Category Archives: Analyst

Influential Damnation 97: Analysts

Conferences are bad, but manageable as they are only once or twice a year. Consortiums are worse, as they meet regularly to thrust their views upon you. Pundits / Futurists are a significant damnation, because their brand of influence seems to be annoyance perfected. But none of these compare to the damnation of analysts. Why?

Analysts are the Gatekeepers of the Gold Seal of Approval.

Let’s say you are a new and innovative startup, or even an older software provider that just went through a re-invention phase, and you have this great new product that contains at least half a dozen innovative features and functions not in any other product in the market that has the ability to deliver any organization that adopts the product tremendous efficiency and cost-control beyond anything else they can put in place. Your software should be winning awards and getting the gold-seal of approval that lets potential customers know that, for industry X with problem Y, this is one of the best solutions on the market. But it won’t even get a side mention in the back pages of the local business journal until it gets recognized by an analyst firm as an emerging solution, and forget front page coverage on something like Mashable until it has been vetted and approved by at least one major analyst firm. They are the keepers of the gold seal of approval, and if they don’t like you, you better keep one foot in the coffin.

If you’re not on their lists, you’re not on BigCo’s list.

The best way to get coverage is to get a big win. But a big win requires a big company adopting your software and getting a big result that they want to advertise to the world (so they can say how smart they were and how well they did). But the chances of a big company even inviting you to an RFX until the analyst firm, that they spend six or seven a years on to advise them, puts you on a contenders list is slim to none. Unless you can find a back door (through a consulting partner who will use your product to get a great result on a services engagement and then mention you in a press release and give you credibility with the firm), you’re out in the cold. After all BigCo payed six, if not seven, figures for the analyst firm’s shortlist, so it should be the best and they shouldn’t question it.

If you won’t pay to play, it will take a while to get on the analyst firm’s shortlist.

Analyst firms have two major client pools: BigCos (the Global 3000s and the emerging mid-market companies that want to be the Global 3000) and TechCos that want to supply the BigCos with tech products. BigCos pay for access to the research library and time with the top analysts to help them identify the right solutions. TechCos pay for access to the research library and competitive analysis and time with the analyst to help craft a product and/or services roadmap that will help them differentiate themselves in an often noisy marketplace. The big clients in each group will pay a significant amount of money, and will respect significant value in return. BigCos will expect one-one-one analyst time with the experts and specific consulting projects and the TechCos will expect prominent placement in all of the research.

As SI has explained, there’s a reason why every time a new Perilous Pyramid report is released on a subject by a big analyst firm, which will typically revisit major software markets every one to three years, the criteria for inclusion as well as the criteria for scoring changes. It’s not just because the technology changes, but because sometimes certain companies need to be excluded and certain capabilities scored higher for those six figure TechCo clients to look good. And if those six figure clients don’t look good, they won’t be giving the analyst firm six figures at renewal time.

And if you’re not a big client, good lucking winning the Perilous Pyramid.

As a result, if you’re a new company that can’t afford to become a big TechCo client of the analyst firm, or that doesn’t believe in the pay-to-play model and won’t pay for lip service, good luck winning the Perilous Pyramid, because, even if you happen to get the attention of the lead analyst on the report and that lead analyst really likes you, if your solution is too much of a threat to the big TechCo clients, it could be a couple of years of relationship building before you even get a mention as an emerging company (that didn’t make the Pyramid because revenues hadn’t exceeded the new minimum of m Million). the doctor, who is an expert in optimization and analytics and associated technologies as well as other advanced sourcing platforms can tell you that the best platforms in these areas have never reached the top level of the Perilous Pyramid and many never even got included in the reports when they were one of the best solutions (due to lack of revenue, lack of suite functionality, or some other arbitrary inclusion requirement). Fortunately most of these Pyramids did rank the established companies that were included fairly accurately (as there are big TechCos with good solutions that would serve the needs of most, but not all, client organizations), but the reports never gave a complete picture. Either equivalent options (from a technology perspective) were missing or not ranked as highly due to arbitrary ranking or scoring criteria.

As such, analyst firms are one of the biggest influential damnations out there. Like any market intelligence / consulting firm, they have to keep their clients happy to stay alive, but that often means ignoring solutions that should be covered. This means that new startups suffer as do big clients that have a very specific need that can’t always be met by the bigger TechCos. Now, a few analysts do their very best to uncover and promote new startups that aren’t paying clients (and some even do so without the expectation that those startups will become paying clients when they can afford to do so), but given that they have to spend the majority of their time flitting between, and dancing to, two different types of tunes (BigCo client and TechCo client), they don’t have much time left for anyone else. So while their advice will be good, it’s never complete and even though we might want to think that because we paid six figures for their advice that we could take it at face value, we can’t and, like everything else, have to take it with the grain of salt it comes with.

What Impact Will a 9% Drop in Profits Have On Your Organization?

