Category Archives: Market Intelligence

The 6 Days of X-asperation: Day 1 – Questions to Ask Every Vendor!

Yes folks! the doctor just keeps on giving! In addition to the specific questions on Spend Analysis, e-RFX and e-Auctions, Decision Optimization, Contract Management, e-Procurement, and e-Payment functionality that you should ask your prospective vendor before you even think about making any commitments, as x-emplified during the 12 Days of X-emplification, there are also some general questions that you should be asking each and every software vendor you are approaching for an e-Sourcing or e-Procurement Solution. In this post, I’m going to outline what they are and why they are important. Then, in the next five posts, I’m going to outline the full answers that you want to hear from your vendor. (And that’s why this is the X-asperation series, because if most vendors weren’t exasperated after the first series, you can count on them being exasperated after this one. But that’s a good thing! Do you really want technology that hasn’t been updated since 1999?)

Feel free to thank me, because I know for a fact there’s quite a few vendors out there that aren’t going to thank me for yet another set of questions that they, unfortunately, don’t always have good answers for. (Let’s put it this way, after this series, I’ll be even more relieved that there just isn’t enough money in waste management in the part of the world I call home to attract a certain breed of waste manager.)

1. What do I have to do to get a good handle on how to make effective use of this technology, and for an organization of my size, how long is it going to take?

Chances are that whatever you need to do, you’re not the first company to need to get it done, or the first company to set about to do it. As such, even your best estimates are going to be just that – estimates. They might be close. They might be way off. But if the vendor has a sizable customer base, cares about it’s customers, and works with them, then it will have a good idea of how long it’s really going to take to implement the technology from end to end – in terms of software implementation, data population and cleansing, and project management.

Furthermore, even though most projects should be doable in a matter of weeks, the reality is that many e-Sourcing and e-Procurement systems actually take 3, 6, or even 12 months (or more) to implement because the buying organization isn’t (fully) prepared. Remember, the vendor can only get the work done in an efficient time-frame if you know where your data is (and have negotiated the required access with IT), your processes mapped, and the people on hand with the knowledge to quickly answer data and process questions as they arise during the implementation. If the vendor is any good, the vendor will understand exactly what they will need from you to implement the system in the time-frame they quote and, more importantly, they’ll be able to tell you exactly what you need to do to get there. (If they can’t tell you precisely what data and processes you need, and how to find that data or implement the processes you need, keep looking. You don’t want another expensive piece of software nobody uses. You want a solution, and that solution needs to include the requisite services, training, and knowledge transfer.)

2a. How much functionality is my organization realistically going to be using in 12 months?

In this space, one of two things ultimately occurs, either an uninformed buyer asks for pie-in-the-sky functionality because they read some BS propaganda somewhere that said they absolutely need it, or, more often than not, some uninformed or FUD spreading salesperson tells them they absolutely need it (and that only the company they represent can offer it). The fact of the matter is, you usually don’t need more than the basics during an initial implementation (as long as the key features addressed in the early posts in this series are there) to be productive and get a good initial ROI from the system. (You’ll eventually want the more advanced features, but you won’t be ready for them right away, and implementing them too early can sometimes do more harm than good!)

Furthermore, how many tools are there with more than a few dozen features where you regularly use all the features? You’re probably familiar with Word. Word 2000 has hundreds of features. The same holds true for Word 2003. Word 2007, like every version before it, added over a hundred features. How many have you used, ever? And, more importantly, how many do you use regularly? A small fraction, on both counts. It’s not how many features the tool has, but how many features you really need. Therefore, it’s also important to ask:

2b. How much functionality do I really need?

Chances are, not as much as you think. (As my X-emplification series attempted to point out – most of the time it boils down to a small set of key features.) Map your processes and pains and then, with the help of an independent consultant if necessary, map these to basic system and software functions. What falls out is what you need, what’s left, you probably don’t – or at least you don’t need it right away. More importantly, make sure the vendor answers:

2c. And how does this functionality solve my #1 pain today, which is X?

If you have a major pain point, like maverick spend, lack of spend visibility, or a paperwork nightmare due to compounding compliance and regulatory requirements in Europe that are driving you batty, make sure the vendor is able to clearly explain how their tool will solve that problem, how your buyers will use the tool on a daily basis to do the work they need to do, and how long it will take them to perform these common tasks that they need to do everyday. If the tool isn’t able to do what your buyers need it to do, when they need to do it, and do it significantly faster than they can do it manually, then it’s likely not the right tool for you.

3. How much training is my team going to require to effectively use the software? How long is it going to take them to absorb this training?

