In Source-to-Pay, How relevant is the Analyst Firm?

As a result of the M&A mania in the late teens (during the era of [mega] suite consolidation) and very early twenties (during the pandemic when all of the PE firms suddenly realized that e-Sourcing, e-Procurement and, most importantly, e-Payment solutions were critical [when no one could go into the office]), a lot of known smaller, and even mid-size, players were swallowed up, leaving a vacuum at the lower end of the market.

As a result, two things have happened:

* a slew of new players (run by leaders new to the market) have entered the market; and while most have very limited solution breadth or depth, their use of modern technology is plugging a hole and offering value out of the gate (especially to smaller companies with nothing)

* a lack of talent (which has also been swallowed up into larger companies) at the remaining offerings has resulted in many of the leaders in these companies coming from other areas of enterprise software

… and neither of these sets of players have a deep understanding of our market or the analyst firms in it and too often I’m hearing that part of the strategy is “get on the Gartner Map“, “get on the Forrester Map“, or “get on the Spend Matters Map“. And while the last map*0 is the map you definitely want to be on at some point (as it actually focusses on technology vs. a mix of soft vs. hard factors that make it hard to judge how technically relevant the solution on its own is for you), “getting on the map” isn’t a strategy.

As a corollary, I’m also hearing too often that a big part of the marketing strategy is to “get in front of the big analyst firms as fast as possible and, hopefully get written up“, and if there are analyst relations, all their time is focussed on these big firms. And that worries me. A lot!

Why? Because they think “the firm” is the answer, when, in fact, it’s not the firm but the analyst because “the firm” will only get it right IF the analyst gets it right. And at many of these firms, I’m more worried by the year if the analyst will get it at all. Why?

If we go back to Saturday’s post on AI: Applied Indirection, Artificial Idiocy, & Automated Incompetence, we have the dual problem that most of the solutions out there are claiming capabilities they don’t have and even most people in technology can’t judge whether or not the claims are real or fake, and this goes for analysts too. Especially new, junior, analysts without the right tech background, domain understanding, education*1 and experience in our space.

The reality is that we’ve went from the point where, in the beginning, to be a good analyst you needed to:

* understand the space
* understand the unique processes the technology has to support to serve the space
* understand the current breadth of offerings and capabilities across the vendor landscape

to where, to be a good analyst as technology progressed, you also needed to

* understand the different technology stacks and what they can, and cannot, offer
* understand the different technology options and what they can and cannot do (i.e. algorithms, workflows, etc.)
* understand the nuances of buyer needs across industries and niches (e.g. direct vs indirect, manufacturing vs. distribution, F&B vs CPG, etc.)

to today where, to be a good analyst, you also need to

* understand the different technologies that are used in ML/AI and what actually qualifies as ML/AI and what does not
* understand where advanced technologies, especially those based in ML/AI, are required, and where classic techniques will do just as well, or better
* understand the different levels of analytics, and whether a solution has real analytics, or just pre-packaged reporting
* understand how the different technologies on the market need to link together as we move from the world of suites to platforms

In other words, we’ve gone from the point where to be an analyst, in the beginning, you just needed:

* critical thinking skills
* a basic business understanding
* good writing skills

to where, as technology progressed, you also needed:

* a basic understanding of technology (2 years of computer science or equivalent STEM offering in engineering, physics, etc.) and scientific thinking
* a basic understanding of source-to-pay and related processes across industries and category uniqueness that may or may not dictate different needs
* a basic understanding of integration points to other enterprise systems
* a good domain understanding of the Sourcing/Procurement needs in modern multi-nationals

to where, looking at technology today, you also need:

* a deep understanding of math and analytics (and at least a Bachelor’s in a STEM area)
* a deep understanding of models and metrics and where, and how, all the different data sources integrate for risk, diversity, spend, and opportunity models
* a deep understanding of what’s needed for a modern data interchange, API integration, and procurement management platform
* a deep understanding of how procurement works with and supports supply chain, logistics, and finance and how the pieces support this
* a good bullsh!t detector and the ability to dive into claims that a company may want you to take without question and find out what really is there and what the claim really means
* at least a decade of experience on top of close to a decade of education (because if you’re not a genius, you probably need at least a Master’s or two Bachelor degrees to get all the background you need) to put it all together

But who has that anymore? And where are they?

