One Hundred and Fifteen Years Ago Today …

Gustave Whitehead, a man of great mechanical skill in the creation and construction of lightweight engines, claimed to have made the first powered flight in his Number 21 that supposedly achieved 60m above ground for 800m. Still disputed to this day, with the waters made murkier by the fact that thirty years ago a replica successfully made 20 successful flights of up to 100m, it was an important day in aviation history as it certainly would have inspired more, better, avaiation inventors to build powered planes that would actually fly and, not much later, carry cargo.

DirectWorks: SaaSifying Co-exprise

Co-exprise was founded back in 2004 with a goal of building a new-type of direct sourcing solution not yet available in the North American marketplace. The goal was to integrate the new sourcing tools of the day — namely RFx, auctions, project management, collaboration, product information management [PIM], dashboards — with bill of materials, supplier engagement and management, and workflow management — capabilities not found in standard sourcing tools but desperately needed by manufacturers to handle their direct sourcing needs. In fact, it was so revolutionary that the doctor described it in 2007 as the first solution on the [North American] market to make a serious, honest, effort to address the complex direct sourcing problems that other systems cannot handle because these types of problems are unique and require a distinct solution.

The Co-exprise platform was relatively unique in its day in that it was built on a number of basic building blocks, including workflow management, business process rules, collaboration technologies, a centralized repository, project management, cBOMs (collaborative Bills of Material), cost models, and analytics, that were inherent to, and invasive across, the platform. This meant that all of the technologies were integrated into one collaborative workflow where all of the common data required by a direct sourcing professional was always accessible and analyzable. But, fast forward a few years, the platform had one failing — and that was that it wasn’t designed to be multi-tenant SaaS from the ground up.

Why? Back in the early 2000s, fast internet wasn’t pervasive, third party data center and application management was expensive and, most important, manufacturers wanted to keep their proprietary data in-house and valued deep security over remote manageability. But now that cost is paramount (and SaaS is always cheaper than in-house for non-IT enterprises), the cloud is accepted, and multi-tenant SaaS managed by professionals is often more secure than the corporate intranet, the playing field has changed and modern manufacturers want a SaaS platform.

So, shortly after a regime change, Co-express decided that it needed to go true multi-tenant SaaS, and that it would re-build from the ground up … as DirectWorks. Doing this would allow them to take advantage of new web development capabilities, such as better UI and distributed processing, that might not be doable if they just tried to do a straight port. So was this the right thing to do?

Yes and No. The new platform has a very easy to use and clean UI. Is extremely simple for the mid-size manufacturers that still use a traditional BoM sourcing approach that it was designed for. It allows manufacturers to organize items into products and products into programs so that sourcing and management can be done at the appropriate level. It still has good RFQ capabilities and a supplier repository. And a graphical dashboard with reporting capability.

But it still doesn’t have many of the features in the original Co-exprise product. There are no auctions. They may not be common, but sometimes it’s the fastest way to source commodity raw materials and items at market prices. Co-exprise had a fair amount of configurability and a workflow manager with some capabilities to customize the application to the buying organization, and the new SaaS product doesn’t really have either yet. The BoM structure and sourcing process is very inflexible, and there are no hints of true SRM.

However, while the indirect sourcing platform space is quite large, the direct sourcing space is quite small. The only players are DirectWorks, Pool4Tool, and SupplyOn — the last of which is mainly oriented around electronic interfaces and document exchange (but which also includes proposal, auction, and contract management capability). And while Pool4Tool, which used to lag in usability and integration among its modules, has now caught up and surpassed DirectWorks, Directworks has managed to port over half of the capabilities they built over ten years in two years, so it’s conceivable in two more they could be back to their glory days and a major fighting force on the market. Time will tell. And SI will be watching.

For a much deeper dive into the new DirectWorks, watch out for the upcoming Pro series by the doctor, the prophet, and the maverick over on Spend Matters Pro!

Technology Sustentation 89: IP & Patents

Intellectual property and patents are a good thing, right? They protect your inventions and prevent your competitors from stealing your innovation and making money off of them, right?

As per our initial damnation post, wrong. The theory is considerably different from reality. They don’t stop your competition from stealing your ideas and inventions, they only give you the right to go after your competitors in court for damages (but not necessarily succeed) if your competitors steal your inventions. And moreover, they make it easy for your competitors to duplicate your invention. (Remember, to patent an invention, you have to complete define the invention in enough detail for someone to easily reproduce it. It’s like handing a car thief the keys to your brand new custom made Ferrari and asking him if he’d like a joyride.)

