Twenty Years Ago Today

The Boeing 777 entered service as the world’s largest twinjet. This particular twinjet had a number of different variants, including the 777 Freighter which was an all-cargo version that had a payload of 103,000 kg (226,000 lbs) and a range of 9,070 km at maximum payload.

While not the capacity of the 747 200F which could handle a MTOW of 378,000 kg, which had a range of about 8,000 kms at full payload, the improved operating economics not only offered new options for long-range, lower-cost air freight.

It was yet another advance in the long line of aircraft advancements leading up to the recent 787 Dreamliner which, despite being a prime example of a supply chain fiasco as chronicled in Supply Chain Digest’s “The Boeing 787 Dreamliner: A tale of TERRIBLE supply chain management”, is still a technological innovation.

Where is Procurement Headed?

Will Procurement ever graduate from the status of misfit toy to that of
one eyed one horned flying purple people eater?

Procurement is still the back room function in many organizations. The early achievers adopted new technology and new processes in the early to mid noughts. The leaders adopted new technology and new processes from the late noughts to the early teens. But the laggards are still on the fence. And not just because they are laggards — but because their organizations are laggards and not giving them the respect and support they deserve.

Let’s face it, with the vast majority of Procurement organizations not having a seat at the table, they are still being treated as a misfit toy. Graduating to the status of one eyed one horned flying purple people eater would be a grand accomplishment — if they could get there.

But first they need to be a rockin’ band. But in order to rock, they need instruments. Technology, which they don’t get budget for, processes, that they haven’t been trained on, and knowledge, that they don’t even know they need. And even if they could get the tools, processes, and knowledge that they needed, they still need to learn how to play in sync.

We’ll start with the second issue first. In order to learn to play in sync, they need training. Training that they never got, even when training was a top procurement survey issue for almost five years in a row. But this is not only hurting Procurement, it’s hurting the organization. Because if Procurement had the training, they would not only know how to play in sync, but they would have the knowledge. In particular, the knowledge they need to not only obtain great savings, and value, for the organization, but the knowledge they need to institute better processes, identify better technology, and convince the organization of the proper steps to achieve savings success.

Good training not only provides knowledge to execute, but knowledge to educate, and knowledge to entice the rest of the organization to follow your lead.

So if your Procurement organization wants to excel, it has to get training. If it can’t get it by hook (by getting it in the budget), then it has to get it by crook (PO now and take the consequences when the invoice come in later), or if there are no other options, with the personal check book (and replace the funds with the bonus you’ll get when the savings materialize). And only then will Procurement be a band of one eyed one horned flying purple people eaters.

M&A: Confusion or Clarity?

There’s been a lot of M&A in the past few years, with companies like SciQuest, Selectica, Xchanging, etc. gobbling up a number of smaller companies with offerings that the acquirer believes could be used to make a full S2S (Source to Settle) suite, and with the recent investment announcements, including this week’s announcement of an 80M investment in Coupa (at a 1 Billion valuation, which the doctor still finds unbelievable), there is sure to be a return to the M&A frenzy of the late noughts that will likely equal, if not exceed, the scale (and occasional absurdity) of the APE Circus. (Which I hope will be accompanied by a return of the Sourcing Maniacs, but alas, the doctor has not heard from them since they told us they were on their way back from their African vacation on New Year’s day five years ago.)

But will it be worth it? First of all, many acquisitions end up being overvalued. (For example, the doctor believes CombineNet is still far in the red, and this can’t be helping SciQuest.) Secondly, many acquisitions have overlap in functionality and offering. Thirdly, many acquirees often use different platforms. Right now, .NET, true C++, Java, and Ruby on Rail frameworks are all quite likely in the space and many acquisition frenzies result in a the merged company having three or more platforms to deal with.

Since, for example, a Source to Pay offering is only valuable if there is more integration than a company could achieve on its own by acquiring separate sourcing and procurement, and, if necessary, contract management and spend analysis platforms, this last point presents a major headache for the newly merged companies. Simply defining the push-pull endpoints and automating the data transfer doesn’t add that much value. A third party integrator can do that. Value comes from real-time end-to-end visibility through the source to pay process for every invoice, shipment, purchase order, contract, supplier, etc.

And the functionality overlap presents another hurdle. Each customer that uses a platform will expect all of the functionality of that platform, so you can’t even consider killing a platform component until all of the functionality is in another platform component. Not only will this take development time and effort while the organization has to support two platforms, but considerable time will be required as bruised egos try to decide which is best to keep and which to discard if both “endpoint” modules appear to be equally valuable.

And then there is the balance of how far to take integration in the short term when sales are rapidly needed to justify the expenditure, pay for the overhead loss as reorganizations occur, and support new personnel to plan development of the next version which will, someday, integrate everything on one underlying stack.

Sometimes it’s quicker, easier, and more cost effective to be patient, just build everything in house from the ground up, and go to market with a truly integrated solution which offers end-to-end visibility because it takes top talent to pull off a successful technology integration. And, by definition, not every company will have top talent with enough expertise across the source-to-pay process to make the right decisions.

the doctor is sure there will be some great success stories in a few years, but there will also be some mega failures as well. And in the interim, we’ll likely have more confusion than clarity.

Any differing opinions?

Coupa = 1B? the doctor is still shell-shocked!

the doctor is still so flabbergasted that he does not know what else to write! So, in honour of their amazing, unprecedented, achievement, the doctor is reposting the classic first single from the Coupa EP: Davie and the Coupa Factory, which was originally released on March 24, 2007.

Oompa Loompa Doom-pa-dee-do
I’m building a great product for you!
Oompa Loompa Doom-pa-dah-dee
If you are wise download it for free.

What do you get when you go open source?
Straying away from the Oracle course
Where you are going terribly flat
What do you think will come of that?

I don’t like the look of it

Oompa Loompa Doom-pa-dee-dar
If you are willing, you will go far
You will live in happiness too
Like the Oompa Loompa Doom-pa-dee-do

Oompa Loompa Doom-pa-dee-do
I have a great product for you
Oompa Loompa Doom-pa-dee-dee
If you are wise you’ll take a look-see

Oracle’s fine when you have lots of cash
It stores all your data and caches it fast
But when you’re cash-strapped, you’re hung out to dry
To watch the vultures circ’ling high

Up in the dark’ning skies

Oompa Loompa doom-pa-dee-dar
But now there’s Coupa, you can go far
You will buy in happiness too
Like the Oompa-Loompa doom-pa-dee-do

Oompa Loompa Doom-pa-dee-do
I have a great product for you
Oompa Loompa Doom-pa-dee-derd
If you are wise, you will spread the word

Ask who they’ll blame when your spend is off track?
Deep in the red and there’s no turning back
Contracts alone will never be enough
If your software’s not up to snuff

And doesn’t track your stuff

Oompa Loompa doom-pa-dee-dar
But now there’s Coupa, you can go far
You will buy in happiness too
Like the Oompa-Loompa doom-pa-dee-do

Oompa Loompa Doom-pa-dee-do
I have a great product for you
Oompa Loompa Doom-pa-dee-derd
If you are wise, you’ll buy enterprise

Recquisitions with a click of the mouse
No more mistakes for accounting to delouse
One click receipts when the order arrives
Invoice matching that always jives

You’ll have no … you’ll have no … you’ll have no regrets

Oompa Loompa doom-pa-dee-dar
But now there’s Coupa, you can go far
You will buy in happiness too
Like the Oompa-Loompa doom-pa-dee-do