To be continued … in Part II

 

*0 as of posting as those maps, V3, were designed as pure-tech [and the last iteration co-designed by the doctor]

*1 most programs, if they teach anything at all, teach classical operations management or logistics, neither of which is modern procurement or supply chain management, and definitely not advanced math or algorithms!

 

Now that Per Angusta is going away …

… we’re finally getting a new Procurement Management Platform! And that’s a great thing!

Hopefully that last line caught your attention enough to read on (since Per Angusta isn’t actually going away, just its name) because the reason it’s a great thing is that Per Angusta, which finally completed it’s integration with SpendHQ, is soon to be one with SpendHQ. This will provide the procurement space with one of the first, true, Procurement Management Platforms, which, as per yesterday’s post, is something the space is desperately needing. (We doubt it will be the last such platform this year, but it’s certainly the first.)

Why?

1) It will be spend data driven, not just pull and push spend data around.

2) It will support all of the necessary intake requests and output reporting.

3) It is built to support procurement-centric workflows or projects.

4) It is built to integrate with any application an organization needs to support a certain process, sub-process, or data-centric capability through easy multi-endpoint integration with push-pulls at either end.

… which solves the four big problems created by Source-to-Pay suites as pointed out in yesterday’s post that asked where the Procurement Management Platform was.

And how they did it is very slick. Not only did they follow the levels of integration appropriately (where they started by re-creating the Per Angusta UX using SpendHQ look-and-feel, while they were working on data model integration on the back-end [which is a difficult task that many companies don’t actually achieve]) to get to the point where they are now working on full integration, but they built the solution to support third-party solution integration at key process points, not just separate integration tabs / menus, and this allows all of the embedded applications to be extensions of each other, not a pool of disconnected apps you have to glue together with Excel.

In other words, every solution that is integrated is inserted at key points of the process flow where it makes sense to do so … for example:

* sourcing partners are brought up when an opportunity is being created and sourcing is selected as the mechanism
* data partners are displayed in a supplier overview / risk report so that an analyst can punch in to the source system for deeper analysis, metric breakdowns
* partner spend solutions are integrated at key parts of category drill downs if an analyst wants to push out a subset of data for what-if or experimental (AI) analyses without messing up the categorization or mappings of the source system
* key data from CLM systems can be pulled into the core to drive the application, and when contracting opportunities arise, data can easily be pushed out and pulled in at key points

etc.

And on top of all of this, there’s a solid, modern, competitive spend analysis platform built into the solution that is both a leader in data usability and in multi-data source integration, which is a key requirement for spend analysis, and Procurement success, as a whole, because, unless you can get a complete picture across all of your spend (related) data, you can’t truly make informed decisions and determine which opportunities are worth pursuing and likely to deliver the best organizational results over all.

The only thing that’s missing is the message.

* SpendHQ is all about “Spend Intelligence: Clear & Simple” (which is not a unique message or capability)
* Per Angusta is all about “Powering Up Procurement” and “Procurement Performance Management” (which is not a unique message or capability either)
… but neither comes close to capturing what the integration truly is, or can do, or how they’re one of the handful of players that will be creating the new foundations for Procurement offerings going forward (as Suite 4.0 is not just a suite, it’s a platform).

I hope they get it right, as we don’t want SpendHQ to go away too …

Where’s the Procurement Management Platform?

Where’s the Procurement Management Platform?

When we started out in the very, very, very late nineties, it was all about Procurement and/or Strategic Sourcing, which, in the beginning was all about RFPs and on-line auctions. The focus was on taking many organizations from fax and spreadsheets to integrated bids and on-line analysis and reporting (even if utterly simplistic).

Then, in the early naughts, we had the introduction of spend analysis, CLM, S(R)M, and invoice management and by mid-decade vendors were building mini-suites for upstream (Source-to-Contract) and downstream (Procure-to-Pay, which included Catalog Management, etc.) Sourcing and Procurement. By the time the teens came upon us, the big suite vendors were taken steps to merge upstream and downstream and you had the mega S2P suites start appearing in the early to mid-teams, some through over a decade of development and others through acquisition (mania). They third generation of these products/suites were heralded as the one platform solution (which ERP vendors like SAP and Oracle were hailing themselves as back in the eighties), but …

1) Even though the mega-trend in the 2010s of the Source-to-Pay mega-suite was supposed to be the end of decades of advancement in S2P, we soon found out that even a suite that had the six-core applications of Sourcing, SRM, CLM, Spend Analytics, Procurement, and Invoice to Pay didn’t meet all of an organization’s needs as they needed supplier networks to engage with suppliers, data providers for discovery and diversity, CSR & GHG data providers for risk, custom sourcing tools for complex/niche categories, etc. etc. etc.

