SaaS Management Solutions Start to Eat Services Procurement Tech A+

More specifically “vendor management systems” (VMS) that are all about the billable hour.

As The Prophet asks, what happens when that billable hour becomes an SOW (either to skirt worker classification requirements or because it really is a complex SOW) especially when consultants, managed services or outsourcing providers need to blend and leverage AI, tech, data and other capabilities to deliver an outcome? You get joint SaaS/[IT] Category (management) solutions that become the new new norm of solutions for taking on certain business functions. And they won’t look anything like today’s VMS or SOW solutions, and will, as The Prophet notes, likely be new generation of todays SaaS/IT Category solutions which will either blend in more services or merge with / be acquired by new-age MSPs that build the offering around the new tech, and not the old tech.

But what will these solutions look like? Good question (that The Prophet did not answer).

More importantly, as The Prophet notes, this convergence will raise a ton of questions.

• What metrics do you use to set up ideal outcomes in a blended services/tech/AI/data world?
• “What” is negotiated (hint: it’s as far from the billable hour or a weekly “team” rate as can be)?
• How do you capture and validate demand?
• How do you reduce contract risk (including indemnifying (or not) for IP considerations, given recent AI lawsuits)?
• How do you benchmark (drumroll please) an outcome?
• What happens when an outcome becomes continuous, a metered service (like telecom) so to speak?

These answers may or may not dictate what the blended deliverable looks like, as the developments are just as, or more likely, to be developed taking into account whatever regulations currently exist or get introduced around the services, data, technology, and/or AI utilized. Plus, the smaller players will likely try to build off of whatever is getting traction from the big players but in a more innovative, effective, and cost effective fashion. (Remember, the big players like to charge you way more than a service can be profitably delivered for. Case in point: spend analysis. Large engagements, which usually start with a massive data cleansing effort, require a lot of analysis and reports, and modern solutions, will usually get quotes starting in the 7 figure ranges when there are a number of mid-sized, niche, consultancies, that can usually do the same work, faster and better, for 250K or less. [Remember, analytics is one of the the doctor‘s area of expertise, he knows the vast majority of vendors, and talks with the best regularly. Solutions 10X better than anything a Billion Dollar Suite or ERP will throw your way cost 1/10 of what they did a decade ago — but we’ll save this rant for another day.] The point is, they’ll let the big players create a market around a new offering, and then swoop in with a better, more cost effective, alternative.

the doctor has to admit this is one area where the answer has not yet revealed itself, one of the few areas where he’s not sure what the first solutions will look like (beyond a blend of current SaaS tools pre-integrated with third-party data feeds, semi-dedicated personnel performing regular tasks, account managers monitoring progress, and consultants doing quarterly checkups and advisory), and how long it will be before new workforce regulations get passed that change how such services can be offered (or how workers must be paid).

It will be an area to watch, and the doctor bets that Andrew Karpie will be watching it closely, so be sure to read anything he writes about it. It will be the first shakeup the VMS industry has had in decades.

The Tech Office of the CFO is Coming … Finally A

Yes, it is.

And while The Prophet thinks the naysayers will call him a fool, all the doctor can say is, join the club! There’s lots of room … only a few of us have been correctly calling the future for almost two decades, and all of us who have been have also been called foolish, crazy, and worse. I’d rather be right than popular. At least I’ll be ready for what’s coming …

COVID started a big push into “FinTech” investments as everyone realized that no-travel, and even no offices, meant you needed online/SaaS payment systems, contract systems, financing systems (as you couldn’t walk into a bank), etc. The CFO slowly realized there was more to modern Finance Tech (FinTech) than online spreadsheets. Plus, as they realized they needed visibility into Legal and Procurement, they wanted companion contract, risk, and P2P systems and/or customized interfaces for them.

As a result, we will start to see the rise of Finance suites that, as The Prophet points out, will integrate:

• FP&A
• AR & O2C
• AP
• Treasury
• Payments
• SCF
• Expense Management
• Commodity Management
• Risk
• Corp Dev / M&A
• P2P

as well as

• Contracts
• Spend Intelligence (with all data/reports updated at least monthly)
• Inventory Management (with visibility into overhead costs vs. depreciation)

Moreover, as The Prophet has pointed out, each of these areas is very complex. Spend Matters considers AP alone as including the following areas: core AP workflow, dynamic discounting, e-invoicing compliance, fraud detection and prevention, supply chain finance, tax compliance, tax management and working capital management.

When you get into AR/O2C, you then get into PO receipt and tracking, shipment tracking and notification, invoice generation and transmission, invoice receipt acknowledgement, payment receipt, etc.

Expense Management may or may not include P-cards and/or virtual cards, and may or may not include catalogs, travel management, integrated airline or hotel bookings, app integration for auto-expense report generation (snap & go), etc.

Risk breaks down across multiple dimensions across supplier and supply chain risk, and for more information, see the doctor‘s Source-to-Pay series (especially Parts 15 to 20) and the first 9 parts of the doctor‘s Source-to-Pay+ series which are all on (primarily) supply chain risk.

