The Strategic Sourcing Lifecycle: A Free e-Book for You.

Last fall in our post on how the Trade Extensions Event Was Different, we noted two important things. The first was that the Trade Extensions event was different because, unlike many vendor events, not a single presentation was about their platform — it was all about the customer and the various types of value available to the customer (including a focussed vision, sustainability, and an understanding of how what comes next can generate value). The second was that their message was different. Unlike most vendors which focus on their key capability, their most powerful modules, etc, Trade Extensions only had one thing to say. It’s not optimization. It’s just sourcing.

And SI echoed this point in a series last fall because that’s the truth. It’s just sourcing. And sourcing is not just an RFX, e-Auction, or optimization-backed negotiation. It’s a process. A process that starts with the identification of a need and only ends after the last unit required by the organization has arrived safe and sound and is put to proper use or the last hour of service has been successfully completed.

This process covers the entire product or service lifecycle from the initial planning phase through the traditional sourcing phase (which includes the RFX, e-Auction, Optimization, Negotiation, Contract drafting and award) and the traditional execution phase (which includes performance, relationship, risk, task, and change management) to the analysis phase (which includes a formal review and opportunity assessment before the next opportunity is selected).

This process goes beyond what a typical platform will support, and what a typical vendor will tell you. Especially when the vendor’s platform will not support each and every step that you need to be aware of. But Trade Extensions will tell you (because only educated people can make proper use of a true optimization-backed Sourcing Platform), and to make sure they got it right, they commissioned the doctor to write an e-book that exemplifies the full end-to-end strategic sourcing lifecycle that makes it clear for one and all what it is, what it requires, and what you should keep in mind when looking for a platform to support one or more parts of the cycle. And that e-book has now been made available to anyone who wants it for FREE over on their site. Simply fill out a brief 5-box form and The Strategic Sourcing Lifecycle: A Brief Introduction, a 118 page e-book, can be yours today.

In addition to a detailed definition of each of the four phases (planning, sourcing, execution, and analysis), the e-book also takes you through the evolution of strategic sourcing, Supplier Relationship Management (SRM), the next level of sourcing, complex tenders, and the evolution of strategic sourcing platforms as well as providing you with a detailed sourcing glossary that will define the most common terms and abbreviations. This is essentially a print-book in e-book form as it even includes a full index!

Whereas the most an average vendor will give you is a long white-paper disguised as an e-book, just like the Spend Visibility Guide (still FREE) was the first true e-Book on Spend Visibility and Spend Analysis, this is the first true e-book on the full strategic sourcing lifecycle. Download the The Strategic Sourcing Lifecycle: A Brief Introduction today. It will be worth your time.

Data Breach Response Planning Part I


Today’s guest post is from Torey Guingrich, a Project Manager at Source One Management Services, LLC who specializes in helping global companies drive greater value from their IT and Telecommunications investments.

It seems as if no industry or company can escape the potential of a data breach. Over the past few years, we have seen large retailers, health insurance companies, financial services firms, and the U.S. federal government deal with reporting and responding to large-scale data breaches. The first reaction to the threat of a breach is to bolster prevention. While there are clear ways that companies can mitigate the risk of a breach, there will always be someone looking to exploit weaknesses in security systems and protocol. While preventing a breach would be ideal, prevention should work hand-in-hand with preparation for a breach, including having the necessary partners identified or in place to respond to, cease, and mitigate damage. Procurement plays a key role in preparation by working with IT and various stakeholders to determine which types of services are needed for a data breach, as well as supporting the selection and management of the specific suppliers.

There are a few key supplier partners that Procurement should look to establish relationships with in preparation for, or in the event of, a breach:

  • Forensic IT
    While your IT department is very familiar with the systems in place and is able to manage them, they may not have the expertise needed to identify the source of a breach. Forensic IT firms can help identify the source and extent of a breach so that your IT team can focus on securing against the breach and ensuring operations can return to working condition. Procurement should work with IT to evaluate potential suppliers for forensic services based on the organization’s architecture, network, and potential entry points and vulnerabilities. Procurement can look to leverage sourcing activities or existing relationships for IT managed services to identify potential suppliers for forensic IT services.
  • Outside Council
    Unless your internal legal team is well versed and qualified to respond to a breach, you will likely need to bring in additional resources with specific expertise to direct your company on compliance and regulatory implications. When evaluating potential legal firms, Procurement should look for those who have expertise in notification requirements in all fifty states of the U.S. as well as in other countries, as appropriate for the company’s operations, and in your company’s specific vertical (e.g. healthcare, banking, insurance). Because these requirements are evolving, be sure to identify firms that are keeping pace with the most recent rulings and regulations.
  • Credit Monitoring/Identity Theft Repair
    With the increase of cyber threats and attacks over the past few years, firms that used to be seen primarily as credit monitoring tools are leveraging their experience and insight to offer response services that include customer notifications and call centre support, along with credit monitoring and identity theft repair services for affected customers. Procurement should ensure the chosen supplier is able to meet the expertise and capacity needs of the organization and can offer value-add services to bolster your response plan. Some suppliers offer services such as data breach simulations that can help identify holes or potential gaps in the designed response plan.

