Category Archives: Sourcing Innovation

Is this the year CLM breaks the bank?

Or at least the deal?

Last year Icertis raised over 100 Million at a valuation that allowed it to become the next unicorn and Coupa bought Exari to fill the hole in their suite. Seal Software raised another 15 Million just to power contract discovery and a new startup, Lexion, raised 4.2M to bring AI to contract management.

Pure-play CLM, and its precursor technology, has been around for a long time. Exari was founded in 1999 and Selectica, which rebranded as Determine after it acquired b-pack and Iasta, dates back to 1996 when it offered a CPQ (configured price quote) solution. Not long after, Nextance (which was acquired by Versata) was founded in 2000. And the saga continued from there.

But we won’t bore you with a detailed recounting of providers that have come and gone over the past 20 years. The point was merely to make it clear that while CLM has been around for a long time, it hasn’t been very successful. The majority of providers have been acquired, acquired, and/or morphed into different solution providers in order to survive.

But this is the year CLM may finally come to the forefront. With risks increasing, costs escalating, and supply chains lengthening, contracts, and associated obligation and liability management, are becoming ever more important. It’s not just negotiating a good deal, it’s ensuring that deal is adhered to. That’s more than just loading the items into the catalogue with agreed to pricing and ensuring the invoices match the purchase orders, it’s ensuring the items are bought when they are supposed to be (so the company keeps its end), delivered when they are supposed to be, at the quality level they are supposed to be at, and free of the risks they are supposed to be free of.

This requires not only careful monitoring of execution, but careful construction and review (are there any clauses with ambiguous interpretations or would counter-party suggestions increase risk), and this is a capability most Source-to-Pay providers don’t have. When most vendors advertise contract management, what they really have are contract meta-data management — the system can track contracts, products and services, pricing, promised demands, and associated contract documents, but can’t suggest templates, analyze them, or intelligently determine when an obligation isn’t being met by either party. The systems can’t intelligently manage clause libraries or help with intelligent contract drafting, comparison, or exception management.

But if contracts are the only cure to the ills of risk and obligation management, considering the difficulty most organizations have in finding and getting a handle on them, then this might be the year that CLM finally comes into its own. It may not break the bank, but it may start being the differentiator in deals. And that may just be enough.

Platforms in 2020

Last week we talked about analyst predictions for analytics in 2020, most of which were just statements of the obvious, wishful thinking, or some combination thereof, but there was one prediction in particular that stood out … the one that was 100% correct. In particular, the prediction that companies will continue failing analytics and AI transformations.

Considering that most companies don’t have a good grip on analytics and an even worse grip on AI, what it really is, and how to judge if a company truly has some level of Artificial Intelligence — be it Assisted, Augmented, Cognitive, or Autonomous Intelligence — or if the company is just using Applied Indirection in their marketing.

But Analytics is just one aspect of technology that an average company is going to be interested, and if the company is not looking for a best-of-breed analytics vendor, it is looking for a platform. So what’s in-store for platforms in 2020?

Well, as usual, more of the same-old same-old, but their might be a few pinpoints of light in the near future. However, first, let’s discuss what’s going to happen for sure.

1) The M&A Mania is going to continue … and accelerate.
Workday’s (almost) ridiculous multiple for Scout (based upon current revenue) is going to make everyone hungry for acquisitions to keep up.

2) CLM and Analytics will be focal points.
Contract Management is the buzz, and while most organizations still don’t quite understand how to really extract value from it, no one wants to be left behind.
Similarly, AI is weaving it’s way into analytics, and while most vendors don’t have what the market thinks they have, it’s bringing analytics back into the limelight.

3) Mega-Acquirers (large companies and PE firms) will be all-in with suite mania.
If they don’t have a sourcing, supplier management, contract management, analytics, e-Procurement w/ Catalog Management, Invoice Management, and Payment management capability, they will be out to acquire any of those pieces as fast as possible to check all the major boxes and claim equivalency with Coupa, Ivalua, etc.
If they have the main pieces, they will be looking for ancillary pieces to increase the value and differentiate from the competition along the lines of T&E Management, BoM management for direct sourcing, Quality Management for Direct, Optimization and What-if Analysis, Freight “Broker” platform integration for (near) real-time weights and accurate Total Cost bids, etc.

