Monthly Archives: January 2024

The Prophet‘s 2024 Procurement Prediction Number 5

The Suites, ERP and Big Tech Strike Back A

When everyone writes you off in favour of the new, new thing, there is one thing to do to prove the young turks wrong: thrive.

Never write off the Turks! A lot of people are these days, but remember they are one of the oldest known civilizations on the planet, with continuous settlement dating back to circa 7,500 BCE (at Çatalhöyük). But I digress. (Even though I should note one of the next powerhouse S2P suites is likely to come out of Istanbul … see the recent archives for more information on a rich caffeinated Turkish Punch.)

Back to The Prophet‘s prediction that 2024 will be the year where procurement and supply chain suites reclaim mindshare (and more) in the market. (More specifically, S2P [Source-to-Pay] suites, supply chain suites, and ERP providers.)

Which will happen. The only unknowns are how fast and in what areas.

As you get older, you get wiser, and the big corporations have not only learned how to make themselves indispensable, or at least irreplaceable, and how to identify, and attack the shortcomings / risk posed by smaller players and, even if they lose some new business in the short term, reclaim it in the long term.

According to The Prophet, this is firstly because suites and big tech have the capital to fund innovation (through acquisition) in lieu of Series B and C venture rounds.

While big players have, more or less, lost their ability to innovate internally (as their risk and audit departments quash innovation faster than a minnow can swim a dipper), they didn’t suffer* during the COVID years, or the recovery, because those subscription payments kept coming, and now, especially with the drop in available VC and PE capital, they alone have the money to spend to buy whatever they need. And, as The Prophet has indicated, they will.

Moreover, where they can’t, or won’t, buy, they’ll “exclusively” partner with small specialist providers in Direct that make their interfaces more user-friendly and integrate with related applications, use those partners as lead-ins, and pretty much lead the partner down a development path that props up their suite (because they make it more financially lucrative for the smaller partner to do so).

This is also secondly because of the backlash of SaaS proliferation.

While Procurement wants best-of-breed, they can only deal with so many application providers because each new throat-to-choke is yet another provider they have to manage. So unless they truly need something unique or best-of-breed offering wise, an 80% suite solution will do for many departments.

It is thirdly because no one has cracked the direct materials procurement code at scale, especially in the smaller providers. Direct more or less requires a deep, sophisticated, integrated suite of capabilities that cross multiple stand-alone modules in indirect. It’s hard for a smaller player to attack. (And that’s why, as The Prophet notes, Direct is still owned by ERP and Excel!)

Finally, as cash again becomes king, it is because we will see the SaaS Office of the CFO.

Which is true, and which will be discussed again in Part 8, we’ll also see an upsurge is the acquisition of SaaS management tools, which will hopefully lead to a crackdown on Sales and Marketing that have an average of 20 tools each, which do, at most, 2 different things. (And maybe, finally, free up some budget for the CPO for the tools the organization ACTUALLY needs.) (So it’s going to be a good year for those SaaS [Subscription Cost] Management tools!)

So keep an eye on your current suite/ERP provider as well as the competitor suites targeting their market (who may soon bring back the offers of free data transfer/migration services and configuration replication to lock in a multi-year deal).

* Sure they had to tighten the belt and stop having their corporate Christmas parties in penthouse suites while telling the CEO his expense account was no longer unlimited and he couldn’t upgrade the corporate jet, but that’s not exactly suffering.

The Prophet‘s 2024 Procurement Prediction Number 4

Supply Chains Get (Remain?) Political A

The Trump era ushered in a sober reminder to the world (primarily China and the EU) that mercantilism and one-sided trade policy will eventually have to face the music in the face of a sleeping giant who awakens (finally) to a new trade era.

And now the world is responding, and supply Chains are getting extremely political.

The Prophet has five big predictions here … and most are on the money (as you can probably deduce given that the doctor has given the prediction an A).

