Category Archives: Market Intelligence

M&A: Confusion or Clarity?

There’s been a lot of M&A in the past few years, with companies like SciQuest, Selectica, Xchanging, etc. gobbling up a number of smaller companies with offerings that the acquirer believes could be used to make a full S2S (Source to Settle) suite, and with the recent investment announcements, including this week’s announcement of an 80M investment in Coupa (at a 1 Billion valuation, which the doctor still finds unbelievable), there is sure to be a return to the M&A frenzy of the late noughts that will likely equal, if not exceed, the scale (and occasional absurdity) of the APE Circus. (Which I hope will be accompanied by a return of the Sourcing Maniacs, but alas, the doctor has not heard from them since they told us they were on their way back from their African vacation on New Year’s day five years ago.)

But will it be worth it? First of all, many acquisitions end up being overvalued. (For example, the doctor believes CombineNet is still far in the red, and this can’t be helping SciQuest.) Secondly, many acquisitions have overlap in functionality and offering. Thirdly, many acquirees often use different platforms. Right now, .NET, true C++, Java, and Ruby on Rail frameworks are all quite likely in the space and many acquisition frenzies result in a the merged company having three or more platforms to deal with.

Since, for example, a Source to Pay offering is only valuable if there is more integration than a company could achieve on its own by acquiring separate sourcing and procurement, and, if necessary, contract management and spend analysis platforms, this last point presents a major headache for the newly merged companies. Simply defining the push-pull endpoints and automating the data transfer doesn’t add that much value. A third party integrator can do that. Value comes from real-time end-to-end visibility through the source to pay process for every invoice, shipment, purchase order, contract, supplier, etc.

And the functionality overlap presents another hurdle. Each customer that uses a platform will expect all of the functionality of that platform, so you can’t even consider killing a platform component until all of the functionality is in another platform component. Not only will this take development time and effort while the organization has to support two platforms, but considerable time will be required as bruised egos try to decide which is best to keep and which to discard if both “endpoint” modules appear to be equally valuable.

And then there is the balance of how far to take integration in the short term when sales are rapidly needed to justify the expenditure, pay for the overhead loss as reorganizations occur, and support new personnel to plan development of the next version which will, someday, integrate everything on one underlying stack.

Sometimes it’s quicker, easier, and more cost effective to be patient, just build everything in house from the ground up, and go to market with a truly integrated solution which offers end-to-end visibility because it takes top talent to pull off a successful technology integration. And, by definition, not every company will have top talent with enough expertise across the source-to-pay process to make the right decisions.

the doctor is sure there will be some great success stories in a few years, but there will also be some mega failures as well. And in the interim, we’ll likely have more confusion than clarity.

Any differing opinions?

Coupa = 1B? the doctor is shell-shocked!

It takes a lot to shell-shock the doctor. It’s a crazy, crazy world and companies get overvalued all the time (take Facebook, for example). But 1B for a Procurement play best suited for the SMB market that only recently added basic sourcing (which qualifies as level 1 in the forthcoming 5-level sourcing model), basic finance support, and globalization support? A 5X multiple would be generous — and this is definitely closer to the 15X multiple that Spend Matters estimates in “coupa valued at over 1b in latest funding round”.

There are some who would argue that Coupa was past it’s prime when it started – the doctor had a conversation yesterday with someone who thought focussed Procurement platforms should have been over in 2006 (which is when they saturated the early adopter market). But since the true measure of maturity is when the technology starts to saturate the leader majority, the actual date the doctor would give for Procurement platform maturity is circa 2010-2011. Coupa doesn’t have anything that hasn’t been available from multiple vendors since at least then.

What Coupa does it make it faster (with instant start-up), better (through unprecedented ease of use), and cheaper (through SaaS and economies of scale). But it’s not unique, it’s not new, and while it is a Ferrari compared to the ERP Yugo, it’s still just Procurement with some Sourcing, Finance, and a solid technology stack. And it’s trying to lead a very competitive market. They may have grown faster than their peers (but they also raised 80M to do it when many companies only had a fraction of that to work with at any time), but hungry, hungry hippos come along everyday. And now that they are global, they have to take on the European heavyweights and newcomers (like Basware and b-Pack, which can now offer end-to-end Source-to-Pay as a result of the recent Selectica/Iasta acquisition, and both of these providers have Finance offerings as well — Basware actually started in Finance). And they more they crack open the market, the more companies that are going to be grasping at their coat tails, forcing them to be faster, better, and cheaper still — which at some point is going to erode their margins and affect their profitability.

