What Makes a Good UX? Part II “Smart Systems”

A couple of months ago, after we sang Bye, Bye to Monochrome UIs, we indicated that we were beginning a series that chronicles what makes a good UI, and more importantly, a good UX (User Experience) in a modern Sourcing or Procurement system. This is critical because systems that are not useable do not get widely adopted, and systems not widely adopted never deliver the promised value.

In our first post on What Makes a Good UI where we noted that the full series was being published over on Spend Matters Pro [membership required] as it is the result of a deep long-term multi-blogger collaboration (led by the doctor and the prophet) designed to identify what should be (and not what ay given vendor will try to promote based on what they have), and sponsored by Spend Matters, we outlined some of the fundamental requirements of a UI / UX for any Supply Management application which include, but are not limited to:

  • integrated, pervasive, guidance
  • … that is based on true expertise and historical use
  • “touch-less” automation wherever possible
  • extremely context aware
  • mobile support and mobile first in the field
  • messaging as a competitive advantage

(And if you want deep coverage on these topics, see the first instalment of our full series on “Measuring the Procurement Technology User Experience: More Than Just a Pretty Screen” over on Spend Matters Pro [membership required].)

But, as we stated, these were just the absolute base-line requirements. In Parts II and III of our full series, we outline the next set of core functionality that should be pervasive across any Supply Management platform that you acquire. And in future articles, we dive into e-Negotiation, e-Auctions, Optimization, Spend Analytics, SXM, CLM, Requisitioning and Shopping, Procurement and Catalog Management, and Invoicing … just to start. But we’re getting ahead of ourselves.

One of the core requirements we reveal, and dive deep into, in Part II in our article on Smart Systems and Messaging, Chat, and Collaboration is smart systems.

As per our article, smart systems drive integrated guidance leveraging new “AI” techniques -— better termed automated reasoning (AR), as software isn’t truly intelligent —- that adapt and learn over time. They do this by mixing semantic technology, sentiment analysis, key-phrase driven expert systems and other machine learning techniques with history to determine what the user is doing and what the user wants to do.

For example, a smart system in sourcing will detect if there has been a full event/process before run by a user or similar peers in an organization, and allow the user to instantiate a new instance (by copying the template or previous event). Or, in the case of one-time requisition in which competition could benefit the outcome, a smart system can detect an automated spot-buy event that can be run against prequalified suppliers hands off, which the system suggestions.

And that’s just the beginning of what a smart system could, and should, do for you. For deep insights into not only where the bar is today (as leading providers start to release first versions of these guided systems), but where the bar will be by 2020, check out our post, which also dives deep into the Messaging, Chat, and Collaboration functionality [MCC] that a modern system should support. [Hint, more than just integrated e-mail or first generation chat!]

And stay tuned for the next part, coming later this week, on the final set of core requirements that we feel a modern Supply Management System cannot be without!

P.S. If you are a vendor invited to the Sourcing, SRM, CLM, or Spend Analysis Solution Map, this is a series you do NOT want to miss!

Pay the Piper on Time or Pay the Price!

In response to abysmal payment terms of 120 days or more, which were seriously crippling smaller suppliers, the UK has instituted a requirement for large businesses to report on their UK payment practices twice a year, with failure to do so a criminal offence with unlimited fines. The goal is that the mandatory reporting requirement, which requires companies to report on the average time it takes to pay invoices for the majority of contracts (0-30 days, 31-60 days, and 61+ days), will encourage businesses to improve their payment practices as a result of transparency and public scrutiny.

It’s a shame that this requirement only exists in the UK, because not only should you know, and be prepared to report on, how fast you are paying your suppliers, but you should be striving to pay all of your suppliers within 30 days of receipt of a valid invoice, because your success depends on their success, and while a happy supplier, like the pied piper, will catch and lead the supply chain problem rats away, an unhappy one will allow those problem rats to multiply, and possibly even aid in their reproduction and spreading.

Suppliers are critical to your success. They not only provide the raw materials, products, and services you need, but often the raw materials, products, and services your customers need — and if these raw materials, products, and/or services are not of high quality, delivered timely, and supported enthusiastically, your customers will not be happy. Unhappy customers, especially those not under or nearing the end of their contracts, tend to defect.

