Category Archives: Technology

OEM Software Maintenance: Should I Stay or Should I Go? Part I

Today’s guest post is from Torey Guingrich, a Project Manager at Source One Management Services, who focuses on helping global companies drive greater value from their expenditures.

As a strategic sourcing consultant, the very broad category of “software” seems to always be an area in which companies are looking to reduce costs. The spend categorized as software is usually compromised of some net new licenses purchases, perhaps annual subscription based licensing, but almost always has a large portion of spend that is actually ongoing maintenance and support for previously purchased licensing. But is there an opportunity to substantially reduce maintenance costs if you want to continue utilizing the applications?

While third party maintenance providers are expanding their ground for many hardware and software solutions, one of the more prominent areas of expansion has been in managing annual support costs associated with ERP systems where the cost of maintenance can be a staggering, and ever-increasing, amount. While there are some conflicting opinions on the future of ERP third party maintenance given the ongoing legal battles in recent years, there is a strong case to be made that third party maintenance as a concept will not being going away anytime soon. While Procurement professionals may be enticed by the opportunity to slash a software budget, does it make sense for your company to cut to ties with native maintenance services from the software publisher and how should you go about evaluating this option for your company and/or discussing it with the stakeholders who manage those relationships?
The areas below will help Procurement frame questions and discussions with IT to better determine if third party maintenance is a potential solution for your organization:

Application Lifecycle:

  • What are the current owned licenses and associated maintenance costs/structures? Gaining visibility into the current software and maintenance environment is key to determining the scale of software maintenance costs as compared to other areas of spend within the IT budget.
  • What is the roadmap for the current software system in use? Once you have isolated the primary solutions that drive maintenance costs, it is important to set the stage for measuring stability in the environment. If a particular system is planned to be replaced or retired in the next few years, it may be a great opportunity to explore third party support for a limited time on the system being decommissioned before the new system is put in place.
  • How long has the solution been in place?/Have you recently launched or upgraded the solution in questions?/How stable is the environment? Immature and unstable environments tend to rely more heavily on OEM updates, upgrades, patches, and other content than those that have been in place for many years. Stability of the current environment is a key component in evaluating opportunities for third party maintenance as any change may be disruptive without the comfort of patches and regular updates from the OEM.
  • Is there a desire to keep the current system beyond the period the OEM offers support or are we being forced to upgrade where we would rather not? If you discover that the environment is very stable with no planned upgrades, you may have the option to actually extend the life of a certain application or release by leveraging third party maintenance where an OEM is no longer offering support.

These necessary questions are just a few of the key questions you need to ask. If the answers to these would allow a third party provider to be considered, the next step is to assess value, customization, and response. We will discuss these issues tomorrow in Part II.

One Hundred and Twenty Years Ago Today

One Hundred and Twenty Years Ago Today J.J. Thomson announced his discovery of the electron at the Royal Institution in London.

Without a good understanding of electrons, which play an essential role in electricity, magnetism, and conductivity (in addition to more fundamental gravitational, electromagnetic, and weak force interactions), we would never have made the advances we made in modern technology. For example, even though, based on the work of Goldstein and Hittorf, Sir William Crookes developed the first cathode ray tube back in the 1870s without knowing what they were, it was electrons that made them work — as determined by J.J. Thomson and colleagues through experiments they conducted in 1896 (based on the work of Lorentz and Schuster).

The visual computing revolution started with the cathode ray tube, and, moreover, as there is no computing without electricity, and no electricity without electrons, without the discovery of electrons, and a good understanding of what they enabled, we wouldn’t be where we are today.

AnyData: Another Analytics Arriviste from Across the Atlantic

Maybe some good is coming of all the gross incompetence in public sector spending, unreasonably long payment terms, and multi-nationalization of contemporary British companies … the last few years have seen more Analytics companies start in the UK than in the rest of the English speaking world. Anydata, founded in May, 2013, is one in the long list of UK-based spend analysis providers that have been receiving coverage here on SI and over on SM over the past year or so.

It’s one of the more unique offerings as, in some ways, it has more in common with Agiloft, a BPM (Business Process Management) vendor which recently forayed into Contract Management, building its first application in a matter of days using its visual development environment.

Like Agiloft, and unlike many other vendors in analytics, Anydata started out by building a visual development framework upon which it built its spend analysis offering. This gives it a number of advantages which include, but are not limited to, rapid configuration, rapid report and dashboard construction, rapid visualizations (that is on par or faster than Tableau, QlikView, PowerPivot, Birst, and other platforms they are typically compared against), and rapid development of workflows to support additional data collection.

The analysis platform is centered around powerful dashboard-driven analytics that can be customized by client from dozens of dashboard templates that include historic, strategic, geographic, vendor, company, office, cost-center, and chart-of-account overviews as well as savings opportunities, invoice opportunities, and category opportunities.

The categorization is quite powerful, and currently second only to Sievo in functionality currently on the market. Sievo’s unique multi-pivot drill-down approach allows users to classify data in chunks in any way they want to define those chunks in any order in a very collaborative fashion, which is currently unique on the market today. And while the AnyData approach is not as collaborative, it is as powerful as you can define chunks not on pivots and values, but on queries which can then be replayed, in the order of your choosing, as data is reloaded. So instead of having to define a three level breakdown to select a specific group of transactions for a category, it’s a simple query — which allows for much faster categorization if you are a power user good at creating SQL queries. Much faster.