2) Most of these platforms had little to no project management, process management, or opportunity management

3) Most assumed that serving procurement meant serving buyers and that was it … but you have to serve reports and oversight up to management and pull purchasing needs in from across the organization. I.e. no (out-of-the-box) management / Finance reporting and projections or intake management (facilitating the need for further Excel usage, and not less)

4) Even those with great spend analysis didn’t always revolve around the spend, and when you think about how business measures its metrics, spend should be the foundation.

And, in summary, they didn’t, and still don’t, deliver an organization everything it needs to be successful (which is why the BoB vs Suite debate rages on today), because Procurement is not an island (even though it was once staffed like the Island of Misfit Toys), and instead is the front-end interface to the supply chain, which, for some companies can include 10,000 companies when you trace all of the product requirements down 3, 4, 5+ levels to the raw material source. (But that’s another topic for another day.)

Getting back to the topic at hand, if you had a proper Procurement Management Platform, which was designed to support data-centric end-point integrations for specific processes and organizational needs, then

1) it would be quite easy to augment and add in custom applications for niche processes or data collections for niche process and reporting management as needed

2) it would be built around sourcing and procurement centric project management and contain the extensible workflow capability required to add customized process and opportunity management as needed

3) it would allow for the creation or integration of intake applications and interfaces to gather needs and report on decisions and progress and to synthesize all relevant data for roll-up views and KPIs that finance and management needs on a regular basis

4) it could be built to use the organizational spend as the foundational data source …

and Procurement could build up, maintain, and evolve the solution it really needs to be successful over time — which is something it can’t do today because buyers can’t code low level APIs, app stores don’t ensure app connectivity, and today’s “networks” merely support data exchange and not overall process management.

So where do you get this when no single provider on the market has (historically) had this? Good question … and one that we’ll hopefully answer in the year ahead.

2030 is too late for Center-Led Procurement!

Especially since 2020 was too late! And organizations should have been there by then since center-led procurement was being discussed as the next generation model in the mid-2000s and, more importantly, as the futurists were predicting that the future of work, and companies, was remote and distributed last decade, every company should be “center-led” by now.

(Note that we mean “center-led” and not “centralized” where one central office handles all major procurement projects globally. We mean center-led where a centralized function determines the best procurement path for each category — which could be centralized, distributed, multi-level, or mixed — and provides guidance to all of the global teams and makes sure they build the right procurement — and supply chain — models up front.)

In fact, by now, all organizations should be working off of a virtual center-led model where the “center” is the Procurement A-Team, where the members could literally be spread out over the 6 continents to “locally” absorb the situations in each geography before making decisions and to always have someone available to answer questions on not just a follow-the-sun but follow-the-local-business hours model.

And while virtual / remote / distributed work still seems to be an entirely new thing that most companies didn’t think of before the pandemic and that most companies are trying to eliminate entirely now that the pandemic has been declared over (even though the next pandemic is just around the corner and, yet again, no one is prepared for it), those of us in IT and Supply Chain have been doing it for two decades (and the doctor has been primarily been working remote for the past 19 years — the tech has been there, and has worked, for two decades … and now that high speed is in just about every urban area globally, there’s no reason a hybrid/virtual model cannot work and work well).

The reality is that the pandemic not only brought global supply chains crashing down but brought to light the high risk embedded in them a few of us saw a decade ago, which went beyond the obvious risks of “all your eggs in one basket” (even though Don Quixote was published in 1605) and “The Bermuda Triangle“*1, but also included the risks of relatively centralized procurement where one team in one part of the globe made the all-our-eggs-in-the-China-basket and managed the relationship with one team at one factory in another part of the globe; so if either team got completely locked down with little remote/virtual support (and we saw some countries limit people to 1KM from their homes and China lock down entire cities and not even let people leave their apartments), the entire chain was shut down even beyond the worst case that some of us were envisioning a decade ago (and made our definitions of bad — which was factory goes out of business, shipping lane closes, or ship sinks — look good by comparison because, at least then, you could still go to work and travel to find a new factory, organize a new lane, or spin up the factory 24/7 until you remade the order).

