Category Archives: Best Practices

It Doesn’t Matter Where You Start, You End with BoB in Analytics!

In a recent article, we asked in the battle of Suite vs. BoB (Best-of-Breed), which do you choose, and ended up with the answer of neither, but potentially both, because, as indicated in our article we asked in our post on Where’s the Procurement Management Platform, you need a true platform (that enables the creation of a true source-to-pay plus ecosystem for the various workflows and processes that need to be managed).

As a result, we indicated you could start where you wanted, provided:

  • you could conceivably manage it,
  • the vendor offers, and publicly publishes, a complete Open API, and
  • the vendor offers the necessary quick-start services.

(And for even more details on each of these requirements, stay tuned for our upcoming article on how it doesn’t matter where you start, you end with BoB in SXM).

But where do you end up? For some Procurement Practitioners, it depends on:

  • the module,
  • the organization’s biggest need for workflow/process management, and
  • the organization’s biggest savings/cost avoidance/value creation opportunities.

(And again, we’ll have even more details in our upcoming article on how you end with BoB in SXM for more details.)

But for Analytics, like SXM, you will end at BoB for analytics as no suite equals the best in class (BiC) (spend) analytics solutions (even if they are built in BiC technologies for generic analytics like Qlik or Tableau) as the true BoB spend analysis solutions (which are fewer and further between than you would expect) are leagues beyond them.

Moreover, for Analytics, you should start with BiC, even if the suite has a pre-packaged solution that’s pretty good, enough to get going, more than your fledgeling analysts are likely to be able to handle in the first year, and appears to be offering the module cheap as an add on to everything else they are selling you. Why?

Lots and lots of reasons. Here are five to get you started:

  • Top X Opportunities: Suites will only show you your top 10 categories, top 10 suppliers, top unmanaged tail categories, etc. No guarantee that these primitive, canned, analysis will be YOUR biggest opportunities. BoB will come with hundreds of built-in analytics, considerably more customization capability, and the power to find opportunities that pre-built suites and dashboards will never give you.
  • Better Classification: Suites will do a decent classification, usually through their black box AI (trained on billions and trillions), but even if they get to 95%, it won’t be great, it won’t be manageable, and it won’t be customizable to your organization’s need. BoB, when it uses AI, will use it to create rules, that can be corrected and overridden, that you can customize to your specific taxonometric needs for optimized Procurement (and no standard industry classification is worth its weight in protactinium), usually starting with an out-of-the-box taxonomy customized to your industry using the vendor’s experience and community knowledge.
  • Better Analytics: many of these tools have a lot more capability in terms of report construction, dimension derivation, metric support, integrated data science, etc. etc. etc.
  • Better UX: while UX is completely subjective, and as per a (previous/upcoming) rant, is not something an analyst should be scoring and advising you on (as the best UX is the one that works best for you), in general, the probability is very high that you will find these BoB tools more customizeable in workflow and configuration, more logical in workflow, and much easier to use (if this wasn’t the case, no one would buy these tools and the vendors would have closed their [virtual] doors a long time ago)
  • Beyond Analytics: most BoB solutions will have integrated opportunity selection and project/savings tracking, performance/throughput/project metric support, and/or risk-based analytics. The value of analytics is continually overlooked because the “Savings” is identified in the sourcing event, captured in the contract, and realized in Procurement, and no one wants to acknowledge the opportunity would not even have been identified without analytics.

And, finally, why not get used to using a best-in-class tool from the get-go so you don’t have to relearn a new tool when you max out the capabilities of the suite solution and are ready for the next level? Especially when, as you get better and better at analytics and dive deeper and deeper into categories, you can improve the taxonometric mappings, track all the opportunities you identify (and your progress), do what-if analysis when the mood strikes, and get productive in a tool that will do [much, much] more for you in the long run?

So, while you might select a suite SIM module as a foundation for your supplier data store when you need to start centralizing supplier data somewhere for your sourcing projects and procurement buys (which is where your organization has determined it needs to start its S2P journey), when you’re ready for analytics, just go straight to BoB. (And if the C-Suite wants to see reports in the fancy suite, buy the basic reporting package and let them use the basic dashboards. And if the suite supports custom dashboards, then pump the appropriate analytics back in as reporting data. Get good with best-in-class analytics from the go with the best solution you can.)

Suite vs BoB. Which Do You Choose?

Neither!

But you need something. And there is no other option (yet). So are you doomed?

That depends. But first, let’s talk review the Primary Pros and Cons of each.

