Category Archives: Marketplaces

Data is Too Darn Expensive Today … But It Won’t Be For Long

THE PROPHET, who has recently discovered ranting is his new favourite thing to do (on LinkedIn), recently complained that Procurement, Commodity, and Supplier Data is Too Darn Expensive.

And while he’s right in that data is often too expensive for what it is, it’s not going to stay that way. Next generation providers are going to commoditize quality data and lower anonymized community data subscriptions to win (and keep) clients, because they know that there’s no value in advanced technology alone (and especially in analytics, optimization, and AI wihtout quality data to feed it) but there are three key points he missed in his rant where he complained about data prices and advocated the use of LLMs and Gen-AI as a substitute (which they are not, and considering how much they hallucinate, we wouldn’t even trust them to be directionally accurate — just feed the historical data you can get your hands on into Excel and do some basic trend plotting if directionality is enough).

1) As Lisa Reisman noted in the comments, sometimes you need highly granular accurate data by geography, volume, and production methodology. When pennies make a difference, because you are buying tens or hundreds of millions worth of the material for a global operation, it matters.

2) Most firms are still ignoring their own data, which, when run through something like Covalyze (which THE PROPHET should love as it was founded and designed by economists), gives very accurate target cost models on any category the firm has enough historical data on, allowing them to pinpoint where they need more data and why for cost breakdowns (and should cost models to refine the target cost models), and which suppliers they actually need those expensive profiles on. Then they can go to pay by the sip providers like Veridion for basic supplier data or other emerging commodity and supplier data portals.

3) The amount of data most firms need is much less than they think. In the tail, most of the spend is not significant enough for any market data to provide insight on a significant savings potential beyond what you will get from analyzing your own historical data and market quotes. When pennies won’t make a difference, you don’t do detailed cost breakdowns by raw material. When the product is a commodity that can be supplied by multiple suppliers at similar price points and equal quality levels, you don’t do deep risk profiles because you can just go to the next supplier in the queue if the first one fails you. And so on. You only do detailed analysis where there is statistical likelihood of a real opportunity or a real risk. Otherwise it’s a waste of time, money, and resources as no organization today even comes close to fully analyzing the significant categories and risks they have in any given year. Thinking you will do more is delusional and not worth it if you don’t have the basics covered.

By the time firms actually need more data, you can bet a next generation of data providers will have it readily available and cheap by today’s standards.

Sourcing Innovation stands by it’s statement that the USA is …

… math stupid that it made in it’s post explaining why the lack of adoption of analytics is NOT complicated. the doctor knows it ruffled a few feathers, but it’s not the doctor claiming that, it’s the OECD data (which is available here).

At least the doctor didn’t point out in that post that the USA is effectively failing across the board as it is below average in literacy, numeracy, and adaptive problem solving (and significantly below average in numeracy, as we pointed out in our last article), that there should be no reason for this when the USA is seventh in the world in nominal GDP per capita (beaten only by Iceland*, Singapore, Norway, Switzerland, Ireland, and Luxembourg*, where the * countries are not in the OECD rankings), and that the USA could afford to have the best educated people in the world if it desired (and it could allocate the budget if it desired, considering the percentage it spends on defence is more than twice the global average, and that’s before all of the foreign military aid).

However, he feels it is now very important that he does point this out because too many Americans are heralding the budget cuts to the Federal Department of Education (on the basis that funding should be tied to performance, which is a justifiable goal, but the best way to do that needs to be carefully considered) without a plan instead of insisting that it be restructured to address the serious educational deficiencies or replaced with more state level agencies (where funding is tied to specific focal points and not allowed to be disbursed on whims).

To nail these points home, here is the relevant data:

Literacy

Country Rank Score
Finland 1st 296
Canada 10th 271
Czechia 14th 260
AVERAGE 260
USA 16th 258

(which is a 12 point drop for the USA since the last OECD ranking!)

