Category Archives: Technology

There’s Nothing More Important Than A Good “Test Drive” — Even in e-Procurement!

While my esteemed colleague at Spend Matters might believe that you can’t “date” where e-Procurement is involved (as per “Don’t Test Drive e-Procurement, Make the Right Decision First”, I have to disagree. You see, e-Procurement, like e-Sourcing, is a multi-step process that doesn’t conclude until you seal-the-deal.

You see, despite the continually propagated misconception that e-Procurement, EIPP (Electronic Invoice Presentation and Payment), and P2P (Procure-to-Pay) are essentially the same thing, nothing could be further from truth.

By definition, the only requirements for a P2P system is that it permit e-Procurement, possibly through a (n integrated) third-party (e-Procurement) platform that permits electronic ordering, and that it permit payment approval, possibly through a(n integrated) third-party (e-Payment) platform. A P2P “solution” could be as simple as a “punch-out” to a supplier catalogue and “punch-in” to your accounts payable system, allowing accounts payable to process the returned invoice and pay it (through e-banking) as soon as you indicate the goods have been received.

Similarly, by definition, the requirements for an EIPP system are just as weak. As long as the system enables suppliers to submit electronic invoices, procurement to review them, accounts payable to process them for payment, and integrates with one or more e-Payment mechanisms, it’s an EIPP “solution”.

On the other hand, e-Procurement must enable each and every phase of the (up to) 9-step procurement process:

  • Requisition:
    The e-Procurement system must make it easy to create requisitions. This means that it must support up-to-date catalogs and punch-outs and should support virtual supplier networks and B2B 3.0 enterprise search capabilities that allow users to requisition what they need, when they need it, on the appropriate contract.
  • Authorization:
    It must support and require authorizations when a volume limit or dollar amount is exceeded or when a requisition is off contract. The workflow should be customizable to the organization’s approval process.
  • Purchase Order:
    It must support the automatic creation of purchase orders off of approved requisitions.
  • Receipt of Goods:
    It must capture good receipts.
  • Invoice:
    It must allow for suppliers to submit electronic invoices using EDI, XML, or web-based forms.
  • Reconciliation:
    It must support multi-way matching between the contract, requisition, purchase order, goods receipt and invoice and insure that the organization only pays for delivered items at contract prices.
  • Payment:
    It must support payment authorizations and integration with one or more payment systems.
  • Tax Reclamation:
    It must capture the data necessary for finance to reclaim tax payments.
  • Analysis:
    It must enable export of the data in standard formats for spend analysis.

And, most importantly, it must be:

  • easy to use:
    User adoption is the single most important factor when it comes to e-Procurement Success.
  • easy to administer:
    If you can’t keep the platform up-to-date, it will be abandoned.
  • easy to change:
    If workflows, processes, supplier data formats, or related supply chain systems change, it must be able to support these changes.

And this is why you need a test drive.

Brochures, demos, and sales assurances can’t tell you if it’s easy for your buyers to use. And these deomos certainly won’t uncover the limitations and hiccups of the administration process. And unless you can see the APIs and run your own integration test, you’ll never know if you’ll be able to properly integrate it with your current system(s) or not.

Furthermore, an e-Procurement test drive needn’t be rolled out to the whole organization. It can be limited to a small control group of buyers, and organizational users, who would be most impacted by its implementation. Only if it looks promising would the “test drive” need to be extended to additional users. While an e-Procurement system might touch a significant number of users, only a small percentage will be using it regularly. Think about it. How often does Paul Programmer order new machines? Sam Secretary restock the office supplies cabinet? Sally Salesman replace her cell-phone? You only need a few of these users to gauge usability and impact.

Furthermore, if integration with your current payment system is critical, you can have IT, or your third party integrator, dive into the APIs and evaluate the complexity and expected time-frame of integration while you test-drive. And if the configuration and integration requirements are significant, as my colleague suggests they will be, I suggest you say “No Thanks” and move on. With so many EDI and XML standards to choose from, and so many new on-demand and SaaS solutions supporting standards out-of-the-box, if it’s not an easy configuration, then the vendor is behind the times.

Similarly, if the education requirements for basic use require more than an hour of training, keep looking. With the advancements in usability made over the past 10 years, and the fact that everyone is familiar with standard office software, Web 2.0 applications, visual workflows, and multi-media “on-demand” training, your e-Sourcing and e-Procurement applications should almost drive themselves where standard tasks are involved.

Finally, if the primary benefits of the new process enabled by the new solution aren’t obvious, I’d ask if they were there in the first place. We’re a tech-savvy generation who want to use well-designed software solutions because we’re tired of poorly designed clunkers that impede us. If the primary benefits aren’t clear, the system isn’t yet mature.

