We’re In the Midst of Conference Season … What Have We Learned So Far?

There are two conference seasons in enterprise software, Spring and Fall, and enterprise sourcing and procurement falls into this squarely.

Every year, it seems to get crazier and crazier, but what have we learned?

The Bigger You Want to Appear, the Bigger Your Conference Needs to Be

Back in the day, if you were big, you satisfied yourself with a low-key user workshop … so low-key that it might not have even made your website. These days, you do big 3-day affairs, splashed across the relevant parts of the web, and keynote it with the biggest names you can get, whether or not they have anything to do with Sourcing.

The Bigger You Want to Appear, the More Events You Appear At

It used to be that you went to an event or two and splashed your banner, but now you go to every major event — ISM, Procurement Leaders, ProcureCon, SIG, etc — and all their instantiations. You’re on a constant roadshow, because the gospel needs to be spread far and wide.

The More Attention You Want, The More You Focus on Indefinites

Instead of focussing on functions, or process improvements, or knowledge, there is a big focus on value, customer success, or organizational recognition.

In other words, many of the big vendors, who have been pumped up by big PE coffers or IPOs, have apparently used their reserves to lure away the big enterprise CMOs under the assumption that the broader enterprise success strategies will work in Sourcing and Procurement. Their tactics are certainly getting them noticed, but these people are used to selling to IT, Operations, Marketing, Accounting, etc. — everyone but Procurement.

They haven’t yet figured out that Procurement is different.

First of all, Procurement are tough negotiators — they’re not going to pay a penny more than they think the software, and the services (be it implementation, process improvement, or other best practice education) that comes is worth. So unnecessarily boosting overhead by spending money on trade shows that don’t deliver value (because they don’t enable any learning opportunity) or on keynotes that don’t advance the knowledge of the attendees (because they don’t know anything about Procurement) or on drastically overpriced venues doesn’t help their case.

Secondly, Procurement want more than one-way conversations. They want interactions. They want input into the next release and the overall roadmap. And they want to learn as they do it. But these days, many user conferences have done away with the user feedback sessions, even though it’s the perfect place to do it.

It wasn’t long ago the marketers in this space got that. Let’s hope they reclaim their top spots after the new mega cos realize that the enterprise marketers they brought in are missing these fundamentals. Because for our space to advance, everyone has to be smart on all sides.

April Planning Prevents May Panning (for Gold)

Let’s face it, once May comes around, you’re under the gun to identify significant savings before the end of June when you, or more importantly, your bosses want to take some time off during the summer (and know that suppliers do the same and results will likely be limited until people get back to work full force in September).

But if you wait until May to identify those categories you are going to go after for quick wins, you’re better off panning for gold … it will have a better success rate. Even if the best method to capture those savings is identified as a reverse auction, and even though it can be run in a day, by the time you

  • run a spend analysis across categories not significantly under contract or where the contract is expiring
  • collect market / should cost pricing and demand across the categories and estimate savings opportunities
  • rank the opportunities
  • evaluate each opportunity and identify the best strategy
  • extract those where auction is the best choice
  • identify the appropriate supply base for this subset of categories
  • get the suppliers onboarded in your SRM/Sourcing system
  • send the invites and get commitment
  • run the auction
  • cut and sign the contracts

… it’s mid to late summer. But if you start this process now, limit the quick-hit projects to those where you already have most of the suppliers in the system, and get going just on those, you will have time to finish a few of them before summer hits. Otherwise, if you wait for May, you’re better off packing your pans and booking a ticket to Alaska.

Don’t Go Down In Flames …

… just like Jesse James.

For those of you into Americana, One Hundred and Thirty Five (135) days ago today, Robert Ford, who was in Jesse’s gang, killed Jesse James for a reward. Jesse James was one of America’s most famous outlaws who, after the civil war, gained significant notoriety, and even public sympathy, as a result of his many successful robberies that included banks, stagecoaches, and even trains and the portrayal of him as America’s Robin Hood (who stole from the rich and gave to the poor), even though there is no evidence that he or his gang actually shared their spoils in that way. (And when he was killed, he became one of the legendary figures of the Wild West.)

