Category Archives: Vendor Review

CombineNet Comunique VIII: CombineNet Energy

Recently, CombineNet (acquired by Jaggaer), one of the few companies lucky enough to have inspired a whole series of posts (I, II, III, IV, V, VI, VII) on this blog, launched CombineNet Energy which, although it sounds like a new sports drink, is actually a re-launch of their advanced sourcing application platform with built-in decision guidance systems for the energy sector.

As you may know, back in 2003 CombineNet, in a leading initiative, formed an Energy Division, which, considering the recent energy crisis, doesn’t look nearly so crazy or risky in hindsight. According to their

solution overview, in a competitive energy market place, shareholders insist on strong financial performance, customers expect reliable and affordable service, and regulators require detailed reporting and compliance. In this pressured environment, CombineNet Energy offers proprietary, optimization-enabled decision guidance technologies that enable energy executives, policy makers and business managers to address the most complex strategic, financial and operational issues confronting the energy industry. CombineNet Energy’s advanced technologies help energy companies increase operational efficiencies and maximize profits.

In addition to their advanced sourcing platform, based on their Expressive Bidding and Scenario Builder offering, they are now offering a Gas System Guidance System, GS2, that they are promoting as an entirely new breed of operational and financial planning tool for the natural gas industry that simultaneously analyzes all elements of the vertically-integrated natural gas operation, including supply, transmission/compression, storage, operational solutions and contractual constraints, to guide weekly, monthly, and annual operational decisions that maximize profits and efficiency. It sounds very interesting – pipeline optimization is a tricky problem. At any one time, you can only pump one-way, and it’s hard to predict exact demands in advance. They even have a Video Demo, which is kind of neat.

The also have an on-line flash-based value-assessment Calculator that an energy company can use to estimate it’s potential cost reductions using the CombineNet tool (which is quite important because this type of technology comes with a hefty price tag, and not every one understands that the rewards can be many times greater than the investment). For example, given the number of Local Distribution Companies, the annual operating revenue, annual gas purchase expense, annual volume of gas withdrawn, the weighted average cost of gas, the annual transportation expense, and the property, plant and equipment balance, it is able to calculate an estimated range of savings that would be obtained using CombineNet’s solution. Check it out.

I’ll eventually get to my promised “Powers of POE” piece …

A Conversation with Ketera

When I was down in the valley, I made a point to visit Santa Clara to catch up with Ketera (acquired by Deem) who recently announced their next generation spend analysis solution, which I’m not going to spend too much time talking about (even though they are getting a good reception and a lot of customers because of it).

I did get a chance to see it recently, and it’s quite good. It’s not the absolute best in any regard (automatic classification, reporting, flexibility, etc.), but the overall solution puts it in the short stack of solutions you should definately be including in your review process. They have a two-tier classifier, which starts off with what they call a high-confidence classifier (which, you guessed it, is based on the old GL Codes, Vendors, GL Codes and Vendors mapping) and a trio of lower-level lower confidence classifiers (that use various rules and external sources) to try and collectively get a high confidence match. Failing that, they have manual classification and a rules engine to automate the match in the future. They also have a tierd knowledge base: global, industry, and organization to allow for multi-level rules and classification. Their reporting solution is now based on MicroStrategy, which, besides giving you standard best of breed reports, allows a user to fairly easily build basic BI reports and drill down within current reports. And it’s on-demand. (So, in recap, they potentially have one of the best classifiers, one of the better reporting front-ends from a usability perspective, and it’s on-demand.)

My interest, and the focus of my California conversation was what they were doing with their e-Procurement, Invoice Management, and what they are doing to enable the Procure-to-Pay (P2P) cycle; their recent partnership agreement with Hyperion (which was just acquired by Oracle) and their progress towards delivering operational Business Intelligence capabilities; and their supplier enablement (and catalog hosting) services and solutions.

At the moment, their procurement solution is one of the better enterprise solutions out there – it’s usable and it interfaces with their Invoice Management Solution and Supplier Management Portal. They have a two-level checkout process, basic and advanced, since most organizational users will use the system ony once a month and need a simple solution, and they have integrated document management. Furthermore, a future release will include Hyperion reporting.

