Category Archives: contract management

A Great Guide to Outsourcing Risk Management, Part III

In Part I we we discussed the starting point of your outsourcing project and how you go about selecting service providers to issue RFPs to and in Part II we discussed proposal evaluation. Today we will discuss the contract, and the dispute resolution process in particular, and remind you to check out the full series on outsourcing risk management by Alsbridge, as printed by SourcingMag.com, that this series is partially based on.

So What Needs to Be In the Contract?

Lots and lots of legalese, of course, and I highly recommend you check out Stephen’s Guth Vendor Management Office Blog and the books and downloads he has indexed on his site (including The Contract Negotiation Handbook and Implementing a Vendor Management Office) before you start. That being said, there are two critical sections that must be in every outsourcing contract, and that must be carefully thought out and specified in detail before the contract is signed if you really want to alleviate potential risks, and they are dispute resolution and service level agreements.

So What Do You Need With Respect to Dispute Resolution?

Remember, if there is a disagreement between two parties, the time to figure out how to discuss and resolve it equitably is not in the midst of the disagreement. That’s why the rules for boxing matches are set in advance rather than discussed after one fighter has already tried to bite the other’s ear off. Making the process as defined and clinical as possible will remove tension from disagreements, especially when things must be escalated and your counterpart is angling for your ear. Be sure that each of the following questions are answered in your agreement before the agreement is signed.

  • What is the process for raising an issue?
    This must be spelled out, or the other party can claim that they were not aware of an issue, and hence under no obligation to take any action.
  • How long does each side get to investigate and formulate a reply?
    The party being notified of an issue must have a set timeframe in which they have to formulate a reply, otherwise, they can stall indefinitely with “we’re looking into it”.
  • If the issue is not resolved, who meets?
    The project managers? Subject matter experts? Mangers? Executives?
  • When?
    The meetings to resolve issues, and resulting disputes, can be ad-hoc or regularly scheduled, but there must be a maximum timeframe that can elapse without a meeting being when there is an issue to resolve or there is nothing to prevent one party from stalling the other indefinitely.
  • Does the timeline vary based on issue size?
    If one party discovers the issue to be larger than originally thought, is an additional fixed time allotted for further investigation or resolution?
  • When does an issue become a dispute?
    After an unsuccessful meeting? After 7 days without resolution? This must be clearly defined.
  • What clear authority does each party have to negotiate?
    This must be clearly defined so that the right people are at the table for issue, and dispute, resolution meetings. Otherwise, the other party can claim that their representative had no authority to negotiate on their behalf and stall a negotiation indefinitely. The contract should also stipulate what authority project managers have to resolve issues and disputes. For example, sometimes a few extra hours of work on behalf of one party or the other, even if they have to be off-the-record, can go a long way to resolving problems and building a rapport that is invaluable to team success. For example, if a project was supposed to take eight weeks, but at the end of eight weeks, three days of work is left, is it really worth a dispute? Or can the project managers for each party decide to just “split the difference” to get it done and move on.
  • How long do the authorities have to get to the table?
    If a dispute arises, how long do parties with the authority to resolve it have to get to the table.
  • If no agreement is reached, when can the issue be escalated?
    There’s always a good chance that a dispute will arise that cannot resolved amicably between the parties at the table in a reasonable timeframe, so it must be crystal clear when a party can request that the problem be escalated within their counterpart’s organization.
  • What triggers arbitration or legal action?
    Although everyone hopes it won’t happen, some disputes will not be resolved even when the CEOs make it to the table. Therefore, the agreement must clearly spell out when a party can request arbitration or resort to legal action if it was clearly damaged by an action, or inaction, of the other party.

The next post in the series will discuss service level agreements.

The Sourcing Maniacs 2008 Vendor Tour Part 15: Upside

This post is a little lengthy, so it’s been broken into Flipside and Upside.


Flipside

 

Wakko Why are we in Texas? I thought we were headed Northward.
Yakko We’re not in Texas, Wakko. We’re in Alberta.
Wakko Alberta?
Yakko Yes, Wakko. We’ve crossed into Canada.
Wakko But the plains. The bright sun. The cowboys.
Yakko Are also found in Alberta, who’s biggest trading partner is Texas.
Wakko So that’s why everybody’s oot and aboot, eh?
Will we get to meet Bob and Doug MacKenzie?
Yakko They’re not real Wakko.
Wakko Not real? NOT REAL? They’re my heroes!
  Editor’s note: Oh Dear!
Dot So what are we here for?
Yakko Upside.
Dot What upside can we possibly find in Canada. I’m a sophisticated girl. How sophisticated is a country where most of its population still lives in igloos most of the year!
  Editor’s note: While some traditional Eskimo’s in the far, far noth still live in igloos, the vast majority of the 33 Million plus Canadians do not live in igloos. In fact, except for the fact our money is colorful like European money (only our twenties are green), and we pay more taxes (supposedly to cover our public healthcare costs and additional social programs, but you can check the news to see where it really goes), Canada is extremely similar to the US. Canada may have stayed tied to Britian longer, but the US, our largest trading partner, is Canada’s primary influence. About the only other difference is that we still follow the British parliamentary system, and we don’t get to vote for whether we want tweedle-dee or tweedle-dum as Prime Minister.
Yakko Actually, Canada is quite sophisticated. Although it is true that the majority of e-Sourcing companies are in the US, and more recently, in the UK, there are a few players in Canada and some, like Upside, have attracted a significant user base outside of their native land. And remember, the doctor is Canadian, and currently lives in a place called Halifax, Nova Scotia, which he claims is the best place to do international business in Canada.
Dot So what’s the upside?
Yakko Upside Software, a specialty provider of Contract Management solutions.
Dot So where are they?
Yakko Edmonton.
Dot Edmonton. Never heard of it!
Yakko It says in the guidebook that it has the West Edmonton Mall which was, since its construction in 1981, the World’s Largest Shopping Mall until Jin Yuan, the Golden Resources Shopping Mall, opened in Beijing, China in 2004.
  Editor’s note: Only three malls are larger. The Golden Resources Shopping Mall in Beijing, the South China Mall in Dongguan, and the SM Mall of Asia in Pasay City in the Phillippines.
Dot THE AMERICAS’ … LARGEST … MALL! AWESOME! LET’S GO!
Yakko It also says in the guidebook that the mall contains the Galaxyland Amusement Park with the Mindbender, the world’s largest indoor high speed, triple loop roller coaster.
Wakko AWESOME! RACE YOU!
Yakko To Upside?
Yakko & Dot Yes, Yes, To Upside!