A supplier is only likely to provide high quality, supported, timely products and services if it is happy. And believe the doctor when he tells you that a supplier will NOT be happy if that supplier is not paid on a relatively timely basis most of the time. Like you, suppliers need predictable cashflow and if you give them a cashflow nightmare, they will not be too concerned about giving you an inventory forecasting or customer satisfaction nightmare.

So don’t rely on a forthcoming guidance or industry initiative to tell you when to pay the piper. Just pay the piper and reap the benefits. (And if you not only pay on time, but pay early, you’ll be a customer of choice, and those customers tend to get all the benefits.)

The M&A Mania Ain’t Over Yet … But …


 

With one hand, pick up your copy of The Hitchhiker’s Guide to the Galaxy, with your other hand grab a Pan Galactic Gargle Blaster, have a seat, and read a few random entries while you have a nice relaxing drink. And definitely don’t panic.

In fact, don’t even give the acquisition a second thought right now. Why? The reality is that, for at least six months, nothing is going to change and you don’t have anything to worry about in the short term. First of all, takes a while for companies to figure out whether they are going to keep the tech, and then if they are going to merge it or keep it separate. Secondly, what to do with the teams. How they integrate (and who stays and who goes) and work together. Then the offices need to be harmonized. Etc.

Now, it’s a very real possibility that the company might have bought your provider just to squash the competition and/or try to get you as a customer, and that’s okay, because not only will it not happen overnight, but if you’re doing your job, you’re (re)evaluating your solution options at least once a year (before budget season) to not only identify what you are missing, but whether or not your current tech is still up to snuff. So, if the worst happens, or looks like it will happen, you already know who your likely options are and can start that RFP process.

Plus, if a company is paying 10, 20, 40, 100 million for another company, they probably don’t want to lose you as a customer (as they can’t afford to lose anyone at those prices for a few years), so even if their plan is to kill the technology and move you onto their platform (which will, hopefully be better … by the time they try to do so), they’re not going to force you overnight … they will honour your contract (which you signed and ensured had a change of ownership clause to your liking, right) and likely present you with a long term plan.

In other words, you have time to figure things out, and, to be honest, you should be moving much faster than the vendor anyway. So take another sip of that Pan Galactic Gargle Blaster and don’t panic!

Manual = Money

Yes, technology costs money and five and six figure technology purchases look expensive, especially if a vendor is asking for payment up front, but it’s often the case that not having an automated technology solution as a mid-size or large organization is costing your organization even more. The reality is that anything not automated has to be done by someone, and having that someone do a task costs you a lot of money. Even if that someone is a (near) minimum wage resource. Remember, it’s not just the $15 an hour, $120 a day, $600 a week, $30000 a year that resource costs, but it’s all the overhead associated with that resource. Benefits. Training. Office space. Equipment. Opportunity cost of NOT having them work on more strategic tasks. Etc. When you do the math, that $15 an hour / $30000 a year resource is likely costing you closer to $30 an hour / $60000 a year. If the solution costs less than 30K a year, and replaces one FTE that’s not only a savings, but another resource you can reassign to value identification and generation (which never comes from doing tasks that can be automated).

But in Supply Management, the solution can often replace 3, 6, 10 or even 50 FTEs with very little incremental processing power required. A great, and often repeated example, is invoice processing with m-way (typically 3+) way match and auto-return to supplier for completion of missing information and correction of (potentially) incorrect information. These systems can review these invoices 100% and often, through auto return and correction, reduce the number of invoices that need human review to less than 2%. For an organization that receives 50,000 or more invoices a year, with dozens (or hundreds) of line items per invoice, where a team of 3 people can only fully review 20% and spot check a few lines on 20% more, this system, if in the 50K price range, has an ROI 10X its cost as it allows all invoices to be fully reviewed and verified before being paid — something that would otherwise take a team of 10 people, who are more error prone than the system and will still miss issues that need to be reviewed.

But it’s not just invoice review in Procurement that takes a huge amount of time, and never gets finished. It’s data entry and maintenance. Catalogs. Supplier Masters. Approved products and bill of materials. Preferred products. An average organization has tens of thousands of records that need to be created and maintained over time. Larger organizations have hundreds of thousands. And the annual maintenance of each record is so time consuming that the cost to accurately maintain this data (and keep it up to date) is literally in the hundreds of thousands of dollars, if not millions. (the doctor once read a thesis that estimated the average annual cost at about $2 a record, and with the increased rate of data change, that actually seems to be on the low side). But a system that allows suppliers to maintain their data, automatically updates the data from one central, verified, repository (provided by the supplier or vendor), etc. can greatly reduce this cost while increasing the accuracy.