Don’t get the doctor wrong, he has loved Coupa since Procurement Independence Day, and he even dedicated a full EP to them (which includes the hits It’s Coupa Time, The Coupa Store, and the unforgettable Davie and the Coupa Factory), but 1B is just crazy. It’s placing unreal expectations on Coupa and the Market as a whole, and setting them up for a huge acquisition that could make them the new Titanic of the space. And we all know what happened to the Titanic …

All Boards should Follow Kenya’s Lead!

Now that’s a title the doctor never thought he’d write! But a recent news story over on Capital FM Kenya that stated that President Uhuru Kenyatta issued a stern warning to his Cabinet to Adopt e-Procurement in 7 Days or Face the Axe got his attention.

If even the President of Kenya, a country in Africa that is not likely to be associated with progressive e-Procurement practices like leading countries in Europe, knows that it is necessary to introduce transparency, accountability and eliminate abuse of … existing procurement and financial management process than how come your average board of a 100M+ company in North America hasn’t figured it out yet? Less than half of companies of these size have modern systems or processes, even though decent systems have been around for almost 15 years!

Especially when SOX has been in force for almost 13 years and:

  • mandates a set of internal procedures designed to ensure accurate financial disclosure,
  • mandates the external auditor to report on the adequacy of the company’s internal control on financial reporting, and
  • mandates that the company adequately report on risk

A modern e-Procurement system, which can track all expenditures, not only makes all expenditures through the system visible but also makes it easy to report on such expenditures. If the company mandates all such expenditures through the system, then the company can report on all of those transactions and make accurate financial disclosures.

If the company forces all requisitions, purchase orders, and purchases through the system, then it has adequate spending controls and reporting.

Plus, since a company can quickly see what they are buying and who they are buying from, it makes it easier to identify risks – simply evaluate each supplier and cross-reference each product against a list of products where demand may exceed supply or where necessary raw materials could become scarce as a result of a potential disruption (such as a natural disaster, trade embargo, etc.). It doesn’t address all risks, and, in particular, sell-side risks, but it’s much better than not knowing what you are buying or who you are buying it from.

So follow Kenya’s need and mandate that your organization enter the modern Supply Management world.

Why Can’t I Find Top Supply Management Talent? (Repost)

This post originally ran four years ago today. But it’s relevance has not waned.

The simple answer: you’re looking for a resource that is so rare it may not even exist! And I’m not the only one who thinks so. After talking with a number of thought leaders over the years it’s become clear that this is the most common reason Supply Management organizations can’t find talent. (Note that this is only the case with respect to “find”. The reasons a Supply Management organization can’t hire talent or keep talent are different.)

As Supply Management has become more and more challenging, the average reaction of a supply management organization has been to continually augment the job description of a supply manager to the point where the individual is expected to not only be a jack of all trades but master of all. This has resulted in a search for senior buyers with an eclectic collection of skills and experience so rare that you can probably count the number of global supply professionals around the globe that make the grade. For example, whereas the average job description for a senior buyer ten to fifteen years ago might have looked like:

  • good communication skills
  • college degree
  • negotiation experience
  • buying experience in chemicals, pharmaceuticals, and energy
  • some supervisory experience

Today’s average job description for a senior buyer looks like:

  • great communication skills
  • excellent writing skills
  • master’s degree with 10 years experience, PhD preferred
  • expert in negotiations with a global supply base
  • buying experience in manufactured goods, services, IT & Telecommunications, legal, marketing, and temporary labour
  • supervisory experience of global business teams and outsourced services
  • buying experience in Europe and Asia
  • speaks English, Hindi, and Mandarin fluently
  • experienced in contract drafting
  • expertise in import/export requirements of the US, the EU,
    India, and China
  • in-depth knowledge of REACH, WEEE, RoHS, and similar regulations
  • expert in should cost models, TCO models, and global logistics models
  • experienced user of e-Sourcing and e-Procurement applications and expert in e-Negotiations and award optimization
  • expert in spend analysis
  • great project management skills
  • risk management skills
  • working capital management skills
  • financial reporting experience
  • innovative and capable of leading cross-functional innovation teams
  • NPD experience
  • implemented multiple successful SRM initiatives
  • experience with CSR and sustainability initiatives
  • expert at market intelligence
  • high CQ
  • great leadership skills
  • adept at navigating regulatory issues
  • speaks techie
  • etc.

See the problem?

If you don’t, think about it for a while.

