Daily Archives: March 9, 2010

What Level of Procurement Performance Are You At?

Last week, Pierre Mitchell of The Hackett Group asked you if you knew the difference between procurement value and procurement performance (part I and part II) over on Spend Matters and invited you to participate in a study that would help you identify where you were on your procurement journey by way of 18 value streams that range from “naive apprentice”, where you’re measuring performance at an elementary level, to “expert sorcerer”, where you’re extracting procurement value at a very advanced level. (Pierre also posted a link to a corresponding finance study that will help Hackett compile a full view on the problem, which Pierre has promised to provide free insights into on Spend Matters in the weeks to come.)

If you haven’t taken the survey, as a serious supply management professional, I highly recommend that you do. I know that 30 to 45 minutes is a lot of time given how busy most of you are, but the 14 page survey is overflowing with more good information on what you might do to become “best in class” and much more informative than the last dozen tragic quadrants, graves, and research griefs that I’ve read from the “major” analyst firms. Organized around the 18 value streams that are designed to take a Procurement organization from “naive apprentice” to “strategic sourcerer”, it forces you to think about the core issues and will help you understand where you are in your Procurement journey and just how far there is to go. This, in turn, will prepare you for the forthcoming posts where I give you the value streams and explain why they are important. These posts will then be followed by more posts from Pierre that will summarize the major results, on Spend Matters, and, at a later date, provide his views on the results and a few of the best practices that might help get you started on your journey, here on Sourcing Innovation.

(For those of you thinking you can skip the survey and wait, I have two things to tell you. First, Hackett, which is the premiere benchmarking and strategic advisory firm in the space, doesn’t give away everything for free — at the very least you have to complete the survey if you want deep insights. Second, if you don’t take the survey and think about the questions with respect to the given alternatives, you’re not likely to fully understand the value propositions Pierre and I will be giving you. Just like you have to prepare your body for a marathon, you have to prepare your mind for knowledge.)

Stay tuned! Much more to come in the weeks ahead.

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The Gartner Tragic Quadrant for Strategic Sourcing Application Suites, Part II

As I noted in yesterday’s post, while the Quadrant wasn’t all bad, when you added up all the issues, it was more tragic than magic. And, despite the fact that one of my commenters may be right in the observation that it’s not worth the column-inches I’m going to use discussing it, I can’t let it go. Given the importance assigned to this report by the market space, which is equalled only by the Forrester Grave, I need to make sure you don’t misread any of the statements and base a bad decision on them. So, in this post, I’m going to continue taking the most important issues point by point.

Just Plain Wrong: The unique functionality needed to run reverse auctions is a differentiator between simplistic and enterprise-class strategic sourcing applications.
Correction: in 2001. Not in 2010. I can list over 30 providers of reverse auction solutions off the top of my head (and you can find many of them on the resource site). If it doesn’t have reverse auctions, it’s not a sourcing suite. Period. The real differentiator between simplistic and enterprise is true strategic sourcing decision optimization or an advanced analytics platform.

Crazy Talk: The market is far from mature enough to expect competing solutions to be technically comparable.
Correction: The strategic sourcing process has been well understood, and well documented, by the big consultancies since the early 90s. The core technology has been well documented and well understood since the early 00s. From a technology perspective, every sourcing cycle starts with spend analysis; moves to e-negotiation, which includes RFX, e-Auction, and Optimization (which is used to qualify suppliers, gather bids, and analyze them); and ends with contract (creation and) management. Execution generally includes SRM and Compliance, which tracks data used for supplier selection and evaluation in the next sourcing cycle. The basic requirements have been well documented for years. I even co-authored and edited a book that’s been available on Amazon.com, for two years, that anyone who wants to understand the baseline requirements of these solutions can get their hands on. (They can even get an e-version free through Iasta.) So while some of the newer/advanced features may not be directly comparable, most of the standard features are. (And if they weren’t, how could Gartner even author this paper?)

Out of Left Field: Most of the vendors in this report are privately held, and so we considered management turnover, job openings, press and financial filings in our rating of overall viability.
Correction: Viability is financial stability. That’s primarily average annual growth rate, size of customer base and (recurring) revenue, and customer turnover. It has nothing to do with press. And it’s not job openings, it’s employee turnover. If the company is growing, of course it’s going to have job openings!

Positive, not Negative: Company X does not run full-service, reverse auction events on behalf of customers.
Correction: This means that they understand that (a) auctions generally aren’t strategic and that (b) even if the market conditions are optimal for an auction, you’ll get the best result if you engage a category expert and not an auction technology expert. Thus, unless you have those category experts, when you consider that (c) an auction tool should be easy to use, you probably shouldn’t be offering full service events.

Irrelvancy: Sourcing solution lacks optimization functionality (in the description of multiple vendors)
Fact: Of the 14 vendors that made the report, only two have true strategic sourcing decision optimization that meet all of the criteria I outlined years ago in the wiki-paper. Most of the vendors don’t have any optimization functionality at all!

Irrelevancy: Spending analysis: This is a very new product with minimal automated classification capabilities. Most of the cleansing and matching are done manually.
Correction: How many times do I have to say it? It’s the Analysis, Stupid. Classification is not analysis. Cleansing is not Analysis. Matching is not Analysis. (And the right way to do it is to manually define the classification rules so that future refreshes don’t corrupt any data elements that you’ve already cleansed. If you’re using an automated system that uses another organization’s rule set, you’re just asking for trouble!)

Scary: Spending analysis scalability with references reporting analysis of millions of transactions (in the description of a vendor)
Correction: Most big companies have millions upon millions of transactions in their systems. Many have tens of millions, if not hundreds of millions or billions. How could you possibly claim to have an enterprise spend analysis system if you can’t analyze millions of transactions? Considering that BIQ can analyze up to 50M transactions in real time on your laptop with its desktop solution, shouldn’t a true enterprise spend analysis solution be able to handle a few hundred million transactions? (And, before I finish, the report is wrong in dismissing BIQ as a desktop only solution. BIQ also offers a client-server version, which can take advantage of as much server power as you have — and handle hundreds of millions of transactions in real-time if you have the computing power, a thin-client externally hosted web-application through WTS or Citrix, and one of it’s distributing partners is currently beta-testing a new front end creator for the viewer that is built on BIQs XML interface and runs through your browser).

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