SUITE
BoB
PRO

  • one vendor relationship to manage
  • modular integration out of the box
  • consistent UX (or it’s not really a suite)
  • pre-implemented with major ERPs
  • the primary module offered by the vendor is truly Best in Class and considerably beyond the average suite capability
  • implementation is typically vendor supported, along with some integration services
  • low (subscription) cost out of the gate, pay as you need
  • today’s BoB comes with full, complete Open APIs to build your own ecosystem
CON

  • likely that only one or two modules are Best-of-Breed (BoB)
  • implementation and integration services are likely third party
  • high cost out of the gate
  • traditionally a closed ecosystem
  • multiple vendor relationships to manage
  • limited integrations out of the box to other modules you will need
  • inconsistent UX across the modules
  • limited to no ERP/MRP support in many modules

In other words, many of the weaknesses of the suites are the strengths of BoB and vice versa. But you want the strengths of both and the weaknesses of neither, even though that doesn’t exist today as no vendor does everything well, nor can they because they would need to be experts in everything. (So unless a vendor hired all the experts, and became a monopoly [and we generally agree monopolies are bad], no vendor could even come close.) Even if a vendor did hire all the experts of today, and build everything out to the best of those experts’ capabilities, they’d soon become an unaffordable mega-suite (and then still not be best in breed in anything because once they built what the experts they hired envisioned, there would be a new generation of experts they still wouldn’t have employed with new, innovative, possibly revolutionary, ideas).

So what do you do? Well, the answer is, as we pointed out in our post that asked where’s the Procurement Management Platform, acquire a platform that is designed to support data-centric end-point integrations for specific processes and organizational needs as this will allow you to select the right module for each task, configure the right procurement workflows, integrate new, even previously unthought of, modules with the Open API, and even support intake and supply chain platform integration.

But, as we noted, there’s no platform. So, unfortunately, you have to assemble your own. But at least today you can. A decade ago there were no options to do this, so either you bought a suite, and lived with it, or you bought best of breed and did extensive work to glue them together in a grit, spit, & a whole lot of duct tape situation (that would take about 69 months).

But today, all of the new best of breed applications are being built from the ground up with complete Open APIs and the newer suites are also offering you APIs to easily get data in and out as well. (Not so much on the workflow configuration / function execution front, but that’s not necessary.) [But please note that an App Store or Marketplace is not an Open API, it’s a closed ecosystem limiting you in what third party add-ons you can select.]

So you can theoretically start with the right instance of a BoB or a Suite as your base and build out the right platform over time, depending on your needs today, and how fast you can digest a new module. If you already have one or more first generation modules, you have the understanding of what these modules do and how to use them and can likely digest new versions of those modules pretty quickly, so you could start with that many modules plus one. If you have no modern S2P modules, then, as we indicated many, many times in our very long Source-to-Pay series, you need to pick a module that represents your most immediate need, start with it, and start to grow your platform from it.

The 39 Steps … err … The 39 Clues … err … The 39 Part Series to Help You Figure Out Where to Start with Source-to-Pay

Figuring out where to start is not easy, and often never where the majority of vendors or consultants say you should start. They’ll have great reasons for their recommendations, which will typically be true, but they will be the subset of reasons that most benefits them (as it will sell their solution), and not necessarily the subset of reasons that most benefits you now. While you will likely need every module there is in the long run, you can often only start with one or two, and you need to focus on what’s the greatest ROI now to prove the investment and help you acquire funds to get more capability later, when you are ready for it. But figuring out how much you can handle, what the greatest needs are, and the necessary starting points aren’t easy, and that’s why SI dove into this topic, with arguments and explanations and module overviews, both broader and deeper than any analyst firm or blogger has done before. Enjoy!

Introductory Posts:
Part 1: Where Do You Start?
Part 2: Where Should You Start?
Part 3: You Start with …
Part 4: e-Procurement, and Here’s Why.

e-Procurement
Part 5: Defining an e-Procurement Baseline
Part 6: There are Barriers to Selecting an e-Procurement Solution (and they are not what you think)
Part 7: Over 70 e-Procurement Companies to Check Out

Interlude 1
Part 8: What Comes Next?

Spend Analysis
Part 9: Time for Spend Analysis
Part 10: What Do You Need for A Spend Analysis Baseline, I
Part 11: What Do You Need for A Spend Analysis Baseline, II
Part 12: Over 40 Spend Analysis Vendors to Check Out

Interlude 2
Part 13: But I Can’t Touch the Sacred Cows!
(including Over 20 SaaS, 10 Legal, and 5 Marketing Spend Management / Analysis Companies to Check Out)
Part 14: Do Not Stop At Spend Analysis!