1) All major US Presidential candidates and parties march in unison on trade. And you won’t hear a peep about it — since they’re all too busy trying to rip each other apart for sinful ideas and acts, including many they didn’t even do. (But this is not a political site, so you can do your own research here.)

2) The US deepens ties with those regions (trade-wise) which are necessary to eventually operate supply chains independently of China. This could actually be 1b) as it’s a fallout from flawed trade policy and practices of the past two decades.

3a) Technology transfer, favorable trade terms and investment deals become the price Israel pays to “finish the job”.

Nope. Since Hamas achieved it’s goal of triggering other militant and terror groups to both attack trade ships and increase their (terror group) resentment, and hate, of the US, Israel doesn’t need to do anything to “finish the job” — they will get what they need regardless of what Congress or the Senate wants throughout this year as Biden actually said “Israel could get into a fistfight with this country and we’d still defend” it — so now that US trade is being actively attacked, Biden will make sure the US is there doing whatever is needed pro-bono (including bombing Yemen and [future] Israeli targets on behalf of Israel).

3b) Saudi and the UAE quietly deepen ties with Israel to create a broader trading block powerhouse in the Middle East (outside of the headlines, at least for now).

The Prophet hit the bullseye here. Saudi and the UAE are going to work with Israel to create the trading block powerhouse in the backroom to become the preferred trading block of the US and UK in the middle east (as Iran is pushed out due to their [perceived] lack of willingness to help contain the Houthis and other Islamist terrorist groups).

4) China continues its mercantilist march to fight for the natural resources it needs (to import) around the world as its trade imbalance declines. (Note that, in 2022, China Imports to the US were 563B and its total trade surplus was 877 B US dollars, vs 230 B US in 2012. If it lost half of US exports, it would lose 33% of it’s trade surplus and if the EU followed suit, who imports 626 B Euros, it would be down 72% of its trade surplus, and be back to 2012 trade surplus level.)

5) The EU becomes increasingly irrelevant … as a trading block and single economic group as backlash to central policies, country policies, and failed energy policy distract from collaboration.

The backlash to Brussels is becoming quite significant, especially in Poland and neighbouring countries where Ukranian grain and is being dumped and the removal of restrictions mean that the local truckers are losing their jobs (at a time when most of the world doesn’t have enough truckers). There’s the massive protests in Germany due to subsidy cuts for diesel and vehicle taxes for farm equipment. There’s also discontent in the Nordics with the number of Islamic migrants/refugees being let in without verification (which is allowing the terrorists to exploit the system and slip into the EU — as evidenced by the 2022 Oslo shooting). Etc. As a result, trading turmoil is going to increase significantly, even as the EU bands together in spirit (if not in action) on climate change.

You need to identify where the political winds are shifting, or doubling down, and start working on compliant (re)sourcing strategies now before your current source gets cut off, triple tariffed, or unusable due to extended, and still unreliable, delivery times.

Roughly Half a Trillion Dollars Will Be Wasted on SaaS Spend This Year and up to One Trillion Dollars on IT Services. How Much Will You Waste?

Before we continue, yes, that is TRILLION, numerically represented as 1,000,000,000,000, repeated twice in the title and yes we mean US (as in United States of America) dollars!

Gartner projects that IT spend will surpass 5 Trillion this year. When you consider that 30% of IT spend is usually for software, and that one third (or more) of software spend is wasted (for unused licenses, which is why we have a whole category of IT and SaaS specialists that analyze your out-of-control SaaS and software spend and typically find 30% to 40% overspend in a few days), that means that roughly half a trillion dollars will be wasted on software this year.

Even worse, Gartner projects that spending on IT Services will reach 1.5 Trillion. And the waste here could be two thirds! Now, we all know that you need IT services to implement, integrate, and maintain those IT systems you buy. But how much do you need? And how much should you pay? Consider that an intermediate software developer should be making 150K a year (or 75/hour), that says that an intermediate implementation specialist shouldn’t be making any more than that, and not billed at more than 3 times that (or 225/hour). But how much are you being billed for relatively inexperienced implementation consultant, with maybe a few years of overall experience and maybe six months on the system that you are installing? the doctor knows that rates of $300 to $500 are not uncommon for these resources that are oversold and overcharged for.