An enterprise software tool isn’t e-mail, word processing, or web searching. It’s not something you can expect the average user to figure out on her own, at least not in any reasonable time frame. Nor can you expect them to grok it from reading a manual. Let’s face it … supreme court opinions and the resulting in-depth analyses by legal scholars are children’s literature when compared to the average technical manual. If you want your people to be productive on the tool, they need to learn the tool, and for that they are going to need training. If the vendor has well-designed multi-media self-study courses, then your buyers will be able to do a lot on their own, but they’ll still need questions answered and demos that show them how to use the tool to do tasks specific to their organization. There’ll always be a traditional training requirement. Furthermore, the more features they have to learn, the longer you should expect that training to take. If a vendor representative is selling you a full suite and says training will take a day, he’s clueless or the suite doesn’t do anything. This will sometimes be a judgment call, but a good general rule of thumb is that for each major piece of functionality (or module), you should expect somewhere between half a day and a couple of days for a sufficient mastery of the basics. (Longer if the system is not user friendly.)

4. How much is this software REALLY going to cost me in the first year and each subsequent year?

Let’s face it, especially where a few traditional behind-the-firewall vendors are concerned (and the ones that offer you 50% + discounts in particular), the software cost is never the full cost of the system. In fact, with some vendors, it’s not even close!

In the traditional on-premise model, or the ASP hosting model (which should not be confused with true multi-tenant on-demand), the vendor quotes you a cost of a license to use the software for a fixed term, but that’s all the quote includes. When you go to buy, that’s when you find out that there’s also an installation fee (on-premise) and / or initialization fee (hosted ASP) to install the software and get it ready for daily use, which doesn’t include the initialization services fee where they load your data, users, etc. And let’s not forget about the yearly maintenance fee. And of course, when you need to install the first update, there’ll be an update fee to install the patches for you. And we all know that the training costs are never included.

If you’re lucky, it stops there. If you’re not, you find out that you were sold the “basic” version, but the functionality you really need is in the “professional” version or “enterprise” version and that you have to upgrade and pay a rather substantial upgrade fee, as well as a higher maintenance fee on the back-end. Then there’ll be a need for data conversion and enrichment services, which will cost extra. And of course, there’ll be more training, at additional training day rates.

But even if the basic version is enough, you might find out that you need bigger, better, faster, hardware – which can come with a hefty price tag. After you get the system implemented, you might realize there’s too much work for you to do to ready all of your projects on the new system and that you need to bring in some services professionals to augment your team. And so on.

A 100K system can end up costing you 1M* (or more) over the course of the first two years and your expected ROI of 10 can vanish seemingly overnight! If you don’t get the most honest answer of all to this question, stop the process with the vendor here and now. No matter how good the system might be, it’s not a solution if it costs you money. (After all, if it’s just labor savings, somewhere in the world there’s people in a developing country who’ll still work for pennies on the dollar. And they won’t ask for a 1M software system – which they probably aren’t educated enough to use anyway.) If you do think you are getting an honest answer, and all they are apparently charging you for is licensing and some standard services, then you should still make good and sure that they’ll incorporate explicit provisions in the contract that indicates that all of the services and updates needed to make the system work, are included in the license or maintenance costs – and not separately priced. Otherwise, you might find that the vendor changes its tune six months down the road.

*I’m not saying you shouldn’t pay 1M (or more) for a good e-Sourcing or e-Procurement suite, but that you need to make sure the ROI is there. If you’ve done your baseline and benchmarking and expect the solution to save you 5M to 10M over the timeframe where you spend 1M, then it’s a good deal. But if you do your baseline and benchmarking and the 1M system is only going to save you 2M, tops, I’d think twice about buying it. (Also, you’re likely only going to get this level of savings if it includes real spend analysis, real strategic sourcing decision optimization, or true end-to-end procurement cycle integration.)

5. You say you care about your customers and that you are going to provide great service. Prove it!

You should be able to choose from half a dozen references. The vendor should have a process to make sure all bugs are immediately logged, investigated, and incorporated into a release cycle. There should be a methodology to develop work-arounds or temporary patches if the functionality is critical. You should be allowed to go to the next conference or user meeting before you buy. The vendor should be more than willing to share the knowledge you need to answer each of these questions fully, completely and, if you missed any of these important questions, willing to point out what those questions are and why they feel that you need to ask the questions – without answering the questions for you. You want a vendor who’s willing to let you do your own research, confident that there’s a very good chance that you’ll come back to them.

