Monthly Archives: November 2023

Ardent Partners Steps Up Its Game — But Will the CPOs Rise Up?

Unless you’ve been under a rock for the past ten days you will have noticed that Ardent Partners — a research firm that has traditionally focussed on Contract Management, Accounts Payables/Invoice Management/e-Payables, Contingent Workforce, and CPO Advisory — stepped up their game when they hired Magnus Bergfors as VP of Research. Magnus, a former Gartner and Spend Matters analyst, possesses deep expertise on the Source-to-Contract side of the S2P equation, especially around Strategic Sourcing, Supplier Management, and the front-end of e-Procurement. With the addition of Magnus, Ardent Partners can now truly cover the Source-to-Pay spectrum.

Even though they only have three (3) senior analysts, at the very least, given the slew of departures over the past few years from the top firms, Ardent Partners can now attempt to go head-to-head with these firms in confidence and possibly be more valuable to their clients than those firms. While the doctor doesn’t expect that they will be able to introduce a new market map (or even want to try given the technology dominance of the Spend Matters map), as every up-and-coming market firm is want to do these days, he does expect that, given the vast network of CPOs they have built up, Magnus will be able to draw out some fairly interesting insights from that group. Likely deep insight into the typical technology landscape, average Procurement department proficiency, key concerns of today’s CPOs, and so on.

But the question is, how will Ardent Partners make use of that knowledge, how will their clients, and what will Magnus do to disrupt the space in his new role? the doctor will be watching.  In the mean time, the doctor suggests keeping an eye on Magnificent Magnus Mondays for some hints into what might be coming.

Finance and Procurement Need to Collaborate, but Sometimes the Relationship Needs to go Beyond the Financial Viewpoint

A recent article over on Financial Executives on Why Finance and Procurement Need to Collaborate For Success made some very good points …

The article in question, which noted that how companies approach expense management will become a top priority with the economy heading into uncertain times summarized an interview with Matthew Smith, CFO & CoFounder of finetune, a full service expense management firm focussed on select complex categories (such as uniform rental, waste & recycling, pest control, energy & utilities, and security) for large clients. In addition to the baseline assessment, sourcing, implementation, and ongoing management (which many BuyDesk operations will do), they also do regular auditing, which is key to ensuring you get what you pay for because, as Matthew said, where the rubber meets the road in expense management is what happens after the contract is signed.

Matthew believes that expense management does need to be its own thing and that there has to be a coordinating element between the affected functions, which always includes Procurement (which is responsible for placing the order and managing the contract) and Finance (for paying the bill) and then the department(s) that are using the goods or services being procured. Especially since the vendors will give up a lot in the negotiations, and then do their best to get it all back through change orders and off contract-purchases of items not covered under the contract. In addition, analytics is becoming critical, but most organizations have bad data. However, without the necessary expertise, the data won’t be clean and the right calculations can’t be done. Procurement can identify the good data and Finance can identify the key analysis that needs to be done. (Not ChatGPT, which is hallucinating and getting all those bad answers and producing false information. Matthew’s words, but the doctor couldn’t agree more.) Furthermore, without a good understanding of the entire situation from multiple sides, you don’t know when incentive are good or bad.

Expense management is a key area where Finance and Procurement needs to collaborate because it takes both departments to prevent overspend, and the article was a really great deep dive in this respect, but it’s not the only area. Working capital management is also key. Managing expenses is a great start, but the goal should be improved working capital management. If both departments work together, and with other organizational departments, to appropriately predict demand and utilization, and optimize payment terms, then the organization can do accurate cash-flow forecasting and working capital can be optimized. And that can truly only happen when both departments collaborate.