But this isn’t the worst of it. As per our upcoming article Fraud And Waste Are Not The Same Thing, many implementation “partners” will try to get all they can get and make sure that when you go in for a penny, you go in for a pound and they will push for:

  • frequent change orders during implementation, usually billed at excessively high day rates as they have to “divert resources” or “work overtime”
  • unnecessary customizations or real-time integrations that are an extensive amount of work (and cost) when out-of-the-box or daily flat-file synchs are more than sufficient
  • extensive “process evaluation” or “process transformation” processes that are well beyond what you need to eat up consulting hours
  • extensive “best practice” education when your practices are good enough for now and/or those best practices are already encoded in the system you just bought and paid a pretty penny for and just following the default process gives you the same education

That will often double to triple the cost. But that’s not the worst of it. As per comments the doctor has made on LinkedIn, he regularly hears stories of niche providers losing 200K deals because customers said their quote was too low because all the Big X companies quoted over 1,000K for what should be 100K worth of work in their view (and, right or wrong, if a niche firm comes in less with a detailed proposal, they should be evaluated — maybe the Big X, with a very general request, over estimated your requirements and the effort, or maybe the niche firm completely underestimated it — how will you know if you don’t evaluate all the responses?). Literally. This is because, as the doctor has noted in previous posts and comments on LinkedIn:

  • they don’t have always have the talent in advanced tech (and even The Prophet has noted their lack of talent in areas of advanced tech in multiple LinkedIn posts, though he has been much more diplomatic than the doctor in discussing their lack thereof; but he did note in a 2024 advice post that consultancies are going to have a hard time attracting talent this year) — for every area, an average firm will have a team leader who’s a superstar, two or three handpicked lieutenants who are above average, and then 20 to 40 benchwarmers who are junior and not always worth the rate they are charging);  now, as with every general observation, there are exceptions (with some Big X recently acquiring a number of best-in-class technology, analytics, and AI vendors that give them top-notch world class talent, and others actively recruiting top talent form the best tech firms, but every firm is different, and, most importantly, every need is different — it’s up to you to fully qualify your need, review the proposal carefully, and vet the proposed talent, otherwise, it’s your fault if you overpay, fail miserably, and don’t get value
  • some of these firms have an incredible overhead — they got big in good times and built posh offices to house the partners making more than top lawyers who have a lifestyle to maintain (or, in some cases, they just acquired expensive real estate in premiere locations)
  • they don’t always have the knowledge of, or experience in, modern tools — some of which are ten times more powerful than last generation tools; this, of course, means that, in these situations, Big X benchwarmers are using last generation tools which take ten times the manual labour to extract value from
  • etc.

Unless you want to pay 1K an hour, at some of these firms, you’re not guaranteed getting that one superstar resource trying to be the front end to two dozen projects that his three lieutenants are trying to manage, all of which are staffed by junior to intermediate individuals who can barely follow the three to five year old playbook.   (While if you chose a different Big X firm that just acquired a whole consultancy with dozens of top analysts, it’s a different story.)

There’s a reason that The Prophet predicted in his 9th prediction that SaaS Management Solutions [will] Start to Eat Services Procurement Tech and that many companies will go in house if they have tech expertise. Because he realizes that these consultancies will have a hard time not only hiring, but retaining, tech talent when they have hiring freezes, salary freezes, and reduced engagements as more and more companies can’t afford the ridiculous rates they’ve been charging recently. (Companies may not have had a choice during COVID where it was implement on-line collaboration and B2B tech or perish, but now they do.)

