When it comes to openness, there are three primary types of vendors. There are the self-promoters that openly talk about their capabilities with pride, with confidence that they are, at least in one way, the best at what they do and that some customers will see that value and buy from them. There are the modest types that don’t talk much, but don’t hide when you ask questions. Then there are those that try to hide behind proprietary technologies and processes, aging patents, and trade secrets, often knowing that what they have is not even as good as the company down the street, that the patents are outdated and reaching end of life, or that the trade secrets have been public knowledge for years.

However, because this third group hasn’t been innovating (as fast as their peers), have a large (and expensive) Sales & Marketing organization, have high manufacturing costs (because they haven’t upgraded facilities or capabilities), are top heavy (with too many chiefs and not enough tribal members), and/or have high-shareholder expectations, they have to do something to maintain their revenue stream and/or profit margin, and since openly flaunting what they have won’t do the trick (on its own), they have to hide behind patents, proprietary technologies, and trade secrets, even if the latter turn out to be nothing more than a lot of hot air in the end. (For example, there are still spend analysis vendors today trying to sell their mapping algorithm with its “secret sauce“, when the “secret sauce” has been publicly known for two decades.)

I call this third group of vendors E-CHAOS vendors because, in my mind, they bring chaos and confusion to what would be an otherwise orderly and well understood space, and usually attempt to do so with heavy use of the electronic medium (because it’s cheap and reaches a wide audience quickly) that includes copius amounts of press releases, extensive media coveage of those press releases, and regular self-serving webinars.

And I personally don’t think there’s any room for these vendors anymore. Thanks to the recession and jobless recovery we’re overworked and stressed to the max, especially since we have to increase productivity by 2.3% year after year or fall (further) behind on the global stage. As a result, as far as I’m concerned, we don’t have time for vendors who hide behind smoke and mirrors and won’t put their money where their mouth is when its time to step up to the plate — especially if they expect you to spend seven figures on a solution. And, as far as I’m concerned, just giving you a demo doesn’t count. First of all, you’re not the expert. You don’t know what to look for, what to ask, or when you should insist the vendor go off script. Heck, for all you know, it could be a video of fine-tuned “in-development” functionality that never makes the final cut (because that was the only example where it worked). Secondly, you don’t know what you need to see to make apples to apples comparisons. (And while you can compare apples to oranges, the comparison isn’t that meaningful, and only possible if you have a lot of time and the right analytics expertise on your team, which you probably don’t.)

And, most important, why should you put up with this when for every vendor that tries to hide behind closed doors, when an analyst or blogger tries to put them under public scrutiny, there are dozens who’ll gladly welcome anyone into their glass atrium with open arms? You shouldn’t! If you can’t go to your favorite analyst or blogger and get an objective third-party review of a solution that is going to cost you an investment of six or seven figures, and you have other options, the first thing you should do is strike that solution from your list because you can’t afford to not know what the vendor is trying to hide. Maybe all the vendor is trying to hide is a bloated organizational structure with too many chiefs and sales people which requires a high revenue stream, and, thus, a high sale price, to maintain and that’s okay if the vendor can deliver value appropriate to the purchase cost (because it’s fine to spend 1M to save 10M as no one’s going to argue with that ROI), but what if the solution is missing a fundamental capability and you don’t discover that fact until integration time?

Thus, from now on, not only will SI not cover any solution from an E-CHAOS vendor, include such a vendor on any potential solution lists, public or private, or make any further attempts to reach out to these vendors (since SI has had an open policy since day one and has NEVER refused a demo request that follows the rules), but it will also not cover any vendor in the modest category (or the open category if such vendor snubs SI, because then the vendor isn’t truly open in SI’s view), include such a vendor on potential solution lists, or make any further attempts to reach out to that vendor if the vendor won’t give SI a demo. Because, frankly, without a demo, there’s really no way to tell the difference between a modest vendor and an E-CHAOS vendor.

And, as per yesterday’s post (where I mentioned I would not be reviewing the vendors in the Forrester Wave in detail because too many fall into the small group of vendors that have refused SI a demo), this means that SI will no longer be including the following vendors in its recommendations or covering their solutions until such time as they change their minds and give SI a demo (because even though SI honestly believes these vendors have good solutions, belief is not enough — you need proof):

Emptoris
CombineNet^*1
Hubwoo
Ariba
Oracle^*2 (Sourcing/Procurement) and
SAP

If you really want coverage of the first four, you can go to SpendMatters, as long as you don’t expect much more than a services / business analysis for some of them (because that’s all I’ve seen in the past). For the last two, you can try the Enterprise Irregulars. While Oracle and SAP are finicky with whom they’ll open up to, they will open up to a few bloggers. But, until these guys open up more, just don’t look here.

^*1 Yes, CombineNet recieved some fairly extensive coverage a few years ago, but that was when a different regime was in charge.
^*2 Oracle is a top commercial database in my mind, and the doctor‘s generally preferred ERP solution, but Oracle is off the sourcing/procurement list until I get more than a white-paper to base a recommendation on.

In yesterday’s post, we noted that the latest Forrester Wave on eProcurement Solutions has been released and that Jason was right in his recent Spend Matters post when he said the Forrester ranking methodology, generally, does a better job than Gartner because it provides better transparency into the criteria that contribute to a ranking on each axis, but that, overall, the report wasn’t much better for a few, very significant, reasons.

