In our last post, we said there is no such thing as Savings-as-a-Service and any organization promising to deliver it (with the exception of the big provider recently valued at 1B) is making a promise they likely won’t keep. The majority of organizations that jump on this new acronym with grandiose claims of SaaS delivery will not meet up to expectations, and many will not deliver any savings at all.
The reason being is that a company is not delivering savings unless they are either delivering a product or service below market average price or delivering a product or service at market average but at a higher value than would normally be obtained (either through enhanced quality, reliability, features, knowledge, etc.). After all, anyone can go to Amazon, Staples, Office Depot, eBay, etc. and figure out a rough market average and get that price if they want to.
For a company to deliver savings, they need to (have a platform that):
- know what the market average is for a commodity or service, and always provide options that are less or the same with additional value beyond the market norm (which means they need a modern catalog platform)
- have a way of collecting quotes and bids from potential suppliers that can be compared in a normalized, weighted, apples to apples fashion (which means they need a modern e-Sourcing platform with strong e-Negotiation support capability)
- have a services team to handle the negotiations and the contract process to make sure that what gets offered gets agreed to
- have a platform capable of managing the PO, invoice, and goods receipt process (and m-way matching) to make sure that the right products are ordered at the right price, that only invoices at the right price are accepted, and that payments are only made for goods and services received (which means they need a modern e-Procurement platform with strong e-Document management capability)
- have a platform capable of tracking obligations and supplier performance (to make sure that deliver is on time, quality is up to snuff, etc.) and handling any corrective actions that are needed and supplier development that can improve overall value (which means that a strong SRM platform is needed as well)
- and have the expertise in the appropriate categories relevant to your business! An engineer from the direct materials world probably know squat about contingent lab or procurement or marketing agency management, which could be where a considerable portion of your unmanaged spend is.
How many providers have a full featured S2P platform with enhanced e-Catalog and SRM functionality, budget integration, analytics that support normalized year-over-year spend reporting, services professionals to support all of this as a true SaaS (Software as a Service) platform *and* the expertise to support the categories you need supported?
The answer is: relative to the number of providers in the Supply Management space, very few. Only this handful of companies can claim that they can deliver Savings-as-a-Service. And, fair warning, their services will come with a hefty price tag. (This is not to say that the price tag will not be worth it, especially since there are providers that can consistently deliver a 5x to 10x ROI year after year, but that you need to be prepared for the price tag up front and willing to work with them and follow their lead in order to realize the savings.)
Because it sounds so awesome, expect a number of companies to jump on this new SaaS acronym, and expect most of them to be stretching the truth at least a little (if not a lot). Do your due diligence and find out what it is they really deliver and what will be expected of your team to realize the ROI they are promising. Then figure out if your team is up to the challenge, can be with training, need (temporary) (GPO) (expert) augmentation, or need a services provider to simply take over part of the Procurement in an outsourcing relationship until they can be brought up to the level (and manpower) needed to realize the ROI themselves.
Everybody wants savings, but simply not paying more than you have to under normal circumstances is not saving, it’s just avoiding clearly unnecessary cost. Savings is going below the baseline, and to realize that, you need a provider that can actually help your organization achieve that consistently across categories.