But there are still many companies who will, when they encounter a (perceived) tech need, immediately pick up the phone and call their favorite Big X firm and bring them in to help them understand who to bring in for an engagement, instead of widening the net to niche providers who might be 3 to 5 times cheaper, and who will deliver results at least as good, if not better, or, if their proposals won’t cut it, will validate when that multi-million proposal is a great value and will deliver the expected ROI.

Now, again, the doctor would like to stress that, despite how much he insists they are usually not the right solution for specialist advanced tech implementations that aren’t the enterprise systems and suites they usually implement, that Big X are not all bad, and sometimes worth many times more than the high fees they charge. [See when should you use Big X?] Most of these companies started off as management/operational/finance/strategy consultants and grew big because they were one of the best, and in certain domains, each of these companies still are. As they grew, they added more areas and became experts in those.  But no company can, and should, be expected to be an expert in everything!

And while there will be exceptions to the rule (as every one of these companies has some tech geniuses), the reality is that when you need more bodies than there are talented bodies in an entire industry, you’re not going to get them and, because consultancies are not cool when you want to be a tech superstar (and join a startup that becomes a unicorn), the ratio of superstar to above average to average to below average talent in these organizations is much thinner than in multinational tech companies (like Alphabet, Apple, Meta, Microsoft, etc.)  (Because if they were the best of the best, there’s no way they’d lay off 10,000 employees at a time every time the market jitters.)

In short, manage that IT services spend carefully, or you’ll be double paying, triple paying, or worse and providing a big chunk of the roughly ONE TRILLION DOLLARS in IT services overspend that the doctor predicts will happen (again) this year. (Unless, of course, you agree with Doctor Evil who says, why make trillions when we could make … billions. Because that’s exactly what happens when you overpay for software and services. Don’t expect the Big X or Mid-Market to say anything as they get the majority that overspend, and that’s how they stay so profitable.  Plus, they usually need those revenues to deliver what you’re asking for, as ill-defined projects mean they need to make a lot of assumptions and often over engineer to decrease the chance you will be disappointed in the result!  In other words, if you overpay due to your lack of research and preparation, it’s on you. )

The Prophet‘s 2024 Procurement Prediction Number 3

Supply Chains Cope By Developing a Sense of Humour A+

You have two choices. Laugh or cry. Crying didn’t work in Covid and certainly won’t now. It’s literally the only choice for Supply Chains that want to survive.

Moreover, with so much going on, as The Prophet notes, how does one predict what supply chain and procurement show is next to drop? And will it be:

  • frenetic commodity and input costs rendering sourcing strategies all but impossible to get right
  • wrong demand signals resulting with you being stuck with all the wrong inventory
  • supplier bankruptcies disrupting production and essential services
  • a global scale terrorism event, as per The Prophet‘s 2024 Procurement Prediction Number 1
  • the whiplash of DEI-led HR procurement/supply chain strategies which walked experience and expertise out the door in favour of inexperienced and uneducated minorities to fulfill an agenda

as well as (which were not mentioned by The Prophet in his list)

  • massive, coordinated, labour strikes across multiple ports
  • acts of war that result in massive sanctions against an entire country that effectively eliminate them from the sourcing equation entirely
  • escalated global boycotts of your products simply due to state (country) affiliation that create a rampant drop in demand (when you have perishable goods and contracted deliveries in transit)
  • more countries undergo rapid massive economic decline (like Venezuala, Ukraine, and South Africa, which are all in the top 30 for economic decline); e.g. Iran, a home of the Houthi rebels, is a top 40 fragile state and a large global producer of Petroleum)
  • the double whammy of long-term double-canal shutdowns as we enter Panamanian dry season and an increased escalation of attacks in the Red Sea

… and about a dozen more risks of slightly less severity and probably three or four major risks we haven’t thought about yet! (Many of which, as we noted in part one, are going to hit us one by one as the black swans break flight formation and barrel roll directly at our supply chains.)

So if you huddle in the tub and cry, not only will you either permanently damage your tear-ducts or drown, but you won’t solve anything. So it’s time to develop, possibly a very dark, sense of humour, laugh when you can, and get yourself mentally ready for black-swan defense and disaster mitigation.

