Category Archives: Uncategorized

How Do You Know If That SaaS is Priced Right?

As per our recent post on What is that Platform Worth?, SaaS is good, but only if you get an RoI from the subscription license fee. So how do you know if that SaaS platform is priced right for you?

Six years ago we ran a post on Good SaaS vs. Bad SaaS where we focused on some of the key non-functional characteristics that should be examined in your SaaS purchase process. Six years have past, and they still haven’t really changed. In summary,

Good SaaS is Bad SaaS is
focussed on value sold on cost
has RoI models and plans to achieve them talks about process improvements and associated cost reductions
is designed to support business cases is focused on manpower reduction
has offerings and prices applicable to different customer sizes has a one-size-fits-all offering and pricing scheme
competitively priced for what you need priced out of the ballpark

Breaking it down, a good SaaS vendor comes in with a proposal that

  • competitively prices the solution based upon a value model that
  • demonstrates a realistic realizable ROI based upon an
  • appropriate implementation plan that not only addresses
  • process and workflow improvements that will result not only in manpower reduction and cost reductions but
  • increased throughput and improvements that will increase the overall value Procurement contributes to the organization.
  • And the vendor will be able to help you summarize all of this in a business case customized for your organization.

    It’s about your needs, not their optimal sales process / price-point.

Purchasing Blues (Repost)

It’s the first day of summer, so:

Click Here to sing along!

Well, it’s time to raise a fuss
and it’s time to raise a holler
About diminishing returns
from the corporate dollar
I just heard from my boss
who governs me
If I don’t save the cash
he’s gonna fire me

Sometimes I wonder
What I’m gonna do
If there ain’t no cure
For the purchasing blues

The buyer he told me to
go beat on the supplier
That his margins must be high
with ours under the wire
So I talked to the supplier
he said that costs were elevated
He was losing all his money
at the rates we had created

Sometimes I wonder
What I’m gonna do
If there ain’t no cure
For the purchasing blues

So I found a consultant
told her ’bout my problems
She discovered that
the supplier was just stalling
Material costs were falling
and the exchange rate was fair
I had wasted all my time
just pulling out my hair

Next time I have a problem
I’ll find me a solution
I’ll find a sourcing expert
and get my retribution

No more will I wonder
What I’m a-gonna do
I’ll find me a cure
For the purchasing blues

Sourcing Talent is Rare

Sourcing, like many facets of Supply Management, is not as easy as it seems. The skills required to identify the products and services required, identify potential suppliers, construct an appropriate RFI, evaluate that RFI, construct an appropriate RFP, evaluate that RFP, identify suppliers for negotiations/RFQ, assess the market, assess the RFQ responses against the market, select one or more finalists, negotiate, define the award, create a contract, and manage the whole process are quite numerous. Especially since that’s just the basic process. A determination of demand, of current market conditions, of expected cost, etc. will require spend analysis, (should-cost) modelling, and (statistical) trend projection. If multiple bids are competitive, and an auction is out of the question, then (strategic sourcing) decision optimization, and the mathematical modelling it entails, is also required. Plus, if the buy is strategic, then multiple stakeholders will be involved and cross-functional team-management skills will also be required. All this, and more, may be required just to get to a contract.

Then comes the actual Procurement. This will involve considerable skills in logistics, inventory, and global trade. When do you place the order? What is the best mode of transportation? Do you cross-dock or not? If the inventory is available too early, do you store it over-seas, before export, or locally, after import. If there are value-add components, do you take them or leave them, as they can considerably increase import or export tariffs? For example, sometimes the difference between shipping a cartridge in a printer and shipping it separately will save a few percentage points off of the total cost. (Check the HTS codes if you don’t agree.)

So, to re-iterate, you need the following skills at a minimum:

  • (Cost) Analysis / Market Analysis
    What are the current market conditions, what is the expected or best cost, etc.
  • Logistics
    What is the best method of transportation and how do you time it to optimize costs and revenues, etc.?
  • Needs Identification
    What do you need, when, and are there alternatives, etc.?
  • Negotiation
    What do you offer? What’s your minimal viable alternative? etc.
  • Project Management
    How do you balance your resources (time, money, talent) to achieve the goal? etc.
  • Resource Management
    What’s the best use of your limited resources? When do you buy and sell? etc.
  • Supplier Identification
    Which suppliers want to supply you? Which suppliers are acceptable to you? etc.
  • Trend Identification / Projection
    Are demands going to increase, decrease, or stay the course? etc.

These skills are not easy to come by and not easy to advance. For example:

  • Analysis
    requires mathematical skills and training
  • Logistics
    requires cost analysis and network modelling skills and training
  • Needs Identification
    requires the ability to elicit details from both analyses and stakeholders
  • Negotiation
    requires training and people skills
  • Project Management
    requires knowledge and training
  • Resource Management
    requires strong analysis skills and an understanding of the inherent value and limitations of each resource
  • Supplier Identification
    requires the ability to assess a supplier across multiple dimensions and know what those dimensions should be
  • Trend Identification
    requires analysis, statistical training, and an instinct for the right questions

Now do you understand why even if you could get approval for the staff you need, finding the right individuals might be hard?

Geek Cat Still** Says

You know I never
I never heard you talk so good
You never chat the way you should
But I like it
And I know you like it too
The way that I want you
I gotta have you
Oh yes, I do

You know I never
I never ever get home late
You know that I can hardly wait
Just to ping you
And I know you cannot wait
Wait to ping me too
I gotta chat you
Cause baby we’ll be

On the Facebook
In the Farmville pen
Behind the bushes
Until I’m begging again
In the chartroom
Lock the public out
And baby
Talk qwerty to me

Again, many apologies to Poison. Many, many apologies.

* He hasn’t changed his tune in eight years!

Category Management: Getting it Right is Key to Surviving the Trade Wars Part II

In our last few posts we told you the Trade Wars are coming. The Trump Tariffs are going to continue to come fast and furious, and the rest of the world is not going to take its time retaliating. So get prepared, because everything is going up. And how much it goes up is up to you.

You’re not going to thrive, because no one wins a war, and, furthermore, no one comes out unscathed. With care and planning you can survive, but only if you start now. So what do you need to do?

As we pointed out yesterday, you start by:

1. Understanding your Current Costs in Detail
2. Understand your Tier 2 Supply Chain in Detail

… but you don’t stop there.

3. Start By Identifying Alternative Supply Choices

For each high dollar or strategic category, identify at least two other acceptable choices of supply in two different countries than the country you are sourcing your primary supply from now. This means that you have to go out there, evaluate products, and maybe even award a minority share of the business to alternative suppliers just to make sure you can ramp up or switch supply if you need to.

4. Then Build Alternative Cost Models Around those Alternative Supply Choices

And make them as detailed as the cost models for your current supply choices. Compile all of the appropriate component and raw material costs for those suppliers, the local energy and labour costs, the current import and export tariffs, and fair margins for the supplier in question. And keep them handy.

5. Re-Evaluate on Every Tariff Change

With the models in-hand, whenever tariffs change, you can just plug in the new models. If you subscribe to data feeds, the models can be programmed to be self-updating and you can simply run a report on every tariff change to see how much the changes are costing you and when they get too high, you can switch to an alternate supply choice, that you already identified, where you buy local and sell local and avoid tariffs entirely.

Is this everything? No, but it’s a start.