As I noted in yesterday’s post, while the Quadrant wasn’t all bad, when you added up all the issues, it was more tragic than magic. And, despite the fact that one of my commenters may be right in the observation that it’s not worth the column-inches I’m going to use discussing it, I can’t let it go. Given the importance assigned to this report by the market space, which is equalled only by the Forrester Grave, I need to make sure you don’t misread any of the statements and base a bad decision on them. So, in this post, I’m going to continue taking the most important issues point by point.

Just Plain Wrong: The unique functionality needed to run reverse auctions is a differentiator between simplistic and enterprise-class strategic sourcing applications.
Correction: in 2001. Not in 2010. I can list over 30 providers of reverse auction solutions off the top of my head (and you can find many of them on the resource site). If it doesn’t have reverse auctions, it’s not a sourcing suite. Period. The real differentiator between simplistic and enterprise is true strategic sourcing decision optimization or an advanced analytics platform.

Crazy Talk: The market is far from mature enough to expect competing solutions to be technically comparable.
Correction: The strategic sourcing process has been well understood, and well documented, by the big consultancies since the early 90s. The core technology has been well documented and well understood since the early 00s. From a technology perspective, every sourcing cycle starts with spend analysis; moves to e-negotiation, which includes RFX, e-Auction, and Optimization (which is used to qualify suppliers, gather bids, and analyze them); and ends with contract (creation and) management. Execution generally includes SRM and Compliance, which tracks data used for supplier selection and evaluation in the next sourcing cycle. The basic requirements have been well documented for years. I even co-authored and edited a book that’s been available on Amazon.com, for two years, that anyone who wants to understand the baseline requirements of these solutions can get their hands on. (They can even get an e-version free through Iasta.) So while some of the newer/advanced features may not be directly comparable, most of the standard features are. (And if they weren’t, how could Gartner even author this paper?)

Out of Left Field: Most of the vendors in this report are privately held, and so we considered management turnover, job openings, press and financial filings in our rating of overall viability.
Correction: Viability is financial stability. That’s primarily average annual growth rate, size of customer base and (recurring) revenue, and customer turnover. It has nothing to do with press. And it’s not job openings, it’s employee turnover. If the company is growing, of course it’s going to have job openings!

Positive, not Negative: Company X does not run full-service, reverse auction events on behalf of customers.
Correction: This means that they understand that (a) auctions generally aren’t strategic and that (b) even if the market conditions are optimal for an auction, you’ll get the best result if you engage a category expert and not an auction technology expert. Thus, unless you have those category experts, when you consider that (c) an auction tool should be easy to use, you probably shouldn’t be offering full service events.

Irrelvancy: Sourcing solution lacks optimization functionality (in the description of multiple vendors)
Fact: Of the 14 vendors that made the report, only two have true strategic sourcing decision optimization that meet all of the criteria I outlined years ago in the wiki-paper. Most of the vendors don’t have any optimization functionality at all!

Irrelevancy: Spending analysis: This is a very new product with minimal automated classification capabilities. Most of the cleansing and matching are done manually.
Correction: How many times do I have to say it? It’s the Analysis, Stupid. Classification is not analysis. Cleansing is not Analysis. Matching is not Analysis. (And the right way to do it is to manually define the classification rules so that future refreshes don’t corrupt any data elements that you’ve already cleansed. If you’re using an automated system that uses another organization’s rule set, you’re just asking for trouble!)

Scary: Spending analysis scalability with references reporting analysis of millions of transactions (in the description of a vendor)
Correction: Most big companies have millions upon millions of transactions in their systems. Many have tens of millions, if not hundreds of millions or billions. How could you possibly claim to have an enterprise spend analysis system if you can’t analyze millions of transactions? Considering that BIQ can analyze up to 50M transactions in real time on your laptop with its desktop solution, shouldn’t a true enterprise spend analysis solution be able to handle a few hundred million transactions? (And, before I finish, the report is wrong in dismissing BIQ as a desktop only solution. BIQ also offers a client-server version, which can take advantage of as much server power as you have — and handle hundreds of millions of transactions in real-time if you have the computing power, a thin-client externally hosted web-application through WTS or Citrix, and one of it’s distributing partners is currently beta-testing a new front end creator for the viewer that is built on BIQs XML interface and runs through your browser).