The Prophet‘s 2024 Procurement Prediction Number 2

DEI Discrimination Dies in the Supply Chain B+

According to The Prophet, this will be the year DEI dies in the top-performing Supply Chain and Procurement Departments as a result of

  1. corporate abandonment (as a result of / prevention for lawsuits) and/or
  2. a desire for better performance.

However, these agendas were put in place by companies that wanted to

  1. have a politically correct reason to hire certain groups/individuals (who may not be deserving of the role when all other considerations [education, experience, ethics, etc.] are otherwise equal),
  2. have a politically correction reason to discriminate against certain minorities who were not classified as a recognized minority (especially religious minority — if you define minority by race, it often becomes easy to discriminate against certain religions), or
  3. target a market that likes a “diversity” brand
    and focus their marketing around their diversity efforts; where these marketing efforts worked, they are doubling down on that marketing — and their efforts to maintain diversity “in the supply base”.

So while many companies will silently abandon DEI in their own four walls (to deal with / prevent lawsuits and increase performance), they will double down on their DEI requirement for their suppliers. And this, as has been noted, can be extremely problematic.

Not only is it setting your suppliers up for the same problems as they succumb to mandates from big US and EU customers to diversify or die, especially in countries that are slowly catching up on anti-discrimination laws, but it’s setting them up for different problems as well.

First of all, if they’re so dependent on DEI-mandating customers that they have to fill quotas, they definitely don’t have the bank account to survive even a big government fine, yet alone a lawsuit. Secondly, if they are staffing up will less competent workers in a jurisdiction where the average worker is likely less educated and experienced in modern processes and technology as it is (as it wouldn’t be a low-cost country otherwise, which is where big US and EU companies still predominantly source from), they may not have enough competence to make the reliable, environmentally friendly, and safe products you need, with a big emphasis on safety. Reliability problems will just cost you a big repair bill or the cost of a replacement, but safety problems where an unsafe product results in permanent disability or death will cost you a massive lawsuit.

Moreover, you can’t just eliminate all suppliers that might be going overboard on DEI when your options are limited, because chances are they are all serving bigger customers than you whose business they rely on. If there’s only half a dozen factories that can make your stuff, what do you do?

You will need to spend time educating your suppliers on what DEI is supposed to be (and not how it’s being implemented in America and other countries that are misusing it). That it’s not arbitrary mandates or quotas, it’s non-discrimination and equal chances for all. That no applicant is turned away based on race, religion, etc.; that all of the best applicants from an education and experience get an interview, and that, if there truly are 2 or 3 candidates with equal education, experience, ethics and overall ability to do the job, only then will the minority/diversity factor enter the equation in the award of the job.

You will also need to favour suppliers who don’t set arbitrary quotas, especially ill-informed ones around some hypothetical, non-realistic, idea of equality. For example, 50% women in STEM jobs in many countries is just not realizable. When only 20% to 25% of graduates in STEM are women, you’re not going to get a 1:1 ratio; and if you do, then a lot of companies are not going to be at the 3:1 ratio they should be at, which is going to lead to even more women spurning STEM when they see the all male work places that result when companies with deeper pockets hire all the women and prevent them from hiring any. It’s not quotas. It’s not arbitrary definitions of racial or religious minority. It’s who do you have and who don’t you have. If you’re 75% old white male, guess what?, you need women, youth and people who aren’t white for diversity. And if you’re 75% young black female, which is very possible in many African countries, then you probably want some older individuals who are not women and not black (but not necessarily white, remember, all races, religions, and colours should be equally considered). That’s the tie-breaker at the end of the day — what you’re missing. But ONLY when all other things are equal.

Now, when the intolerant tolerant like to define arbitrary buckets, it will be hard to get this message across, but you have to educate, explain, and persevere — or else your suppliers’ DEI will be your downfall.