Category Archives: Technology

Every Supply Management Vendor Should Review Their Strategy, Not Just Ariba

There was an interesting article over on Fast Company recently that described three steps for re-evaluating your company’s strategy. To illustrate why a company might need to reevaluate, the article chronicled Ariba’s rise, fall, and their recent 300% growth in their stock price over the last year.

According to the article, Ariba, which has a Supplier Network with over 500,000 participants that conducts 170B in transactions a year, had to change their model and refocus when their stock crashed from over $700 a share to $10 in a matter of months. This included opening up their network and switching to SaaS. Furthermore, according to the article, this change was the result of learning the following three strategic lessons:

  1. Don’t Confuse Missed Timing with Missed Vision
    Often the vision is right but ahead of its time.
  2. Look for the Rise in the Fall
    When a company is forced to revisit its strategy, it may find an opportunity it overlooked.
  3. Build the Snowball
    Find a solution that will draw in customers that will in turn draw in more customers.

While the lessons are important for Ariba, if Ariba has truly learned them (as I believe they could have done, and could still do, better than they have done with respect to lessons two and three), they are equally important for Ariba’s competitors. And, as the article points out, Ariba’s competitors have to ask the following questions:

  • If it ends up taking three times as long to achieve our vision, what would we do differently today?
    While some would argue the Supply Chain space is dead, only the leaders have adopted modern solutions, and the laggards are still struggling to get past a spreadsheet to an outdated ERP.
  • If our core business fails, how else could we profit from the assets and activities of our business?
    Sometimes it’s the right vision, but the wrong implementation. Sometimes an idea belongs in the consumer space. Sometimes the add-on becomes the application. And sometimes its just a different deployment model. The original business plan is just the starting point.
  • What is the kernal of our snowball?
    It’s all about making it almost viral.

If they do, many will be in a better position than they are today.

Apptio – Helping you with your IT Portfolio

Earlier this week, in reference to an article on the SCRC site on The Supply Chain IT Investment Enigma and Hackett group recommendations, I asked what is the right portfolio view of the Supply Chain IT Investment. Given the laundry list of Supply Chain Technologies — DM, PLM, PP, APS, SCEM, SRM, WMS — that one has to consider; the dizzying array of hardware, software, infrastructure, and support options; and the difficulty in capturing and computing cost metrics and comparing them to industry averages, it’s a good question.

One vendor trying to make sense of the situation is Apptio. A Technology Business Management vendor with a background in system management and automation with capabilities in IT Services Transformation, Infrastructure Optimization, Application Rationalization, Cloud Business Management, Data Center Consolidation, and IT Financial Transparency, this week they released a new IT Service Performance Solution with supplier/vendor relationship management (SRM/VRM) capabilities. Building on their deep expertise of IT systems of record, application stacks, hardware platforms, and on-site and off-site infrastructure solutions, they have created a unique service performance management (SPM) solution that is customized to the unique needs of IT.

Designed to give an organization a holistic view of internal and external suppliers, and apply supply chain best practices to IT, the purpose-built vendor relationship management solution, which can import data from over 40 major systems-of-record (SAP, Oracle, JD Edwards, Peoplesoft, Ariba, etc.) out-of-the-box, allows an organization to define and manage vendors and contracts, understand spend by vendor and category, monitor and benchmark performance against pre-defined and custom KPIs, and hold vendors accountable to performance. In addition, due to their ability to also integrate with multiple major accounting systems out of the box, spend can be tracked against contracts at a category level by unit of time and IT managers can see how spend is trending relative to projections.

The Apptio VRM solution supports the full IT supply chain from IT planning and vendor identification, to Bill of IT creation, service costing, service performance, and IT benchmarking and allows IT sourcing personnel to effectively manage negotiations, contracts, costs, relationships, performance, and spending over the life-cycle of the relationship. In addition, a custom scorecard can be created for each vendor which can not only track custom metrics and KPIs, but also overall customer satisfaction.

Purpose built for IT, the solution allows the IT relationship managers to define a custom dashboard that displays, for each vendor, the current financial, quality, performance, and satisfaction ratings (which can be defined against pre-defined or custom KPIs) and whether the vendor scores good (green), satisfactory (yellow), or below contract requirements (red) on each rating — allowing problem vendors to be quickly identified. The user can then drill into the vendor and see the basic supplier info, contact info, contracts, debits/credits, and scorecard details summarized for each vendor (and whether each contract, balance, and scorecard is good, satisfactory, or below contractual requirements).

In addition, the top-n vendor and contract summaries allow the IT sourcing managers to quickly see which vendors and contracts are consuming the most spend and how these particular vendors and contracts are trending over time. In addition, the IT sourcing manager can just as quickly get breakdowns by internal vs. external spend, contract type, and vendor relationship. Given that most of the leakage will occur in the biggest contracts, this is a useful capability for IT sourcing managers. Especially since the metrics can be defined against activity based costing (ABC), which is not a feature common among many service or performance management platforms.

