Category Archives: Procurement Innovation

Why Are There So Many Undifferentiated ProcureTech Startups That Still Don’t Solve My Problems? Part I

Preamble: When the doctor started his influencer series on LinkedIn (with Top 10 Ways To Be A Procurement Influencer), one of the first comments he received was that it won’t get many likes. This was his expectation, especially considering he posted a partial summary of his final installment, One Final Piece of Advice, where he basically told wanna be influencers to find their next job sooner than later. However, that series was tame compared to this one, which definitely won’t get any likes. In fact, it is almost guaranteed to get the doctor a few more haters, but some things need to be explained. (And there’s no need to point out the obvious to him!)

Just Why Are There So Many Undifferentiated ProcureTech Startups That Still Don’t Solve My Problems?

After all, with over 666 solution providers out there, I should be in solution utopia, right?

There are three big reasons for this, they are people-centric, and they all start with F!

  1. Founders
  2. Financiers
  3. Fashionistas

Founders

There are many different types of founders who get into it for many different reasons, but the reality is that the majority of founders of ProcureTech fall into two categories:

Procurement Practitioner

Typically, a practitioner who was stuck in the dungeon of the Tower of Spend with outdated tools, insufficient support, a crushing workload, a belief there has to be a better way, and enough will to quit and try to find it.

Tech Guru

Typically, a tech guru who invented a great new piece of tech which they think will revolutionize the Procurement space or has a history of “transforming” different back-office areas and believe that, if they tackle Procurement, they can solve it too.

But they both have one thing in common:

They don’t know the space. They don’t know the terminology, the vendors, the solutions (beyond the antiquated ones they used), or the unsolved problems (as they haven’t even looked beyond the basic problems that their tech didn’t solve). They Don’t Know. And it’s hard to build a good solution when you don’t know. When you don’t know what your competition does (because you don’t even know who your competition is). When you don’t know what problems your competition is not solving (and what you should be building). And you don’t know what your target customers would pay the most for, now, without having to go through a year-long sales cycle. This holds true for both of these categories of founders.

Let’s take practitioners. They don’t know the terminology, think it’s still purchasing, and don’t know how to do proper research. They’ll do a few Google searches, find a few mass market simple finance payment platforms (such as ramp.com for billpay, airbase, etc.), think they’ve found everything, and start designing their solution. They’ll add a few additional features, basic e-Procurment/catalog support, maybe an RFP, and think they have the best Procurement solution ever designed and run with it. Or, stuck using spreadsheets and email for RFPs, design a simplistic RFP solution, add in some Gen-AI to auto generate requirements from spec sheets and auto-parse RFP responses, and think they’ve revolutionized strategic sourcing.

the doctor is not being melodramatic here. Having analyzed over 500 solutions in his career as an (independent) analyst, he’s talked to well over 500 companies, and asked quite a few of them how they started, especially when he was doing due diligence projects. And when the company was founded by a practitioner, this was the story all too often — that they started the company because the solution they had wasn’t doing the job, the 2 or 3 solutions they looked at (which weren’t at all relevant) weren’t doing the job either, and they believed the market needed a better one. Not knowing the market (beyond maybe what they saw in the odd Gartner or Forrester report), they believed there were next to no modern, affordable solutions for small-to-midsized companies that did what they believed needed to be built, so set out to build one. The good news is that they usually designed a decent solution (as they started with great intentions and built something they felt they could use). The bad news, there are twenty others that more or less do the same thing (already existing and designed by a couple dozen other founders who had more or less the same idea before them or at the same time around the world) and it’s hard to get the message out.

Then there are the tech gurus, who believe there is no modern tech in Procurement, and that the optimization, analytics, automation, and, today, AI they can bring will revolutionize our space! That all the current solutions are missing is modern tech, and if you just inject a bit of it, miracles will happen. This group of founders typically builds really cool analytics-based apps, but tends to miss a lot of the basics or ignore the 80% of the workload an average Practitioner does on a day to day basis, either because they assume the existing platforms do it well (and the existing platforms usually don’t do it well enough) or because it’s not cool. They tend to build better tech but worse solutions.

Short story is that, the majority of the time, neither of these groups do proper research before they start, or when they launch. Not only into competitors, but into the analyst firms (beyond Gartner, Forrester, and IDC), the professional organizations, or the independent experts who they could ask for advice and help. Research that could help them create a solution that checks all the base boxes, tackles some of the thornier problems, and that actually does something different from their competition.

