And you shouldn’t have to hear it!

The word of the day is still outcomes, and, no matter where it’s used, it’s still a dirty word.

Yesterday we gave you many examples of where outcome-based pricing has become the norm which includes, but is not limited to:

• GPOs
• Recovery Audit Firms
• AI-first services-as-software
• Big Consultancy projects

and where every single situation the entire point of the “outcome”-based sales pitch was just a ploy to convince you to pay more for less because

• suppliers will happily match GPO prices for reasonable commitments as they have to pay the GPO a 1.5% to 3.0%+ administrative fee to get that business, and, moreover, at the head of the tail you can always get as good, if not better, prices using a tail-spend sourcing solution that automates 3-bids-and-a-buy RFQs and auctions (in a standard format that allows suppliers to automate bids) … and this solution often costs a fraction of what you will pay the GPO based on transaction fees (and then the additional savings from being able to quote every category at the head of the tail and not just what the GPO offers adds up to a greater savings)
• proper retail-centric e-Procurment augmented with supplier and product management could prevent 90%+ of overpayments to begin with (and Lavante, Inc. proved that over a decade ago — why else would PRGX have acquired it and taken it off the market)
• for every reliable AI-first services-as-software solution (as we all know that hallucinatory Gen-AI enables and amplifies fraud, security risks, bad decisions, etc.), there is a traditional SaaS alternative for a fraction of the price that does the same thing if you can do without the natural language chatbot interface and a slick UX
• once a consultancy gets you on outcome-pricing, they are going to focus on projects where they know you are doing particularly poorly, employ junior grunts with five year old playbooks guaranteed to increase efficiency and reduce costs (because you are way above market average cost or way below market average efficiency), and use AI to generate their reports and strategy presentations (and hope the junior grunts both do their job and catch all the hallucinations in the prepared documents)

But, as we said in our last post, that’s not the worst of it.

The worst part of all these “outcome”-based pricing offers is that they are masquerading the grift that keeps on taking! (Which is something any American reading this should be quite familiar with by now!)

It’s not the overcharging that is the most insidious part of “outcome”-based pricing models, it’s what’s behind them.

• GPOs want you to turn over more and more and more of your procurement to them because, the more you turnover, the more you reduce staff, and the more dependent you become … locking you in for years to come as your fees skyrocket to the point where you’re paying more to them then it would cost you to buy a modern sourcing to settle solution (that supports regular and semi-automated tail procurement and a couple of buyers [who will simply review any tail-spend awards that are new or out of bounds compared to past awards and select the suppliers for regular sourcing events, which the platform will automate until award time])
• recovery audit firms want you believe only they can keep millions in your pockets and software will never solve the rampant overspend the suppliers siphon out of you, will do anything they can to further the narrative that you’re going to lose millions without them, that you shouldn’t even try to improve your procurement processes, and it’s best to just turn more spend over to them … again locking you in for years and years when you could be taking steps towards reducing your overspend to almost 0 with the right technology, processes, and senior category managers preventing that overspend from ever happening
• AI-first service-as-software firms want you to go all-in on their service, fire your buyers, and believe that only their tech can get stellar results before compute costs go through the roof, the AI bubble bursts, and/or everyone realizes that the whole thing is being orchestrated by the Wizard of New Oz, it’s a bigger circus than anything P.T. Barnum ever managed to assemble, and when the curtain closes, all you’ll be left with is empty pockets (and, when you’re not looking, just like the auto-classifiers of old, they will throw as many Another Intern at the problem as required to ensure you succeed)
• the consultancies don’t want you do anything yourself because once you realize that, if you hire qualified people and installed modern systems, you can do it just as good yourself, do it for less, and save a lot of money … so they will try to keep up the savings and strategy show as long as they can

In other words, the whole goal of “outcome”-based pricing is to take away your self-sufficiency, capability, and even knowledge and ensure your entire existence is 100% dependent on them. That way, they stay super profitable at your expense with the grift that keeps on taking!

At the end of the day, the only vendor who won’t price on outcomes is one that knows they can’t actually deliver any, even with fakery, because any vendor who can will find a way to use this trend to inflate prices and grift your hard earned gains!

P.S. You shouldn’t be surprised. It’s the same old story with a new name. It’s been going on since the first modern Procurement solution hit the market.

And you shouldn’t have to hear it!

The word of the day is outcomes, and, no matter where it’s used, it’s a dirty word.

You all know that where DEI is concerned, especially in North America, it’s a dirty word. As @Jason Busch will explain in detail at every opportunity, DEI has replaced “equal opportunity”, but unlike properly applied equal opportunity, which took us two steps forward, DEI, or at least its “outcome”-focussed interpretation, has taken us two step backs.