My rationale for this interest is that it appears that there are significantly fewer general-purpose e-Procurement solutions than general-purpose strategic sourcing solutions (even though there are a lot of niche offerings, especially in the Software-as-a-Service arena); even though there are a lot of Business Intelligence solutions and a lot of dashboard solutions, not many attempt to tie together operational metrics with their financial impacts; and even though there are a growing number of supplier management and supplier information management solution, not many support the quick enablement of a large number of suppliers and I wanted to know how close Ketera had come to achieving each of these goals. That’s why I was glad to hear that they were working on tieing in their invoice management and procurement solutions with their contract management solutions, that they were working on Hyperion integration, and that they have a few other surprises for the year ahead. After all, once you have this, you just add better integration with spend analysis, and you have a great start at an integrated procurement and sourcing application that would be a great solution for many underserviced mid-market firms.

Supplier Information Management with Aravo

Aravo is a provider of an on-demand Supplier Information Management solution based in San Francisco with the goal of enabling business to rapidly onramp all of their suppliers and corresponding information. During my last trip to San Francisco, I was fortunate enough to be able to sit down with them and talk about what makes their solution unique.

Aravo focuses on what they call the Supplier Information Lifecycle that starts with the initial engagement, proceeds through supplier selection, and continues through supplier relationship management. Aravo contends that most systems do a poor job of supplier information management and that good, centralized, supplier information management is essential
to process efficiency, error prevention, rapid supplier on-boarding, compliance, and good, actionable decision support. For the most part, I have to agree.

I’m a big believer in Supplier Relationship Management, since I believe this is the foundation for innovation, performance, and risk management. Furthermore, when you get right down to it, you can’t have good SRM if you don’t know your supplier – and that involves knowing who they are, where they are, what they do, who to contact when things go wrong, what their financials are, etc., etc., etc. To do this effectively requires good centralized data management. Furthermore, without good, centralized data management, each individual in your organization who requires such data will have to spend time searching for it when she needs it, and updating it in her own applications when she finds it is out of date, leading to a lot of lost productivity over the course of a year when you add up how much time people spend just searching for and updating supplier information.

This is where Aravo’s solution comes in. They have a suite of tools that supports a slew of data formats and a suite of tools that supports a slew of common ERP, eSourcing, and eProcurement applications. Furthermore, their J2EE-based web-services stack makes it easy for them to integrate many different systems that use many different data formats. This allows them to do true integration of all of your supplier data – and do it across your enterprise. They can suck it in from each and every system you use, and when it is updated, push it back. Furthermore, not only can everyone in your organization use the same supplier information system, but each individual can choose to retrieve just the data that they need when they need it.

Aravo also has a few other advantages compared to other supplier enablement solutions. Recognizing that every supplier has different levels of e-competency and that every buyer has differing levels of supplier information needs, Aravo has invested time in developing multiple supplier views, each with different levels of detail. Furthermore, recognizing that some buyers might prefer to have third parties manage their supplier on-boarding and data maintenance issues, the system also permits definition of third parties with different levels of data management permissions. Finally, they support role-based dashboards that allow each user to keep track of their enablement projects and determine how many suppliers are in the system, how many suppliers have their information up-to-date, and how many more suppliers need to be enabled.

Rapt up in Revenue

When I was in sunny California last, I had a chance to sit down with Rapt (acquired by Microsoft) and talk about their rather unique solutions that revolve around pricing strategy, decision analytics, and price optimization that, when combined, can help a company maximize their revenue opportunities.

Rapt’s sophisticated software platform, that integrates more statistical, analytical, and optimization algorithms than you can shake a stick at, was designed to uncover the many complex supply, demand and price relationships that, when harnessed, predictably improve profit and market share. Unlike simpler modeling tools and platform, Rapt can break down products, or SKUS, into features and analyze the impact of each feature on demand. This is one of the reasons why their solution is becoming popular in high-tech.