And it’s not just tactical Procurement that requires a lot of manual effort. It’s also, believe it or not, Sourcing. A lot of categories that should be strategically sourced can be mostly automated. Especially the lower value, market-driven, and non-strategic categories. Often, the best strategy is just a winner-takes-all auction or a 60/40 split between the two best RFPs, where the bidders can be limited to pre-approved suppliers (and products) in the first case (with ceilings) and pre-approved suppliers in the second. These events could be automatically configured and, once reviewed by a buyer, automatically launched and executed and, once the results reviewed, automatically awarded. The entire process, which often takes days in some platforms, could be accomplished in an hour or two, freeing the buyer up to focus on truly strategic and large value categories and new types of supplier consolidation / part standardization / raw-material unification analyses that might yield previously unknown savings opportunities.

In other words, never balk at the cost of a solution until you calculate the true ROI, which is often many times the tactical manpower cost you are replacing (as its often the case the manual effort isn’t doing a complete job). The ultimate goal is to allow your team to focus on value identification and capture, and they can’t do that if all they are doing is manual data entry and review that can be (almost) fully automated.

Bigger. Badder. Baffling.

As per our previous posts, the merger and acquisition cycle is peaking. Coupa went on a spending spree and bought Spend 360 and Trade Extensions. Jaggaer merged with Pool4Tool. OpenText is acquiring Covisint Corporation. And Descarte Systems acquired PCSTrac Business. And we just know more announcements are coming.

Everyone is getting bigger and badder, at the expense of BoB (whose days appear numbered), and it’s getting a bit baffling. Some of the acquisitions make a lot of sense (at least on paper) with companies trying to flesh out suites, but some like Open Text’s acquisition of Covisint (which is very vertically focussed on automotive) are stretching a bit. But what’s most baffling with the rapid pace of acquisitions are how the companies are going to manage integrations (of platform and strategy) and solution footprint.

When you get big, things can get costly … quick, especially if there are multiple platforms involved. This isn’t good for you from a market perspective (as the size of the customer base that can afford your baseline solutions will shrink), and it isn’t good from an operations perspective. There’s a reason that Oracle expected to save a Billion in operating costs by acquiring Sun, and a lot of it came down to platform. Sun Microsystems was very efficient in its software infrastructure, running almost 1,000 different systems whereas Oracle, which ate its own “one instance dog-food”, ran one Oracle instance. By migrating all of Sun’s systems into one, it saves hundreds of million a year (at least 250 to 300 by some counts, more by others). If a company has six different platforms to maintain, that’s six different hardware infrastructure costs, six different software infrastructure costs, six different dedicated support team costs, six different implementation expert team (who will implement and train third parties) costs, and so on. These costs add up. Rapidly.

And they escalate the platform costs that the companies need to charge to customers, which shrinks the perspective customer base. And if the mid-market gets squeezed out, everybody hurts as the greatest number of companies without decent Supply Management solutions (and the bulk of the 40% who don’t have solutions) are in the mid-market. So while acquisition makes sense to fill a hole, not working on ways to integrate, or at least harmonize, the solution (so that there is no duplicate development across products or unnecessary, and costly, integration efforts) can be costly. So, in some sense, the speed at which some companies are moving is a bit baffling, as good integration takes good analysis, planning, and development — all of which takes time. Given that some acquisitions are being completed in two months, and that the amount of information that can be extracted in due diligence is limited, there’s no way the average company can begin integration out of the gate. In many cases, the acquiring company (that are experts in a different technology and business process) won’t even know where to start.

In other words, while some companies might be on the right track, they are just beginning a very long journey and have thousands of miles to go before they reach their destinations. Adding acquisitions adds miles to the track — miles that have to be travelled. The question now is not do they have the vision, but how will they get there. And that can be a baffling question for anyone to answer (especially without third party expertise and guidance). But not necessarily unresolvable …

In the interim, Spend Matters has been putting together decent guides on questions to ask your providers if they were involved in one of the covered acquisitions. Check them out. And answer the questions for yourself before committing.