And if this was the worst of it, the situation would not be so bad. It would barely be a problem. The worst of it is that many of these founders not only believe they know everything they need to know about how to build a great solution, but also on how to market and sell it, package and deploy it, build, and run, a company around it. But they don’t. Sometimes, not even close.

And even worse, they won’t admit it. They won’t look for the help they need, and, even worse, they won’t accept it if you offer, even if you offer to help them for free! Some will even get very defensive, double insist they know everything they need to know, and cut off communication. (Fortunately, this particular situation only happens a small percentage of the time. But still.) This is the problem. Not all founders have this level of ego, but some do.

the doctor has direct and indirect evidence for and (personal) experience with the situations described above. Even when the doctor has tried to help indirectly, such help has been ignored. There’s a reason that the doctor wrote a series on Ten Best Practices for (Software) Vendors, a series on iZombie, and two series on Dumb, Dead, and Smart Companies. To politely, less politely, and when they still wouldn’t take the hint, bluntly tell them what they needed to know in the hopes that, since they didn’t have to admit to anyone they didn’t know everything, they would heed some sound advice and not join the ranks of the vast majority of their peers, which, over time, eventually disappear. Having followed this space for over two decades, one thing the doctor knows is 90% (or more) of companies WILL disappear. Not the typical 70% that the statistics tell you for startups. 90%! The lucky will be acquired on terms they can accept, the survivors will be acquired on terms that a decent percentage of their staff continue to be employed, and the rest will just disappear. And the companies with great solutions WILL NOT be spared. Success requires a lot more than a great solution.

The majority of founders just aren’t up to the task. And that would be totally fine if they’d admit it, because not everyone has the skills it requires to grow and run a company, but anyone with the skills to found one obviously has a valuable set of skills the startup still needs, and there’s nothing wrong with stepping back to the COO, CTO, CSO, or CRO role you’re best at, especially if it’s for the greater good. But with a number of these founders, ego gets in the way. But they aren’t the only problem!

Has Procurement Tech Peaked?

If you’ve been following along, you know the following:

  • the doctor is very disheartened at the lack of innovation, and even direction, among the major suite players
  • the doctor is tired of the nth solution popping up that does the same thing as solutions 1 through n-1 (which is why SI doesn’t even try to review every solution of the 666+ solutions that exist, but only those with actual improvement or innovation)
  • the doctor is fed up with the fact that almost every vendor has been blinded by the hype of Gen-AI and are focussed on shoving it into every virtual nook and cranny they can find in their product (whether or not it provides any value whatsoever)
  • the doctor is fed up with the constant claims that we will soon have Agentric AI that will solve all of our problems and eliminate the need for Procurement professionals

Which begs the question. Why is all of this happening?

  • why is there a lack of noticeable innovation, and even direction, among the major players (besides cramming Gen-AI into all of the nooks and crannies)?
  • why are there so few new, innovative solutions (and 40 carbon calculators when one will do)?
  • why are so many vendors jumping blindly on the Gen-AI bandwagon (heading straight for a cliff with no steering and no brakes)?
  • why are so many vendors claiming that the next generation of tech is Agentric AI?

Is it because Procurement Tech has peaked?

Sadly, for the time being, the answer is … YES!

Even though there is sill much that can be done, for the time being, procurement tech has peaked. There appears to be three major reasons for this:

  • an almost all-in focus on Gen-AI, a technology that has not delivered on its vast over-promises and likely never will;
  • an emerging focus on Agentric AI in the hopes of replacing people, instead of augmenting them; and
  • an over-focus on orchestrating what is there, instead of orchestrating what is missing.

Each of these reasons prevents the necessary innovation that is needed to take Procurement Tech to the next level.

  • As the doctor has repeatedly told you, Gen-AI is only useful if the problem at hand can be reduced to either large document search and summarization or natural language translation of inputs and outputs. The continued quest to force this technology to solve problems it fundamentally can’t is preventing any research and development on tech that would actually advance Procurement.
  • As the doctor has repeatedly claimed, the answer is not in Artificial Intelligence but in Augmented Intelligence
  • As it stands now, orchestration is just gluing best of breed systems together, it’s not really enhancing any ProcureTech.