A CPO Leading a Spend Management Strategy is a Key to Organizational Success

Not that long ago, the doctor gave you THE SIGN that you need a CPO which, directly put, was that your organizational spend was over 10 Million a year. No ifs, ands, or buts about it! Not long after, he found this article over on CXOtoday.com which pointed out that empowering business success was The Art of Mastering Spend Management. This article stated that companies should consider implementing a spend management strategy, regardless of their size and it made him happy (even though the article looks like it was written by a junior copy-editor* who just cut and paste standard spend management summary sentences from generic spend management publications as it was not very deep or specific) because CXOs need to hear this at a high level over and over and over again until they get it. (Note that the doctor doesn’t get happy often. Most articles just make him angry. Sometimes very angry, especially when the conscientious invoke their right to dare to be stupid and embrace artificial idiocy, but that’s a rant for another day.)

The article starts off by clearly stating that a spend management strategy plays a vital role in today’s economic reality as it enables companies to control costs, boost financial efficiency, and make informed decisions. It ensures resource optimization, agility, and long-term stability, enhancing competitiveness and adaptability in a rapidly changing business landscape.

This is most certainly true. And all one has to do to see that it is true, and it would have been so much better if the article said this, is remember the first formula they teach you in business school:
Profit = Revenue – Expense

Since Spend Management allows you to minimize expenses, this helps you maximize profit. And when you consider that
Margin = Sale Price – COGS      and that
Margin % = (Sale Price – COGS) / Sale Price      and that
Margin % for most industries <= 10%

This says that every $1 saved in expense generates at least as much profit as every $10 increase in sales. As a result, spend management is at least ten times as effective as sales or marketing and key to get a grip on early, even before you can afford the full time CPO. The CFO and COO should develop best practices for any decisions that result in spending, monitor the decisions, ensure corrections are made (and employees [re-]trained) when mistakes are made, and baselines generated for all recurring costs. Even though they might not realize the same level of success as an experienced and dedicated CPO, the baselines they generate and the knowledge they capture will be key when the CPO starts as the knowledge will allow them to dive in quickly and find near-term and mid-term opportunities for improvement (and cost reduction) and the benchmarks will allow them to not only prove it, but ensure that all bids received are competitive.

The only thing we want to note is that the important aspects of spend management, especially for smaller organizations, are:

  • strategy,
  • process (that implements the strategy), and
  • governance (that ensures the process is followed and the strategy implemented)

Technology is not critical (or even necessary), and only technology that supports the process (and collects the appropriate data) should be implemented.

This is important to note because this article is sponsored by a particular vendor in an effort to promote a particular product (which is only good for T&E spend, not all organizational spend) and you don’t necessarily need that technology (or any other instance of that technology) to have a spend management strategy and do proper spend management, especially if you are a smaller organization. (However, larger organizations do need good T&E spend management, and spend analysis, because flowers should not be $5,000 unless it’s a greenhouse.)

* but what should one expect considering it was sponsored by SAP to promote SAP Concur (and routed through their PR Agency)?

Do you want to get analytics and AI right? Don’t hire a F6ckW@d from a Big X!

Note the Sourcing Innovation Editorial Disclaimers and note this is a very opinionated rant!  Your mileage will vary!  (And not about any firm in particular.)

Now, I’m going to upset a lot of people with this, but I don’t care because the linked article below is literally the best article I ever read on why you should NOT hire F6ckW@ds from Big X (or any other) Consulting Firms who claim to be analytics and AI experts when they don’t actually know

  • the difference between a mathematical formula to calculate the center of gravity of a falling object and to calculate the median spend in a category
  • proper software architecture
  • proper compute resource allocation
  • your business
  • the difference between real ML technology, RPA and a few formulas, and the current Gen-“AI” where the “AI” stands for artificial idiocy

because

  • you’ll spend 3 years and millions of dollars to implement something that should take 3 to 6 months
  • you’ll spend hundreds of thousands on big vendor software licenses you don’t need
  • you’ll spend hundreds of thousands on compute power you don’t need

After all, these guys and gals get paid by the hour and the commission on the resell license is a percentage of the total price they convince you to pay for it. So, the longer the project takes and the more licenses and compute power they sell …

Read the linked article. Twice. And then tape it up to your fridge. The situation described in the article is NOT the exception. As a former CTO and 25 year consultant/analyst, I know this is the norm!


