Technology Sustentation 80: The Cloud

As SI said in our post on technology damnation 80, software was good. Hosted ASP was better. True multi-tenant SaaS was better still. But the “cloud” is, more often than not, the one step back that follows the two-steps forward.

The cloud is not a white fluffy cloud full of day dreams, it is a gathering storm cloud that could soon erupt and flood your entire operation while the hail it dispenses pummels you to a bloody pulp.

As per our damnation post, if you are not careful, you could:

  • lose your mail,
  • lose your data,
  • lose your platform, and
  • lose your customers as well as
  • lose your supply chain visibility,
  • lose your revenue stream, and
  • lose all the cash in your bank account

And you could be permanently lost at sea when the floods carry you away.

Unless, of course, you take precautions. What kind of precautions?

  1. Make sure that your providers’ platforms are designed in such a way that not only is there no data cross-pollination, but that there is no access cross-pollination. This may require that the provider not only create a new instance for each client, but run it on a new virtual machine. (The database can be on one server, as long as it’s encrypted and the encryption for each client uses a unique key so that if a hacker gets through to the database through another client’s poor security configuration, and gets all the data, your data can’t be decrypted.)
  2. Make sure that the provider supports encryption across all of your data, not just parts of it, and that it is up to date (and up to snuff). Even data that might be considered inconsequential can be enough to be damaging if enough bits of it are pieced together.
  3. Make sure the provider does near-real time incremental, replicated, distributed, off-site back-ups to make sure that, in the case of hardware failure (or FBI/NSA server seizure), your data is not lost.
  4. Make sure the provider has multiple real-world data centres that the platform can be run on in case one (or more) data centres become unavailable.
  5. Make sure the provider has a distributed fault-tolerant up-time monitoring solution that can detect if an application instance becomes unavailable and restore the most recent back-up to a different data centre and do the necessary re-routings in (near) real time.

In other words, security, fault-tolerance, and distributed processing and back-up are critical. Without it, you’ll be hacked, your system will go down, and you may not get it (or even your data) back.

Influential Sustentation 95: Competitors

I know this appears to be an oxymoron, but competitors do sustain you. Without competitors, there is no validation for your product, your market, and even your existence. But this isn’t a blog about Sales, this is a blog about Procurement. Believe it or not, competitors also help to sustain your Procurement practice. And we’ll get to that, but first we need to discuss the damnation that competitors can be.

Competitors are an outright damnation to the whole organization. Marketing makes an announcement, your competitors try to one up. Sales signs a great customer, your competitors try to weasel into the customer’s good graces through the backdoor. Your R&D makes a great discovery, and here comes the corporate espionage. But from a Procurement point of view, they are also damning.

  • They compete for limited supply and drive prices up.
  • They compete for limited talent and drive prices up.
  • They compete for limited expert (technology) resource time.

Ouch! How can they possibly be a sustentation. Well, this is an example of where when the going gets tough, the tough gets going.

Your Procurement can wallow in self-pity every time the competition scoops up a limited supply at a great price before you, steals the talent you want, or gets the top expert at the systems integrator to work on their project first, or you can recognize that anything they can do you can do better. And here’s where you start.

  • Monitor the market constantly, on-line, and in real-time to not only detect the rare occasions when forward auctions get listed (because a competitor went out of business or overbought and has to dump), but to detect events that could impact supply. If a natural disaster wipes out a significant portion of supply, then the market is just going to get tighter and having advance knowledge of the pending crunch can allow you to stock up on inventory early and cut your competitor off, or at least get pre-crunch prices locked in.
  • Invest in and understand the talent market, what each generation wants, and put together comprehensive work-life balance packages that will be more attractive than a competitor who merely promises a slightly above market salary (and nothing else).
  • Make sure to negotiate up-front sufficient access to any resources you will need, guaranteed milestone dates on the integration project, and penalties for non-performance.

There are other things you can do, but if you start here, you will suffer less supply crunches, attract more talent, and get your projects done on time. And this is a great start.

Re-introducing Keelvar, An Optimization Backed Sourcing Platform

Last summer, we introduced you to Keelvar, a provider of an optimization-backed Sourcing Platform with a strange name that produced uncommon results. A client of Keelvar’s with 30 year’s experience in ocean freight sourcing remarked that it was like their first generation sourcing suite on steroids, so Keelvar is definitely a platform that should be on your radar.