And you’ll never know the integration complexity, education requirements, or design usability without a walk-through. While it’s easy to fashion a good looking demo (and vendors excel at this), it’s much harder to control a user “test-drive” — and this is where the truth comes out.

So, while if this were 1999 (and maybe even 2004) where e-Procurement systems were on-site, clunky, and required more training and integration than grandpa could shake his stick at, I might agree with my fellow blogger, but this is 2009 and we’re on-demand, streamlined, and self-explanatory. This says that taking a software test-drive should be easier and less committal than test-driving the new vehicle on your automotive dealer’s lot.

The simple truth of the situation is this: you can’t figure out if a software solution is right for you until you use it. So take that test-drive. As long as it’s well designed, well planned, and suitably controlled, you can’t lose.

Rant On Jason, Rant On (Procurement Solution Providers Are Doom and Gloom Too)

I tried to post this comment on Spend Matters, in response to Jason’s latest rant on “Getting Angry and Doing Something About It” about doom-and-gloom procurement practitioners, but his comment mechanism is “broken” due to an apparent mismatch between his CFML and Database (but I’m not a Cold Fusion expert, so I can’t say for sure). So I’m posting it here.

Jason, I hope your next rant is about how this is the time for the vendors and solution providers of the space to stand up and seize their opportunity to shine by helping buyers achieve never-before-achieved levels of productivity and savings that will help them shake the doom and gloom of this recession which, as you point out, provides Procurement and Supply Management with one of the greatest opportunities it’s ever had to shine.

Instead of putting their marketing engines into overdrive and making sure that all of the procurement and supply management departments, who desperately need solutions, are aware of their offerings and the problems their solutions can solve, I’ve seen many (of the smaller) vendors slash marketing budgets to 0 to “conserve cash” and reduce marketing and sales head count.

And instead of escalating New Product Development (NPD) to create leaner, meaner, easier-to-use solutions that can be brought on-line faster (and making use of streamlined out-of-the-box ready-to-start SaaS deployments), they’re putting NPD on hold and eliminating Product Managers, Quality Assurance, and Development Positions.

And most importantly, instead of taking their own advice and bringing in external experts who can help them get lean, mean, and thrive in a recessionary price-compression environment, they’ve cancelled all contracts and put a moratorium on external contractors until the recession is over.

As a result, the obvious has happened. Pipelines have dried up. Revenue has dived (as current customers have less to spend). And, in an effort to “survive”, they’ve slashed head-count by 10% to 50%, further impeding their ability to sell, build better solutions, service existing customers, and, most importantly, take on new customers. But, for some, even this won’t be enough as many of the smaller vendor’s aren’t sitting on years of operating expenditures in the bank. Their investors will likely have them on the block before year’s end. (You have to remember that many of the smaller vendors in this space are VC funded.)

There’s a reason I penned the “Dumb Company“, “Dead Company“, and “Your Marketing Really, Really Sucks” series (links below). I’m seeing the same mistakes being made again and again. Mistakes that were made by technology (based) solution providers in the last two recessions THAT ARE NO LONGER AROUND. Having worked for, and with, a number of start-ups and small companies (and collected piles of worthless stock in the process) earlier in my career, I see the writing on the wall. A number of companies that I thought were the more innovative companies in the space are acting like scared-stiff software providers instead of procurement enablers and blindly marching down the path to oblivion. If we lose them, the Big Co’s lose competition, and instead of thinking that solution X doesn’t need to be improved for 5 years, the Big Co’s will become the ERP providers of our space and we’ll be lucky if they update their solutions every 10 years!

So Rant On! Help me shake these dazed solution providers out of their slumber, because if we don’t, all of the buyers we so desperately want to help are going to suffer.

P.S.
If you’re a vendor reading this and you think this post doesn’t apply to you, think again. Based on my conversations and observations over the last three quarters, and my personal experiences working for, and with, a number of failed technology providers during the last two recessions, at least 9 out of 10 vendors in this space are making at least one potentially serious error at this point. And while one mistake won’t kill you, in a prolonged recession, it doesn’t take many. So I advise you … take a good hard look at yourself before shrugging this post off and going back to business as usual. I’ve already removed 3 service provider links from my Company List I hadn’t heard of over the past three weeks … and I’m really not looking forward to removing companies I have heard of, talked to, and rooted for.