Numeracy

Country Rank Score
Finland 1st 294
Canada 12th 271
AVERAGE 263
Croatia 21st 254
USA 25th 249

(which is a 7 point drop for the USA since the last OECD ranking)

Adaptive Problem Solving

Country Rank Score
Finland 1st 276
Canada 10th 259
AVERAGE 250
Slovak Republic 19th 247
USA 19th 247

I’m old enough to remember when the US education system was the envy of the world (even though the US has scored in the lower half, and sometimes the bottom, of the FIMS, FISS, and the IEA — which measured the global performance of the primary and secondary education systems across 12 to 20 countries back in the 1960s through 1980s), because, post Sputnik, the US poured money into public education in an attempt to produce the best students in the world to enter post-secondary STEM programs and become the best engineers in the world … and its Universities took prominence as the Universities you wanted to be admitted to (bypassing centuries old Universities in the UK and Europe in popularity).

Now it’s true that the US should have improved substantially based on this investment (which means that there are fundamental issues that have never been addressed), but just saying “it doesn’t work” and attempting to tear it down without a plan to put something better in place is not only unhelpful but sends a message to the world that the US no longer values having the best education system. I’m afraid this will have ripple effects on the popularity of US institutions, which rely a lot on full tuition foreign students to maintain their top-tier quality programs, and lead to further degradation in adult literacy, numeracy, and problem solving skills (which are now barely on par with countries North Americans grew up believing, partially thanks to propaganda, to be significantly below us).

For those of you who not only want your American-based companies to continue to be the best in the world, but also want America to attract global headquarters (or at least regional headquarters) of more multi-nationals, the sincere hope is that you will fix this. In this increasingly unstable global economy (thanks to natural and man-made disasters), the winners will be those with the best educated people who have the skills to use the best tools at their disposal to make the best decisions fast enough to survive. As a result, companies that want to weather the storms should now be more inclined to choose the Nordics, Japan, or Canada (which top the adaptive problem solving list with high literacy and numeracy scores, and don’t have the energy issues Germany is dealing with or the lack of local population that Estonia is dealing with). Now, while that last option is good for the doctor, let’s face it, for the past eigthy years, the market dynamics worked best when the biggest companies were in America and, through mutual trade agreements (NAFTA or USCMA), Canada supported.*

* Although it must be admitted that maybe the time of American dominance with Canadian and Mexican support has, unfortunately, come to an end. Especially since Canada is still “Open” on the Civicus Human Rights Watchlist and not one of the two countries that recently had their score narrowed significantly in the March 2025 update. While research needs to be done on the subject, when you consider that 17 of the top 31 countries are “open” and 11 are “narrowed” in terms of human rights and civic freedoms on the Civicus rating scale, there does seem to be a high correlation between civic freedom and average educational level as only 2 countries are “obstructed” and only 1 country is “repressed”. And while the repressed country of Singapore comes in high at #13 if you take the average across the 3 scores, the two “obstructed” countries come in low at 22 and 26 respectively.)

Everyone In the Procurement Ecosystem Exists For a Reason — But Do You Know Why …

… and more importantly, when you should use them?

Joël Collin-Demers recently commented on a LinkedIn post that

Everyone in the ecosystem exists for a reason. Big consulting and analyst firms are great tools for organizations in particular contexts (e.g. a big firm is a great way to get a lot of smart people deployed on a problem quickly).

The point I’m trying to make is that we tend to over-rely on big consulting and analysts.

And he was correct. Big X consultancies, niche consultancies, implementors/integrators, analyst firms, suite vendors, best of breed vendors, etc. were all started for a reason and continue to exist for a reason. Understanding both of these helps you determine when you should use them, why, and what you should (and should not) expect. In this post on where we asked If You Really Want Success … or Just Say You Do, we made it abundantly clear that Analyst Firms, Big X, Implementors, and even Vendors (beyond a certain point) ultimately don’t care about your success because

Big Analyst Firms (that produce the pay-to-play maps) make money pushing the solutions of the vendors that pay them the most, not on making sure those solutions solve your problems. While there was a time you could always count on the best unbiased advice from an analyst firm, that was long ago. Ever since the first big vendor realized it was faster (and cheaper) to buy influence by sponsoring reports or cutting big research access POs, the end of unbiased recommendations began. (And it’s more your fault than the vendor’s because you came to expect free reports, but no one can work for free, which means the vendors had to pick up the entire cost, which means those reports say what the vendors sponsoring them want said, not what you need to hear.)