 



Upside

Dot Why are we stopping?
Yakko I think we’re here.
Dot I don’t see a Mall!
Yakko Remember, work first, play later.
Wakko rather solemn
o.k.
out comes the mini-mallet
tap … tap
Spectabled Sales Guy ‘Ello, ‘ello!
Dot What’s my upside?
Spectacled Sales Guy Excuse me?
Yakko I think she means to ask, is this Upside Software?
Spectacled Sales Guy Why, yes it is.
Yakko And what’s the upside of using Upside Software for Contract Management?
Spectacled Sales Guy Well, that’s a rather involved question. Who are you?
Wakko I’m Wakko.
Spectacled Sales Guy No comment.
Spectacled Sales Guy I’m Yakko.
Spectacled Sales Guy Obviously.
Dot And you can call l’il ol’ me, Dot.
Spectacled Sales Guy Hi Dot. And where are you from?
Yakko Well, we used to be from the valley …
Wakko … but we got wak’d.
Spectacled Sales Guy O …. K …. and who do you work for now?
Wakko No one … we’re fancy free!
Spectacled Sales Guy So why do you want to know what the upside of using Upside Software for Contract Management is? You obviously don’t have any use for it in your current predicament.
Dot We’re trying to better understand the sourcing space.
Yakko It seems our view is a little narrower than it should be.
Spectacled Sales Guy But why are you here? There are obviously dozens of other companies you could talk too, some of whom may even be hiring, and most a lot closer to California than us.
Wakko the doctor sent us.
Spectacled Sales Guy You really are wacko. Doctors prescribe medicine …
Dot Not a doctor, the doctor … of Sourcing Innovation.
Spectacled Sales Guy Sourcing Innovation … hmmm … the blog?
Yakko The one and only.
Spectacled Sales Guy So if I answer your question, I’ll get some free publicity?
Yakko Of course!
Spectacled Sales Guy Well, even though we don’t really need it … we’ve been in the press a lot lately … we are, after all, one of Canada’s Best Employers … and companies … but it’s a fair exchange. So have a seat. And I’ll tell you why we’re different — and what the upside to using Upside is.
Dot Great!
Spectacled Sales Guy First of all, we support the full life-cycle of the contract. How familiar are you with enterprise contract management?
Yakko Isn’t it just the centralization of all of your contracts in a centralized, searchable repository so that you can find out who you have contracts with, what they’re for, when they’re expiring, and, most importantly, how much you should be paying for a good or service?
Spectacled Sales Guy Well, that’s where it starts, but it’s much more than that. To quote your doctor, it’s not just “managing your contracts” but “managing the information that is within the contracts and related to the contracts”. “It’s being able to not only find the contract for the part you need, but share that information with your sourcing and procurement systems for automated compliance verification of invoices. It’s about being able to not only create standard terms and conditions in your contract templates but being able to annotate them with the reasons therefore. It’s about being able to determine not only what contracts are about to expire, but what risks you are open to with respect to your current contract base with respect to liability, supply stability, and corporate social responsibility. It’s about being able to drill down from a supplier contract into relevant supplier data to determine compliance. It’s about being able to drill down from your customer contracts to your supplier performance metrics to determine on-time delivery performance. Its about being able to truly manage your operations off of your contracts.” (From Enterprise Contract Management.) And more.
Dot More?
Spectacled Sales Guy It’s budgeting, project management and risk management. And it’s about simultaneously meeting the needs of accounting, legal, and procurement, whose needs are quite diverse.
Dot Really? That too?
Spectacled Sales Guy You draft a contract for goods or services in specified quantities in specified amounts. The contract has a committed amount, which comes out of a budget that needs to be carefully tracked. And if you’re in construction, consulting, or exploration, for example, most of your contracts are project based, and need to be managed against projects. And these days, contract management is as much about risk management as it is about price and service levels. You need to identify the risks, mitigate the risks, and monitor that the identified mitigations are being implemented.
Yakko And your tool does all that?
Spectacled Sales Guy To the extent that a Contract Management tool can.

