Monthly Archives: July 2024

Dear Fellow Independent Consultants: How Can We Dispel the PROCUREMENT STINK!

Hopefully you know by now what the doctor is talking about, but if not, as per the Sourcing Innovation article from two months ago, PROCUREMENT STINKS and we should not deny it anymore.

In a nutshell, and just is just the tip of the garbage heap:

  1. Case studies are ranker than expired fish in a microwave on high.
  2. Approximately 85% of companies are AI-washing everything.
  3. The Gen-AI claims that it will deliver Procurement to the enterprise are FALSE.
  4. Intake/Orchestration is totally useless on its own.
  5. Consultancies are often more in the dark than the Procurement departments they are claiming they can help.
  6. DEI is being misused to push agendas and sometimes to Do Extra-legal Initiatives,

And, as per a poll put out by THE REVELATOR, we are especially concerned with the fact that 14% of practitioners would rather trust a salesperson or a marketer than a consultant or an analyst! (Now, part of this is probably due to the lack of independence from many consultancies who continually pushed their vendor “partners” on the client whether or not the “partner” was the best solution, but still, it’s not ideal. [And, hopefully, as a result of the bloodbath, the consultants who weren’t offering value to their clients were the first to go.])

As far as the doctor is concerned, the most trusted advisors in the space should be:

  1. analysts
  2. independent consultants

and that’s it! No sales people, no marketers, no influencers, no made up positions. Sales people are paid to sell, not to solve problems, and marketers are paid for leads and, in some organizations, there is no correlation between “leads” and the sales funnel.

So how can those of us not at a bigger consultancy, where we would be joined at the hip to preferred partners or subsidiaries (and not recommending them results in a pink slip), dispel some of the stink and regain some trust?

The first thing the doctor wants to state is that he has even less ideas here than he does for his fellow analysts. In fact, the ideas he does have should be pretty obvious.

1. Disclose any (formal) relationships we have with vendors that are recommended.

Even if a partner is the best recommendation for the client, we must still disclose the relationship, especially if there is any additional benefit we get from the recommendation (and definitely if the benefit is financial). (In addition, we should make extra effort to demonstrate that we did thoroughly evaluate the identified alternatives and have a number of reasons for the partner recommendation that are specific to the client’s needs).

2. Create RFPs based on identified needs, not free vendor templates or analyst map outlines.

It’s critically important that we don’t take shortcuts here because vendor templates are designed to ensure that the vendor who gave the template away always comes out on top (by focussing in on the requirements that the vendor executes best) and analyst map requirements focus on a set of requirements that the analysts can use to compare vendors on the same scale, not on a set of requirements that is relevant for selecting a platform for a specific customer, or even a customer of a specific size in a specific vertical.

3. Recommend vendors based on technical fit and hard requirements, not cultural fit and soft requirements.

Just like it’s not an analyst’s job to judge cultural fit or other soft factors in their analysis (as that varies too much by company to even take a shot in the dark), it’s not our job to tell clients who is a good fit — that’s for them to decide. We’re there to tell them which companies can provide a good solution, and let them decide who they are comfortable with as they will be stuck with the vendor for 3, 5, 7 or more years (not us)!

4. Make recommendations on expected ROI for the customer, not follow-on work potential.

At bigger consultancies, where the consultant is often joined at the hip to partners (and must use/recommend their solution if it can be force-fit), they are often also pressured to making the recommendation that will lead to the most follow-on work and engagement extensions (and, preferably, long drawn-out implementations and integrations). As far as the doctor is concerned, this is one of the most egregious things you can do. Especially considering that, in Procurement, work is never done and the client will always need more advice, new technology, and more help.

If we focus on the technology that will deliver the most ROI, then we are enabling the client to generate funding for additional projects and, hopefully, make us their consultant of choice in the process by focussing on them before us. The reality is that there isn’t a Procurement organization anywhere, not even in the upper quartile of Hackett Group top performers, that has all of the resources, technology and knowledge it needs. So we should never think it’s a one-and-done situation if we do well (and, moreover, do it at a fair price-point where we deliver an ROI).

5. Don’t take on projects we’re not qualified to do.

While this might get you fired at a bigger consultancy where the motto is the traditional consulting motto of “sign now, figure it out later” (because they have enough expertise and people across enough areas to do it), we need to be better (because we don’t have expertise anywhere or a lot of people to fall back on). If we’re approached with something that’s not in our wheelhouse as a consultant, we take it to the rest of the company. If it doesn’t fit anyone’s wheelhouse, we need to politely decline the work. If it means we never get asked again, then we know that’s a client we wouldn’t want to work for as any client with working brain cells would be impressed and honoured to know a consultant who didn’t just say yes but instead thought about whether or not they could deliver enough value relative to their price tag before accepting the work.