And, rather uniquely, it has a very powerful data intelligence feature that allows an analyst to query and inspect the data and meta-data on a recently imported data source for the purposes of validating the accuracy and completeness — an activity that should go well beyond just validating the basic check-sums (against the annual financial reports). With AnyData’s platform, you can quickly identify sums, trends, and outliers for any time period of interest, use sliders to zone-in and zone-out on potentially anomalous data, use filters to restrict to dimensions (and even facts) of interest, and understand the characterization of the data you are importing. Not only does this help immensely in cleansing, but helps you pinpoint errors that standard techniques miss in cleansing and classification.

It has additional strengths, and, of course, weaknesses compared to other tools on the market — which can be explored in depth in the Spend Matters Pro series co-authored by the doctor and the prophet [membership required] (Part I) — but this should give you a good introduction to, and flavour for, what Anydata is.

PRGX: Optics on Optix

In our last post, we noted that, as written by the doctor and the prophet over on Spend Matters Pro (membership required) in the PRGX Intro, PRGX is one of a select number of dominant services provider in the niche market for recovery audit services — a market that unlike other procurement services faces tremendous price pressure for its core recovery, statement and related auditing and profit recovery services but also a vendor that has started to remake itself quietly from within.

As a result, as indicated in our last post, PRGX has built the most complete, and in many ways the most advanced, analytics and recovery solution for the retail sector and, in doing so, has built one of the most complete and advanced analytics and recovery solutions for just about any sector that buys and relies on goods. It does this via two platforms, Optix, which has deep Payment, Spend, and Product analytics, and Lavante, which has deep SIM and automated recovery prevention analytics. (We expect they will eventually be merged, but, for now, they are separate.)

As we have covered Lavante multiple times in the past, we’re going to focus on introducing the features of Optix.

Spend Optix

Spend Optix is designed to help an organization get deep insight into their category spend like a typical spend analysis platform for Sourcing and Procurement. Reporting revolves around categories and suppliers. It is also the only PRGX product that today has a built-in report builder, which can build spend reports across pre-defined dimensions and fields. The product is designed to help you understand spend category performance, spend under contract, invoice-vs-supplier insights, item price variance, and commodity cost indices.

This product can also be configured to track all contracts, all meta data of interest, and relate the contracts to the relevant categories and products. This allows a user to drill into a contract from a category, a category from a contract, and create accurate “address spend” reports, as will be described below. The ease of use is not at the level of Lavante SIM, but we expect that will change over time.

Payment Optix

Payment Optix is designed to help an organization get deep insight into their payments and related metrics and, in particular, DPO (days payable outstanding), PO (purchase order) vs. Non-PO spend, deep AP analytics, and risk insights.

The home screen, as with the other OPTIX products, is a dashboard with key metrics and graphs, such as invoices processed by month, DPO, Benford’s law (by invoice amount or value), and related metrics that an organization wants to see on a daily basis. The platform is drill-down report oriented, and the reports are segmented into Invoice Processing, DPO, and Risk Management.

Product Optix

Product Optix is designed to help an organization get deep insight into their product pool, including net margin, equivalent products, and best supplier funding opportunities. Reporting revolves around categories, suppliers, and deals.

The best part is the product detail report which brings up not only detailed product information, but the most complete product margin breakdown report you ever did see. With their extremely strong background in retail, PRGX understands true lifecycle margin calculations as good as anyone and it shines through in their report.

This is just a brief overview of what PRGX can do. For a much deeper dive, see the Pro series (Part I, Part II, and Part III) by the doctor and the prophet over on Spend Matters Pro (membership required) that also dives into strengths and weaknesses and a very detailed SWOT analysis to help you understand where they fit.

S2P Nirvana is a LONG Way Off!

And no amount of M&A is going to change that.

Why?

  • 1. There are still lots of problems software does not address
  • 2. No provider can address everything, even with a narrow functional focus
  • 3. Benefits only come from integration, not acquisition

1. There are still lots of problems that software does not address.

Software is simply automation of process by way of (mathematical or logical) algorithms. It is not intelligent (despite claims of AI supporters to the contrary), cannot sense the problems you need to solve, and cannot tell you what you are not doing outside of the process it was coded to support.

For example, in spend analysis, it cannot tell you what spend to look at, how to slice and dice it for unidentified opportunities, and where the functionality is lacking. It can identify trends, indicate what processes worked in the past to take advantage of those trends, but cannot identify any new, unknown, variables that could prevent those processes from working again.

2. No provider can address everything, even with a narrow functional focus.

There are at least half a dozen pure-play best of breed providers in pure spend analysis, and these follow half a dozen pure-play best of breed providers in pure spend analysis that were recently acquired, and all have unique capabilities. Thus, when there is still no provider that does it all, and still so much innovation to do in each narrow functional domain, it’s obvious that S2P Nirvana is still a long, long way off.

3. Benefits only come from integration, not acquisition.

Without integration, there are no more benefits than each solution had on its own. Just because the two solutions are now owned by the same provider does not mean there is any benefit besides potential volume-based cost leverage (if the provider can be persuaded) or more staff for additional services support. Benefits come from simplified and expedited processes, which generally only come from smooth integration, and, sometimes, even absorption of a smaller product into a bigger one.

In other words, S2P Nirvana is a long way off and M&A isn’t going to change that, so while the M&A train is going full steam ahead, it doesn’t mean it’s going to get you to your destination any faster.