It lets you define your budgets, which contracts, and associated line items, are billed against the budgets, and then, as invoices are entered into the system and billed against contracts, it tracks expenditures against budgets.

It lets you define projects, and project components, and associate contracts, and component line items, with projects. Projects can also be identified with funding levels, required forms, and have associated alerts when budget levels are reached, actions need to be taken, or insurance or certifications need to be (re)verified.

And the application allows you to establish, and track, “risk drivers”. You can define a risk event, the “risk driver” that would cause the event, the impact the event would have, and the probability that the impact would be realized. For example, for an early contract termination event, you could define a “risk driver” of no on-time delivery and an “impact” of lost dollars with 75% probability. You can then track the risks by contract, by project, and by budget and this helps to ensure that your risks, and identified mitigations, get monitored.
Dot Wow!
Yakko But what about basic contract management. Since your tool does so much, is it difficult to use?
Spectacled Sales Guy Not at all! It’s a streamlined SaaS offering that supports single sign-on and customization by each client. This insures that you only have to use as much as you need, on a contract-by-contract basis. Furthermore, it’s a wizard-based tool that guides you through the process of requesting, creating, and monitoring contracts, and is thus incredibly easy to use.

Contract creation is as simple as selecting a type, defining a jurisdiction, choosing an appropriate template, customizing the options, defining the duration and boundary dates, and adding a searchable description.
Dot So you have to have a template first?
Spectacled Sales Guy No, but we highly recommend it … because the template can be re-used again and again. And our templates aren’t static Word document templates, they’re dynamic templates where each clause can have different, auto-configured, options depending on jurisdiction, risk tolerance, duration, and value. In addition, legal can define additional alternatives for each clause for special situations that can be selected as needed. This allows contracts to be quickly and easily generated with very little customization.
Dot But I’m comfortable with Word!
Spectacled Sales Guy Most people are … which is why our contract creation tool is 100% Word compatible. You can export to Word for editing, and then import the updated contract at any time. But our tool is much more powerful. Not only can you create drop-down alternatives, including auto-selecting alternatives, for each clause and sub-clause, but you can also track how often an alternative clause is used, how often a clause is modified, and define notes that allow usage to be properly interpreted. Plus, you can define levels of approval and equivalents in foreign languages. This is what allows our system to automatically draft a base contract once the basic meta-data of jurisdiction, duration, risk tolerance, etc. are defined. Whereas most systems just retrieve a static template, our system retrieves a customized contract.
Yakko So creation is powerful. What about management?
Spectacled Sales Guy Equally as powerful. You can search by any associated piece of information; organize contracts by geography, supplier, product, project, budget; and customize the meta-data you want to track. It’s a fully functional repository.
Wakko And all that other stuff having to do with enterprise contract management you rambled on about?
Spectacled Sales Guy All there. There’s compliance management functionality that allows you to specify, track, and alert the affected parties to the requirements at different points in the life-cycle. There’s performance management that allows you to define and track metrics — and we can tie into external systems to automatically load the approptiate data. There’s invoice and receipt tacking, which is supported by our ability to link into ERP systems to pull transactions and status levels. There’s planned expenditure and budget tracking. There’s a powerful wizard-based form-building tool that allows just about any form you might need to support a contract or relationship to be built. E-mail functionality is built into the system, and it can track all communications by contract. All of the data can be exported in flat-file, csv/Excel, and XML, and reports can also be exported in HTM, RTF, and PDF formats. And there’s a very extensive adminitrative tool that allows just about everything to be customized. Wherever possible, we use reference tables to define data, workflow, and functionality and all of them can be customized by our customers in their implementations.
Yakko I never knew there was so much to contract management!
Spectacled Sales Guy Well, it really depends on the organization. A small organization might not need more than decent templating and a centralized repository, but a large multi-national enterprise has very extensive contracting needs — needs that we continually work hard to meet each and every day. And with that, I bid you good day. There’s a wide world out there that also needs my attention.
Wakko & Dot Off to the Mall!

 

The Sourcing Maniacs 2008 Vendor Tour Part X: Iasta

In our last installment of the 2008 Sourcing Maniacs Vendor Road Tour, the maniacs had just finished talking with a somewhat contemplative looking gentleman from GDM somewhere near Denver, Colorado. We rejoin them shortly after their conversation with the somewhat contemplative looking gentleman from GDM.

Today’s post is a little lengthy, so it’s broken up into Interlude and Inquiry, which contains the vendor content.

Interlude

Yakko, Wakko, & Dot We dig dig dig dig dig dig dig
through our data the whole day through
To dig dig dig dig dig dig dig
is what we really like to do
It ain’t no trick to get rich quick
If you dig dig dig with a shovel or a pick
In a large data mine! In a large data mine!
Where a million diamonds shine!
Dot Where Next?
Wakko I think it’s called e-Sourcing Place now.
Dot sneering
Wakko!
Wakko Sorry!
Dot Any more G’s?
Yakko Lots of services companies! Global Procurement Group (Global Supply Training). Global Sourcing Specialists. Greybeard Advisors.
Dot Can you think of any technology companies?
Yakko Besides Google, not today.
Dot So on to the H’s then.
Yakko Hiperos?
Dot SRM. Hmmm … let’s file them under services for now.
Wakko Hyperion?
Dot Oracle, remember?
Yakko I guess we’re skipping the H’s too this time around. Where do we start in the I’s?
Dot I seem to remember this punky little upstart by the name of Iasta from our Ariba days.
Yakko I heard they were just 4-guys in a garage with a simple e-RFX tool.
Dot Well, that’s what we used to say they were. But when was the last time we actually paid any attention to them …
Yakko Uhm … err … I can’t remember.
Dot Neither do I! Should we check them out?
Wakko Well, I seem to recall the doctor mentioning them quite a few times on SI … there must be something to them.
Dot Might as well go for it. And with our e-Sourcing background, maybe we’ll even understand what they do!
Wakko So where are they?
Yakko Indianapolis, I believe!
Wakko Race car city! Cool!
Yakko Super Overdrive!
Wakko Wakko breaks out his best rendition of Super Overdrive by Billy Idol.