Dumb Company

How Dumb is Your Company
Dumb Company
Dumb Company (The Lyrics)
Dumb Moments in Business not Aerospace, Automotive, or Bailout Related
Why Some Companies are Being Dumb

Dead Company

Dead Company
Dead Company II: If You’re Hoarding Cash … (You’re Not Going to Last)
Dead Company III: Fear is the Enemy
Dead Company IV: Avoiding the GraveYard
Dead Company V: More Ways to Avoid the GraveYard
Dead Company VI: New SI Offerings
Dead Company VII: Even More Ways to Avoid the GraveYard

Your Marketing Really, Really Sucks

Marketing is NOT Optional
How to Build a Bat House
The Brain Gives Pinky a Marketing Lesson
Web Marketer, Don’t Be Misled!

Harvard Business Review’s Seven Truths about Information Technology Costs

The Harvard Business Review recently ran a short one-page article on “The Truths About IT Costs” that should be a must-read for every business executive. While they don’t capture everything you need to know about IT, every point they cover is a point you need to be aware of.

  1. Enhancements Don’t Necessarily Deliver Results Commensurate with their Costs
    Consider how much you pay for ERP upgrades, factoring in the upgrade costs and maintenance costs, relative to how much of the new functionality you end up using and compute the resultant impact on productivity and cost savings, especially compared to the acquisition of a new SaaS e-Sourcing or e-Procurement solution that automates a business function that’s currently manual and you’ll quickly realize this.
  2. Projects Are Often Too Big and Take Too Long
    Many projects have pages of “must have” features and functions that are nothing more than requests that came from a single stakeholder who will rarely even use the software. Create a short-list of essential functions that will be required daily and augment it until 90% to 95% of regular daily activity is accounted for. Stop. That’s the initial implementation.
  3. Previously Purchased Applications and Infrastructure Technology are Underutilized
    Invest six figures in your redundant WebsShere environment? Then you certainly don’t need WebLogic! Tell your vendor you want the WebSphere version or you’ll find another solution. Same goes for your hardware. Use what you have. Need a separate environment? No problem – use virtualization.
  4. Project Failure Rates are Too High
    That’s why you have to keep the initial implementation small … and why subsequent phases must also be small as well. The process should also be agile, with regular feedback and testing. That way you don’t spend hundreds of thousands of dollars having a third party build a custom solution that you can’t use because you only find out six months later during implementation that it can’t be integrated with your current platform without another three months and three hundred thousand worth of work.
  5. Technical Teams Often Do Not Have Sufficient Incentive to Deliver High Quality Applications
    Especially at your average chop shop. Just because the third party developer and integrator is charging you $150 an hour for a resource, doesn’t mean the resource is worth anywhere near that amount. It might actually be a junior consultant only two years out of school who gets a flat salary of 60K a year and who doesn’t see a penny of the performance bonus the firm collects if they deliver on-time.
  6. Managers Don’t Know Enough About the Systems that Support Their Areas
    As a result, your tech department is probably overwhelmed with “helpless” help desk costs that needlessly drain costly resources.
  7. IT is Too Risk Averse
    Many old-school IT managers still live by the “No one ever got fired for buying IBM, HP, or Microsoft”, even when those solutions cost three times as much as competitive solutions. There are huge cost savings opportunities just waiting to be found if you go thin client wherever possible (as it costs less and requires fewer costly hardware refresh cycles), discontinue costly (and often unnecessary) maintenance agreements, and embrace open source platforms and applications where it makes sense to do so.

Optimizing Your Procurement Technology Investments

The Sourcing Interests Group recently ran an interesting article on “optimizing your procurement technology investments in 2009”. Although it had some good suggestions, my top five suggestions would be the following:

  1. Get Visibility Into Your Spend (Spend Analysis)
    If you don’t know how much you’re spending on each category, sub-category, product, and service, who you’re spending it on, in what amount, by unit, you need to get this visibility. Get a good spend analysis solution and dive in!
  2. Take Your Strategic Sourcing up a Notch (with e-Sourcing)
    Start with the most attractive savings opportunities that were outlined in step 1. This is your best bet to negotiate big savings in this downturn.
  3. Focus on Contract Compliance (adopt Contract Management)
    You need to enforce hard-won savings by insuring that internal staff and suppliers are compliant with contractual agreements.
  4. Implement e-Procurement
    Done right, this will make it easy for your buyers to buy on contract.
  5. Get a Grip on Global Trade (adopt Trade Visibility solutions)
    Chances are your global sourcing endeavors are needlessly costing you more than you think! As per my recent Illumination on why you need trade visibility, you’re probably paying more than you need to on duty, using costly inefficient processes, paying unnecessary document preparation costs, and making costly errors that are costing you million of dollars a year.