However, with virtual center-led, you not only have a team that knows how to work distributed and remote, and who knows how to use that setup to better mitigate operational risks, but who also has a risk-mitigation mindset that any supply base should also be distributed and different locations remote from each other (two factories in the same town is not risk-mitigation; an earthquake destroys the roads, the entire town gets quarantined, or political borders shut and its effectively one cut-off source of supply) and will help the different parts of the organization design more risk-adverse, or at least risk-aware, supply chains — tapping into local expertise in each part of the world to make the best decision and allowing the organization to move management of the chain around as needed and local teams (because you’re not sourcing your Canadian snow-plow and igloo building services from India, for example) to always have remote access to guidance and best practices in snow-removal services RFP construction (and know how from Norway and Japan).

In other words, center-led procurement (of which you can find a lot of guidance on in the archives here and over on Spend Matters, especially since, now retired, Peter Smith of Spend Matters UK was a guru on this as well as sustainability) of the virtual kind is what you need to be doing now if you want to last until 2030.

 

*1 which, while statistically no more dangerous than any other part of the oceans, exemplifies the fact that even the biggest ships, with an entire year of your inventory on board, can sink, especially when oceanographers have finally realized [even though mathematicians working with wave models understood this concept decades ago] that rogue waves are not a once a in decade occurrence, but a DAILY occurrence on this planet, it’s just that the ocean is so big that the fraction ever covered by ships is so microscopic that the chances of any ship encountering a rogue wave are infinitesimal on a ship-by-ship basis)

It’s Time for the Return of Purchasing Consortiums …

… but not the kind you think!

In the good ol’ days, before everyone had access to cheap and easy e-Auctions (when inflation was low, delivery guaranteed, and supply outstripped demand) or on-demand RFX sourcing platforms, the answer to better “purchasing” was consortiums that pooled demand and negotiated lower costs (hopefully lower landed costs, but you took what you could get). Except in a few industries (like healthcare, where product requirements are highly regulated, or utilities, where manufacturing requirements are exact), these have all but disappeared with the rapid rise in modern sourcing, procurement, and source-to-pay platforms over the past two decades.

While this may have appeared to be for the best, as you lost control over who you bought from, a third party controlled the relationship (and you couldn’t always go direct to get problems resolved), and you had to pay them a pretty golden penny for their problems, the pandemic has shown us that this is maybe not the case. Even though you want to control you purchasing as a buyer for your organization, you need reliable supply … and the pandemic has demonstrated (what many of us new, and blogged, about a decade ago; search the archives) that when you are outsourcing halfway around the world, reliability is a myth.

You need nearshore supply that you can easily get by truck and, preferably, train for large shipments (as modern trains can be more environmentally friendly from a GHG perspective), but every since  the Big (5/6/8/whatever) analyst companies that followed told you to go China, not only did you put most of your home-grown manufacturing plants out of business (which, I’m sad to say, wasn’t always as big of a loss as whiny politicians would have you think and definitely didn’t nail the coffin shut, but that’s another post), but you also put many near-shore manufacturing plants in Mexico (and other Central, Latin, and South American locations) out of business (which did!).

They needed to be resurrected the day pandemic restrictions started relaxing, and every day the need for their reactivation (and modernization) / replacement gets worse!

But unless you are a Fortune 100, you don’t have the spend on your own to convince anyone to even think about restarting a factory somewhere closer, more reliable, and safer. (And even then, the risk equation is not any better than continuing to outsource to China and hoping for the best!)

That’s why we need a return of the Purchasing Consortium, but with a new mandate to not only pool and guarantee enough demand to keep a new(ly) (revived/modernized) manufacturing operation sustainable and profitable but, in the absence of anyone in the target location willing to take the startup risk, manage a multi-shareholder investment on behalf of the Global 3000 parties that need such an operation and can afford to invest in one!

It’s a win-win regardless of whether or not anyone is willing to buy the operation once started. Either someone steps in and takes it off of the consortiums hands, giving the initial investors a return on their investment in addition to guaranteed supply, or the investors, who maintain control, can keep purchasing costs down (and the potential for profits up).

The question is, besides companies like Apple and Microsoft that can afford to build their own chip plants near shore (because what else are they going to do with the Billions they have in the bank?), who else is going to step up and bring it back to where it should be.

 

(Now, before you go bashing the grumpy old analyst for China bashing, this post is not about China bashing [although that’s a great rant topic], it’s about the insanity of going halfway around the world for something you can get [close to] home. If you’re selling in Asia, you should damn well be manufacturing in Asia, as it would be insane to manufacture something in Mexico and ship it to China if it’s easy to manufacture in China!)