Contract management breaks down into Negotiation, Analytics, and Governance, and each of these area has a lot of baseline functionality that is required (as covered in the Source-to-Pay series referenced above in parts 21 to 25).

And so on … it’s a mega-suite that goes far beyond your average S2P mega-suite.

However, before writing off the effort as too intensive or too expensive, one must remember that Finance is ultimately responsible for cutting the cheque, so they are going to want visibility into where the money goes and how it is supposed to be used. Not to mention, sometimes the only authority they need to cut the cheque is their own, so it might be an easier sale to sell or joint-sell to the CFO as well as another C-Suite exec. So a great FinTech Suite could be the easiest sell a new back office tech start up or aggregator could have!

Data, Data, Data A

The Prophet has said that data will be your best friend in procurement and supply chain in 2024 if you give it chance.

And then asked Is 2024 the year you final opt to invest in [data] at the level you should?

Because it should be. As The Prophet also said, if for nothing else, do it to avoid being made the business function where fingers point when things go wrong, which they most definitely will if you don’t take every step you can make sure they don’t (and they still will, but you can be prepared for it and ensure that the disruption that happens is as minimized as possible). However, as I noted in a comment on the original article:

It’s not just better data analysis systems, it’s better data … chances are, if you haven’t been applying proper data governance, and let’s face it, there’s a 99%+ chance you haven’t, you need cleaner, richer, better organized data.

Also remember that’s not as easy as just buying some AI-based auto classifier / enrichment tool that will enrich your brake shoe database with the latest Girotti Oxfords and Montcler runners or take your incorrect supplier abbreviation and classify a denied party as perfectly safe when they are known to source from organizations that use slave labour and supply to militant groups and terrorists. (Don’t think it won’t happen if you fully trust an AI-based auto-classifer/recommender engine. It will. It has!)

Trusted data sources, such as those you get from data enrichers like Tealbook or validators like Apex Analytix will go a long way, but you will still have to manually review and fix those that can’t be auto-matched with very high accuracy (high accuracy is good enough for spend analysis, it’s not good enough for regulatory compliance or risk prevention).

And remember, have fun fishing the data lake you’ve neglected since you literally installed your first database. You never know what you’ll catch. While you’ll hook a lot of old rubber boots on your lines, you may also haul up a solid gold bar! Remember, you never dredged the lake, and there will be some priceless relics mixed in with the rancid pile of garbage.

Moreover, without great data, and the insight that comes from great data, the downside risk of the visibility, insight, predictive and actionable capability you lack today is immense and likely incalculable.

Once you have the data, you can easily install the right compliance, risk, and visibility platforms and achieve the intended results. (But without the right data, those solutions will be worse than expensive shelf-ware because if they are used, they will give the wrong results and insights that will lead to worse decisions than if they weren’t installed at all!)

Get Ready to Make BIG Supply Chain Decisions A

The Prophet says we will make far more BIG decisions in 2024 in Procurement and Supply Chain and possibly more than we have ever done.

the doctor will actually go one step further here — there will be NO little decisions. Every decision you make will lead you down further down a path that will inevitably branch or disappear in an unexpected way and you’ll need to make a BIG decision, and that decision will be limited by prior decisions, which are actually the starting points of the BIG decisions you might not even see coming!

And, as The Prophet says,

1) you need better data than your competitors. Let’s be clear here. That is data that you should have had yesterday! This means you need to clean up your data and enrich it. And this is an effort. But more on this in the next article in our discussion of Prediction #7.

2) you need frameworks for decision making and framing — what do you even need to consider, and who needs to be consulted before the decision is made and included in the decision making team

3a) you need tech for planning and forecasting as well as
b) tech to identify confidence, or lack thereof, in data, models, and predictions
c) tech to support a deep dive into models and predictions with high confidence when the answers are unexpected so that an explanation, or root cause, can be identified and addressed (because sometimes the right response to a situation will be completely unexpected; and you can’t risk brushing off a right response that feels false)

4) you need the scenario analysis and [multi-objective] optimization that should have been in use since the day it became available! [the doctor hasn’t been publicly promoting multi-objective strategic sourcing decision optimization [SSDO] since SI started in 2006 just because he’s a contrarian!] Not only has the lack of use contributed to a consistent loss year after year after year (as companies paid as much as 10% more on total COGS than needed), but it contributed to lack of balance in decisions (as these models allow you to balance cost and risk, cost and carbon, cost and carbon and risk, etc; if you can quantify it, these tools can help you balance it), which is becoming more and more critical. There’s no savings if there’s no purchase … and without supply, who cases what the spend was supposed to be?

5) you need the best “decisioning” team, which MUST be multi-disciplinary and multi-departmental; with so much hitting you from so many angles, it’s virtually impossible for one person to see everything

but you have to go beyond this and

6) a) identify the short-term results expected from your decisions which can be monitored and tracked,
b) implement solutions that allow you to monitor and track toward measurable results, and
c) track progress against those expected short-term results

7) if the actual results start to diverge significantly in the short-term, be prepared to bring the team back together, revisit the data, frameworks, technology, models, and decision factors; find the assumptions, etc. that are no longer valid; and make a new decision, even if there is a short-term drawback (or contract penalty).