Let’s say you have three laptops, the Pinta, the Nina, and the Santa Maria, and each are selling quite well. However, like all electronics today, their life-cylce is limited and you need to design your next generation laptop. Each has a different processor, CPU, hard drive, display, and battery life. How do you determine the best configuration for your new laptop? Rapt’s forecasting engine can integrate your historical sales data with marketplace data, analyze the sales patterns and trends at the feature level, determine which features (CPU, hard drive, etc.) are the most popular, determine how much each feature influences the overall sale, and tell you which combination of features would sell the best in a laptop. You can then use it’s Price Director solution to determine the optimal price-point for your product. This product contains advanced algorithms that work on order, inventory, and market data to extract the elastic and cross-elastic effects among products, their attributes, and consumer demands which it can use to determine the optimal price points for revenue or market-share optimization.

However, one of the most interesting facets of our discussion centered around the fact that the largest uptake in their rather unique solution offering was not in consumer goods industries, but in media, and new media in particular. MSN, Yahoo!, CNET Networks, NBC Universal, The Weather Channel, and MTV Networks, among others, all use Rapt’s solution to determine how to price their advertising, which is defined by high variability in demand, uncertain availability of supply, and the rapid innovation and evolution of medium capabilities. If they can tackle one of the most challenging pricing problems out there, surely they can be helpful in more traditional industries. But then again, many companies in these traditional industries most likely have not yet adopted decision optimization in their award process, should-cost modeling in their product design process, or advanced spend visibility solutions in their strategic sourcing process. All I can say is that … the technology’s finally here, let’s start to use it!

Sometimes it’s okay to get Rapt up in revenue

These days it seems like everyone is focussed on cost savings. This is not a bad thing, considering the vast majority of companies are not best-in-class, which means the vast majority of companies, on average, are probably spending too much on their purchases. But despite some vendor claims that revenue is, and will remain, flat, or that there’s nothing you can do about it since the market sets the price and constitutes the demand, this is not true.

We all understand that the fundamental goal of business is to make money, or profit, and we all learned the same calculation in our first business class: Profit = Revenue – Cost. This tells us that, as a business, there are two levers we can manipulate to increase profitability, Cost and Revenue. Now it’s true that we as sourcing and procurement professionals have a lot more control over cost then we do on revenue, but that does not mean our focus on cost should be myopic. We should also understand the revenue side of the equation and work with marketing on the pricing side of the equation, because neither the market price, the highest price marketing predicts they can get, nor the price at which demand (or consumption) is maximized is the optimal price.

If your goal is to maximize profit, the optimal price is the one where the profit equation is maximized, and this means this price is determined as much by cost as by revenue, and we all know that the cost for a product is not fixed – it depends upon the supplier we use (which determines a host of physical attributes such as quality, appeal, etc.) and, more importantly, the quantity we order. Generally speaking, the cost per unit will decline if we order more units, but this is usually only true to a certain point. Each supplier has a base capacity they can produce on their production lines during their regular hours of operation. To exceed this capacity they will have to add shifts, add lines, or both – which will increase the cost per unit. Or if your product requires a raw material in short supply, costs will increase as you try to divert supply away from your competitor, and there will be a point where you just will not be able to secure more material.

Is marketing, or if you’re big enough, product pricing, going to understand all of the factors that contribute to product cost – and, if so, are they going to understand the factors and inter-relationships as well as we do? Probably not. And that’s why sometimes we need to get Rapt up in revenue – to make sure that not only does the organization choose a price-point that theoretically achieves their profit, margin, or market-share goal (which, without our assistance will probably be based on cost-data that is only an approximation, and not necessarily a good one), but that the price-point is realistic and that the forecasted demand can be met in the intended time-window.

Furthermore, as the users of some of the most advanced analytic and business intelligence tools in the organization (spend analysis, cost modeling, and decision optimization, for example), we are much more likely to understand that our historical data alone is not necessarily sufficient or accurate enough to predict future demands, that different product features and price-points will have a considerable impact on actual sales, that costs can vary significantly by feature and demand level, and that the only way to analyze all of these variables and make the best pricing decision is to use a good decision support tool based on sophisticated analytics and optimization to model the different scenarios at different price points and obtain a true picture of feature – price point – demand level correlation.

And that’s why tomorrow I will introduce you to Rapt (acquired by Microsoft) a decision analytics and price optimization solution provider whose goal is to help companies maximize their revenue opportunities.