 

Inquiry

  The maniacs head off towards Indianapolis, on the scenic route. We catch up with them again a few days later.
Dot This is it. I hope they talk to us!
Yakko Their CEO is a blogger, and they sponsor the e-Sourcing Wiki, which hosts some of the best wiki-papers in supply management that you’ll find anywhere. I’m sure they’ll talk to us.
Wakko Wakko breaks out his mini-mallet.
Let’s find out!
Wakko taps on the door.
A minute later, a smiling man with a moustache steps out.
Wakko Who are you?
Smiling Man I’m the CEO of Iasta.
Yakko, Wakko, & Dot And we’re …
CEO The Sourcing Maniacs.
Yakko, Wakko, & Dot You know of us?
CEO Yes. I’ve read about your exploits, and Eric Strovink from BIQ warned me that you were making the rounds.
Dot Well, hopefully you’ve only heard good things about l’il old us!
CEO Checking that the door behind him, and more importantly, to the server room, is locked (see Where Pinky and the Brain Devise a Plan to Market Their Strategy for a reason why).

What I’ve heard varies. How can I help you?
Wakko What do you do?
CEO e-RFX …
Yakko yawn
CEO e-Auction …
Dot looking very bored
CEO Smart Optimization
Wakko Com-bin-a-tore-e-ul Op-ti-my-za-shun?
CEO Yes Wakko, we do strategic sourcing decision optimization … and we think it’s one of the best solutions out there. And we do Contract Management …
Dot perking up
CEO and we’re in the process of preparing our first Supplier Relationship Management release, better known as SRM.
Yakko Really?
CEO Really. And when you add in our built in project management and our Smart Analytics solution, based on BIQ’s leading spend analysis product, you see that we have one of the most complete end-to-end e-Sourcing suites on the market.
Dot So you go head to head with Ariba and Emptoris?
CEO All the time!
Yakko And win?
CEO More often than you’d be led to believe!
Dot How often?
CEO Let’s just say that we have well over 100 global customers, many in the Fortune 500, and that both our annual North American User Conference and our annual European User Conference are very well attended by happy customers who enjoy learning how they can do even more with the platform they have already bought, and at a very attractive price point I might add.
Wakko How attractive?
CEO We’re a True SaaS provider, so we are very competitive with our basic solution prices.
Dot Under a Million?
CEO We start at under one hundred thousand a year for our entry-level solution.
Dot shocked
Under One Hundred Thousand?
CEO Yes Dot, under one hundred thousand for our basic Smart Source solution. You don’t have to buy everything to start, and even if you do, unless you also buy a considerable amount of services support for your organization, it’s still under the seven figure mark that you liked to charge.
Dot still shocked
How do you make money?
CEO Economies of scale enabled by SaaS, and smart spending. We eat our own dog-food and follow our own advice. We keep our costs reasonable, which allows us to give our customers good service at a great price, and in return we keep them. We believe we have one of the highest customer retention rates in the sourcing space. But I’m sure you’re not here to discuss our success stories. What would you like to know?
Yakko How you’re different.
CEO Well, we think our product is better than our competition, but if you limit yourself to a “check-the-box” comparison, as so many analysts are prone to do, you’d see that our major solution differences when we are compared against your average sourcing vendor are our strategic sourcing decision optimization and supplier relationship management capabilities. These go well beyond your standard bid-negotiate-award-track capabilities found in your average e-RFX, e-Auction, and Contract Management applications and allow you to focus on identifying the best value for your money and then ensuring that the savings you negotiated, and contracted for, are realized.
Wakko But don’t a number of companies claim to have Op-ti-my-za-shun?
CEO Very few have true optimization, Wakko. Most just use heuristic decision support algorithms that they try to pass off as optimization. We use true Mixed Integer Linear Programming and best-of-breed industry solvers, like ILog CPlex, underneath a true strategic sourcing decision optimization model that meets ALL of the requirements outlined by the doctor in the wiki-paper.
Wakko And that’s important because?
CEO Because you need all four types of constraints — capacity, allocation, risk mitigation, and qualitiave — and costs — unit, usage, and freight — to accurately model your average real world sourcing scenario. Otherwise, the scenario you end up with is only approximate, which means the solution is only approximate, and, if you missed key constraints, not realistic. Without all of the constraints, and some “competitors” only provide a subset, you either get a result that’s too good to be true, and is, because you can’t implement it, or the result isn’t as good as you can get, because you couldn’t specify all of the constraints and discounts.
Wakko And it works?
CEO Remarkably. As covered in recent posts by the doctor on Sourcing Innovation and our own e-Sourcing Forum, we’ve had two events where we’ve saved over 20M on two projects of roughly 80 Million and 110 Million, respectively. We also find that we do hit the industry average of 12%+ above and beyond e-Auction savings alone when we apply the technology.
Yakko It must be hard to use. You need a team of PhDs to drive it, right?
CEO Not at all! It’s quite easy … your average intermediate buyer can drive it very successfully after just a few hours of training. You create the constraints using wizards and english sentence fragments. You can import the cost data from Excel or from your e-RFX. You can create a new what-if scenario by copying an existing scenario and changing only what you want. Your power-users will teach themselves to be experts in the tool in a matter of hours. I bet even you could use it Wakko.
Wakko But I don’t know how to do Com-bin-a-tore-e-ul Op-ti-my-za-shun!
CEO You don’t have to. Our tool does all the heavy lifting. If you can fill in a spreadsheet, use drop downs, and enter numbers in web-based text-boxes, you can use it. It’s really that easy.
Wakko Wow!
Yakko And what about SRM. Is that easy too?
CEO As you would say, yassuredly.
Dot So what’s it do?
CEO It’s still in development, and we’re aiming for a late 2008 / early 2009 release, but what it’s going to do is streamline data capture and sourcing processes for the buyer and supplier alike. The first addition to our suite is a new supplier self-registration portal, backed up by a workflow-driven custom survey development tool. This pair of tools, the first for the supplier and the second for the buyer, is going to allow a buyer to define what information they need from every supplier, and then what information they need from suppliers in certain verticals and / or what information they need from suppliers who wish to supply certain types of products or services to the buyers. Then, when a supplier logs in and enters their basic information, as well as specifying the products or services they offer, they only have to fill out the surveys specific to them.