And until

  • Gen-AI is relegated to just another AI tech that is only used where appropriate,
  • we stop trying to replace people and start trying to make them productive at a super human level, and
  • we stop gluing and start truly enhancing

ProcureTech is stuck where it’s at. That’s just how it is. For now. Maybe someday it will change. But not before you insist you want it to change, and do so loud enough that maybe a few vendors will hear you and listen and stop wasting all their time and all your money chasing the wrong tech for problems you don’t actually have.

666+ S2P+ Solutions … But Key Problems Are Still Not Addressed! Part 2

In Part 1 we noted that, by now, you should have seen the Mega-Map and the 666 solution logos on it.

We also noted that you will have repeatedly heard the doctor and THE REVELATOR say repeatedly that another massive purge is coming to our space over the next 18 to 24 months (which will be the greatest since 2009-2011 where hundreds of companies were acquired, merged, or went insolvent), and that it’s already starting (with a few notable insolvencies, at least as far as the doctor is concerned, already occurring).

And you’ve heard us say multiple times that there isn’t room for this many companies because even if you account for market size and vertical, we still only need so many solutions that more-or-less do the same thing.

That being said, there are still core needs not being met in the modern enterprise, especially given that we are seeing a return to protectionism, sanctions, and border closings; a continual rise in natural disasters; and a continual disruption in logistics. Solutions are needed that go beyond siloed Procurement. And any company that steps back, analyzes the problem and the needs, and takes the time to define, and build, something truly new still has a chance to breakout and succeed in today’s overcrowded SaaS market.

the doctor is not alone in this understanding. Back in 2022, THE PROPHET saw this need to rethink Procurement Technology and that’s why he proposed his alt-suites. And while we believe he didn’t get them all right, some of the fundamental issues he saw and reasoning he gave, when expanded upon and thought through, will lead you in the right direction. Just like two of our last three suggestions were built on the core ideas behind his DFS [Design for Sourcing] (which was almost perfect) and A2M [Assess to Monitor] suites, two of today’s take some ideas from two of his suggestions as well.

4. Third Party Management (TPM)

Now, you’re probably saying “wait up, we already have that” since we have third party risk management and third party compliance management solutions starting to pop up, but those just represent a slice of Third Party Management requirements. Now you’re probably saying “but we have some very extensive supplier management solutions that do development and performance and they can be used” but the answer here again is that they represent another slice as they are not only supplier centric, but typically found in organizations that need to manage direct suppliers for quality and cost control — and typically not used to manage partners for consulting or implementation (which those systems have no capability to support).

Just like an organization needs a Risk 360 for it’s Risk Management function, it needs a TPM system to fully monitor and manage the third parties it works with, regardless of what it uses them for. Having separate systems for product suppliers (SXM), contractors (CWM), services providers [for implementation, integration, and support) (TPRM), etc. not only gives a fragmented view of the organizational partner ecosystem, but doesn’t even give a complete view for any single partner. A services partner may provide you with internal headcount (CWM) and third party service outsourcing (TPRM). A product partner may provide you with goods (SDM) and select services (TPRM). And so on. Plus, there’s also quality control systems and customer support systems that will have relevant data on the partner performance.

In other words, you can’t just Assess-to-Monitor from a Risk perspective, but you also need to manage and develop as well. And while you might think that Risk360 could be a sub-offering, risks go beyond the entities you are dealing with to include risks that are independent of partner and sometimes specific locations.

5. Vertical Enterprise Project Management

Now, before you say the doctor has lost it, because we have more project management systems than we can shake a stick out, the reality is that most of these “project management” systems don’t really manage projects across the enterprise, and most don’t support anything beyond timelines, milestones, and resources — not nearly enough to handle the intricacies of complex projects that involve the entire enterprise like NPD/NPI, building/facility construction, partner-aware supply chain (re-)design, and so on.

When THE PROPHET said we needed Commercial Value Management (which was defined as the next generation of Contract Lifecycle Management), he was onto something … because no one really “manages” contracts; no one really takes full advantage of what modern, advanced, contract modelling/creation/analysis systems can do; and no on ever pulls the contract out of the electronic filing cabinet unless there is a dispute … even though it is the foundation of the relationship and should be used as the baseline for relationship management. Commercial Value Management was defined to fix all that, putting the contract at the center of organizational “value”, but “value” is nebulous, and organizations have already proven time and again that they only thing they want to do with a contract is redline it, sign it, and resign it to the e-filing cabinet.