Furthermore, if we take the time to educate the client on what our services are and where we could help, we should be the first call they make when they have the right project, and maybe even get it in a sole-source negotiation if the project doesn’t cross a mandatory public bid threshold. People worth working for value honesty, and are very likely to come back to you, either at their current company or their next company, if you are honest about what you can and can’t do and what value you can provide. (Furthermore, if you investigate the company and can identify something you could do to help them, nothing stops you from proposing that project and working with them to close that project while helping them find the right consultant for the project you can’t do.)

At the end of the day, no one ever ruined their reputation by saying no to work they weren’t suited for — they ruined their reputation by taking on work they weren’t qualified to even talk about and then f6ck1ng it up royally.

the doctor‘s not sure it’s enough, but it’s a start, and if other independent consultants make an effort to figure out how to restore our reputation, maybe we’ll find the answer, provide the value that we are engaged to provide, and get back the trust we should have.

Affordable RFPs – The Real Reason(s) They Are So Rare, Part 2

Three articles ago, we noted that The Key to Procurement Software Selection Success: Affordable RFPs! was critical to getting the right technology to help manage your complex supply chain. This was because a proper RFP required a LOT of understanding to get it right, which we covered in detail in that article and summarized in Part 1. Then, two articles ago, we noted that we know all too well that most of you are asking Affordable RFPs — What Are Those? because you’ve never seen one. So in Part 1, after reviewing the requirements of a good RFP, and pointing out why you weren’t likely to get an affordable RFP from the majority of consultancies, we told you that they were still the answer because

  1. they could be affordable if Niche Consultancies stopped thinking like consultants
    and started thinking like enhanced product-and-data-based SaaS Management Providers,
  2. they only require knowledge management and expert augmentation to get it right, and
  3. if a consultancy understood this and was willing to make the necessary investment, they could quickly become a market leader.

Today we’ll explain what that means. We’ll start with the 10 types of understanding we outlined in our first article on The Key to Procurement Software Selection Success: Affordable RFPs!.

  • Procurement Maturity: the consultancy needs a maturity matrix, along with key capabilities at each level, key questions that need to be asked, and follow on questions (and contextual knowledge) to elicit the right details
  • Process Maturity: the consultancy needs a process progression flow to pinpoint where an organization is in each process, both from a human viewpoint and a technology enablement viewpoint
  • (Critical) Use Cases: not just from a standard “procurement” (“sourcing”, “supply chain”, etc.) point of view, but from an industry point of view; the consultancy needs a large library of standard (critical) use cases to build on
  • Current Technical Maturity: not just from an organizational point of view, but based on the progression of technology in a typical enterprise organization (which, of course, requires a knowledge of the history of tech to the present day along with progression flows along architecture, standards, models, etc. )
  • Missing Capabilities: based on the process and tech maturity, but also based on industry peers and leading solutions; requires all of the above AND all of the below
  • Key Solution Types to Address the Gap(s): knowledge of the standard modular / best of breed offerings in the space and related spaces, as well as knowledge of the standard must have, should have, and nice to have capabilities of each solution type, as well as the progression of technical maturity in each area; a rather extensive knowledge base will be required
  • Key Existing Solutions to Maintain: knowledge of the core, should have, and nice to have requirements of foundational ERP/MRP solutions and companion solutions in inventory, logistics, etc. (to make sure the S2P+ solutions will be enough to go to market for or if other modules / systems [and RFPs] will be needed); a more extensive database
  • Globalization Requirements: knowledge of what the e-procurement requirements are in each country the organization does business in, what languages will be absolutely necessary, what currencies will need to be supported, what government regulations there are for the products/services being sourced/sold, what industry regulations/standards need to be supported etc; internal databases or appropriate database subscriptions will be required
  • Service Requirements: knowledge of what requirements are needed for implementation, data migration, integrations, and maintenance; and how to judge if a vendor / service provider is up to the task
  • Unique Organizational Requirements: knowledge of industries and what differentiates them from a process requirement and solution requirement standpoint; detailed, but yet curtailed, knowledge in an internal database that matrixes this by industry, process, and technology solution

In other words, it means a LOT of detailed models, knowledge bases, and standard progressions as well as a lot of detailed knowledge on:

  • metrics where most organizations lie on the maturity curve(s)
  • vendors, what modules they offer, and how they stack up
  • once all of the above is racked, stacked, and mapped, what the core questions are
  • etc.

And that, of course, requires the consultancy to step up and

  • make some up-front and ongoing investments to build these knowledge bases that will
  • allow their intermediate associates to do the baseline work and
  • enable their experts to come in and finish it up in a fraction of the time compared to if they had to do most of the work themselves (i.e. 1/5 to 1/4).