A spin-out from a research laboratory that built a next generation solver, Keelvar was formed as a SaaS (Software as a Service) company in 2012. Unlike the majority of sourcing optimization software providers, they realized from day one that the solution wasn’t a better optimization module, it was a better sourcing platform where ease of use was the most important driver of adoption. Their Founder and CEO, Alan Holland, believes that “every sourcing event with a possible split-award should be optimized but in a completely transparent manner so that it’s easy for both buyers and suppliers” to understand the award recommendation and the reason therefore.

The starting premise was that the average user wasn’t advanced enough to use the first generation strategic sourcing decision optimization (SSDO) solutions where optimization was a standalone module and you needed to be an optimization platform expert to set up the models and run the sourcing event. It had to be intuitive and easy. Moreover, these average buyers have much simpler categories. As a result, the models were simpler than what some of the first generation expert providers were throwing at them, and, moreover, the majority of these models for standard, “simpler“, categories were fairly standard and could even be mapped to a default template by a senior buyer that the junior buyer could start with, and sometimes use unaltered.

Unlike many platforms, the optimization-backed sourcing platform walks the buyer through a simple process for creating and executing a sourcing event that even a junior buyer will feel comfortable with, detailed in our introductory Keelvar post. This process is as easy to use as a powerful, weighted, RFX tool or e-Auction, which is something that cannot be said for the majority of optimization solutions on the market that still require a solid understanding of the underlying mathematics and operations research. It’s sourcing for the every-man.

And it’s not just for the mid-size company anymore. If you will recall, when SI first reviewed the solution, SI identified it as the perfect solution for the lower-end of the mid-market. However, over the last six months, the usability and power has been steadily improved, and now SI will also identify it as a perfect solution for the entire mid-market and a candidate solution for the Fortune 500 / Global 3000. Keelvar, which has a US presence in addition to its UK presence, has acquired a number of Global 3000 clients for whom the solution is perfect for. For the majority of categories, and spend, in these organizations, there is no need for overkill optimization and the solution is a perfect fit. That’s not to say that it can’t handle the more complex categories either, with a number of global logistics events for some of the world’s largest shippers already under its belt, just that it is perfect for those enterprises where the majority of events are not that complex and can be templated for the average buyer.

Plus, the Kevlar platform is under continual development and improvement. Not many SSDO platforms can say that either. When optimization is one module in a set, providers can’t focus constant development on it. When optimization powers a single platform, it’s a different story.

Any company that chooses Keelvar gets a solution that allows all spend to be subject to the appropriate level of optimization, which is what allows Keelvar to get fantastic results for some organizations and why they have progressed so fast. If you have a traditional, heavy, solution that can only be used by a small set of dedicated resources on a few large categories, the organization will struggle to get 10-20% of spend under optimization-backed management which means, at the end of the day, the savings potential of the solution (expected to save 10%) is a mere 1-2% on the bottom line. But if you have a solution that is lighter, streamlined, and useable by everyone in your organization, you can get 80% of spend under optimization-backed management. And while the simpler categories won’t hide the same opportunity, even if you squeezed out a mere 6.25% average savings, that’s still 5% to the bottom line and a much better investment. At the end of the day, it’s not the line item count that the product can support, but the amount of spend that flows through it. And the bravado claims by first generation solutions that their solution can support tens of thousands of line items have done more harm than good.

Keelvar is an agile company and is developing new product features and global coverage quickly. New developments in the last six months include …

  • RFI with bulk editing capabilities.
  • Bid data sanitizer to detect, correct and prevent erroneous bidding (via automatic identification of outliers).
  • Enhancements to multi-round RFQ capabilities.
  • Large scale e-Auction support for hundreds of lots and bid upload capabilities.
  • New support portal to cater for the growing global customer base.
  • Partnerships with benchmark data providers in Global Logistics.
  • A partnership with an e-Sourcing Suite provider.
  • New offices in South America and Australia (which give it a presence on four continents).
  • Paid trial offering for Global 5000 companies (and, as per a recent SI post, paid pilots, under the consulting budget, could be just what you need to prove the value of an optimization-backed sourcing platform and get investment $$’s to upgrade your platform, and your results).

As one of the few companies aggressively developing an optimization-backed sourcing platform, and one of the few companies in the Supply Management space focusing on adoption first, Keelvar is one of a handful of global companies that might just lead Procurement out of the dark ages (in which Procurement seems to perpetually exist as a resident of the Island of Misfit Toys) and into the enlightenment.