But this is no surprise … it’s just an acceleration of what we’re seeing now.

So will anything be new?

1) “Chat-bots” will be put to work.
They will slowly transform from interactive help systems to actual assistants that will take commands and implement standard actions across the application. “Create an RFP for all off-contract products and products that will be off-contract in 90 days in the office supplies category” will find the template, find the products, identify the minimum information needed (release date, initial supplier pool, etc.) and ask it, and create a RFP ready to be finalized and sent out (using naming conventions, standard definition of incumbents, etc.).

2) “Predictive” Analytics will start to be integrated cross platform.
But don’t get too excited … for the most part it will be traditional trend algorithms or open-source models that have been found to typically work on that type of data and little to no machine learning, but it will be a step in the right direction.

3) “MDM” will be bandied around like it’s the new acronym candy.
And while platforms will make progress in terms of managing all of the data that flow through them, their ability to push data back to source systems and manage master data across systems will still be a while off. MDM will stay in the hands of ERP and highly specialist vendors for a few years to come.

While not an in-depth discussion of the trends that will continue or the trends that will start, it’s a good start.

Synertrade: Looking Forward to Powering Inter-Planetary Supply Management

the doctor thoroughly enjoyed the theme of last week’s Synertrade Digital Procurement Summit, which was the “Mars Age of Procurement”. Not just because it was forward thinking, but because a vendor finally proved to SI that at least some of their staff have truly been following the doctor‘s writings for years (including the writings here on SI).

Long time readers will recall that back in 2013 SI asked Why Aren’t We on Mars Yet? because General Dynamics promised us a manned mission to mars in 1975 back in 1963 and almost 40 years had passed since the promise and a mission to mars still looked to be decades out. And it wasn’t just interest in the space race that prompted this — it was knowing that this would force us to look ahead to the next generation of Supply Management challenges (and start thinking about truly next generation solutions to address them).

Simply put, it’s one thing to source everything needed to build and equip a shuttle for an International Space Station (ISS) mission, another to build and equip a craft for a mission that could easily span half a decade, and another challenge yet to manage the reverse transport of recyclable products and any raw materials we may be able to mine from Mars. So, as you can imagine, seeing a conference embrace a theme around the “Mars Age of Procurement”, even if only metaphorical, is very satisfying as it means the vendor knows that supply management challenges are always going to increase in complexity as our goals and needs evolve, that a company needs to take a long term vision in order to adapt and succeed, and that they understood the hidden metaphor the doctor put forward all those years ago.

Especially since times have changed in the six years since the article was penned. Now that the space race has become the chosen pet project of the tech billionaires, we are being told that we could see a mission to Mars by as early as 2038, which, while over sixty years late according to the General Dynamics timeline, is less than two decades in the future and gives us hope that we may yet again try to explore beyond the planet.

And this is another reason SI is very satisfied with the conference theme! The mere fact that an IT company, which has already survived for two decades as a stand-alone player with a single code base that has never grown by acquisition, wishes to be around as a stand-alone company in twenty years is truly admirable. We are in an industry where most companies want to see how fast they can get acquired or merged with another company at an investment multiple that makes the investors and founders rich; an industry that has already become the new “hot” landscape for Private Equity (PE) firms looking to roll-up, take public, or flip as many companies as they can in the Source-to-Pay (S2P) space now that it has three stand-alone Unicorns (valued at over 1 Billion); and an industry that creates solutions required by every single mid-size or larger company in the world. (All successful growing companies buy and sell — that’s just how business works.) When you consider all that, the fact that Synertrade is one of the few platforms that has deep support for direct (materials) and optimization, it’s leadership rankings from multiple analyst firms (including Spend Matter’s Source-to-Pay Solution Maps), and the fact that Synertrade, especially over the past few years, has grown to be a dominant player in the Source-to-Pay space (especially in Europe) that has been increasing it’s customer base by over 15% year-over-year and it’s revenue by about 30% year-over-year for the last four years, this is very notable.

And yes, the event was very well done. For more insight into the event, SI is directing you to the doctor’s pieces over on Spend Matters which talk about some of the key insights brought forward.

Have You Mastered the 4th T of Tracery Yet?