Supplier Management
Part 15: Supplier Management is a CORNED QUIP Mash
Part 16: Supplier Management A-Side
Part 17: Supplier Management B-Side
Part 18: Supplier Management C-Side
Part 19: Supplier Management D-Side
Part 20: Over 90 Supplier Management Companies to Check Out

Contract Management
Part 21: Time for Contract Management
Part 22: Contract Management is a NAG: Let’s Start with Negotiation
Part 23: Contract Management is a NAG: Let’s Continue with [Contract]Analytics
Part 24: Contract Management is a NAG: Let’s End with [Contract] Governance
Part 25: Over 80 Contract Management Vendors to Check Out

e-Sourcing
Part 26: Time for e-Sourcing
Part 27: Breaking Down the ORA of Sourcing Starting With RFX
Part 28: Breaking Down the ORA of Sourcing Continuing with e-Auctions
Part 29: Breaking Down the ORA of Sourcing Ending with [Strategic Sourcing Decision] Optimization
Part 30: Over 75 e-Sourcing Vendors to Check Out!

Invoice-to-Pay (I2P):
Part 31: Time for Invoice-to-Pay
Part 32: Breaking Down the Invoice-to-Pay Core
Part 33: Over 75 Invoice-to-Pay Companies to Check Out

Orchestration:
Part 34: How Do I Orchestrate Everything?
Part 35: Do I Intake, Manage, or Orchestrate?
Part 36: Over 20 Intake, [Procurement] [Project] Management, and/or Orchestration Companies to Check Out
Part 37: Investigating Intake By Diving In to the Details
Part 38: Prettying Up the Project with Procurement Project Management
Part 39: Deobfuscating the Orchestration and Fitting it All Together

Per Year, How Much Should You Outlay for ADVANCED Source to Pay? 250K to 500K, MAX!!!

That’s right! Continuing last week’s post, we are again putting a stake in the ground on a real, actual, number! (With similar caveats, of course, but still, a real number!)

Why? Because, at least in North America, the one question everyone asks but no one wants to answer, is,

how much for that product on the SaaS cloud
the one with the advanced software
how much for that product on the SaaS cloud
I do hope that software’s priced fair!

Most vendors, especially in the enterprise software space, want to get as much as possible (as failing to do so, especially if they are public or owned by a PE Firm with a tight timeline to enhanced profitability, gets them a “bad” rating), and, thus, obscure their (true) pricing. Their (big) analyst clients want them to get as much as possible (as they all dream of the day they get that Million-Dollar PO from a vendor in exchange for simply keeping the vendor at the top of the charts). Clients who think they got a deal don’t want you to underpay (and then have their renewal prices hiked up as the vendor seeks to maintain it’s profit margins) … and clients who think they’ve overpaid don’t want to tell you. And when some of the bigger vendors won’t even talk to you unless they think you’re good for seven (7) figures (i.e. One Million Dollars) a year or more, you might be tempted to think good (DIY) suites are out of your grasp.

However, as per our last installment, they’re not! And, if you’re smart, they can be quite affordable (especially for baseline end-to-end functionality with some advanced functionality sprinkled here and there) and lead to not just an identified, but realized, ROI in a short time frame.

But sometimes the base is not enough! What if you need advanced features such as:

  • strategic sourcing decision optimization (SSDO)
  • enhanced analytics with market intelligence (commodity pricing, GPO/anonymized community pricing), ESG data, project tracking
  • supplier development with orchestration, network management, discovery, enablement, etc.
  • CLM with analytics or enhanced authoring with augmented intelligence
  • I2P with smart OCR/Free-Form Processing and partial m-way match

These, and other advanced features, are going to pump up the price. How much? It varies. For the list above,

