Category Archives: Market Intelligence

Is Your SRM in a State of Flux? Maybe You Should Find Out!

Earlier this year we introduced you to State of Flux, a provider of Supplier Relationship Management (SRM) software and services, and the initiators of the SRM Research Report which we highlighted in our 3-part series that highlighted why you should focus on essentials, plan against the pillars, and be a customer of choice.

SRM is very important because supply chain success is ultimately dependent on your supply base. Your organization can have the best marketing and packaging in the world, but if the supply base delivers products that are rubbish, your organization’s brand reputation is tainted, and the damage can well exceed even double-digit savings identified during the sourcing phase.

But it’s not easy to effectively manage supplier relationships because SRM is more than just performance monitoring and corrective action management, it’s also nurturing, development, and partnership. Furthermore, effective SRM requires quite a bit of work to get a proper framework in place (as reinforced by Sigi Osagie’s recent Procurement Mojo), which will need to be implemented while keeping the ten essentials in mind that were highlighted in State of Flux’s 2014 SRM Report (and summarized in our post on the essentials).

And it’s even harder to find out how well you are doing until, of course, a major disruption or disaster occurs when a shipment doesn’t arrive or, even worse, arrives with a 10%+ defect rate (because, otherwise, it seems like everything is hunky-dory even when the relationship is spiralling out of control). But there is a way — you can proactively participate in the 2015 State of Flux SRM Research Report and get the full results ahead of the market. You can measure yourself against your peers, find out where the market is, and get the first insights into new best practices.

You have until June 26, 2015 to complete the SRM Survey, which, this year, is focused on helping you get executive sponsorship and support for SRM. Executive sponsorship is critical because SRM needs to be viewed as an organization enabler for the required transition management program to be adopted and enforced.

While this survey will take 45 minutes of your time, the reward is infinitely more valuable than the cost. This year’s publication was one of the most comprehensive compendiums of SRM insight ever produced with 216 pages of data, results, and expert interpretation. Imagine the value that will be yours, for free, as a participant in the seventh annual study.

So, take the 2015 SRM Survey today. Given the depth of the work consistently produced by State of Flux compared to the average analyst report, you won’t regret it!


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