Regular readers will know that the time of PPT — People, Process, Technology — has long passed. In today’s fast paced world where product life-cycles are sometimes over as soon as they hit the market, and where your competitors are constantly striving to outpace you in both sales and supply management, you can’t live on processes anymore — they go stale almost as soon as you’ve got them figured out. And in a knowledge economy, just having a butt in a seat or a worker at an assembly line isn’t enough to succeed — you need a worker who, at the very least, is smarter than the average worker and, preferably, smarter than the worker employed by your competitor. And your technology cannot get out of date.

That’s why SI has been promoting the 3 T’s for years — Technology, Talent, and Transition. You need a solid, regularly updated, technology foundation upon which to build your modern Supply Management Organization. You need talent to put together good operating procedures, properly use the technology, and to constantly identify new opportunities for cost reduction or value generation. And you need great transition management as even best six sigma process today won’t cut it tomorrow when you need to upgrade your product offering, switch suppliers, change distribution methods, and make sure your product is Designed for Recycling from the get-go as new regulations are forcing you to take back your product at end of life and recycle it as you are using chemicals and / or rare earth minerals that are heavily regulated.

But while these are necessary conditions for Supply Management success, they are not necessarily sufficient. As we noted five years ago when we first asked if you have mastered the 4th T of Tracery, while it is true you will not succeed without a mastery of technology, talent, and transition management, as per our first post on Project Assurance many years ago, organizational success also depends on selecting a superior strategy and seeing it through until the desired results are achieved (or the organization changes its strategy, which hopefully wasn’t done arbitrarily on the whim of a CXO after talking to a buddy on the golf course).

However, in order to properly implement a strategy, you have to not only see it through from start to finish, but you have to make sure all of the process streams necessary for success are both completed and properly synched. Just like the key to a good weave, as one might find in Egyptian Cotton, is a skillful interleaving of the thread, the key to a good strategy, is a skillful interleaving of the process strands into an effective transition plan from where you are to where you need to be.

And this, dear readers, is Tracery — the “delicate, interlacing, work of lines as in an embroidery”, or, more modernly, “a network” — the glue that not only binds the Technology, Talent, and Transition Management that your Supply Management organization needs to succeed, but that interleaves these threads in a way that causes each of them to reinforce each other and make a stronger whole.

And, hopefully, monitors them through a common network-enabled platform that can not only bring your internal stakeholders together on one platform, with appropriate views and collaboration features for each function, but also your partners and suppliers who have the data and best practice insights you need to actually get your supply chain in shape. Because it’s not something you can do alone, and it’s definitely not something that will never happen unless carefully monitored, as it’s always easier to “do it the old way”, even if the old way is unsustainable and will lead your down a path to organizational oblivion (through bankruptcy).

The Category Sourcing Scorecard – Still An Essential Tool for Category Sourcing

As we noted when we discussed this topic seven years ago, if you want a successful event that generates significant savings, you have to select the right category — and the best way to do that was often to evaluating them with the right scorecards that could predict savings opportunity.

But success requires more than just selecting the right category, it also requires executing a successful event, and this requires:

  • selecting the right sourcing event and
  • adapting quickly if market conditions change

However, today, to be successful, a sourcing scorecard is more than just a point-in-time snapshot of market factors, buying factors, supplier factors, internal factors, and category-specific factors. It’s historical data, even if anonymized, on past events with respect to size, savings, geography thereof, relevant market conditions, and event type.

This way a buyer not only knows the potential savings associated with a category at a particular time, but what type of event will be needed, and what market conditions need to hold throughout the event to maximize the chance of success. And if there are good projections as to how long conditions will hold, the buyer knows how long he or she has, or doesn’t have, to complete the event to maximize chances of success. And if conditions change unexpectedly, the buyer can halt the event and decide what to do next.

Plus, sometimes you can’t just select the category with the greatest sourcing potential, you have to select the category where the contract is going to expire in 60 days and you can’t be without a contract or risk a production line shutdown. Even if the market conditions are the opposite of what you’d need for best results, you still have to proceed — so having the best information possible on the option likely to give the least unsatisfactory outcome is still a positive. And having a platform that can use a modern category sourcing scorecard to enable the right workflows to drive the right events is most likely to minimize a less-than-ideal event as well as maximize an ideal event when it comes.