and decided to stick with Office 2004.])

Bob Engel’s Ten Fundamental Strategies (for Supply Chain Success)

One of the presentations at the 6th Annual International Symposium on Supply Chain Management was a presentation by Bob Engel of Resources Global Professionals that summarized his 10 Fundamental Strategies for Exceeding in Supply Management. Although you’ve probably encountered all of these strategies before on this blog, they are worth repeating. They are:

  1. Establish a governing council
    Those companies that establish a governance council are the companies that excel.
  2. Align the supply chain organization
    The theme here is centralized consensus with decentralized execution, as this gives you the best of both worlds.
  3. Recruit supply chain professionals
    You need to focus on strategic thinking in both recruiting and incentivizing. For example, if you decide to base an employee’s bonus on the number of purchase orders cut, guess what’s going to happen? That’s right! Every item on Engineering’s Bill of Materials is going to become its own purchase order.
  4. Set the strategic sourcing strategy
    Strategic Sourcing is the cornerstone of Supply Chain Management.
    (And Spend Analysis and Decision Optimization are the cornerstones of Strategic Sourcing.)

  5. Establish key supplier alliances
    It’s not SRM … it’s Alliance Management, especially on strategic and complex categories. It’s a partnership (and that’s why we are finding that mutually accepted common scorecards work.)
  6. Manage total cost of ownership
    TCO needs to be the mindset.
    (At a minimum, if it’s a strategic or complex category, you should be focussed on TVM.)
  7. Manage compliance and risk
    Consider a recent Aberdeen Survey that asked the question “How do you manage your company’s contracts?” to 150 fortune 500 CXOs only to have 100 of these fortune 500 CXOs respond that “We can’t even find them, let alone manage them!” … that’s a problem! (Need a solution? E-mail the doctor <at> sourcinginnovation <dot> com.)
  8. Optimize company-owned inventory
    Remember, with an average holding cost of 20% to 48% per annum, inventory is money.
  9. Gather information on a timely basis
    Good data is timely data.
  10. Establish processes and controls
    And once you simplify processes and controls, so that they are easy to understand and execute, they key is to select complementary technologies that enable them! (And not the other way around!)

The Strategic Sourceror’s (Supply Chain) Anti-Trends

The Strategic Sourceror was first to the plate with a trio of home-run anti-trends for 2009.

  • Strategic Sourcing Outsourcing Finally Gets a Good Rap
    The Sourceror notes that even though the list of anti-outsourced strategic sourcing excuses (just like the list of excuses for why we don’t need no consultants) goes on and on and on, this is the year that people who just made a big investment in (e-)sourcing software realize that software alone is not enough and you need to balance the tools with the human expert techniques.
  • Networking Costs You That Job
    Every time the economy takes a bath in the crapper, every person and his dog comes out of the woodwork with a list of techniques for landing that next job, and networking is always at the top of the list. And this time, the media has outdone themselves and convinced people that “networking” means getting in touch with every single person you have ever heard of in your life and bombarding them with your resume and story … every single day. Now, while you should contact everyone who you honestly think could, and would try to, help you, and while you should be persistent in your job hunt … there’s persistence, and then there’s good old fashioned harassment. Go overboard, and you might just find that you’re the first person blackballed next time something opens up.
  • Hasta la Vista to the Fat Cats
    This post is just too good to every try to summarize.

Cut, Cut, Cut is Not a Strategy (for Supply Chain Cost Reduction)

Jim Tompkins (of Tompkins Associates), who gave one of the best presentations I’ve ever attended at last year’s SCL Conference on Creating a Resilient Supply Chain when he said that his top three tips to bold leadership success were:

  • Don’t Do Anything Stupid,
  • Focus, and
  • Kill the Left Suckers

recently contributed a great article to Supply Chain Brain on the riddle of supply chain cost reduction. In it, he notes that you should not simply “follow the leader” and cut [payroll], cut [advertising], cut [consulting], cut [strategic initiatives] like many (supposedly) “smart” companies are doing, because cutting is NOT a strategy that leads to success.
Across the board cuts, without understanding where your company’s real profitability lies, results in average performance at best and leaves your organization wide open to failure at worst (and gives you a failing grade on the doctor‘s Corporate Intelligence Rating).

The key to cost reduction is to break down your costs into

  1. capital and operating costs,
  2. talent costs, and
  3. strategic costs (for profit improvement initiatives)

and align your costs with your vision and model for success. When you do that, you see that category 1 costs are ripe with opportunities, category 2 costs need to be carefully analyzed, and category 3 costs need to be protected. Did you negotiate your lease during a boom? Is a multi-million dollar enterprise system contract nearing expiration? When was the last time you looked at your outsourcing / support agreements? Operating costs are ripe with opportunity! In comparison, talent costs are a different story. Although many companies are quick to ditch high cost talent, the reality is that doing so usually leaves them in a situation where they are unable to pursue million-dollar savings opportunities because they failed to realize that top talent was paid top dollar for a reason — they were the individuals capable of implementing strategic cost savings opportunities, which should be protected at all costs.

So how do you achieve true cost reduction? Jim recommends you take a holistic-view of your supply chain and focus on Buy-Make-Move-Store-Sell(-Right_Size-Outsource). Specifically, start with:

  • Buy Sourcing
  • Make Lean Manufacturing (Waste Reduction)
  • Move Internal and Domestic Transportation
  • Sore Distribution Centers
  • Sell Inventory Management
  • Right-Size IT Systems
  • Outsource Non-Core & Strategic Operations

And don’t forget to take advantage of the many service providers who are capable of helping you reduce your category 1 costs (often on a contingency / no up-front cost basis). As Jim points out, transportation costs, purchase costs, customs and duty costs, inventory carrying costs and distribution center costs are all very, very important expenses that in these difficult times need to be reduced, and you should do so aggressively and intelligently. The answer to the riddle is an integrated, holistic approach that increases profitability and puts your company in a stronger competitive position.

Great advice — and you can get more by reading reading the article and consulting the Tompkins Associates Publication Library.