And, as per our initial damnation posts, not only are lawsuits not guaranteed to succeed, but if the competitor who stole your idea has deeper pockets, it could bankrupt you. Heck, even if you don’t sue, nothing stops them from claiming prior art, trying to get your patent thrown out, and suing you for IP theft (for anything not explicitly covered in your patent that they claim they invented first).

But this is not the worst of it. Many companies file, or buy, patents not to protect their IP, but to prevent you from selling yours (and this has been going on for a decade as per SI’s classic post on how the patent pirates will plunder away). Plus, since patent clerks are not experts in anything but the rules associated with filing patents, and the reviewers are typically not experts either, many patents that are much broader than they should be, and that actually patent innovations that exist in prior art as part, or all, of the invention, get pushed through by firms with big pockets and persistent lawyers. These patents are then used by companies, known as patent trolls, with no intention of actually developing or selling such products to go after companies with similar technology and demand licensing fees under threat of a patent infringement lawsuit, whether the patent portfolio is violated or not. (The idea is that, since you know how much a patent lawsuit will cost, you’ll simply cave and pay a small license fee to “license” the patent you are not already using. These patent trolls know that all they have to do to bring you to court (in Marshall, Texas) is make a reasonable sounding (not reasonably effective) case to a non-technical judge who will allow them to bring you before a completely technophobic jury.)

It’s insanity, and since the US is not as smart as the EU (that does not allow computer-implemented inventions to be patented), the insanity is here to stay. So what can you do?

1. Keep great documentation on all inventions so you can always demonstrate prior art when you have it.

The minute something is invented and verified by a third party, gather irrefutable evidence and documentation and insure efforts are taken to guarantee its preservation.

2. Make extensive use of provisional patents.

These don’t have to be as finely detailed as full patents and give you a full year to hammer out the details of the invention and get a product to market before having to hand the plans over to your competitors in a full patent.

3. Plan to patent everything of of value that is invented by you.

Whether or not the organization ever intends to try to profit off of it is irrelevant, if it has value to someone, the value has to be protected because it will allow your organization to exploit that value.

4. Form an industry patent licensing cooperative.

Where each entity puts up a relatively equal share of relatively low value patents (to it) that all entities can use for a nominal licensing fee (of $1), where each member agrees to license each patent it holds to other members at a fair price in exchange for the mutual guarantee of no lawsuits (and to settle all disputes by binding arbitration at a shared cost), and where each party may use the entire portfolio to defend against patent troll lawsuits.

Will this prevent damnations from coming your way? Considering that the worst of the patent trolls believe they can take on anything, probably not, but it will certainly minimize the meaningless lawsuits and demand and mitigate damages.

Economic Sustentation 02: Bank Failure

As indicated in our original damnation post, Wikipedia states that a a bank failure occurs when a bank is unable to meet its obligations to its depositors or other creditors because it has become insolvent or too illiquid to meet its liabilities. Since some banks, including the Federal Reserve, have a license to literally print money, most people think that bank failure is impossible. But since some banks over-invest in hedge funds, high risk mortgages, or commodity markets, it can happen and it has happened.

Banks have been failing since they first incorporated, and the fiscal crises in the late 2000’s caused the failure of a number of really big banks, including Washington Mutual, Lehman Brothers, and Bear Stearns. And regardless of how many new acts are passed to try and insure banks limit their risk exposure or keep enough cash on hand to cover withdrawals or payouts in the case of a loss, banks will still fail. Regulators will never keep up with the new and inventive ways banks and investors will come up with to invest, and lose, money.

This is a damnation because not only do they hold your money, all of which above the FDIC (or equivalent) insured amount could be completely lost in a bankruptcy, but your supply chain probably depends on letters of credit and inventory based loans, and they can disappear with the bank that disappears with a bankruptcy. This could cause your critical supply lines to stop, which would result in your production lines going down, and revenue losses mounting by the day while you search for new banks, new lines of credit, and new inventory loans.

So what can you do?

1. Diversify your Banking Portfolio

Just like you should diversify your physical supply chain, and have alternate sources of critical raw material and product supply, you should diversify your financial supply chain and have alternate sources of savings and financing.

2. Include your Banks in Your Supplier Risk Management and Monitoring Program

Even if you have multiple banks, and no bank has more than the insured limit of your money, a failure will still cause you significant grief as you would have to file insurance claims to get your money, arrange new payroll solutions, arrange new letters of financing, and so on.

3. Balance bank financing and private lender financing

Sometimes private lenders will give you a better deal on invoice factoring and inventory financing than banks. Be aware of all your options and balance them appropriately.