The survey construction tool, which will look similar to those who have tried our relatively new contract management tool, is based on the same underlying concept that the user should be able to define what fields, and meta-data fields, are of interest and allow the buyer to define what information they want, and how they want it. In addition, our survey construction tool, which builds on our RFX creation abilities, allows a user to define survey pages, and then makes uses of wizards to guide the buyer through survey construction. And, of course, all of this data is indexed, searchable, and easily managed. Furthermore, as with contract management, the buyer can define triggers on certain events (survey completion, changes to key data fields, etc.) and certain values (expiry dates, renewal dates, etc.) which will send off alerts or e-mails when certain events happen or certain actions need to be taken.
Dot Well, that sounds pretty common sense. A few companies have that already. How’s it different?
CEO What’s different is where we’re going with it and, most importantly, the approach we’re taking. We realize that the “R” in SRM stands for “relationship” and that is something that can not be accomplished with software-based tools alone. You can only have a relationship if there is interaction between the buyer and supplier on a regular basis. This means that there are only two ways a tool can help: enable communication or disable the roadblocks that prevent it. The most common roadblocks are the various tactical tasks that keep getting in the way, specifically, the tasks around collecting, organizing, tracking, and reporting on data.

Thus, in our view, a good SRM tool enables communication — and that’s why we’re building a new supplier portal, starting with our registration site — and centralizes all of the tactical data collection, organizing, tracking, and reporting in one location for the buyer — and that’s why we’re building a new supplier administration module, starting with surveys and scorecards, that is integrated with the rest of our suite, including contract management and meta-bid enabled optimization, which will allow the buyer to track agreements, expirations, certifications, insurance, and performance data in one place. Sometime next year, the tool will also allow senior buyers to define workflows around supplier contracts and interactions, which will guide the buying team through the organization’s best-practice supplier interaction processes. And we’re also building in new commodity-based classification hierarchies that will allow buyers to better segment their supply base and define hierarchical scorecards by commodity category and location to help them get a better view of total operational performance and how a supplier is impacting that.
Dot And it’s all going to be integrated in one platform?
CEO Seamlessly. Unlike our competitors, who have been on acquisition binges for the last decade, we built everything from the ground up on one platform, in one core language. That allows us to seamlessly integrate all of our products into one application in a way that most companies would envy. That’s why we think our SRM will succeed where many have failed before. It may not have all of the bells-and-whistles of some of the best-of-breed stand-alone products, but we believe it will have the core functionality that everyone needs, plus provide the advantage that you only have to deploy one platform. It’s the classic 80/20 rule — 80% of the functionality, for 20% of the cost, and effort, for our customers. When the full platform is released next year, we believe that the majority of customers will find that it does more than what they need. And that’s what we feel the market needs.
Yakko That’s a very interesting take.
CEO And a practical one. Most of the mid-market just needs basic functionality in sourcing and procurement to get through the day. There’s only a few Fortune 500 / Global 2000 companies that are advanced enough to productively use every bell and whistle you can imagine. We’d rather serve the 90% of the Fortune 500 / Global 2000, and, more importantly, the mid-market at large, who have been underserved for years due to the big-platform price tags that have traditionally put the traditional e-Sourcing platform solutions out of their reach.
Wakko I think I get it. 20% of the Fortune 500 would give you 100 companies, and it’s hard to get 20% of the Fortune 500. But if you got 10% of the Global 10,000, that’s 1,000 companies, and there are still 9,000 other companies who need a solution, and a lot fewer companies serving them.
CEO That’s right, Wakko. It’s about building a great company with a great tool that brings great value to, and enables, the mass market. That’s what we’re shooting for. And we think we’ll get there. And with that, I must get back to work. Have a good day.