6. Can I take it for a test drive or a short term lease?

The reality is that you don’t want to be dropping a huge bundle of dough on an integrated solution on just a hope and a prayer. It’s best to spend some time with a very modest commitment of dollars and resources to test drive the product in the context of your projects and your needs. Get a flavor for what it can do, and how much it can save you. You can always dive in and buy the whole kit-n-kaboodle later. (The vendor’s not going to say “sorry, you can’t buy any more – we’re sold out”. It’s software, not limited edition collector plates.)

Furthermore, until you’re able to baseline not only how well you’re doing now, but benchmark how much the proposed solution could realistically reduce the baseline over time, you won’t be able to figure out if the ROI is really there or not. And that’s what it’s all about, isn’t it?

7. Can I buy it or implement it in pieces?

Finally, even if you do decide that enterprise suite E is the solution for you, you still want to be able to roll it out in manageable phases or chunks. Your users aren’t going to be able to lean an extensive suite overnight, so even if the vendor was true multi-tenant on-demand and could get it up and running, with your users and key data, in a matter of days, it wouldn’t help you.

So come back tomorrow as we put the e-RFX & e-Auction vendors through the wringer again by diving into the questions above!

Is This The Year Austin Tetra Breaks Out?

Austin Tetra has been relatively silent since their acquisition by Equifax a little over a year ago. And it’s not because Equifax is in a hurry to dissolve the name (unlike D&B who appear to be trying to dissolve the Open Ratings brand as soon as possible), but because they want their new division to be well prepared with a solid offering for the B2B and B2C communities before they re-launch the service offering.

the doctor had a chance to catch up with the business leaders of Austin Tetra, Equifax’s commercial business unit, last month and it sounds like they have been making a lot of progress over the last year. They’ve been busy helping Equifax build a unique global identification system that will compete against the as-to-now relatively unchallenged DUNS # of D&B and Austin Tetra has been making good progress integrating the US, Latin America, European, and other global databases in Equifax’s arsenal into one universal database with one universal classification scheme – a task they expect to complete in the first part of this year.

They’ve also been making great strides in their service offering that pulls business and consumer data together for businesses that need to deal with small businesses on a regular basis and need to determine the risk, especially where the financial stability of the business often comes down to the financial stability of the owner. They can now, for a given small business, pull together the credit history of not only the business, but the owners as well and give you a combined risk or credit score where they have the data integrated.

They’ve also been making strides in compiling their supplier master and customer master databases where, for any given business, they can give you its performance history both as a supplier and as a buyer, as well as their employee master, where they can tell you how much the individual earned at his or her last job if his or her previous employer submitted information to the TALX database (another recent Equifax acquisition) – which has income, salary, and compensation information on approximately 150 M employees in the US.

They’ve also made great strides in their balanced scores, which aren’t just about diversity anymore. Their blended financial / risk scores now take all of the following information into account:

  • public filings (which they monitor and append regularly)
  • denied / debarred party tracking
  • blended score on individual & business credit history for small, private, businesses
  • customer credit risk based on past payment trends
  • diversity information
  • predictive supplier business failure score
    the chance of failure over the next 12 months using all available information

In addition, they’ve been extending their web services platform to make the data instantly available through customers’ current platforms and their current customers are now able to access all this data through multiple platforms that include Oracle, Siebel, and SAP.

In other words, now that they have the support of a 20B business behind them, they’ve been making great strides. However, given that they still believe in the “crawl-walk-run” philosophy when it comes to development and release cycles, they believe that it will likely be the middle of the year before everything is complete and tested (by current customers) to their liking, and hence likely the summer or fall before they attempt to make a big media splash. But that doesn’t mean that, if these are the types of solutions that you need, that you can’t start talking to, and evaluating, them now – or that, if these are the types of solutions that you might need down the road, you can’t keep a watchful eye out to see what they announce this year. Regardless of what happens, now that D&B is about to have a major competitor, I bet you’ll see a lot more innovation in this space over the next few years as the new contender in the space begins its fight for dominance – and that’s a good thing.

Supply Management in the Decade Ahead [2008] (Collected Links)

the doctor Takes His Turn With the (Supply Management) Magic 8-Ball – Part II

As I said yesterday, everywhere you look, someone is summarizing the best of 2007 or making their predictions about the forthcoming year on a technology-by-technology or vendor-by-vendor basis. However, since the nature of futurism is that it’s virtually impossible to get the micro-level details correct, I’m instead asking the Magic 8-Ball what’s in store for a dozen vendors in the year ahead. I’ll continue to indicate whether or not I agree, but remind you that these will just be the doctor‘s best guesses. The only true way to see what the future holds is to wait for it to be revealed.