Procurement will need to consider the best-fit way to contract these services in order to utilize them in an efficient way. These services can be contracted in advance of a breach; this approach guarantees capacity, provides a faster response, but comes with both a monthly or annual retainer and variable costs that correspond with the breach.

You can also looks to purchase these services when a breach occurs; this would eliminate the retainer portion of costs, but would not guarantee capacity, may put you in a less favourable position in terms of negotiating variable rates, and will have a longer lead time. If you chose not to retain services, it would be prudent to establish beforehand a short-list of potential suppliers to approach for the necessary services when breach occurs.

Another option to obtain these service is through a data breach insurance plan; this is certainly an option for many organizations, but do consider your company’s ability to fully develop a response plan, ability to control the response, and reputation risk when working within the confines of an insurance policy. Deciding which services are used, and how they are purchased, will likely depend on your organization’s aptitude for risk and budget that can be allocated to these services. Procurement will need to explore the different purchasing methods against the risks associated with a data breach to determine the appropriate approach for securing these services for the organization.

Whatever supplier partners you decide to work with (whether proactively or reactively) Procurement should identify what they will need to begin working on your behalf and mobilize as quickly as possible. The development of your data breach response plan should also identify the types of data at risk (i.e. beyond customer data) and how a breach of that data will affect your business. This practice will allow you to identify business areas that may need to be involved in the creation and execution of the response plan in order to properly prompt internal action as you engage suppliers.

Now that you have your response partnership (plan)s in place, in our next post we will discuss the next key to a successful data breach response.

Thanks, Torey.

How Do You Value Cloud Services?

The clouds are here to stay. Whether they are dark nimbostratus storm clouds filled with hail or fluffy white cumulus clouds that dot the clear blue skies, they’re here. (That’s why the doctor recently co-authored a series over on Spend Matters Plus with the prophet on Supply Chains in the cloud.) Regardless of the doctor‘s opinion on whether your supply chain should be in the cloud, the clouds are sweeping supply chains up and the situation has to be addressed. (Thus, one has to do one’s best to insure that one’s supply chain is in the way of the right cloud.)

And while you should be well aware by now of how to cost a cloud-based platform, and compare it to a hosted ASP solution and an on-premise solution (as the referenced series and a number of posts here on SI have addressed this issue in detail in the past and even provided you with spreadsheet templates), you might not be aware of how to value a cloud-based solution.

When it comes to the cloud, valuation is a very difficult concept. There’s the hardware infrastructure and the reliability that comes from multiple locations that can store your data and run your applications. There’s the cloud-OS layer that handles real-time on-site and off-site data replication and back-up, automatic start-up of new processes and machines when a process or machine fails or becomes unavailable, automatic allocation of more processors and memory and storage when usage spikes, and so on. There’s the application layer that not only enables your processes but that is accessible anywhere with a data signal on any device your people happen to be carrying, that supports real-time data sharing and collaboration with your supply chain partners, and that supports innovative new capabilities not possible in on-premise apps.

There is a lot of value in each of these layers. Access to more hardware than you need, or can even afford, is valuable. Real-time off-site backup and failover is valuable too – compared to having to manually bring up an off-site location. And a better application with more capability and innovation is valuable too, but just how valuable?

In the traditional hardware world, the cost of filling a data centre is the cost of hardware plus the cost of a network engineer setting it up. Hardware is the cost of production plus a fair margin – there are enough essentially equivalent providers that costs are kept in check.

In the traditional software world, the cost of software is generally computed as the overhead cost of the company that produces it plus a margin that will produce an acceptable margin that the company can get away with based upon the perceived value differential between it and its competition that it can sell.