These days, everything has to be measured, and the belief is that if you don’t meet the goals for whatever racial/religious/women/minority metric your organization has defined to be an appropriate racial/religious/women/minority mix for your organization, then you aren’t diverse, equitable, and inclusive and, therefore, you should go out and immediately hire the racial/religious/women/minority employees you need to meet the metric. Merit be damned. No longer is it the most qualified resource, where someone of a minority is hired when two or more applicants are otherwise equal, it’s the most qualified resource of the identified minority, who might not be at all qualified for the job! It’s the token black employee taken to a whole new level! Not only does it reward incompetence, but it insults minorities who study and work hard to be just as competent, if not more competent, than their white male counterparts.

But I digress — we already know outcomes is the dirty word of DEI. But what you don’t know is outcomes is a dirty word across the business, wherever it is used – and Procurement is no exception! Why? It’s only become the popular battle cry since the Age of (BS) AI, whereas its prior use was been limited to situations where the consultancy, vendor, or analyst firm could hide the darkness and venom that the word contained.

More specifically, until recently, outside of DEI, outcome was primarily the verbiage of GPOs, who were doing their best to convince you to turn over a significant percentage of your procurement to them, or recovery audit firms, who were doing their best to convince you their services were the only way to recover your money that your suppliers were assuredly screwing you out of.

But they reality is that they’ve been both misleading you since the get-go. Sure a GPO can get you better prices than you can get on the long tail with their volumes, but that’s only true for the long tail. Moreover, the reality is that the costs aren’t that much less, if any less, than what you could negotiate on your own if you did a winner-takes-all long-tail RFQ to a MRO, office supplies, electronics supplier who could meet the volume across your long-tail needs, especially since that GPO is charging the supplier an administrative fee of up to 3%, and they’d happily give you the same price to NOT have to pay that fee! Add to that the GPO is charging you for their services, and you’re not saving much. Plus, when you work your way up to the head of the tail, you are definitely in 3-bids-and-a-buy RFQ or auction territory, and the application of a well designed tail spend sourcing solution will save you just as much as a GPO, IF NOT MORE!

Moving to recovery audit firms, their outcome-based pitches sound great, as you only pay their 33% if they recover the money on your behalf and fatten your bank account, but here’s the thing. If you had a properly designed retail-focussed e-procurement solution that integrated supplier and product management, did m-way matches, and prevented payments where you didn’t have good receipts that matched the invoice that matched the PO where the prices matched the contract, rejected duplicate invoices, tracked rejected units and associated credits, applied those credit notes against future orders (with the matching product), etc., you could prevent all of those overpayments in the first place — despite the fact that all the recovery audit firms tell you that overpayments (and their services) are unavoidable.

But there are more, and more modern, examples. The worst is AI-first services-as-software vendors convincing you that you should pay based on “outcomes” instead of on a traditional SaaS pricing model. Their rationale? The majority of SaaS tools that you are paying for aren’t offering you immediate, measurable, savings and, therefore, are too expensive. But if you paid for software based on “outcomes”, you’d have measurable value and you could claim the fee was worth it. And the argument sounds convincing, even if it’s complete and total bullshit. The purpose of most software is to increase efficiency, not save money. That’s the value.

And when the real reason they are pushing outcome-based pricing is that they can’t afford to sell based on a SaaS model because the compute costs of their BS AI-first are too high to cover on traditional SaaS pricing — even though there is a traditional A-RPA SaaS application that does everything their app does for a fraction of the cloud and compute cost, as long as you don’t need a fancy-smancy natural language interface or a slick UX. In other words, if they were honest about the true value of their application, they could never charge enough to cover their costs and would be out of business yesterday.

A second, more modern, example is the big consultancies taking a queue from their GPO, Recovery Audit, and now AI-first services-as-software peers and trying to justify their highly inflated pricing (which has skyrocketed over the last decade as they became the go-to firms for all big tech strategy). Especially since it’s the only way they can overcharge for projects where they are primarily deploying a multitude of AI agents (which we know produce utter garbage, just look at the Deloitte fiascos in Australia and Canada) and juniors that they hope will catch and clean up all of the hallucinations in the deliverables. (Because if they charged based on what the tech and juniors were worth, in a climate where no one wants to pay inflated rates for consultants for projects with potentially guaranteed return, they wouldn’t be able to maintain their high rates.)

There are more examples, but by now you should see the common theme. Which is simply this: “outcomes” is always a way to charge you more for less (and sometimes next to nothing) (just like DEI is an excuse to replace people with actual capability with people with next to no capability).

But the worst part, the blatant financial rip-off that always accompanies a (pure) “outcome-based” sales pitch isn’t the worst of it!