Category Archives: Technology

There Are No Hard Choices in Software Spending, Just Hard Heads

A recent Industry Week article on “hard choices for software spending”, quotes John Lovelock of Gartner who says that, if you’re an organization, either you’re viewing IT as a way of making money, saving money or increasing your profitability; or you’re viewing it as an expense to be trimmed. The implication, both of the analyst and the author, is that you fall into two camps, the spenders or the savers, and you have to make a hard choice as to what camp you fall in.

Well, I disagree. There are no hard choices when it comes to software spending, only hard heads. Like Procurement, properly approached and managed, IT investments always increases profits (by lowering costs and/or increasing revenue) — especially in the supply chain. Pick an area. Any area. The right systems will always increase efficiency, transparency, and productivity. And if they impact spending, they will help to contain costs and optimize spending, resulting in savings the first time they are used. And anyone who can’t see beyond the up-front costs to the long term savings has a hard head, especially after all of the successful case studies that have been published by the analysts, research firms, and publications over the last ten years.

Unfortunately, it looks like it’s going to be a while before IT spending reaches the level it should be at and companies replace their antiquated systems and/or acquire systems that they should have had years ago, as Gartner is only projecting total worldwide IT spend in the manufacturing sector to grow by 2.6% this year. That means that while one third of CIOs may go forward with software and hardware upgrades that were deferred due to the recession, as per a study conducted by Robert Half Technology earlier this year, it will likely be a while before the other two thirds of CIOs do the same.

As a result, manufacturers will continue to struggle with increasing complexity, global competition, rapidly changing business environments, and volatile raw material prices for no good reason. And the pressure to reduce costs, improve productivity, and deliver greater customer satisfaction while continue unabated. All because they have a hard head.

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Coupa: Crouching Cheetah, Hidden Hippo

For those of you who have been following along, I recently did a 3-part series on Coupa (Part I, Part II, and Part III), a company that has been taking off like a rocket in the e-Procurement space (growing almost 200% year-over-year with one stunning customer win after another), where I asked if their strategy had shifted to customer acquisition first and building a better platform second, as it seemed to me that their rate of product innovation over the past year has not kept pace with their historical rate of product innovation. And while I will freely admit that the most important thing in business is customer acquisition and retention, and that this often means focussing on customer requests, which usually fall under the category of renovation, first and innovation second, I really admired Coupa for their devotion to innovation first and figuring out what the customer needed before they asked for it.

I’m happy to say that Coupa took me up on my challenge and decided to spend a few hours reviewing in detail not only what they have done, but what they are working on now and future directions they have mapped out. The short story is that the product team has been very busy not only fleshing out the core platform, but on finding ways to take its accessibility, usability, and generality to the next level.

From an accessibility viewpoint, they’ve started porting to the Force.com platform. While they haven’t announced it yet, and don’t plan to for a few months, Coupa Expenses is now available on the appexchange2, and can be found by a simple search. Force.com users can now use Coupa Expenses to accurately determine their cost of sales (which allows them to more effectively forecast revenues, estimate expenses, and allocate resources). This app not only allows you to track expenses, assign them to opportunities, and get up-to-date reports against budgets at any time, but also includes the “frugal meter” that lets an employee now when a cost is frugal or high compared to averages and / or limits. And there’s more to come.

They’ve also been working extensively on their API. This may sound boring as all get out, but the real value of a Procurement platform is only realized when all of the spend is accessible through that platform. In other words, unless you have an integrated view of spending that includes direct, indirect, Contingent Labor/SoW, and T&E spend, you really don’t know how much you’re spending and, more importantly, the TCO of categories where the products you are buying require support services and T&E expenses to manage both the manufacturer and/or services provider. If a company is using one (Best-of-Breed) platform for direct, one for T&E, and one for indirect and/or contingent labor, then the spend is distributed across multiple systems and no one system gives an accurate view, unless it is integrated with all of the other relevant systems. Generally speaking, these integrations are expensive as most of these systems (and classic ERP systems in particular) don’t have good APIs and only experienced, expensive, third parties can accomplish the integrations. But with fully documented open and transparent APIs that expose all of the data elements and core capabilities of the platform, any decent development team can accomplish the integration. Not only has Coupa fully exposed and documented their API to allow for easy integration with ERPs and Supplier Networks, but they have also built an extensive site at integrate.coupa.com to allow their customers to integrate with any systems they need to quickly and easily. (And with their Boomi partnership, most customers can integrate Coupa with their ERP systems with very little effort.)

From a usability viewpoint, not only is the current instantiation of the UI (intelligent-)search based, but the UI workflow is being streamlined to make regular tasks as quick, easily and painless as possible for the average user. From auto-calculating miles in expense reports (using Google Maps) to auto-classifying receipts (using OCR when possible), it’s all about making it even easier to use than Amazon or eBay, so that organizations get the adoption necessary to make their eProcurement initiative a success.