Two MUST READS on SpendMatters UK!

Today’s post is being pre-empted with a request to go and check out two great posts published yesterday over on SpendMatters UK that:

  • echo a point that SI has been screaming for years and
  • echo another point that has been pointing out for years to anyone who would ask


Post 1: The True Cost of Screwing Your Supplier

In “The True Cost of Delayed Supplier Payments” on Spend Matters UK, Nancy clearly explains just how much money you will save by extending supplier payments by 30 days on £1.2M annual spend against how much opportunity cost you will lose. An organization might think it will save a very pretty penny on the cost of capital by doing this, but the reality is that all it will save are a few copper pennies that the average CFO wouldn’t even bother to bend over and pick up if they were all dropped in front of him in a platinum-lined wicker basket.

The post works through the savings calculation in detail and the net result (with a cost of capital of 5%) is a whopping annual savings of £417! That’s right, over the course of a year you won’t even save enough to pay the consultant who forced this hare-brained scheme upon you. (Heck, you won’t even have enough to cover the executive lunches where the consultant pitched this hare-brained scheme upon you.) On the other hand, the organization loses a £60,000 benefit they could have gained from SRM (as well as any benefits they were getting as a customer-of-choice, as you’re no longer a customer-of-choice once you screw a supplier like this for no reason).


Post 2: “Made in X” – Legalized Piracy!

In ‘”Made in Nigeria” Public Procurement Policy Will Simply Lead to More Corruption’ on Spend Matters, Peter clearly explains how this new “anti-corruption” policy is just going to lead to more piracy at home (as if there isn’t enough piracy on the seas and over the internet as it is). You see, with the insistence that the government must buy local, and especially where there’s only a handful of suppliers, you’re just going to see cartels forming among the local suppliers for the purposes of colluding to double and even triple prices.

And this is the problem with any “Made in X” public procurement policy that insists that the government always buy local – for any category where the supply base is small enough, unless the product is a commodity that is sold in a local office supplies chain or store where public pricing can be easily tracked and monitored AND the government has a law that says the public sector cannot be charged more than the private sector MSRP or something similar, the public sector price is going to be significantly more than the price on the open market.

SI strongly recommends you check both of these posts out as both of these posts were, literally, between the posts.

 

Authoritative Sustentation 63: Board of Directors

As per our authoritative damnation post on the board of directors, they can be your best friend or your worst enemy, but they’ll probably be your ongoing nightmare because their dictates can drive your daily duties even more than the wacky whims of the CEO.

If all the board does is chant “savings, savings, savings”, then guess what the CFO has to chant. That’s right! “Savings, savings, savings.” But this isn’t the only craziness the board can throw your way. They can get razor-focussed on outsourcing. They can decide that the organization should have no FTE obligations and try to make as many jobs as possible contingent labour. Or they could decide the organization has to acquire or merge with someone soon and task you with supply chain analysis of the most likely candidate organizations.

So what do you do? Dance to their tune every time it changes? Well, you have to — but we’re no longer in the age of the folk, ballroom, or line dance, so you should do your best to make sure those aren’t the dances that come your way. How do you do that?

Stop waiting to follow the leader and start planning to lead the leader. What do we mean? Regardless of any lip service the executive or the board may throw towards the press about a desire to do support minority businesses, increase overall sustainability, or focus on innovation, they profit when the company profits, and profit, which they generally associate with higher revenues (which they demand of sales) and lower costs (which they demand of Procurement), is all they really care about.

So if you want to stop looking for illusive, and possibly non-existent, savings, then start focussing on how you can increase profit and come up with value-generation plans that you can sell to the board.

For example, Procurement can add value by:

  • helping Sales sell into new markets
    maybe the problem is high distribution costs, which Procurement can rectify as it’s already sourcing from the market and knows the lowest cost shippers;
  • helping Finance improve working capital
    as it’s understanding of in-depth cost modelling and (strategic sourcing) decision optimization can help it work with finance to create an optimal payment plan model that optimizes early payment discounts, invoice factoring, and supplier interest charges or late fees
  • helping Engineering improve quality and lower costs during NPD
    as a leading Procurement organization has expertise in Supplier Management

And Procurement can bring a plan to do so to the board before the board gives it a plan that would take it back to the Procurement dark ages.