 

The Road Tour will continue on Thursday.

 

The Sourcing Maniacs 2008 Vendor Tour Part VII: Emptoris

At this point in the story, I ask the Sourcing Maniacs to jump ahead and discuss their expedition to Massachusetts for Empower and what they learned.

This is a long post, since the maniacs love to go on and on and on at times, so I’ve broken it up into Preamble and Discussion. If you’re short on time, you can skip the pre-amble, which doesn’t have a lot of content.

Preamble

 
Guys, if I may interrupt, can we jump ahead a little bit?
Yakko, Wakko, & Dot startled, probably forgetting I was even in the room as I’ve been rather silent to this point during the recounting of their massive summer road tour
Wha …
Dot You’re still here?
the doctor Of course! I’ve been listening intently to your story.
Wakko That’s right! We were telling you the story of our summertime blues …
Yakko I’m gonna raise a fuss, I’m gonna raise a holler
About a workin’ all summer just to try to …
the doctor Yakko!
Yakko Yes?
the doctor Can we jump ahead in the story to where you return to Massachusetts in your quest to sneak into Empower?
Dot I thought you wanted to here about our journey as it happened.
the doctor I do … but I just want you to jump ahead and tell me about your recent trip back to Massachusetts, because I know Emptoris is on everyone’s mind these days … and don’t you want to fit the “E” in at an appropriate place? Besides, as soon as you’re done telling me about your recent side-trip, we can return exactly to where you are now in your story.
Dot Promise?
the doctor Yes Dot, I promise.
Wakko? Wakko!
Wakko just lit four roman candles that he pulled out of his backpack and he is starting to juggle them.
You need to put those out now!
Wakko But juggling candles helps me focus!
the doctor But those are Roman Candles!
Wakko So?
Yakko & Dot They explode!
Yakko and Dot quickly grab the candles from Wakko and snuff them out.
the doctor So, can we jump ahead a little bit? Does it make sense?
Wakko Cents … don’t you need copper to make those?
Yakko Wakko!
Yes, doctor, I think it makes sense.
the doctor Then take it away!
Dot Wow, Vinimaya was awesome!
Yakko I never knew you could integrate more than one catalog in one view before!
Wakko … and simultaneously bring up every vendor of baloney in the world with their current pricing and get the best possible deal for your money today! I’m hungry …
Yakko & Dot You’re always hungry! Didn’t you just eat an entire Boston Cream Pie?
Wakko … and it was yummy! …
Yakko Look … way up ahead … I think that’s Pinky and the Brain!
Wakko I think so too!
Dot Let’s hurry!
the maniacs pick up the pace …
soon after, Pinky and the Brain round a corner
when the maniacs round the corner, they see Pinky and the Brain enter a resort ….
they approach … a guard is guarding the door
Dot Quick! They’re in there!
Guard in a French accent
Halt! No en-tray for yoo!
the maniacs come to an abrupt stop
Dot Do I know you!
Guard Yoo furry little hamzterz again? Yoo are not welcome here either!
Wakko We’re not hamsters!
Guard But yoo still zmell like elderberriez, yoo pointy-eared Ratatouilles!
Yakko What are you doing here?
Guard I go where dey send me!
Yakko What do you mean?
Guard I work for RAG … Rent-A-Guard!
Now go, or I shall taunt yoo again!
Yakko Let’s go … this guy is still crazier than us!
Wakko But …
Yakko We’ll have to find another way to find out what’s going on with Emptoris.
Dot But … Pinky …
Yakko Maybe we can catch them on the way out.
Guard I make fun-nee facez at yoo!
Dot OK … I’m getting weirded out …
Wakko Wakko starts making funny faces back
Pzzzt!
Yakko Wakko! Let’s go.
  The maniacs take their leave.

 

Discussion

the doctor So, you didn’t get into Empower? Did you lean anything? Is there a point to this story?
Yakko We did overhear a few conversations at the local restaurants …
the doctor So, nothing more than rumors then …
Dot Some we heard a few times …
the doctor Well, with respect to those that you heard more than once, did you overhear anything that is more informative than what I already read on Spend Matters and heard from attendees?
Yakko Spend-What now?
Wakko Cost Matters, dude! It’s all about getting as much as you can for whatever you’re selling! It’s all about the mighty dollar!
Dot After all, it wouldn’t be Prada if it were cheap now, would it?
the doctor OOO-Kay … back to topic … let’s discuss what my readers probably already know and see if you have anything to add to it. Sound good?
Wakko Of course they sound good! They’re Bose speakers!
the doctor learning quickly that interrupting the maniacs does not lead to predictable results
Let’s start with the numbers. Any idea how accurate the headcount numbers reported on Spend Matters are? In other words, does Emptoris have almost 450 people, with 150 staff members in engineering and QA?
Yakko I never heard anyone at the local restaurants talk about headcount numbers.
Wakko They were more concerned with losing their shirts, though I don’t know how you lose something that you wear snugly around your body.
the doctor I think they were using a metaphor to refer to the current economic crisis, Wakko.
Wakko Wakko looks … thoughtful.
the doctor It’s unfortunate that you can’t add anything. I’d like to know more about the current R&D breakdown, and, in particular, QA vs. maintenance and support of existing products vs. development of new products vs. mid-term to long-term research?
Yakko Why?
the doctor 150 is a large R&D organization, esprecially in this space. If I had that many people, and they were the right people, I could do some great things. And the more they have on new development and mid-to-long-term R&D, the more you can expect from them in the future.
Yakko After our road tour this summer, I don’t know what to expect anymore! I used to think the solution our former employer developed was very comprehensive and kicked-ass … but now I know it only solved a small part of the problem and that there’s a lot more to sourcing than I thought, and a lot of new solutions out there to help companies address their problems.
the doctor That’s right, Yakko. It’s a wide world of sourcing, with great tools to help you if you know where to look. Let’s move onto the new developments coming down the pipe that Emptoris released details on at Empower.