Unless your Supply Management organization takes it to the next level, your company is facing a 9% drop in corporate profits this year due to rising prices and other inflationary pressure according to a recent Hackett Group study. For a typical Global 1000 company with 27.8 billion in revenue, Hackett’s study estimated that commodity and offshore labor inflation will drive a 150 million per year hit to the bottom line. Ouch!

Why? While most companies are now able to effectively anticipate commodity price increases, more than 60% of companies surveyed by Hackett in the recent study have not been successful at mitigating these cost increases. The reality is that few executives have experienced significant inflation, which is now at levels not seen in 30 years (when inflation rates hovered around 13% back in 1981).

And while inflation may not yet be at 13%, it is bad. Not only do respondents to the Hackett study expect the rate of inflation for commodities overall to rise by more than 30%, to 6.3% a year, but commodity price volatility has increased nearly 60% since before the recession. Making matters worse, at the same time, due to the talent crunch, the rate for internal labor is expected to more than triple from 0.7% to 2.2% and the rate of inflation for external labor is expected to more than double from 1.2% to 3%.

The problem, as identified by the Hackett study, is that most companies tend to take a fragmented, siloed approach to anticipating and mitigating costs. And while more advanced companies will forecast prices and do some basic hedging by adjusting contract length, purchase volumes, or inventory levels, few take the cross-functional approach required to combat the mitigation. The majority of companies do not do the analysis required to understand the impact of commodity cost increases on profitability, do not use specialized analytics to anticipate future commodity costs, and do not provide clear direction and policy for making hedging decisions. A future post will explore in greater detail some of the options presented in Hackett’s study on Taming the Inflation Dragon and why your organization must adopt more advanced

It’s Easy To Move Beyond Spreadsheets and Improve Operational Decisions

All you have to do is survive the uprising that results when you ban spreadsheets from the organization.

Industry Week recently published a very nicely thought out and written piece from SAP on how to move beyond spreadsheets to improve operational decisions using business intelligence that sounds wonderful in theory but doesn’t work in practice. Why not? Because the first thing a user does when they get a new system is dump the data to a spreadsheet they can play with because

they are used to the spreadsheet environment and
the vast majority of BI tools don’t have the capabilities the average analyst needs to do the analysis she needs to do because they all work off one version of the data that cannot be altered in any way.

Thus, an average BI system only worsens the problem as users create and share more and more spreadsheets in an effort to get around the limitations of yet another system with yet another version of the truth. There are only two ways to move beyond spreadsheets. They are:

Ban Spreadsheets
and force your users to work within the limitations of the BI tool or
Adopt a Real Analysis Tool that Supports a Spreadsheet Interface
and allows your users to continue to use the interface they are comfortable with in a productive, value-creating, manner

Spreadsheets are not going to go away just because you’ve introduced yet another system. It’s delusional to think otherwise. Your only choices are to ban them or embrace them in a manner that is actually helpful.

What About Bob?

Almost nineteen years ago, Touchstone Pictures asked What About Bob?, not knowing what a profound question this would be for the Supply Management space, which had not yet truly emerged, nineteen years later. And before you ask what is that crazy doctor referring to, be assured that I’m going to tell you. But first, a little background.

A little over a year ago, Dennis Moore, Susan Scrupski, Thomas Otter, Vinnie Mirchandani, Jeff Nolan, Jason Busch, Zoli Erdos, and pretty much anyone else who mattered in the Enteprise Blogsphere came together and created the Enterprise Irregulars, a central point where anyone who wanted a multi-faceted snapshot of what’s going on in the Enterprise space could go to get it. Little did we know that would be the first milestone on the path to Analyst 2.0, the new analyst model for the Supply Management space. Shortly after, Jason Busch of Spend Matters decided to double down. He expanded the number of voices he allowed to contribute, increased the rate of publication of his Perspectives, and announced bold new changes coming in 2010, which began with the new Compass publication series, which are essentially an Analyst 2.0 spin on the classic Aberdeen model. (The only difference being that instead of sponsoring one big fat [dry] metric filled research study, you sponsor a four-part series that addresses emerging trends and related issues as well as best practices with a dash of metrics thrown in for good measure.)

Then Mr. Horses for Sources himself, Phil Fersht, decided it was time to go all-in with the new Analyst 2.0 model and formed a whole new Analyst Firm dedicated to Global Sourcing Performance.

And now we have turmoil at the Analyst 1.0 firms who are trying to stay relevant. Gartner acquired AMR, and Andrew Bartolini, who was the VP of Global Supply Management Research (and who succeeded Vance Checketts who succeeded Sudy Bharadwaj who succeeded Tim “Mr. Perfect” Minahan), has departed Aberdeen to create his own Analyst 2.0 offering over at CPORising.com.

