Monthly Archives: February 2012

If Your Supply Management Vendor Gets Acquired, Is It A Good Thing?

Over on Software and Services Safari, Brian Sommer recently asked about Cloud Software Consolidation — Is It All Good? It’s a fair question, as there has been a lot of consolidation in this space, between SaaS/Cloud and non-SaaS/Cloud vendors alike, and a lot more is still rumoured.

The companies will always spin it as a good thing, and if the acquisition happens, chances are that the investors (that control the Board of Directors), think it is a good thing, but that doesn’t necessarily mean it is a good thing from an existing customer point of view. As Brian notes, investors are looking for deal synergies, up-sell or cross-sell opportunities, cost reductions/efficiencies, etc. and customers want to know if the product will be around several more years, whether the product will get enhanced over time and what happens to customer support. And the problem is that these two sets of goals are often incompatible.

What usually happens is:

1. Existing Customers Get the Short End of the Stick.
For example, they will be promised new, different, technical architectures that may make some of their prior integration efforts no longer valid.

2. The Acquired Product Often Gets Slated to be Decommissioned.
And the customer has to migrate or lose access to functionality entirely. (And if the innovative start up was bought by the lumbering gorilla, functionality will typically be lost.)

3. The Acquired Product Is Frozen in Time.
It may be supported for the length of time in the newest customer’s original contract, but forget about improvements. The existing customers will be lucky to get bug fixes.

4. Prices Increase
After all, the new company, which probably has a higher overhead, has to make a profit after spending all that dough on the acquisition!

5. But Vendors Still Create Incredible Works of Fiction to Explain How the Products Will Be Rationalized Into Their Product Line.
Which are too amazing to explain in a few short words!

And, most importantly, no one ever discusses the real economics of the transaction and why it was driven in the first place. And Brian does a great job of summarizing what typically drives these deals in Cloud Software Consolidation — Is It All Good? the doctor strongly recommends that you give this post a read. It is worth your time!

Legal Sourcing Requires A Legal Mind

Or at least an understanding of the legal mind! Sourcing Innovation occasionally covers Legal Sourcing, which is one of the sacred cows in many organizations. However, as the doctor has more expertise in Sourcing Technology than in Legal Sourcing, not very often. Thus, when the doctor sees a great article on Legal Sourcing, he points it out.

Last week, over on Spend Matters, he saw such a great article. Cyndi Joiner’s guest post on how you should Be Smart When Sourcing Legal is just such an article. You have to do your homework before approaching Legal, because they always do theirs, you have to understand the landscape, and you have to have a strategy. Cases are built on strategy, and firms that might need to argue those cases are selected on strategy, and if Supply Management does not have a strategy, Supply Management will be shown the front of the door before they even get into Legal’s office.

But if Supply Management has a strategy, they will not only be able to work their way into Legal’s offices, but earn their trust. And when they work with legal to execute strategic sourcing, they will not only get the sacred cow under control, but they will see spend leveraged across the enterprise, standardized rates, documented processes for engaging preferred firms for service, improved billing, and complete transparency and visibility into legal spend. And a sustainable savings average of 7-10%, or more, will be achieved.

To find out how your organization can achieve these savings, check out Cyndi Joiner’s guest post on Be Smart When Sourcing Legal over on Spend Matters.

Apologies to the Faithful, but Optimized Planning is Good, not God!

Last Tuesday, Trevor Miles published a great post over on the the 21st Century Supply Chain blog on how Optimized Planning is Good, not God!. This cannot be understated. Too many companies think that a great plan is the key to unlock the treasure chest that contains the much sought-after savings. It’s the key alright, but you have to fit it in the lock if you want to unlock the treasure chest. And the only way one gets to fit the key in the lock is if one actually reaches the treasure chest, and this requires control. You see, this treasure chest of savings sits on a pedestal at the end of a dark and dangerous dungeon filled with traps, treacherous descents, and natural horrors at every turn. Think of every dungeon and tomb that Indiana Jones had to survive, put them all together, and add in a few dozen more traps and that’s the danger an organization has to evade on a daily basis if it wants to reach the treasurer chest.

As such, an organization requires a lot of control in the form of integrated monitoring and control. At every turn, an organization has to look ahead to see what traps may lie in its path, look back to see what creatures are coming up behind it, and be aware of the foundations crumbling beneath its plan and react quickly, and correctly. The reasons this are the case is simple — nothing every goes according to plan (even if you are the A-Team as you always have to deal with the unexpected wrench to complete the plan) and even if it did, the plan is never right anyway.

Consider the quoted study from Terra Technology that shows that an average forecast is typically no more than 52% accurate. This means that even if the supply forecast was perfect, it would still be, at most, 52% accurate. That’s why an organization has to continuously monitor the plan, and as soon as significant variances arise, respond by re-optimizing the plan. That’s the only way to reach the treasure chest of savings that optimization promises. Otherwise, the savings will never materialize as they were calculated with respect to a plan that was never executed.

So check out Trevor’s post over on the the 21st Century Supply Chain blog on how Optimized Planning is Good, not God!. It’s a great read!