Big X need to keep their benches employed addressing your problems, and if a vendor’s solution took care of everything, what else would they do? This doesn’t mean they are going to screw you, but it does mean they are only going to address what you ask them to, that they are going to try to do it with a diamond/platinum/sycophant partner to keep their top-tier consultancy status, and assign the weakest resources they think they can get away with to keep their top tier resources free to top paying clients. Moreover, as we discussed in our article on When Should You Use Big X, the vast majority of Big X did not start out as IT consultancies or Procurement Tech shops and this is still their weakest area (as the “wild west” tech players and boutique consultancies get the majority of best talent), so even if they are doing their best, it’s only so good. (Compared to their core strengths, which, as we said in the latter post, you’d be foolish NOT to take advantage of.) The reality is, many Big X are now mostly body shops who have to keep those junior consultants employed while keeping their big software partners happy. And that’s a difficult balancing act, especially considering their overheads and the luxurious lifestyle these partners have grown accustomed to.

Implementors make money implementing solutions — if that solution solved everything for the next five to ten years, how would they keep their bench employed as well. Now, they are going to make sure it’s implemented to the best of their ability, but since they weren’t hired as a consultancy, they aren’t going to be the ones to tell you when a solution is not the best for a certain task — they are going to do what they are paid to do (so that, when you realize you need another solution in a year and then use the same Big X again to recommend it, they get that contract too).

Vendors need to keep their investors happy, which means securing sales as fast as possible, not ensuring they are the perfect fit and/or outlining where they will fall short. Now, of everyone in the ecosystem, they definitely want you to succeed, but the reality is, they can only spend so much time on you because they took too much money from investors at too high a multiple, aren’t growing at the expected rate, and the management and sales team risk being fired (and the entire company being shut down) if they don’t continually increase the rate they bring on new customers (whether they can reasonably support them or not). It’s all about “what their solution can do for you” and not about “is their solution right for you”.

And so on.

Niche Consultancies are the best IF they do not have preferred vendor partnerships (which require a certain level of business to maintain) as they know they have to perform to get their next contract, but these are few and far between. And even though it is critically important, almost no one does Project Assurance for their ProcureTech project (and then wonders why we have had Two and a Half Decades of Project Failure).

Short story, everyone in the ecosystem exists to make money off of YOU. While that’s not a bad thing IF they provide value (and heck, I’ll happily give you a dollar if I am guaranteed two dollars in return in a reasonable time frame), not all of them do … and those that do are not equal in the value they provide (primarily due to conflicting pressures, not intent). Until you understand that, your returns will be limited.

The important thing to remember is that if you’re just starting your best-in-class Procurement journey, you typically don’t need an end to end suite, and if you’re Procurement maturity is still elementary school, you don’t need a 7-figure mega suite when a low 6-figure mini suite, which can be implemented in 1/4 to 1/6 the time, can get you 80% of potential savings. Especially when this level of savings will take you 3-6 years to realize. Then, when you’re ready (and know how to get the additional ROI the mega-suite can provide), you can upgrade to the seven figure mega-suite in confidence you’ll achieve the same level of ROI. (Instead of being the next ProcureTech disaster. And while you may believe in a beautiful disaster, there is no such thing where tech is involved.)

The Sourcing Innovation Source-to-Pay+ Mega Map!

Now slightly less useless than every other logo map that clogs your feeds!

1. Every vendor verified to still be operating as of 4 days ago!
Compare that to the maps that often have vendors / solutions that haven’t been in business / operating as a standalone entity in months on the day of release! (Or “best-of” lists that sometimes have vendors that haven’t existed in 4 years! the doctor has seen both — this year!)