However, at the core of the CVM concept is an ability to manage projects off of the contract, projects that would span multiple departments throughout the enterprise. That is useful. If we focus in on that and then realize the problem with most “generic” project management solutions is that they don’t meet specific organizational needs because every vertical has its own unique project needs, we can see that what enterprises need is true enterprise-wide project management support tailored to its vertical. Software that understands the intricacies of construction/facility construction and how it requires the coordination of sub-projects with many contracts and subcontractors, as well as temporary assignment, use, and return of equipment. Software that understands NPD in electronics and how the quest to even determine if you are going to design a new mobile personal computing device will require input from the entire company tailored to electronics project design, component and supplier identification, supply chain design, customer support, etc. Software that understands the unique aspects of identifying an organization’s needs before, during, and after the rip-and-replace of an ERP system and all of the project aspects that will be required (process analysis, data analysis, gap analysis, integration requirements, change management, training, etc.). And while there are tools to support the core activities in the core departments, none take an enterprise view and, further more, can link into the TPM system, ERP/Inventory/HR system, CLM system, etc. and take a truly enterprise view of project management customized to a vertical.

And while it’s possible that someone could build a baseline solution that can support multiple verticals, the front end and customizations required will require separate offerings for each vertical that company goes after. Efficiency, which should be the goal of technology acquisition, cones from supporting integrated processes, not piecemeal tasks.

6. Real-Time True Enterprise Analytics

This is a bit of a cheat in that the doctor knows of one system that can do it (Spendata), but the reality is that the vast majority of enterprise analytics systems claiming to be “best in class” cannot. Even the majority of “best in class” spend analytics solutions don’t even permit true, real-time, do-it-yourself spend analytics.

At a minimum, a modern analytics system must be capable of:

  • pulling in any type of data from any source in real time (and mapping it to a structure that supports analysis)
  • allowing the user to define whatever rules are necessary for cleansing, enrichment, validation, and mapping to not only the internal structure but multiple, simultaneously supported, taxonomies for analysis
  • defining as many derived dimensions as necessary, on whatever calculations and metrics are required
  • supporting as many cubes as are required to accommodate the different data sources being pulled in
  • enabling federation across as many cubes as are required for the analysis
  • managing not only supporting multiple views across the federation, but linked views that support simultaneous drill down
  • creating arbitrary, reusable, filters that can filter on an dimension using any value, or calculation, as is required
  • enabling derived cubes, federations, and views as needed to support dependent, what-if, and problem specific analysis
  • performing data updates in real time, and then propagating those updates through all affected cubes, federations, and views as well as all derived cubes, federations, and views in real-time
  • permitting a user to do all this, on demand, in real time

Most current Business Intelligence (BI) solutions are still based on ROLAP, at best, and all analysis is done against fixed cubes that are updated on a schedule (or on demand, but the entire cube needs to be recalculated before any analysis can be done). They also generally support fixed view types on the provided ROLAP cubes, and an analyst is very limited in terms of what they can do.

The same goes for most Spend Analysis systems. The providers support a fixed number of cube types, give you a default set of reports and dashboards, and you are limited to customizing views on those cubes and dashboards. Building whatever you want, whenever you want, from scratch is out of the question, as is real-time data updates. The best solutions will allow you to bring in additional data to augment your analysis, but unless it’s in the main database, it will be lost when the analysis expires, which is whenever the core cube is updated as only one of these solutions currently supports true inheritance.

In other words, a Strategic Spend Terminal is not enough. Not even close. In fact, it’s just one view, tailored to Sourcing, on the federated data sets that such a next generation analytics solution will support. In fact, there should be multiple strategic spend terminals, one per business unit that shows them the data they need the way they need to see it to allocate their time and effort accordingly.

Until analytics is rethought at the core, users will never be able to do the what-if analysis they need on different data types to get the insights they need when they need it, and AI won’t solve the problem. AI allows for better predictive analytics IF you have the right, verified, structured, data and IF you know the right AI algorithm to apply to the question at hand with the data you have. If you don’t have the right platform, AI is ultimately useless.