Enporion
Question: Is this the year Enporion breaks out of the utility space with their e-Procurement offering?
 8-ball : As I see it, yes
Question: Will they get more than a handful of new customers outside of the utility space?
 8-ball : Ask again later
Question: Is this the year Enporion innovates a new solution that will finally grab them some attention?
 8-ball : Signs point to yes

I think, desperate for a solution that has actually been developed or improved upon in the past year, those companies not ready to adopt an open source solution like Coupa but that still want a new e-Procurement solution will finally take a closer look at Enporion. However, they have a history of being associated with the utility space, so unless they make a concerted, focussed effort to show that they have expanded beyond that space, it could take a while before potential customers see them as a general purpose procurement provider. As for innovation – this could be their year. They’ve been developing all their solutions in house for years, have adopted a process-driven visual model development platform solution that allows for rapid application development (once the platform is sufficiently mastered), and they have been working with some pretty big customers to try and develop fresh new applications. They’re definitely another company to add to the watch list.

i2
Question: Is this the year i2 breaks back into the sourcing scene?
 8-ball : Reply hazy, try again
Question: Is there new AGILE platform strategy a good move?
 8-ball : Most likely

The fate of i2 is another toughie. We’re certainly well beyond the point where any company is going to spend millions of dollars on a multi-year engagement on the promise of a big payoff in the future when they’re hemorrhaging cash today. Thus, an AGILE strategy where a company can start small on a six figure budget to attack their biggest problems first is certainly going to make i2 more attractive to the marketplace. Plus, even though i2 can’t make them public (or at least can’t make them public, yet), I know they’ve gotten a couple of big wins under their belt in the past year and that they’re definitely ready to play in the manufacturing and industrial sectors.

Iasta
Question: Now that Ariba has taken out Procuri, is this Iasta’s year to shine?
 8-ball : It is decidedly so
Question: Will Iasta continue to develop new offerings, as they did this year with Strategic Sourcing Decision Optimization?
 8-ball : Without a Doubt
Question: Will they become a serious competitor to Ariba and Emptoris?
 8-ball : Better not tell you now

Iasta has been essentially doubling its customer base and revenues for six years, offering new functionality every year since its inception, and has recently advanced beyond just being another suite vendor to a suite vendor with innovative best of breed offerings in two key areas – spend analysis and decision optimization. Plus, rumor has it they are tackling even harder problems in their efforts to become a truly innovative player in the space.

MFG.com
Question: Will MFG.com get the growth they’re seeking in 2008?
 8-ball : Concentrate and ask again
Question: Will the Sourcing Parts Acquisition Pay off this year?
 8-ball : Most likely
Question: Will they breakout among companies looking to improve their China sourcing operations?
 8-ball : As I see it, yes

Let’s face it – new supplier discovery is hard, but a trustworthy service that has detailed information on potential suppliers along with buyer ratings can make it easier. This alone should insure that MFG.com continues to grow. As for whether or not any new innovations from MFG.com will help them, that’s a good question. Even though its free for buyers, there’s a big difference between a basic free sourcing solution and a best-of-breed enterprise solution. Although the free tools may help smaller companies, its likely that they won’t be enough for larger buyers.

Oracle
Question: Will they ever get Fusion, now delayed until 2009, working?
 8-ball : Outlook not so good
Question: Will they have a competitive sourcing / procurement offering in the next two years?
 8-ball : Don’t count on it

I think the magic 8-ball is pretty close here. I don’t think they’ll have a competitive sourcing or procurement application this decade, but given the resources at their disposal, there’s a good chance they’ll eventually get Fusion working. I just wouldn’t count on it – and I definitely wouldn’t buy on promises alone.

SAP
Question: Will SAP pull it together this year?
 8-ball : Very doubtful
Question: Before the decade is over?
 8-ball : Cannot predict now
Question: Will they at least put some effort into updating and maintaining Frictionless until they pull SAP SRM together?
 8-ball : My sources say no.

The magic 8-ball might be on a streak here. SAP is another slow moving behemoth that is not likely to turn on a dime, or even the large hadron collider. It will likely be quite a while before they have a best of breed solution.