This will allow most of the work to be done by the intermediate resources at a lower day rate, who will be more efficient with a knowledge base to build on, and then the expert to come in and review the work, identify the areas of weakness, and take it the last mile.

And a consultancy who saw that and made the investments could scale up their operation by allowing their top resources to be four times as productive and support four times as many customers (as well as supporting their customers through the implementation in the project, change management, data migration, and assurance roles. (We only said that they had to be vendor neutral, and not be an implementation provider for the vendor’s software. Everything else is process or organization centric, and as the experts, that’s the work they should be doing, and the most valuable work to be done.)

Again, Affordable RFPs are the answer and maybe someday we’ll see a herd of those mythical unicorns.

Proper Project Planning is Key to Procurement Project Prosperity! Part 1

Ten years ago we wrote about the importance of Project Assurance, and how it was a methodology for keeping your Supply Management Project on Track (Part I, Part II, Part III, Part IV, and Part V).

We told you that Project Assurance, which takes a proactive approach and tries to identify issues, and implement mitigations, before they arise, involves the organization periodically stopping to objectively assess project failure points as they arise, typically with the help of an outside third party who can be completely objective, to identify what is and is not being done well and what could cause failure later if not adequately addressed now.

In traditional Project Assurance, there are six health assessments at six critical points in every project (for each of the six initial project phases defined by the classic waterfall project methodology). In particular, there is an assessment at each of the following steps:

  • Strategy (Pre-Presentation)
  • Acquisition (Pre-Vendor Selection)
  • Planning (Pre-Design)
  • Design (Pre-Acceptance)
  • Development (Pre-Testing)
  • Testing & Training (Pre-Acceptance)

And that the right assurance expert can help you with

  • expectation management during the strategy development
  • narrowing the procurement gap during the acquisition phase
  • aligning the troops during the planning phase
  • delineate the disconnect during the design phase
  • evaluate for acceptance during the development phase
  • tame the transition during the testing and training phase

And we stand by these posts and the importance of a third party expert helping you with the assurance ten years later, because we feel that if more companies adopted the methodology, we might not be in the situation a decade late where we still have a ridiculously high failure rate in procurement technology projects (as well as technology projects as a whole), that, depending on the study quoted, still exceeds 80% in some cases.

But we also recognize that, given the complexity of both modern Procurement (which hasn’t had so many issues to deal with simultaneously in over two decades), and modern technology, project assurance isn’t enough to save a project that isn’t planned right from the get go. (You just don’t have time to identify and fix all the problems once things get underway and you have the army of grunts simultaneously doing the implementation, all the integrations, and training as they try to rush an enterprise project that used to take two years and get it done in 9 months so they can promise payback within a year (which never happens when they do this — but that would be a different rant).

So, in this short series, we are going to dive into the project steps and help you understand what you need to do to get it as right as you can and greatly increase your odds of success.

The Gen-AI Crash Can’t Come Soon Enough!

Author’s note: this first appeared as a LinkedIn post, elaborated upon in the comments of THE REVELATOR‘s post it referenced.

“$1 trillion rout hits Nasdaq 100 over AI jitters in worst day since 2022!”

This is a headline from the Economic Times this week. And a foreshadowing of things to come.

As far as the doctor is concerned, the impending The Gen-AI Cr@p market collapse can’t happen fast enough! Too many people don’t remember the 80s and how all the AI “promises, promises, that were made were the promises, promises they betrayed” …

because processing power, new languages/models/constructions, and expert mimicry is not enough!

The reality is that, until we have a fundamentally better understanding of human intelligence, or can at least assemble and properly support as many cores as humans have neurons [which, FYI, we shouldn’t conceive of as we couldn’t produce the energy requirements with current technology globally to power it] (and not the equivalent of a pond snail at best … look where that got us, it’s golden nugget of insight is we should eat one rock a day), there is zero chance of a new AI “breakthrough” actually approximating anything close to intelligence.

All of the true advancements in our lifetime are going to come from human intelligence (HI!) (that creates better algorithms, models, processes, etc. and then properly, manually, embeds those enhancements in next generation tech).

Remember, they’ve been promising us true AI since the [19]70s … and they are no closer now then the great minds who created, and in their wiser years abandoned, AI (which has materialized as Artificial Idiocy) because some pursuits are still beyond the grasp of mice and men (and others shouldn’t be attempted)!

Every 3 to 5 years they promise us that the brand new shiny tech is the Staples Big Read Easy Button, and every 3 to 5 years this brand new shiny tech fails to deliver. Gen-AI is just the latest in a long line of over-hyped, under-performing tech whose “hype” cycle is almost over and the next tech that is going to bring us a great market crash (which, giving the ridiculous amount of money dumped into this technology which will never be appropriate for the Enterprise, could bring about a crash that might rival the great dot.com crash of 2000 – and if you don’t remember that, you really should look it up — a lot of software providers, especially those whose solutions provided limited actual value relative to the investment made [or money wasted on “marketing” and “brand”] bit the dust).