I have gathered the following from Spend Matters alone:

  • better attachment handling
  • an enhanced notification & alerting framework
  • an updated preliminary bidding interface as well as optimized auctions
  • incremental awards capability
  • ad-hoc reporting capabilities that plug into Microsoft Excel
  • embedded domain knowledge

and I must say that, with the exception of the third and sixth improvements, they don’t grab my attention. We’ve known how to handle attachments for over a decade now, and open source content management / document management solutions with extensive attachment support have been available since early in the decade; if the architecture properly accounts for events, it’s trivial to send off a notification or trigger an alert on any event that occurs in the system; just about everything plugs into Microsoft Excel these days, and has for years; and incremental awards capability is a pretty logical product extension.

That being said, if the domain knowledge that was embedded was extensive, good, and guided the workflow … that would be incredibly useful to your average buyer and if the optimization was tightly integrated into the auctions, that would seriously rock. However, the later is much easier said than done. So, needless to say, I’m curious as to how far they have progressed down that road.

Can you add anything to this?
Wakko When I was hiding in the foliage …
the doctor You were … never mind … continue …
Wakko I heard a couple of men in suits talk about the new “drillable dashboards” and how cool they were. How they thought they’d be able to drill around their reports in real time and find hidden opportunities and then export the data to Excel and play around some more. They said it’s much better than the reporting they got when they first bought the solution.
the doctor A couple of my sources mentioned that too. I hope they did more than that. First of all, as I’ve said again and again, dashboards are dangerous and dysfunctional as they can give you a false sense of security. Secondly, with a spend analysis solution, which is one of the many solutions Emptoris provides, you can not only build your own “dashboard” reports, but actually drill around the entire data set in real time.

I was hoping that the dashboards were quick access points into their SRM application, since that’s the one place I see them being incredibly useful, and was hoping that you’d be able to provide some clarification.

But c’est la vie. Anything else?
Dot When I was pretending to be a waitress, I heard them talking about something called spend desktop intelligence.
the doctor The Prophet (of Spend Matters) mentioned that too, but I’m fuzzy on the details. Are they packaging up their best practices and market insights that they would have gained from working with their customers across America and Europe, and maybe trying to leverage it the same way Ariba is apparently realizing that it needs to leverage it’s category expertise?
Dot I don’t know. They mentioned how great it was that it worked with Excel and supported more ad-hoc reporting.
the doctor That makes it sound like its just an improved reporting tool, which it may be based on a few things I heard. But I hope I’m not getting the full story and that it’s more than that, especially since it’s been reported that they have a Center of Excellence with over 65 staff that speaks ten languages and works with customers across North America and Europe. With that many staff, they would be developing significant market and category expertise, just like the Ariba Supply Watch team, from working on the large number of customer projects that such a team could support over the course of a year. I want to see them package that knowledge up and build a tool that instantly puts it at their customers fingertips. That would be desktop intelligence!

Anything else?
Yakko I heard a couple of suits talking about something called agile contracting and whether or not the simultaneous amendments and mass amendments would be useful.
the doctor Well, if by simultaneous amendment you mean the ability for multiple parties to simultaneously collaborate in the drafting and rapid approval of a contract amendment, which is what I believe it is, that is very useful. But what do you mean by mass amendments?
Yakko I think it’s the ability to amend multiple contracts at once.
the doctor Well, that scares me a little.
Yakko Why?
the doctor Most amendments to a contract need to be mutual … between both parties. That means you can’t just go modifying a contract, once signed, willy-nilly, and that you definitely can’t go modifying a group of contracts willy-nilly … unless you want to give your legal advisor a heart attack. Now, it’s true that some modifications can be made unilaterally, but they are usually restricted to change of address, etc. Although the feature could prove to be quite useful in larger organizations during contract template maintenance and update, which is a huge task in itself if you have the same terms and conditions across multiple types of contracts, I can see it scaring legal council, who would thus be adverse to using it, especially if they think there’s a chance they could overwrite a live contract. Let’s hope they put out some really good messaging on this capability.

Anything else?
Dot Spend enrichment …
the doctor Yeah … I’ve heard this from multiple sources … but I’m going to cut you off at the starting line with this one. Spend enrichment is child’s play with a good spend analysis system (and if you don’t immediately see why, read the wiki-paper and the spend analysis posts on my blog), and doesn’t need much discussion.