I Accidentally Saved Half A Million Dollars
 

Now, if you’re wondering how to tell who is a F6ckW@d and who’s not when it comes to analytics and AI at the Big X, I’m sorry to say that it’s not so easy (especially when it only takes a few bad apples to spoil the bunch, and while the good firms will do mandatory pruning of the consulting tree annually to weed those bad apples out, you don’t want to be the unlucky client who gets one on your project) .

It used to be if they were there for more than a year or two, their was a possibility that they were, or at least not as good as they claimed to be,  that especially if they were junior, right out off school, no real experience. This was because, first of all, tech talent wants to go either to the big glorious tech firms (Alphabet, Meta, etc.) or the wild-west startup frontier, and big consultancies were the backup until they got enough talent to move on.

Thus, the real talent in tech and analytics, who didn’t get promoted quickly in the Big X, usually didn’t stay long before they moved on to specialist firms where they felt they were more respected, higher up, could control the projects, and, more importantly, being higher up, were higher paid.

(Tech/Analytics people take pride in their work [and not their title], and seek the job that gives them the most pride.  Also, even though good tech/analytics people won’t contradict managers because they want to be important, and will only contradict managers because they want the job done right, the reality is that junior people or new hires in big firms often have the impression that this is discouraged in a larger firm [even if it’s not] where you are supposed to learn from and follow your manager’s lead because you don’t see the big picture and may not speak up on the way a project is being approached when they are unsure.  They might be wrong, and should stay quiet, but they don’t learn if they don’t ask.)

However, now that all the big firms are acquiring mid-market experts, with some of the Big X acquiring 3 or 4 specialist plays in analytics and AI over the past couple of years, it’s much harder to differentiate if you are getting the best talent or not.  You have to vet every candidate.  Not the Big X.  YOU!

And you need to remember that some of this AI and analytics stuff is literally so complicated that you need degrees in mathematics and computer science and sometimes a decade of experience to get it right! (It took the doctor two advanced degrees and building advanced analytics and optimization systems for multiple leading companies in the 2000s before he really understood the art of the possible and, more importantly, what was relevant for an industry and what was not.)

In other words, it’s okay if you don’t really get it as a manager. Just find those one or two people who do who you can trust, pay them well, and let them do what they need to make your department look good (be it hire internally, choose a consulting firm you never heard of, hire former colleagues on short-term contracts, use their contacts to get the right person at the Big X, etc.).

They’ll get the job done right and be quite happy to let you take all the credit IF you give them regular raises and a bonus any time they do particularly well. Just put your ego aside and let the people who get it make the tech/analytics decisions, and everyone will win!

But, whatever you do, don’t throw a poorly formed project description over the wall in advanced analytics and AI to a Big X (or any other vendor) and expect good results.

If you don’t know what you need, why, and how you expect to get it, instead focus on what you understand and Use the Big X firm for all of the things you know it is good at, understands implicitly, and has the history and experience to figure out simply based on the type of company you are.   Used appropriately, like any service provider, a Big X can deliver amazing value.   See the linked article on when you should use Big X in our opinion.

Fail Fast And Forward? How About Not Failing At All?

A recent article over on The Sourcing Journal indicated that one should Fail Fast and Fail Forward When Implementing AI into Workflows. WTF? Why fail at all? Especially since if you’re using AI where you are expecting a high risk of failure, there’s no reason to expect that you’ll only fail once, or that you can actually fail forward.

Now, if we were talking traditional ML, where it’s just a matter of continually expanding and refining the model and training data, tweaking the parameters, and starting small, then fail fast, fail forward, get it working, use the spice weasel, knock it up another notch, and continue until you have automation across the platform in appropriate places, it would be good advice.

But when we are talking full fledged Gen-AI (which is the article’s focus) based on massively large and entirely unpredictable LLMs or super-sized DNNs, you can fail fast, but, with absolutely no way to control the models, you can’t fail forward. So while fail fast and fail forward is a good motto in general for technology, process digitization, and automation, as long as you take things step by step and control the risk, it’s not appropriate at all when we are talking about AI!