Or, better yet, to get a clearer picture, check out “The Chief Procurement Officer Job Description: An Overview” co-authored by yours truly and the maverick over on the new Spend Matters CPO site as well as the follow-on posts:

  • CPO Job Description: A Procurement Leader
  • CPO Job Description: Primary Responsibilities
  • CPO Job Description: Picking Procurement Technology
  • CPO Job Description: Managing Procurement Staff
  • CPO Job Description: Developing Procurement Staff
  • CPO Job Description: Aligning Procurement With Other Business Functions
  • CPO Job Description: Budget Management

Contract Lifecycle Management I: Do You Know What It Is?

Today’s post is co-authored by the prophet.

CLM, short for Contract Lifecycle Management, is arguably one of the most snooze-inducing acronyms in the Supply Management space, but yet also one of the most important. That’s because proper CLM not only overlaps both the Sourcing (or Source-to-Contract [S2C]) and Procurement (or Procure-to-Pay [P2P]) cycles (for strategic sourcing of buy-side categories), but also influences the full Source-to-Settle (S2S) / Source-to-Pay (S2P) cycle and provides a partial foundation for risk management, performance management, change management, and supplier [relationship] management (as well as in-depth post-mortem reviews that increase organizational knowledge and effectiveness for years to come).

Moreover, good CLM is arguably the foundation for enterprise CLM, or e-CLM, which goes beyond just buy-side contract support and also includes sell-side contract support to cover the transit of goods from supplier to customer, or, as us network modellers like to say, from source to sink.

But just what is CLM? And where does it fit in Supply Management? According to Gartner, it is a solution and process for managing the life cycle of contracts created and/or administered by or impacting the company. (Source) But what does that mean? And more importantly, what does that mean to you as a Supply Management professional? (Let’s be honest — we don’t care much about sales support because there’s nothing to sell if nothing is purchased, manufactured, or created for delivery. Supply Management comes first.)

In simple terms, Gartner’s definition means that, in order to effectively manage your contracts you need the right processes and the right platforms to support those processes. Chances are your organization, which has been contracting since its inception, has, at least, a decent understanding of the right processes but needs a lot of help identifying the right platforms. But where do you turn?

Vendors? They have a great definition of their platform and how they believe it will help you, but with such a narrow view, how do you know it’s right for you?

Analysts? They have a broader definition, as each of the big firms have their own definition of a Contract Management (CM) suite, but this definition is still not a great one. First of all, it’s heavily influenced by the vendors they talk to the most. Second, and most important, their definition changes from quadrant to quadrant and report to report, sometimes arbitrarily, all based upon which vendors they believe should be in the quadrant and which vendors they believe should not, all based on size, suite, or some other half-baked definition of CM. “Should-haves” become “must haves”, “must haves” become “should haves”, and the baseline requirements for vendor consideration, such as suite breadth, vertical support, minimum customer counts, and even minimum revenue ebb and flow with the tide.

Peers? How do you know they know any more than you? Unless they are in the Hackett Group top 8% or the Supply Chain Top 100, chances are they don’t. Remember, one out of every two companies still does not have modern sourcing or procurement systems. And even if a peer has a system, and even if that system isn’t one that just happened to be bought at the word of an analyst or the salesmanship of a vendor, it still doesn’t mean it’s the right system for your organization.

Professional Organizations? Organizations like the ISM and CIPS tend to focus on process, not platforms. Members, not vendors.

The reality is that you don’t really have anywhere to turn for a good, solid, stable definition that you can bank on and measure against. That’s why, for the first time, Sourcing Innovation and Spend Matters, the leading independent authorities on Supply Management, have come together in a joint effort led by the prophet and the doctor to, once and for all, define the core Supply Management platforms, starting with CLM, the most misunderstood of the Supply Management misfits.

Starting this week, over on Spend Matters Pro [membership required], the first part of Contract Lifecycle Management 101 which introduces an in-depth eight-part series that defines CLM in detail is available for your reading pleasure. This landmark joint-authored series outlines its historical, and typical, implementations, details the must-haves, should-haves, and nice-to-haves of a core CM (Contract Management) platform, specifies must-have and should-have integrations, and provides some tips on how to find the right provider. This series is the first in a set of landmark series (which will also include series on Third-Party Management [3PM] / Supplier Relationship Management [SRM], e-Sourcing, and e-Procurement) which will define once and for all what the technology platforms should do, why the platforms should do it, and provide a standard, open, public benchmark against which all vendors will be measured. As such, the doctor strongly encourages you to head over and check it out.