There’s so much going on right now, and so much noise being made, that I just have to ask What about Bob? You see, while most of the space is going gaga over all of the hullabaloo surrounding the emergence of Analyst 2.0, they’re forgetting two important truths. One, it’s about substance and quality, not flash and delivery. And two, quietly toiling away over in a little corner of The Ferrari Consulting and Research Group‘s piece of the web, is Bob Ferrari who has been plugging away on Supply Chain Matters for over two years now, bringing you deep thought and analysis on a variety of topics on a weekly, and occasionally daily, basis. He’s good. He’s great. He’s wonderful. And he’s too modest to ask it himself. So I’ll ask it. If you need a real analyst, with decades of experience, including stints at IDC and AMR, What about Bob?

Share This on Linked In

The Gartner Tragic Quadrant for Strategic Sourcing Application Suites, Part II

As I noted in yesterday’s post, while the Quadrant wasn’t all bad, when you added up all the issues, it was more tragic than magic. And, despite the fact that one of my commenters may be right in the observation that it’s not worth the column-inches I’m going to use discussing it, I can’t let it go. Given the importance assigned to this report by the market space, which is equalled only by the Forrester Grave, I need to make sure you don’t misread any of the statements and base a bad decision on them. So, in this post, I’m going to continue taking the most important issues point by point.

Just Plain Wrong: The unique functionality needed to run reverse auctions is a differentiator between simplistic and enterprise-class strategic sourcing applications.
Correction: in 2001. Not in 2010. I can list over 30 providers of reverse auction solutions off the top of my head (and you can find many of them on the resource site). If it doesn’t have reverse auctions, it’s not a sourcing suite. Period. The real differentiator between simplistic and enterprise is true strategic sourcing decision optimization or an advanced analytics platform.

Crazy Talk: The market is far from mature enough to expect competing solutions to be technically comparable.
Correction: The strategic sourcing process has been well understood, and well documented, by the big consultancies since the early 90s. The core technology has been well documented and well understood since the early 00s. From a technology perspective, every sourcing cycle starts with spend analysis; moves to e-negotiation, which includes RFX, e-Auction, and Optimization (which is used to qualify suppliers, gather bids, and analyze them); and ends with contract (creation and) management. Execution generally includes SRM and Compliance, which tracks data used for supplier selection and evaluation in the next sourcing cycle. The basic requirements have been well documented for years. I even co-authored and edited a book that’s been available on Amazon.com, for two years, that anyone who wants to understand the baseline requirements of these solutions can get their hands on. (They can even get an e-version free through Iasta.) So while some of the newer/advanced features may not be directly comparable, most of the standard features are. (And if they weren’t, how could Gartner even author this paper?)

Out of Left Field: Most of the vendors in this report are privately held, and so we considered management turnover, job openings, press and financial filings in our rating of overall viability.
Correction: Viability is financial stability. That’s primarily average annual growth rate, size of customer base and (recurring) revenue, and customer turnover. It has nothing to do with press. And it’s not job openings, it’s employee turnover. If the company is growing, of course it’s going to have job openings!

Positive, not Negative: Company X does not run full-service, reverse auction events on behalf of customers.
Correction: This means that they understand that (a) auctions generally aren’t strategic and that (b) even if the market conditions are optimal for an auction, you’ll get the best result if you engage a category expert and not an auction technology expert. Thus, unless you have those category experts, when you consider that (c) an auction tool should be easy to use, you probably shouldn’t be offering full service events.

Irrelvancy: Sourcing solution lacks optimization functionality (in the description of multiple vendors)
Fact: Of the 14 vendors that made the report, only two have true strategic sourcing decision optimization that meet all of the criteria I outlined years ago in the wiki-paper. Most of the vendors don’t have any optimization functionality at all!

Irrelevancy: Spending analysis: This is a very new product with minimal automated classification capabilities. Most of the cleansing and matching are done manually.
Correction: How many times do I have to say it? It’s the Analysis, Stupid. Classification is not analysis. Cleansing is not Analysis. Matching is not Analysis. (And the right way to do it is to manually define the classification rules so that future refreshes don’t corrupt any data elements that you’ve already cleansed. If you’re using an automated system that uses another organization’s rule set, you’re just asking for trouble!)

Scary: Spending analysis scalability with references reporting analysis of millions of transactions (in the description of a vendor)
Correction: Most big companies have millions upon millions of transactions in their systems. Many have tens of millions, if not hundreds of millions or billions. How could you possibly claim to have an enterprise spend analysis system if you can’t analyze millions of transactions? Considering that BIQ can analyze up to 50M transactions in real time on your laptop with its desktop solution, shouldn’t a true enterprise spend analysis solution be able to handle a few hundred million transactions? (And, before I finish, the report is wrong in dismissing BIQ as a desktop only solution. BIQ also offers a client-server version, which can take advantage of as much server power as you have — and handle hundreds of millions of transactions in real-time if you have the computing power, a thin-client externally hosted web-application through WTS or Citrix, and one of it’s distributing partners is currently beta-testing a new front end creator for the viewer that is built on BIQs XML interface and runs through your browser).