Author Archives: thedoctor

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 ?????? ???? years ago! (When the doctor built the leading strategic sourcing ???????????? solution (the first with multi line item support) and THE REVELATOR had a leading ML (machine-learning) based application for ????????? ????? ???????? ?????????????? 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.

How Should a Provider Qualify a Client?

Carefully.

But let’s backup.

Not that long ago, THE REVELATOR penned a post that asks what are the most important things a solution provider needs to know about a practitioner-client.

This was followed by a post that asked why are some clients successful and others not.

And the answer here is simple:

The Wrong Fit.

Which means that if the provider wants a successful client, they need to make sure the client is the The Right Fit and that they, as a provider, have The Right Stuff.

It’s not about the size of the cheque the client can write, it’s about the size of the value the provider can deliver, because if the provider can’t deliver value, there will only be one cheque. But if the provider does a great job, the cheques will keep coming year after year after year. And those cheques will get bigger over time. (A successful organization focusses on lifetime value, not one-time value.)

So, how does a company qualify a client?

In the comments, the doctor outlined a few key points that included:

  • what problems is the client looking to solve (and why)
  • what problems should the client be looking to solve (and why)
  • are those problems the provider can appropriately solve at a price point the client can afford, at a TQ (Technology Quotient) level the client can handle, and at a realistic ROI both parties can be happy with

But first, the provider needs to answer the following:

  • what problems does their solution solve, and solve well
    … and do they have successful clients they can point to
  • what processes do the successful clients follow,
    and can those processes be easily adopted by other organizations
  • what culture does the company have, and what cultures does the provider mesh with

And then, the provider needs to figure out:

  • if the problems the client is looking to solve are the problems the client should be solving
  • if not, can the client be educated into the problems they should be looking to solve (and can the provider accomplish that)
  • are the client’s problems appropriate to the provider’s solutions
  • and will the client adopt the right process modifications
  • and, finally, will the companies cultures mesh

And if any of these questions come up no, the client is not one the provider should take.

Follow the Money — To Find the Spigots that can Turn it Off!

A recent CPO Crunch article over on Procurement Leaders said to Follow the Money as a focus on profit contribution can provide a starting point for improving supply chain transparency.

The article states that having knowledge of our suppliers is one thing, but it’s quite another to have a good understanding of who are suppliers’ suppliers are … not to mention those even further beyond and in a complex, risk-riddled world, such visibility is crucial and can bring meaningful competitive advantage.

In other words, following the money can increase profitability by allowing you to optimize the flow. Which is true, but only half the picture.

The other half is how the flow can be diverted or stopped. Two important things to remember about money flows. First, if these money flows present an opportunity for you, they present an opportunity for others. Not just outright theft of money (or product), but skimming, fraudulent billings/overpayments/handling fees (or your goods don’t move), and even fraudulent good substitution (with knockoffs). Secondly, if any input to any of these flows stops (beyond your visibility), the entire flow stops. And these flows could stop 6 levels down at the source.

For example, let’s say you are in medical device manufacturing or microwave-based manufacturing. Then you need thulium, which is one of the rarest rare earth minerals in the world. If a mine closes, even temporarily, and that mine is the only source of supply into your raw material or component supplier (that produces your enclosed radiation source or manufacturing ferrites), what do you think is going to happen? Production will stop, and your inventory will disappear. Or if you need a custom chip for the control system in your high end electric car, and the one plant currently capable of producing it experiences a fire. (This HAS happened, and chip shortages have been responsible for MULTIPLE shortages in MULTIPLE automotive lines. Just Google it.)

If your only production is in a country with geopolitical instability or deteriorating relations with your country, and borders (temporarily) close, what happens? And so on. If you don’t know the myriad of ways the spigots can be turned off, it doesn’t matter how well you know, or optimize, the money flow. These days, it’s all about risk management, visibility, and quick reaction if a spigot gets turned off to get it reopened again.

Affordable RFPs – The Real Reason(s) They Are So Rare, Part 1

Two 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, including, but not limited to:

  • Procurement Maturity
  • Process Maturity
  • (Critical) Use Cases
  • Current Technical Maturity
  • Missing Capabilities
  • Key Solution Types to Address the Gap(s)
  • Key Existing Solutions to Maintain
  • Globalization Requirements
  • Service Requirements
  • Unique Organizational Requirements (less than you think, but those that exist are situation critical)

And this required a breadth of understanding across

  • the market
  • process evolution
  • use case specification
  • … including what must be technology backed
  • … and what should be technology or data enhanced
  • common module/solution types that mind the gap
  • internal foundations
  • the unique requirements, regulations, and resignations of each country you do business in
  • the services your team, and current partners, can and can’t do — even service specializations you didn’t know exist
  • what other organizations do

And most of this you won’t have in house. So you need Affordable RFPs. But we know all too well that you are all asking Affordable RFPs — What Are Those? because, as far as you know, they don’t seem to exist. And we hear you, because they rarely exist at mid-sized and larger consultancies  (because only a select few from their talent pool can do it efficiently and relatively cost-effectively and those resources with deep experience are going to be dedicated to any F500/G3000 that can afford to pay the A rates to keep them as a dedicated advisor), and unless you are a larger mid-size buying a mini-suite, they don’t even exist at the Niche Consultancies where they should be common.

We also spent a fair amount of time explaining why they don’t exist, even though one would think that they should be readily available at the niche consultancies (as this could not only make those niche consultancies true leaders in Procurement but also help them grow). In this last case, it was because it was typically only their senior resources that could do these projects, and since these projects aren’t currently quick to complete, it doesn’t take long for a senior resource day rate to add up. And, as we noted before, while this won’t be that much when you are larger mid-sized organization looking for a mini-suite or suite, if you’re just looking for one or two modules to fill a gap, this could add up to quite a bit.

So if this is the case, why are we telling you that Affordable RFPs are the answer if they’re almost impossible to find?

Because:

  1. they are the answer,
  2. they would be affordable at Niche Consultancies if those niche consultancies stopped thinking like consultants and started thinking like enhanced product-and-data-based SaaS Management Providers, and
  3. they only require knowledge management and expert augmentation to get it right.

So what would a Niche Consultancy have to do to get it right?

We’ll outline that in our next part. But it starts with investment. (And how many partners at consultancies want to invest their money? They were brought up on the Wall Street Mantra — Other People’s Money.)