  • the most advanced commercial solvers, which most of the SSDO offerings are built on, charge 5K+/month for their solver to be embedded in a third party application, and that’s one of the reasons this software is not cheap (and the other is that these models require extremely skilled and experienced PhDs to build and deploy; but considering it is the only application that, when you’re ready, will consistently identify 10%+ savings on categories that have never been optimized, it can be worth it)
  • you can get the most powerful analytics solution on the market for 2K/month, but if you want market intelligence, you’re either going with a company that has a large enough install base to build that (and paying a lot more for the company to collate, anonymize, and offer that) or multiple third party market feeds; this will cost you another 3K to 5K a month (but you don’t understand your should cost without this data, and can’t identify the true opportunities in some categories without this data, so it can be worth it)
  • networks seem easy enough (all the big vendors have one), but you need a lot of suppliers, and true networks are multi-tier (meaning every supplier is a buyer in a sub-network), orchestration requires a lot of different data of a lot of different types and sometimes requires complex graph algorithms to get right, discovery isn’t easy if you need specific capabilities and not just commodity products, and enablement, well, as you can tell if you go back and review the CORNED QUIP mash of vendors, there really aren’t that many that do true enablement for the supplier
  • core semantic tech seems pretty cheap with a lot of open source models, but well tuned and well trained semantic tech on appropriate data is not (because training it on social media garbage produces the electronic equivalent of hazardous waste as output, as per a piror/upcoming article), so you’re going to pay for this, especially if you want technology finely tuned to analyzing your contracts, auto-building suggested templates appropriate for your business, guiding you on where legal focus needs to be (due to low confidence or ambiguity), etc.
  • if the invoice comes in as a PO-flip or using an EDI/XML standard, any platform can process that efficiently and cheaply; but if you’re tying to process PDFs, even if a supplier sticks to a template, that’s work; you not only have to train models, but build customized models to each invoice type; that’s a lot of manpower on the vendor’s part to build those for you (or on the vendor’s part to build tools you can use to define those templates for the software using WSIWYG low-code or no-code interfaces)

The reality is that any advanced application you need/want is going to triple to quintuple the price you’re paying for that module, depending on how advanced the functionality is, how much expertise is needed to build and maintain it, and how much the vendor itself has to pay in SaaS/license fees to third parties for advanced models/capabilities it is building off of or appropriate, reliable, human vetted data sources. What was a 2K module is now going to be 6K to 10K a month (or, if you have to augment what you have with a third party application, an additional 6K to 10K a month).

Not cheap, but when advanced technology, properly applied on the right categories / problems in the right circumstances can deliver 2X to 3X the cost reductions, it becomes very affordable. For example, let’s say you have a 100M components category in electronics and all a well-constructed RFP and analytics manages to find is a 3% cost reduction opportunity. That’s 3M, if captured, but what if there’s really a 6% opportunity through non-obvious re-allocations when logistics, tariffs, FTZs, and volume breaks are taken into account. That’s 6M, or an extra 3M. If the SSDO module cost you an extra 60K per year, even if used ONLY on that one category, that’s a 50X return! Similarly, if advanced contracted analytics with augmented intelligence allowed your legal team to dynamically build up clause libraries and templates on the fly, reducing contract preparation time by 70% on every category, that’s going to greatly increase your sourcing cycle velocity, allowing you to get through more events, and compound cost reduction opportunities. The manpower savings will likely be 10X the extra 60K a year.

And so on. The value is there, but, as per our S2P series, only if you have a need for it AND are ready for it. (That’s why we suggested implementing one module at a time, and starting with baseline capability so you can get your spend under management, get the data for a proper spend analysis, determine where the true opportunities are, determine what you need to address the true opportunities, and then upgrade to the advanced offerings of the vendor (or augment with third party modules).

But, at the end of the day, based on our knowledge of what provider offerings with best-in-class opportunities start at, average multiples over baseline, and just how much a mid-size organization will need across source to pay, we’re putting a stake in the ground that an advanced S2P offering with advanced capabilities across all 6 core modules should top out at 500K, and, in fact, we’re betting that an average organization, which will only need advanced capabilities in half the modules, should only need to pay 240K to 300K a year — or the cost of 2 FTEs, which is peanuts compared to the efficiency improvements the organization will realize and the cost reductions they will see. Even if a smaller organization (500M-ish in revenue with 250M-ish external spend that Procurement can influence) only gets 30% of their addressable spend under management (75M-ish) and only sees a reduction of 3%, that’s still 2.25M, which is 8X+ the cost, and definitely worth it!

However, all the same caveats from our last installment hold.

[01] You are a true mid-market company, which we’re defining as a company more-or-less between 500 Million and One Billion in Revenues and an addressable spend of 250 Million to 500 Million (as you can’t address payroll, government controlled utilities, mortgages/long term lease rates, etc.).

[02] You have an average sized procurement team of under 30 people. (In a 2019 Benchmark, average organizations had 33.5 Procurement personnel per 1 Billion in revenue.)