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On Friday I asked if Gartner’s new Quadrant for Strategic Sourcing Application Suites was Magic or Tragic?. Even though it was better than some of the previous quadrants, the fact that it only covered 14 vendors, that 4 of them seemed to slip in under the wire, that the lack of response time probably excluded a number of vendors that should have been there, and that there were a number of statements that just make you go “huh?” (and lead you to believe the report was as rushed as the surveys), I’ve decided that it was more tragic than magic.

And although it wasn’t all bad, as the market overview and definition was pretty good, and the vendor descriptions were mostly accurate, there are a dozen statements that just aren’t right. And even though, as a commenter pointed out, it’s probably not worth the column-inches I’m going to use, given the importance assigned to this report by the market space (which is equalled only by the Forrester Grave), I can’t let it go. I need to make sure you don’t misread the statements and make a bad decision. So I’m going to take the most important issues point by point.

Misleading Statement: Moreover, we are now seeing suite-level functionality that leverages the common database and data model of an integrated collection of solutions, such as the ability to pull suppliers identified in a spending analysis exercise into a request for proposal, and the automatic population of a contract template with supplier information and pricing data from a winning bid.
Correction: Now? NOW!?! Get real. This functionality has been around for at least 7 years. Ariba has had it for a while. Procuri, now Ariba, always had it. Iasta always had it. Heck, even Mindflow had it between the core modules back in 2002/2003 when I was there. Maybe the big ERP vendors didn’t have it until recently, and maybe the players that acquired most of their solutions didn’t have it, but it’s not new. And it’s not hard. And yes, you should expect it if you’re buying a suite.

Missing the Point: Since the trend toward suites is likely to continue indefinitely, consider point solution providers of supply base management, spending analysis, strategic sourcing and enterprise contract management only if the arrangement is short term to medium term (three to five years), or if the niche vendor’s solution can provide a competitive advantage.
Correction: Term is irrelevant. It’s about value. As long as a point provider can give you more value, you go with the point provider. If that’s a year, it’s a year. If that’s five years, it’s five years. If it’s until you retire, it’s until you retire.

Lack of Clarity: Go without business consulting services only if you have five or more years experience with a suite, and if you have an established, internal center of excellence to help users.
Correction: While you should definitely consider using category and process experts if you are not experienced and / or do not have a centre of excellence, if it takes you five years to learn a tool, you have a problem. A big problem. It shouldn’t take you five years. It shouldn’t take you five months. It shouldn’t even take five days. Not only is RFX, Auction, Project Management, Contract Management, and Spend Analysis, etc. well understood, but there are dozens of solutions out there that are easier to use than Microsoft Office. Your average sourcing professional should be able to pick up the basics on their own in a few minutes. If they can’t, the tool is too complex or poorly designed and you should find a better tool.

True, but Bad Advice: Most organizations that utilize spending analysis refresh on a quarterly basis.
Correction: While that may still be true, it’s the wrong approach to spend analysis. The right approach is to refresh at least weekly, if not daily, and there are at least a dozen providers who can integrate with your existing systems and do that. A good spend analysis system should allow you to track your spending. It’s not very useful if all it tells you is what you spent three months ago.

DANGEROUSLY WRONG: The reverse auction is the most powerful way to drive down costs …
Correction: WTF? When not expertly applied (and even sometimes when it is expertly applied), a reverse auction is the most powerful way to damage relationships, drive quality through the floor, and drive up spend in times of greatest needs. It’s as I wrote in my guest post on “a brief history of optimization” for By the Buy:

In the beginning, there was the reverse auction. Industry visionaries applied reverse auctions to their sourcing events for commodity and competitive categories (in the mid nineties) and saved a small fortune (which sometimes exceeded 30%, 50%, and even 70% of previous category costs). They were heroes and the world was good.