From a generality viewpoint, they’re working on features and functionality that will take e-Procurement to the next level in the average mid-market company, regardless of vertical. Look for a few announcements late this quarter / early next quarter on how they’re going to do that (and how they’re going to not only address the weaknesses with their new benchmarks and budgeting capabilities, but take them to a new level as well). The development cheetah has been running at full speed in the background, and once the product management hippo gets excited, it’s going to charge with an almost unstoppable force.

Does Your CSM System Provide Multiple Product Views?

A recent white paper by Dassault Systemes on Product Lifecycle Management (PLM) hit the nail on the head when it asked, near the back of the paper, if your Component Supplier Management system supported multiple views? Specifically, the paper on “Component Supplier Management” (CSM) identified three views that your PLM / CSM system has to support if you want it to be adopted across the organization and utilized across the product lifecycle:

  • system (logical)to enable distributed and cross-organization design activities
  • physical (EBOM: engineering bill-of-materal)to enable component identification, selection, and standardization
  • financial (BOM: manufacturing bill-of-analysis)to enble supplier identification, selection, management and (strategic) sourcing activities

The reality is that PLM is a very involved process that not only touches most of the orgnization, but impacts most of the organizational functions. As a result, it needs to either support most of those functions or capture the data required by those functions and/or integrate with other organizational systems that capture the necessary data and/or accomplish the relevant functions in order to be useful, because PLM is not a function that can be siloed into any one organization. Keep this in mind when selecting your next PLM system.

Yet Again, the Cloud is Not a Fluffy Magic Box

This blog has told you that the cloud is not a fluffy magic box and given you a number of reasons, but yet, even though it is one of the seven deadly software sins, it would appear that many people are still holding on to this notion. Take this recent “panel from Ariba Live” (as covered in CRM Buyer) for example. Even though the experts admit that there are still issues to be addressed and problems to be solved, I get the feeling that many of them still believe that the cloud will solve all your woes. It won’t. And if you’re not careful, it might even create new ones!

First of all, do you even know what the cloud is? Is it the next form of SaaS? of IaaS? of PaaS? Is it truly computing-as-utility, or is it the next step in the evolution of computing on its journey to become a true utility service? Depending on which vendor you talk to, it might be any of the above, all of the above, or none of the above … and thanks to the proliferation of useless buzzwords, you might never know what your provider’s definition is (until the service goes down and they don’t fix it in a timely manner because it’s “not their problem”). Until there is a consistent definition of cloud, it can’t even be called a platform!

Secondly, it won’t necessarily lower costs or increase efficiencies. That is all dependent on your internal efficiencies, the provider’s efficiencies, and the platform your provider operates. With respect to software, one has to consider at least the following costs:

  • License / Maintenancethe initial acquisition cost plus ongoing license / maintenance / utilization costs
  • Supporting Softwareback end database, web/application software, and middleware
  • Hardwareservers, SANs, routers, switches, etc.
  • Powerraw energy costs
  • IT Personnelsystem, server, and database administrators; network engineers; help desk / user support specialists; etc.
  • Bandwidthinternet costs

which might not be reduced at all. Consider:

  • License / Maintenancewill add up as the organization is paying monthly costs for infnity
  • Supporting Softwaredoesn’t go away, it just gets rolled into the monthly cost
  • Hardwarewon’t be any cheaper for the cloud provider than it is for any reasonably sized organization
  • Powerraw energy costs could be higher if the cloud provider’s data center isn’t situated in a region with low power costs (from sustainable sources)
  • IT Personnelare still required and still need to be paid a decent salary and the organization will only see savings if (a) the organization didn’t need full time resources which it would otherwise be paying for or (b) the cloud provider has resources that are more efficient
  • Bandwidthcould go up as now all data is flowing back and forth over the internet, and not across internal networks

The cloud is only more efficient if the provider is able to take advantage of efficiencies of scale unavailable to the organization — and it’s only more cost effective if the cloud provider can pass the savings on and if the customer can pay only for what it needs (and not the shelf-ware that comes bundled with most current enterprise systems). This is never a guarantee as there are a lot of variables that have to be considered in the calculation of the lifetime total cost of ownership, which is the only true way to determine which system is the most cost effective.

Third, the contract, and the policies within, really determines the value. If the provider is not taking responsibility for delivering the whole solution, then there could be serious problems down the road. For example, if the provider is only delivering the software and using a third party for the infrastructure and the third party goes down, the provider might be down for days and leave you without recourse if the provider can claim “force majeure “.

Finally, the average executive doesn’t care how IT is delivered as long as it is cost effective. This says that the penetration of the “cloud” will be limited to those situations where it is truly the most cost effective solution and where IT is comfortable with a solution that stores corporate data off-site. Even in five years, despite the rosy predictions of some of the analyst firms, that’s not likely to be anywhere near 50% of the market.

So get your head out of the clouds (which bring asphyxia, hallucinations, brain-damage, and sometimes even death. It’s for the best.

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