And while it might be nice to be legendary, a corporate death is not the type of legendary you want to be. But it’s one that’s easy to realize if:

  • You upset too many senior stakeholders with aggressive savings-focused sourcing events that ignore stakeholder desires and even requirements (even though this may make the CFO do the dance of joy)
  • You achieve too much success (too fast) while satisfying all of the sourcing requirements and make your peers look bad in comparison (because you achieve double digit savings while adhering to every business constraint and satisfying every named stakeholder requirements) … giving them incentive to back-stab you (and set you up for failure not of your doing)
  • You step on the toes of too many powerful incumbent suppliers (with CEOs that join your CEO on the golf course) and/or take too much business away from them too fast (even though they may need to be replaced, replacement of major incumbents often has to be done slowly and with care)

So, when you are reviewing your contracts and (re) sourcing your significant categories, be sure to do so with care and finesse — your incumbents may need replacement, but such replacement will have to be done with care, and support. It’s a sad truth that sometimes your efforts will be undermined by personal relationships between chief executives and board members, but a truth you need to be aware of and approach with caution. Once these individuals understand what their relationships are costing them, or you get the CFO or CEO to help you explain that to the stakeholders, you will be able to (slowly) replace the suppliers and make the right sourcing decisions (and save), but the last thing you want to be is alone, because, instead of being seen as a hero, you will be seen as an outlaw, and someone who will be given up for a bigger reward. Sad, but true.

Time for Spring Cleaning. Start With Your Evergreen Contracts.

The spring tradition is to clean house, and that means your house of business as well. Chances are there a number of areas of your operation that need to be cleaned up, but the place to start is your evergreen contracts. Most organizations have significant overspend in these contracts because prices have dropped, demand has increased, and/or new options have entered the market — but since the organization decided to set, and forget, these contracts, it has not been able to take advantage of new options, negotiate against the increased demand, or realize the reduced prices.

So how do you start?

First, make sure all of your contracts are in electronic form and in a central electronic filing cabinet.

How do you do this?

Acquire a good OCR solution and feed all your paper contracts through it and create a set of contract e-documents.

Then, acquire a good network drive scanner to find all of your e-contracts. Some might be part of the scanned set (as they were printed out and filed), some might be duplicates (as different users might put them on different drives), and some might be draft versions.

Finally, to get a complete (as you can) distinct set of contracts, run them through a semantic process that can identify similar documents that will group all documents that are highly similar into a set and identify the (likely) final version based on dates (and differences between similar documents).

Then, figure out which contracts are, or could become, evergreen …

How do you do this?

Acquire and apply a semantic analytic solution that can sift through the contract clauses, identify the term, and whether or not the contract is, or could become, evergreen.

… and order them by upcoming (auto) renewal date.

This is just a simple sort, which can be done by exporting the contract titles and (auto) renewal dates to a spreadsheet which is easily sorted.

Then do a spend analysis (and projection) on each category defined by the contracts, in (auto) renewal order, and when the savings percentage is significant (near double digits) or the savings amount is significant (many 3X to 5X times what a category re-sourcing would cost), provided there is enough time to re-source, you queue up the sourcing event. If there is not enough savings potential, or time, you add it to the end of the queue to be reanalyzed sufficiently in advance of the next auto-renewal date.

Eventually you’ll work your way through all the evergreen contracts, and replace them (with non-evergreen contracts) in order of priority, defined by savings potential.

And that’s how you start your evergreen contract spring cleaning.

Will the Trade Wars Be Good for Advanced Sourcing?

Trump is imposing tariffs. China is retaliating. And this is just the beginning. As a result, supply risk and the need for spend forecasting is finally becoming real. But is it becoming real enough for organizations to take action? It’s hard to say. But one thing we do know is that the only way organizations can progress forward is to better understand not only the risks, but the costs.

What are the risks? Many. What are the costs? Significant. And how can you know of either? In the first case, you need to monitor the news, the sentiment of the responses in regards to the news, crowd-source some predictions, and run some advanced analytics on all this data to determine the probability of something happening — and sticking.

And in the second case, you build should cost models with current data, and projected data, to determine the impact of a tariff on the total cost of ownership of the product. This means that a simple RFX or Auction platform is just not enough – an organization needs a platform with deep should cost modelling and the ability to create what-if should-cost models based on projected and anticipated changes.

But even that’s not enough. If the projected increases are significant, then the organization will, at the very least, need to reallocate global supply chains to insure that products, which are currently sourced from multiple suppliers and/or locations, are being exported from and imported into the most cost effective locales the organization has access to. And if this is not enough to keep costs under control, then the organization may need to even source from additional suppliers (in different locations) or re-source the entire category (to the extent possible).

But it’s hard to figure all of this out without an optimization backed sourcing platform. Hopefully this is the kicker that is needed to get these powerful analytical platforms into the hands of more Sourcing and Procurement organizations, as these platforms are desperately needed and reduce spend on analyzed categories by an average of 10%+ year-over-year, making their ROI immense.

But, alas, only time will tell. But if bankruptcy could be on the line (when a tariff wipes out the entire profit margin), maybe this time these platforms will finally take hold.