And while it’s true that most of the analytics can be easily computed with a good spend analysis tool that allows for the definition custom metrics in the hands of a spend analysis pro, if data needs to be pulled from mutliple systems, the reality is that performance will only be analyzed against most contracts one or two times a year, and by then it might be too late to insure real savings (as the organization is not likely going to get 1 Million in support overpayments back). Plus, most spend analysis tools or platforms are not going to be integrated with a benchmark database that allow an organization to quickly identify what the usual service/software/hardware costs are for its usage levels and save an average of 20% to 30% in its negotiations. (In fact, some beta testers saved 50% on some hardware, software and/or support categories due to a better understanding of usage, industry standard pricing, and past performance and the ability to do what-if analysis in conjunction with activity-based costing.) While it will be a while before we know ROI of the solution for an average organization, I agree that it is likely that an average organization with significant IT spend will begin to see payback within 90 days and that a 20% savings on major contracts will be common the first time around as only those organizations that have, or bring in, IT sourcing expertise tend to get best pricing in the IT category. It’s definitely worth a look for those organizations with a large IT spend as there are very few solutions out there that understand the unique nature of IT categories.

What’s the Right Portfolio View of the Supply Chain IT Investment?

A recent article over on the SCRC site on The Supply Chain IT Investment Enigma promoted a portfolio view of the IT investment, in line with Hackett Group recommendations, that appropriately balances the sustainment of current capabilities with the development of new capabilities. The question is, for an average organization, what’s the right balance?

It’s difficult to say as it depends on where the organization is on the technology curve, how long since it has acquired the solutions it has, what types of solutions it has, and what the gaps are between the organization and world class organizations in its peer group. Furthermore, it’s often hard to differentiate sustainment technologies with new capabilities, since upgrading certain solution suites, such as the sourcing suite, will not only sustain the organization’s capabilities but add new ones to the mix.

And the article, which ran through the laundry list of Supply Chain Technologies — DM, PLM, PP, APS, SCEM, SRM, WMS, etc. — wasn’t very helpful in terms of describing what that portfolio should be. Analytics needs to be there. World class sourcing and SRM needs to be there. And PLM needs to be there. But what else needs to be there depends upon the current state and specific needs of the organization. And so does a solution that integrates all of the solutions onto one backbone. But it might not be possible to determine more than this without a gap analysis by an appropriately experienced supply chain IT professional. Any other thoughts on the issue?

the doctor’s top 11 priorities for supply chain information technology

Industry Week recently ran an article of “Tompkins Associates’ 11 priorities for supply chain information technology”. It was pretty good. Here is the doctor‘s version.

1. Get a Talent Management Solution in Place Now (TA01)

The talent gap is widening by the day in supply chain despite unprecedented unemployment levels as a result of the ever increasing skill set required for success.

2. Define your on-site vs. off-site (SaaS / Cloud) needs (TA03)

Before selecting new solutions, understand what your options are.

3. Update your base Supply Chain transaction store (TA02)

Get all of your transactions into one place for effective and efficient management.

4. Make sure your spend analysis solution is world class. (TA08)

BI is key to right decisions, but good intelligence requires good data, and the starting point is always organizational spend.

5. Make sure your e-Negotiation solution contains decision optimization.

There are only 2 e-Sourcing solutions that consistently deliver average returns in the double digits: spend analysis and decision optimization.

6. Make sure your e-Procurement/P2P solution contains m-way match against Purchase Orders and/or Contract terms.

Otherwise, somewhere between 30% and 50% of your negotiated savings will leak away due to maverick spend, misbillings, and overpayments.

7. Put a Global Trade Management Solution in place. (TA10)

With many transactions requiring dozens of documents, and significant delays resulting from any missteps, an appropriate global trade automation solution is a must.

8. Have automated solutions for regulatory compliance. (TA07)

Regulations like REACH, WEEE, and RoHS are springing up not only in Europe, but around the globe.

9. Get a solution that enables stronger SRM. (TA11)

Your success is dependent upon your suppliers’ success.

10. Make sure your freight management solution can handle as many bids and cost models as you can throw at it. (TA05)

Due to the rising cost of fuel, and the impending driver shortage, freight is going to go up.

11. Get a NPD solution in place and take costs out from day one.

Once 80% of the costs are locked in, the opportunities for savings are minimal. Take costs out from the get-go.

Compliance and Security are Top IT Concerns

A recent article over on Supply & Demand Chain Executive that summarized a survey by the Information Systems Audit and Control Association (ISACA) that found that the top three concerns of IT professionals were:

  1. regulatory compliance
  2. enterprise-based IT management and governance
  3. information security management

It’s kind of surprising that information security management is third and not first on the list given the headlines that come from breaches in security, such as the recent Sony PlayStation Network breach. Regulatory compliance is important, as it can result in fines for failures, but breaches are more costly, once the damage to the brand and the lawsuits are factored in.

I was a little surprised to see enterprise based IT management so high on the list. It’s an important topic, but given recent disasters, I would have expected diaster recovery and business continuity, #4, to take its spot, as IT management is a never ending issue and rarely overlooked by CIOs and CTOs, even though they might no always find the time to get it where they want it.