[03] You’re doing an average number of projects per year for those people (and likely maxing out at addressing 20% to 30% of the addressable spend per year).

[04] As you have (next to) nothing in terms of modern source-to-pay technology, your primary focus is the baseline capabilities (as defined in our Source-to-Pay series). You might want a few of the more advanced capabilities, but right now, getting the baseline (which will likely provide 80% of the value by allowing you to get all of your processes, and costs, under control) is the primary goal.

[05] This does not include integration costs, training costs beyond access to all of the online-training materials/virtual academy, and the implementation costs are limited to flicking the switch to activate the license and any necessary setup configuration. (Unless you are buying an advanced module, in which case the vendor will include more setup, configuration, and additional data load support.)

[06] The sales cycle is mostly virtual (web demos, video conference meetings, etc.). You won’t get to meet the sales rep in person more than once during the sales cycle (and that’s only if you’re buying a mini-suite or multi-year deal; these vendors stay affordable by keeping their costs down, and multiple on-site demos and meetings do nothing but drive up overhead and costs).

[07] Most vendors will help you with the initial data load (provided you are loading data from a supported system in a supported format), but refreshes will typically not be included in the ongoing support, which will mainly be limited to online help and workaround support for identified bugs while the bugs are being fixed.

[08] With the exception of some market intelligence from anonymized customer data or free public data sources, this will typically not include any data enrichment offerings also offered by the vendor, especially if those data enrichments are coming from third parties, but these will be pre-integrated and you will only pay the third party fee if you want to turn them on.

But what if you’re a borderline/true multi-national enterprise? Or a small company / borderline “small” mid-market? What should you pay then?

To be continued.

Get it Together! Good Data Ain’t That Hard!

A few weeks ago, the Supply Chain Management Review published a short piece on
Procurement’s Data Problem that noted recent surveys from Globality and SpendHQ had some appalling statistics, including the findings that 82% of leaders are not managing indirect spend well, 79% don’t have dedicated software to track and manage performance, and 75% doubted the accuracy of the data they present. What The Hell? It’s not 2003 anymore. It’s 2023. And this is easy stuff. Get it together people!

The data problem is easy. (At least at a basic level.)

  • Have a process that forces ALL spend through the e-Pro/AP system.
  • Make sure there are POs (Purchase Orders) for everything that’s not a recurring invoice such as a utility or lease payment, and VPOs (Virtual Purchase Orders) for these recurring invoices that define either agreed to amounts, hourly/usage rates, or expected ranges (that can then be corrected to the actual amount when the monthly bill arrives).
  • Make sure all invoices are imported into the e-Pro/AP system before any payment is made.
  • Make sure they match the PO before they are paid.
  • Make sure all payments are captured in the e-Pro/AP system.

Now you have an accurate, trustworthy, record of every single transaction from order, through approval, to payment. Now you have good spend data that you can trust. To extract insight and/or create reports, just use a good spend analysis tool. Basic, accurate, trustworthy data is easy.

Baseline Performance Management ain’t hard either.

Spend performance is just analyzing the average price per unit paid over time. If you don’t have a a performance management (sub) module, you can literally do this with a spend analysis tool where you create a report for every sourcing project you do that tracks spend over time against a baseline from which savings/cost avoidance over time can be created. Associate each with a user, a department, and a category and you can easily create performance reports by user or department or category.

Managing Indirect Spend is straight forward as well.

  1. Use your spend analysis tool to identify categories and spend level.
  2. For high spend categories, do strategic sourcing projects that are (multi-round) (hybrid) RFX and/or auctions.
  3. For low spend categories, do 3-bids-and-a-buy / approved catalog Procurements (through your e-Pro tool).

Sure, you might not realize the maximum opportunity, but this simple recipe will likely capture 90%, often without significant effort, and you go from losing 15% or more on the tail of the indirect spend and 5% to 15% on the higher volume indirect spend, to only losing a few points on the higher volume and less than five points on the tail. It’s simple. It works. It only needs an e-Pro tool and a cheap RFX/Auction tool, and there are examples of each of these tools that support mid-size enterprises with unlimited use for less than 2K a month. There’s just no excuse not to have the basic tools and not to use them. (As for spend analysis, Spendata Enterprise starts at 1,200 a month! And Anydata Solutions has mid-market pricing under 2,000/month as well! [Both require minimum commitments.])

Less than 60K solves these problems. That’s less than a fully burdened junior buyer. There’s no excuse for this situation anymore. Simply none. So get it together please.