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!