What else?
Yakko Performance visibility within Contract Management …
the doctor Now that would be cool … especially if they tightly integrated their SRM application within their CM tool and, for any supplier, you could see how well they were doing at a glance, where they were weak, and what needed improvement … and could take immediate action. And if you can see their invoice accuracy, and verify that you are not overpaying, and thus realizing your negotiated savings … that’s useful. What were you able to find out about it?
Yakko Nothing.
the doctor Nothing?
Yakko They left the restaurant just as they started that conversation.
the doctor That’s unfortunate … as I don’t have any details on this either, though I’m told by multiple sources it’s coming. Anything else? Anything?
Wakko Something about A T K.
the doctor Do you mean AT Kearney?
Wakko I think so.
the doctor What did you hear?
Wakko Something about AT Kearney using Emptoris Spend Enrichment exclusively for all of it’s opportunity assessments.
the doctor Are you sure?
Wakko I think so. Why? Is it important?
the doctor Are you kidding? If you heard right, that’s huge!
Dot, tell me what you heard about what they are calling “spend enrichment” … their definition must be more extensive than mine if they’ve won over AT Kearney.
Dot Something about building in an item knowledge base and vendor knowledge base …
the doctor And???
Dot I got called to another table. I had to keep the waitress act up, you know.
the doctor That sucks. I’d love to know how they won AT Kearney … and to what extent AT Kearney is deploying them … I’d bet that to be one of the most important revelations to come out of Empower … after all, with the exception of optimization-based auctions, just about everything else sounds like logical, incremental, expected upgrades to their existing suite. But whatever they did to get the undivided attention of AT Kearney is certainly worth investigating! It’s too bad they won’t talk to us …

Anything …
Yakko They’re hoping to have their next release out soon.
the doctor I’ve heard that too. Did you overhear what’s going to be in it?
Yakko Dutch reverse auctions, dashboard intelligence, and better spend analysis.
the doctor Sounds about right. My sources didn’t provide much insight here, which is probably good since future development plans are always subject to change anyway. Did you hear if they are going to take whatever they have for auction-optimization up a notch? That could be so cool!
Yakko I don’t know. I didn’t overhear anyone talk about optimization at all.
the doctor That’s depressing. I know that I’ve said before that I don’t think it’s the best solution on the market, but let’s face it, you don’t need the absolute best optimization solution on the market to save big money the first time you apply it to a category … a good optimization solution, which they appear to have based on the details they released in a Spend Matters Post (Emptoris Optimization: Setting the Record Straight) and other publications I’ve been able to dig up, will save you a small fortune (especially if it is significantly more affordable than the best solution out there, as there is generally not that much of a difference between a good, solid, optimization solution and a great one, which generally only saves you additional dollars on significantly complex or specialized categories), and from what I understand, they’ve made some definite improvements, at least on the usability front, over the last couple of years and I bet there’s still a lot of categories their average customer could save 10% (or more) on. (And, these days, that’s a lot of money!)

But what should I expect from the market? The true leaders get it, and the laggards, which, apparently, constitute the majority of the space, don’t. I guess I’ll just have to keep educating them that optimization is easy, that they can do it, and that they can save money … significant money … and this is doubly true if they are already using a solution (like Emptoris) that has optimization. (Even though I’m starting to feel like Rob Schneider in an Adam Sandler movie.) I hope that, for the sake of so many companies which are in unnecessary financial jeopardy, it doesn’t take me much longer.

Anything else?
Yakko Not really.
the doctor Dot?
Dot No … I was really much too busy having fun playing waitress …
Wakko I got so comfortable in the foliage, I feel asleep.
the doctor So you didn’t hear anything more than I did. Pity. Because what I’ve been told, by attendees, and heard over the last few months doesn’t go much beyond the coverage on Spend Matters, the news sites (Supply and Demand Chain Executive, ITWeb, and their own Emptoris Connect news site), and the Analyst sites (like Forrester, AMR, and IQPC). And my readers want more than that. They want deep insights into problems, solutions, and vendors who can help them. Not marketing fluff or the superficial coverage, which is often no more than parroting press release, that most of the news sites seem to be content with these days.

On a different subject, did you meet up with Pinky and the Brain while you were in the area?
Dot Pinky came to see me …
the doctor And?
Dot He told me some funny stories.
the doctor Any contain any insights as to what’s going on with the vendor world?
Dot Not really. They were just about the Brain’s latest attempts to take over the sourcing world.
the doctor Tell him to share them with me! It’s been a while since I’ve heard from him.

Well, if there’s nothing else, I should let you get back to your story.
Yakko Where were we?
the doctor Reviewing notes.
Oompa Loompa Doom-pa-dee-do

 

The next part of the story continues after where we left off in Part VI.

Empirical Proof That Saving Is Easy

Earlier this month, Supply Management . com ran a story on how a “21-year old student saved Dow Corning 370,000”. Gareth Davies, who is currently studying purchasing and supply chain management at the University of Glamorgan, spent a year at Dow Corning in Barry, Wales as part of his training where he renegotiated a variety of contracts making savings worth around 20 per cent.

That’s right, a 21-year old student kicked-ass in his first outing. Imagine what you can do as a pro if you take Gareth’s simple advice and take the right approach to get the right deal, using the right tool in the right circumstance! Knowing where to start, what tool to use, and how to use it is a great edge … and if you have optimization and spend analysis in your toolkit, the savings, even in today’s economy, are there for the taking. (And if you need to brush up on your skills, I’d recommend checking out Next Level Purchasing’s (now the Certitrek NLPA) SPSM curriculum. It might be for you.)