Vinimaya
Question: Is the Vinimaya Network the future of Supplier Networks?
 8-ball : It is decidedly so
Question: Is this the year they breakout?
 8-ball : Reply hazy, try again

Vinimaya is a very innovative and progressive solution when compared to many of the other supplier networks out there. As such, they face the same issues BIQ is facing – a market that might not be ready to accept that there might be much better solutions than the solutions they are using today and give Vinimaya an honest evaluation. However, when the time comes that the majority of the market is ready to accept a next generation supplier network, it’s very likely that Vinimaya will be a major player.

the doctor Takes His Turn With the (Supply Management) Magic 8-Ball – Part I

Everywhere you look, someone is summarizing the best of 2007 or making their predictions about the forthcoming year on a technology-by-technology or vendor-by-vendor basis. However, since the nature of futurism is that it’s virtually impossible to get the micro-level details correct, I’ll instead ask the Magic 8-Ball what’s in store for a bakers dozen of vendors in the year ahead. I’ll also indicate whether or not I agree, but point out that these will just be the doctor‘s best guesses – not statements of fact.

Aravo
Question: Will Aravo finally hit its groove with its new Sustainability Program Management Platform?
 8-ball : Signs point to yes
Question: What about their new blog – 2Sustain?
 8-ball : Outlook Not So Good

Aravo has a good supplier information management solution and a good sustainability management solution with its ability to manage massive amounts of data on a web-based platform where all data can be maintained through a centralized interface that allows each relevant party to maintain its own data. They certainly deserve to take off, either on their own or through a strategic merger or acquisition, but its hard to say when, or how, that will happen. As for the blog, due to the lack of regular posting, I don’t think it will be a big hit – but it will be a good tool to get the message out about what Aravo is trying to accomplish to potential customers.

Ariba
Question: Is this the year Ariba gets innovative?
 8-ball : Very doubtful
Question: Will they successfully integrate the best of Procuri?
 8-ball : Better not tell you now
Question: Will they at least support Procuri through 2009?
 8-ball : Don’t count on it

So, does the 8-ball have it right? Maybe. As far as the doctor is concerned, Ariba hasn’t been truly innovative in a long time, and even though Procuri had innovation in them, it’s a reality that most acquisitions usually result in the loss of a substantial amount of the innovative talent in the company being acquired, even if the acquiring company tries to keep them. Furthermore, even if they do support Procuri for longer than everyone is expecting, it’s probably safe to say that the integration of the best features of one platform into the other will take longer than predicted, since that is the industry norm. But regardless of what happens, you can be sure they’ll be putting out press releases at least every other week and getting lots of media attention.

BIQ
Question: Is this the year that people finally understand the difference between static reporting on data warehouses and true spend analysis?
 8-ball : Concentrate and ask again
Question: If it is, will BIQ finally break into the limelight?
 8-ball : Yes – definitely
Question: If it isn’t, will BIQ still continue steady growth?
 8-ball : You may rely on it
Question: Will BIQ continue to innovate in spend analysis?
 8-ball : It is certain
Question: Will BIQ finally get the media / analyst attention it deserves?
 8-ball : Outlook not so good.

I hate to say it, but I think the 8-ball is on one heck of a roll. BIQ is likely to keep innovating, likely to be one of the few companies that actually understands what spend analysis is, and one of the few companies that actually offers a real spend analysis solution. However, it’s also likely that, thanks to the confusing B.S. being spread by most of the vendors in the space, that this will not be the year where the average buyer realizes what the difference is between static reporting on data warehouses and true spend analysis (despite my efforts). It’s also likely that the media and so-called analysts will continue to ignore BIQ in favor of the larger vendors with the larger marketing budgets. However, once someone sees their solution, I predict that, at least in the indirect space, they’ll win more deals than they lose and continue to grow.

Co-exprise
Question: Now that Co-exprise has started promoting its new solution, are buyers going to accept it?
 8-ball : Most likely
Question: Will the next release contain all of the key requirements of spend analysis for direct sourcing?
 8-ball : Signs point to yes

I’ve reviewed the Co-exprise platform twice – and I’m impressed with what they’ve been able to do in a relatively short time. They don’t show any signs of slowing down on the development front, so it’s more likely than not that they’ll continue to innovate and achieve the goals they’ve laid out. Also, due to the lack of integrated PLM and sourcing solutions in the direct sourcing space, I think many buyers are starving for options (since the only other option for some of these companies is Siemens PLM – which was the UGS / e-Breviate solution), and that a fair number will accept it – or at least give it a shot.

Emptoris
Question: Is this the year that Emptoris gets innovative?
 8-ball : Concentrate and ask again
Question: Is this the year that Emptoris makes another acquisition?
 8-ball : Reply hazy, try again
Question: Is Emptoris going to go public this year?
 8-ball : Signs point to yes
Question: Any chance that they’ll succeed in luring away droves of Ariba / Procuri customers and possibly become the number one player in the next year or two?
 8-ball : Cannot predict now

Well that’s a pretty non-commital 8-ball – but it’s probably right. With Emptoris, you just never know.