2. Every vendor logo is clickable!
the doctor doesn’t know about you, but he finds it incredibly useless when all you get is a strange symbol with no explanation or a font so small that you would need an electron microscope to read it. So, to fix that, every logo is clickable so you can go to the site and at least figure out who the vendor is.

3. Every vendor is mapped to the closest standard category/categories!
Furthermore, every category has the standard definitions used by Sourcing Innovation and Spend Matters!
the doctor can’t make sense of random categories like “specialists” or “collaborative” or “innovative“, despises when maps follow this new age analyst/consultancy award trend and give you labels you just can’t use, and gets red in the face when two very distinct categories (like e-Sourcing and Marketplaces or Expenses and AP are merged into one). Now, the doctor will also readily admit that this means that not all vendors in a category are necessarily comparable on an apples-to-apples basis, but that was never the case anyway as most solutions in a category break down into subcategories and, for example, in Supplier Management (SXM) alone, you have a CORNED QUIP mash of solutions that could be focused on just a small subset of the (at least) ten different (primary) capabilities. (See the link on the sidebar that takes you to a post that indexes 90+ Supplier Management vendors across 10 key capabilities.)

Secure Download the PDF!  (or, use HTTP) [HTML]
(5.3M; Note that the Free Adobe Reader might choke on it; Preview on Mac or a Pro PDF application on Windows will work just fine)

The B2B Software Marketplaces Will Rise. Then the Hammer will Fall!

Thanks to Apple, every consumer thinks there’s an app for that. And for most consumer desires, there probably is. Especially since Apple’s App Commerce climbed to 1.1 Trillion in 2022. Yes, that’s 1,100,000,000,000 US Dollars! That’s a lot of money, especially when most apps are being sold for a few bucks.

When you consider:

  • consumer app marketplaces are now a Trillion dollar business
  • enterprises are buying more SaaS than ever, as every employee in every department wants an app(lication) to support every task they do
  • enterprises pay 10X to 100X what individuals pay per user license, and, thus, the opportunity of enterprise app marketplaces is in the tens (to hundreds) of Trillions
  • enterprises want easy, centralized, acquisition to limit the number of vendors they need to deal with / handle subscription invoices from

It’s easy to see why all the big software / cloud vendors are opening their own app marketplaces. A recent article on IOT Analytics shouted the rise of the B2B software marketplaces while quoting their B2B Technology Marketplaces Market Report (2024-2030) that noted that:

  • they are the fastest growing procurement channel (for software)
  • dedicated platform providers are seeing success
  • some sellers make Billions

And they will continue to grow for a few years. But then, the hammer will fall.

What one has to remember is the following:

  • many of these marketplaces are taking a big cut, like 30% or more, which is what a sales partner would have taken to compensate its employee(s) that actively sold the product, but they are doing NOTHING but creating a listing, making it searchable, taking an order, collecting a payment, and providing a license key … even when you consider cloud fees, payment processor fees, platform maintenance fees, they could be very profitable at 13% (remember that recent article on how roughly half a trillion dollars will be wasted on SaaS spend this year … well, this is only going to increase that as you’re paying almost 20% more than you need to for the licenses you do need and use)
  • apps, licenses, and overspend is going to proliferate rapidly as “approved” app stores make it easy for every employee with a p-card to buy what they want, when they want
  • those SaaS audits and rationalizations that identify 33%+ overspend are only going to reclaim at most 20% of that, if you’re lucky, because, even if the software developer is willing to refund unused licenses, they’re not going to refund that 30%+ they already paid the marketplace … and that’s if they’ll even talk to you because you acquired the license through a third party
  • there’s no real negotiation opportunity when you buy from a marketplace

So as businesses race to digitization, they will embrace the marketplace as it will help them get part of the way there very quickly, but then when they realize just how much they are spending on app(lication)s, and turn Procurement on strategic procurement of SaaS, the first thing to go will be the app marketplace purchases … and then … it will be time for the hammer to fall.