The even sadder reality of the situation is that we don’t need the tech. In almost every business domain, there has been software which, with a bit of manpower and human intelligence, has solved the majority of our current business problems, even the most complicated global supply chain/trade problems. All we had to do was stop using the monolith technology from two-plus decades ago and take a small chance on newer, better, more powerful players who started to solve real problems with software the average Jane could use.

In Procurement, the vast majority of companies aren’t using the tech we had 𝐓𝐖𝐄𝐍𝐓𝐘 𝐅𝐎𝐔𝐑 years ago! (When the doctor built the leading strategic sourcing 𝐨𝐩𝐭𝐢𝐦𝐢𝐳𝐚𝐭𝐢𝐨𝐧 solution (the first with multi line item support) and THE REVELATOR had a leading ML (machine-learning) based application for 𝐚𝐥𝐠𝐨𝐫𝐢𝐭𝐡𝐦 𝐛𝐚𝐬𝐞𝐝 𝐩𝐮𝐫𝐜𝐡𝐚𝐬𝐞 𝐢𝐝𝐞𝐧𝐭𝐢𝐟𝐢𝐜𝐚𝐭𝐢𝐨𝐧 and realization [for everyone else, think guided sourcing strategy, like Levadata does for electronics, based on market and organizational data, with execution support]).

If the average organization even had this V 1.0 technology, they’d do SO MUCH better across the board (and now we are at V 3.0 in most Procurement applications; in optimization, what I did at Iasta [acquired by Selectica, rebranded Determine, who sunset what they didn’t understand] and consulted on (in other players) after was V2 and Trade Extensions (acquired by Coupa) gave us V3 with full supply chain support and modelling capability beyond your dreams (and now maybe Coupa’s understanding with Arne and Fredrik (founders) gone … but there are those of us who still understand the phenomenal vision and realization thereof of the great Arne Andersson).

Also, the reality is that if anyone understood what Coupa Supply Chain Optimization [Llamasoft] or Logility [Starboard] could do in the right hands … THE REVELATOR‘s parts management dreams and scenario-based Procurement guidance from the late 90s and early 00s would come true.

(And we don’t need no fake-take to make it happen! Proper catalog-enhanced true SaaS solutions have been built with integrated intake for the last decade. You just have to look beyond the same old, same old 10 to 20 vendors that Gartner and Forrester tell you about every year (pretending that the other 656 don’t exist). Vroozi [see our 2-part summary: Part I and Part II] has had this capability since day one, and once all these Gen-AI and fake-take plays come crashing down because they don’t actually enable true Procurement or have any real Procurement capability under the hood, you’re going to see a new generation of true Strategic Procurement providers rise up and offer something that every enterprise, and mid-size enterprises in particular, needs and can benefit from. And when this reckoning comes, it will humble any organization still on one of these powerless platforms. So the time to find a real platform is now!)

If You Still Don’t Believe That Gen-AI is Bad for Procurement …

Then maybe you should do the math.

It’s very expensive for what it doesn’t do. You can pay 10K a month or more just for a conversational interface to search your data or push data into your applications. For 10K a month, you can get a decent core P2P application or source-to-contract application that, well, actually does something.

It’s even more expensive to train these systems on your policies, connect them to your applications, test that basic requests generate reasonable responses, train it to guide your users to get to an eventual answer, and so on. This could easily be more than a year or three of license fees.

But the true costs are in the utilization. Every time a user asks a question, or responds to a question posed by the Gen-AI to try and elicit the users intent, it takes compute time. LOTS of compute time. At least 10X the compute time of a standard search engine or keyword based retrieval system. In some cases, 30X. (The wattage required is easily 10 to 30 times traditional Google search.) So if you’re a mid-sized organization with more than 1,000 employees, a portion of your cloud computing costs, which average between 2.4 Million and 6 Million a year (according to CloudZero), is going to increase 10X to 30X. Let’s say 5% of that was basic search and inquiry, 120K to 300K. Almost inconsequential. But multiply it by 10 to 30, and you’ve just added another 1 Million to 9 Million to your bill. Think about that.

That “low-cost” Gen-AI “chatbot” that makes enterprise search and application interface “easy” (but not as easy as a well designed workflow, FYI), that you think costs 10K a month after implementation, training, and most importantly, cloud computing costs could actually be costing you 100K a month (or even 500K). For what? A fancier Google?

As Procurement professionals, you can, and should, do the math. So even if you don’t believe the doctor when he says Gen-AI is a fallacy, then believe the math.

The math says Gen-AI is just NOT worth it.