Then, a couple of years later when they circled back to the first categories and held another auction, something unexpected (to them) happened. The total savings shrunk considerably. The average savings, expressed in terms of percentages, dropped from the mid double digits to the (low) single digits. The savings often equalled what they would have expected from a traditional RFX / negotiation process. But the market was a seller’s market and the total event time, and thus the total event cost, was low, so with the right spin, they still looked quite successful. The world was still good.

Another couple of years passed, and they circled back to the first categories again. But this time, the market was a buyer’s market again and savings were bound to equal those seen in the initial category reverse auctions, right? Wrong! Instead, something really surprising (to them) happened — instead of saving money, total costs increased — sometimes in the double digits! The world was a dark and scary place. What happened? Could it have been avoided?

In short, reverse auctions are NOT strategic!

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Magic or Tragic?

There’s been a lot of hullabaloo about Gartner’s new “Magic Quadrant” for Strategic Sourcing Application Suites, including a lot over on Spend Matters in “we report, you read, and we all decide” and “clarifying a few questions”, and with good reason. As one of the two publications that are supposed to “define” the strategic sourcing space, the other being the Forrester Wave, there are a large number of expectations that it will be fairly complete, mostly correct, and useful to the client base. But considering that only 14 vendors made “the final cut”, that one of those was an “exception”, that up to 3 more appear to have slipped in on “technicalities”, and that, depending on your viewpoint, up to a dozen other suite providers were excluded for no immediately apparent reason (including some you would expect to slip in under “technicalities” as well), it really makes you go “hmmm”. Especially when, upon diving in, you encounter a number of statements that make you go “huh?” and leave you with the nagging feeling that the report was as rushed as the survey process itself, which upset a large number of vendors, as you can see from the comments to “Gartner’s Two-Week Fire Drill” and “Too Little Time In The Oven?” over on Spend Matters.

Before I start ripping it to shreds, which you know by now I’m going to do, I should point out that I thought this was better than some of the previous quadrants because it was clear to me that, with respect to the criteria used, 10 of the vendors definitely deserved to be there. (Not that I agree with all of the criteria or definitions, or the final rankings. However, it’s reasonably clear that Debbie made a conscious decision to define criteria, as arbitrary as some of them seem to be, and stick to them.) Furthermore, most of the information about the included vendors was correct. (I thought it was better than Mickey’s 5^th piece on Reaching Sourcing Excellence, “Sourcing Technology Is a Commodity With Short Time to Value and Immediate ROI”, that was released around the same time. Though her article was well written and made a number of valid points,   it, unfortunately, contained a poorly-constructed “Category Profile and Qualification Table” that attempted to rate the capabilities of 27 vendors across 12 capabilities.   This, in my opinion, ruined what was otherwise a pretty good piece.  But that would be another post in and of itself)

So what didn’t I like? In short the criteria — as some of them didn’t make any sense; a few of the definitions — as some are non-standard and confuse the issue; the implied and unwritten technicalities that resulted from the criteria and let some vendors slip in when there are others who were left out who are bigger, have a better reputation, and/or, in some cases, are more innovative; the amount of notice vendors were given — which may have resulted in a number of exclusions; and the results. I’m sorry, but when you ask me who the “visionary leaders” are in the space, I’m not going to say SAP, Emptoris, or Ariba. SAP is, as it’s always been, a slow lumbering giant in this space. It’ll get there, but not before just about everyone else. Not only does Emptoris have a history of acquiring most of its innovation, but up until it’s recent acquisition by Marlin Equity Partners, it spent the better part of two years downsizing and outsourcing all of its development and most of its support (to India), and you can clearly see the lack of innovation that resulted with respect to other companies in the market. And while Ariba, like Emptoris, is still a “leader” from a market size and solution footprint perspective, they’re still, in reality, dealing with the long-term effects of the Procuri acquisition and trying to fully integrate the code-base and capabilities into their platforms, some of which they still need to integrate and normalize separate from the Procuri acquisition.

Stay tuned for a more in-depth discussion and expose.