But the cloud is not set in the traditional world. In fact, the real-tine off-site backup and failover in a virtual OS layer didn’t even exist before the cloud. How much more valuable is having access to as many machines as is needed to power your application at full capacity at all times? While this power is known, failure — be it machine failure, power failure, or communication line failure — cannot be predicted and sometimes the entire application infrastructure must be ported in real time to a different part of the cloud.

And how much more valuable is having software that is maintained and regularly updated by the provider as compared to having software that must be manually updated and kept up by in-house development staff? Especially when that software might be capable of offering more real-time collaboration, real-time product tracking, market intelligence, and analytics than an on-premise platform. This is a much harder question to answer.

But one that should be asked. Just because a cloud solution is the cheapest alternative, that doesn’t mean that you are getting the full value you could be from your money. There are multiple providers, and they won’t all charge the same. Plus, if the technology is relatively simple, if its implemented as a true multi-tenant cloud based platform, and it doesn’t need to be updated very often to meet your needs, then the platform likely doesn’t cost the provider very much and may not have the value the provider claims if another provider offers essentially the same platform for three quarters of the cost.

There are no good answers here, but the questions should be asked and good answers should be expected before you commit to a solution, even if you are a non-profit that was donated a certain amount of cloud services — because you might not be getting what you think and may get hit with a big bill at the end of the year if your acceptance entails an agreement to pay for any usage above the donated amount of services.

Since there are no standards, providers are more or less free to “Value” services anyway they want, make extravagant claims as to support costs, and value a service at 5X its cost, or more. So be careful.

Economic Sustentation 05: Currency Conservation

As we have previously indicated, there is no salvation, at least not now. It’s only going to get hotter, and the best you can do for now is survive. But survival will be easier if you know what to do, or at least know what you might try, so, in this post, and the posts that follow in this series, we will present some of the options at your disposal, starting with currency (conservation).

So how can you protect against the currency fluctuations that can cause you significant economic damnation?

As indicated in our original damnation post, one preventative measure you can take is to determine the Purchasing Power Parity (PPP) of a currency to determine whether it is undervalued, and likely to rise, or overvalued, and likely to fall, and base your total cost of ownership models not on the current value against your base currency but the expected (average) value over the course of the contract.

But of course, this is not enough to predict every fluctuation in currency as some currencies rise and fall as the result of significant investment being pushed into a country (because of low wages, energy costs, etc.), being pulled out (because of new, burdensome, tax laws, etc.), or political actions that cause boycotts of goods from a certain country, or even trade embargoes. The latter situations can cause currencies to rapidly rise or fall seemingly overnight. So what can you do?

First, whenever possible, try to buy in the standard, or preferred, currency of the organization, and, in particular, the currency that most of the customers are paying in. If the organization is being paid in US dollars, then it should, whenever possible, try to buy in US dollars. This even eliminates (potentially costly) exchange fees from the picture.

Second, if this is not possible, because demand exceeds supply and the supplier has more negotiating leverage or the customers are buying in a currency that is not the preferred currency of the organization going forward, try to negotiate discounts as a result of currency strength increases against a major currency or gold. If the supplier suddenly has considerably more buying power from their dollar and their customers have considerably less, then it might be in the best interest of the supplier, especially if it is producing its goods from raw materials bought in a different market using a weaker currency, to pass on a bit of savings to its customers that might otherwise have to default on a contract or risk bankruptcy otherwise. It won’t always be possible, but if your organization is a major customer whose absence would be felt financially by the supplier, it’s worth a try.

Third, if you have to deal with multiple currencies, keep investments in multiple currencies so that trades can be made at strategic times to allow the profits in the currency trades to cover the increased costs of an unexpected rise in the currency required to pay a supplier. While the currency markets aren’t a zero sum game, generally speaking, value lost in one market always appears in another. And while SI realizes that, in the eyes of an economist this is a gross simplification, economics and trade works because, at any one time, there is a fixed amount of GDP in the world and a fixed value of a currency related to that GDP. Thus, at any point in time, value is conserved just like energy is conserved in our universe under thermodynamic laws.

There’s no silver bullet, but there’s enough lead that, if properly sprayed, will get the job done.

Four Hundred and Forty Five Years Ago Today

The Royal Exchange opened in London, and while only the exchange of goods took place until the 17th century, it has a long and rich history as the fifth oldest exchange in the world (preceded only by Antwerp Bourse, Lyons Bourse, Toulouse Bourse, and Hamburg Bourse). It was destroyed by fire twice (the first time in the great fire of 1666 and again in 1838) but still stands, in its third instantiation, today.

It serves as a reminder of just how long established trade has been taking place in the western world and how old Global Supply chains really are.