Spend Matters has thrown caution to the wind and followed Gartner’s lead jumping onto the AI Hype Bus (with no steering and no brakes) that is still heading straight for the cliff and are wheeling out webinars on AI faster than a prairie fire with a tailwind. (Needless to say Sourcing Innovation does not think this is a good thing. There are valid uses for AI and automated processing, but fully handing over financial decisions is like wheeling in the Trojan Horse and leaving it unguarded in the server room with unrestricted access to your bank integration.)

Recently, The Maverick advertised yet another Spend Matters webinar on Autonomous and AI Sourcing where he said we should “follow the money”. Which we should, but there are a few things we need to clarify first.

1. No Money Changes Hands In Sourcing

It changes hands in Procurement … and it’s because most companies don’t follow the money after the contract is signed that 30 to 40 cents of negotiated savings never materialize in many companies, which The Maverick should remember from his AMR and Hackett days, as it was laid clear in Mickey North Rizza‘s famous 2009 “Reaching Sourcing Excellence” series, which we know is in his archives.

2. “Speed” is NOT a strategic edge if you don’t get it right!

If you don’t go out with the right strategy, don’t know the current market price, don’t know the reason for the current market price, and don’t have the knowledge to project if the trend is going to continue, stabilize or reverse, going to market is not a good decision … and it’s an even worse decision to automate the sourcing project and secure an award as fast as possible if you don’t know if it’s the best you could have done or the worst you could have done.

3. “Pecunia non olet”, but yet these vendors are asking you to treat it like it does!

They want you to automate spend analysis, sourcing, contracts, purchases, and everything else that involves money by turning over everything to their Agentric AI because, apparently, money stinks and you don’t want to touch it. (But they are quite happy to not only spend yours for you but takes as much of it as they can for their services.)

But here’s what they don’t tell you.

• AI is NOT Intelligent.
  The level of intelligence in their “AI” is equivalent to the level of intelligence in a carpenter’s hammer. The level of effectiveness is entirely dependent on how skilled the person “training” the system and how skilled the person “using” the system is, just like the effectiveness of a hammer is dependent on how well the carpenter was trained and how experienced he is in it’s use.
• AI Does Not Know What it Does Not Know.
  If the data is incomplete, the recommendation is very likely incorrect.
• AI Cannot Do Better than the Best A Human Has Ever Done in Decision Making.
  So, if none of the situations it was trained on led to great results, neither will what it recommends for you.

You need to remember how Gen-AI does its work (or should we say does not work). It is large document search and summarization and chain of compute. Now, the more advanced players are trying to embed knowledge graphs into this, but these are not perfect either. With good training examples, and a very similar situation, the probability it will work well is very good, but it’s still only a probability. As a result, nothing should ever be fully automated where money is concerned. The tools should be used for their recommendations, and if the recommendations are good, and the risk is low, most of the tactical data processing and event management should be automated, but the decisions should ALWAYS be made by a human, who should be involved at every decision point. Even if that decision is verifying the system recommendation. It only takes one miscalculation due to an incomplete data source to project a wrong trend, rush an auction, lock in a price 3X what you are paying now, only for it to fall in a month later when a factory (which went offline temporarily due to a manmade or natural disaster) comes back online and the supply-demand balance returns to normal. And while you may have stocked out for two weeks, those losses will be orders of magnitude less than paying 3X at a contract you have to honour (unless you want to get dragged into court).

Now, if you really want to make money, forget all this Autonomous and Agentric AI BS, look for Augmented Intelligence solutions that make your staff two, three, five, and even ten times more efficient, purchase those, and, remembering that the US infrastructure is crumbling fast (and not going to get renewed under a Republican administration that is more interest in trickle-on economic tax cuts for its billionaires than ensuring you have running water), it’s time to remember how the smart made money in ancient Rome — public bathhouses and latrines. Time to invest in your own desalination facilities and be ready when the public wells run dry. After all, “Pecunia Non Olet“.