First of all, limiting the evaluation to vendors with more than $15 Million in revenue is unduly restrictive. While it’s critical that the vendor have a steady income stream to maintain stability, a specialist vendor focused solely on best-of-breed e-Procurement solutions can be quite stable around the 5 Million mark. e-Procurement, like e-RFx and e-Auction, is a mature technology that’s not rocket science. As a result, a specialist provider with real talent in the R&D organization can easily maintain and continue to enhance such a solution on a regular basis with only 1 to 1.5 M in the R&D budget.^*1 And since a small provider without a lot of sales & management, operational, and executive overhead can devote 30% or more of revenues to R&D, it’s easy to see that 5M makes a very sustainable company.

I realize that lowering the threshold would have entailed a lot more work, and probably doubled the number of vendors, because then Forrester would probably have had to look at b-pack, Conexa, Coupa, Esize, Global eProcure, Intenda, iValua, Ketera, Proactis, PurchasingNet, Puridiom, Verian, and / or WaxDigital. But would that have been so bad? Especially when CapGemini and Hubwoo, which are just extensions of an underlying SAP platform, were included?

Secondly, while product strategy is important to consider in an evaluation (is this an end-of-life product or a product that is just hitting it’s stride with years of improvements planned), strategy does not deserve a 50% weighting. If a company is going to acquire a solution, it has to solve the problems the company has today, not solve those problems in two years time. Furthermore, while financial resources to pursue the strategy are also important, if the list is limited to companies with a sufficient revenue stream, it has no place in the weighting since all companies make the cut. And as for corporate strategy, that will be reflected in the product strategy. Plus, with respect to the “current offering criteria”, where’s the “integration” criteria? Remember, it is Sourcing and Procurement. Thus, while supplier connectivity and enablement is important, so is integration with the sourcing suite and the underlying ERP (that holds the organization’s data store, if there is one).

Third, procurement isn’t the problem, it’s compliance! It’s getting the big maverick spenders under control and forcing them to buy on contract (unless there is a real, management approved, need to go off contract) and forcing the suppliers to only deliver contracted merchandise and to bill for it at contracted rates. This is why most organizations only see roughly half of negotiated savings — mavericks buy off contract and they don’t catch the unapproved supplier substitutions and overbillings. Both require a good settlement function with advanced reconciliation and m-way matching capabilities. In the first case, invoices from contracted suppliers without POs have to be caught and denied (since the contracts will state no invoices without POs will be paid) and in the latter, matches have to be done against the PO and contract. However, “settlement” only gets a 1.5% weighting in the Forrester evaluation! In comparison, (future) product strategy gets a 30% weighting and goods purchasing, which an application has to have to be considered eProcurement, gets a 10%.

But, as I noted in my last point, at least this report had some good points. For better or worse, it defined inclusion and evaluation criteria and stuck with them. No vendors slipping in or out on analyst exceptions or technicalities. It displayed an understanding of what maverick spend is and why e-Procurement is needed to counter it, even if it didn’t capture and weight the appropriate functionalities. It noted that the right process must be easier than the rogue one and that approvals must be rapid when the right decision is made. It understands that while suites are getting better, there is still lots of edge left for best-of-breed to capitalize on. And it provides its evaluation spreadsheet to its clients who can alter the weightings to see which subset of the solutions are more appropriate to it based on the Forrester criteria. (You might still end up with a foot in the grave if you select one of these solutions, especially if you’re not a 1000 lb gorilla, but at least you can choose your own grave!)

Conclusion: Unlike many analyst reports, it’s definitely worth a read, but I wouldn’t base a decision on it unless you’re a 1000 lb Gorilla who is limited to buying from a 800 lb Gorilla by corporate mandate. An average mid-market company IS NOT likely to find the right solution for it in the evaluated vendor mix.

Finally, for those of you who have decided that you are going to limit your eProcurement selection to one of these gorillas, I’d watch for Jason’s forthcoming vendor analysis. SI will not be doing any further analysis on this report. Given that it missed the majority of solutions appropriate to the mid-market with its ultra-restrictive inclusion requirement and that a number of these vendors are in the very small set of vendors who won’t talk to SI, it’s not worth it.

^*1 There are some “micro” companies in the space that I follow that work magic on a yearly basis on an R&D budget that never tops 1M.

Ocean or Kiddie Pool?

As one of the flagship publications in the space, this is one that, for better or worse, a lot of people look forward to come decision making time. So, just like SI tackled the Gartner Quadrant last year, it’s going to tackle the latest Forrester Wave on eProcurement Solutions (Q1, 2011) to help you understand what’s good, what’s bad, and, in some cases, what’s downright ugly. Because, in the end, if you don’t know how to ride the wave, you might just end up digging your own grave.

First off, I agree with Jason (who commented that “Forrester’s eProcurement Wave Captures the State of the Market” on Spend Matters) that the Forrester ranking methodology, generally, does a better job than Gartner because it provides better transparency into the criteria that contribute to a ranking on each axis, that this report in particular does a solid high-level job of creating a credible segmentation for a sub-set of the vendors in the market, and that “there was little to broadly differentiate” among providers, at least on a feature/function level for providers that were included in the report. But better is not sufficient, high-level segmentations are pretty easy, and if you limit your report to the 800lb Gorillas, all of the solutions are going to pretty much look alike.

For example:

• if you have to get from New York to Los Angeles quickly, rail is better than car (because even though it makes lots of stops, the train runs 24 hours a day and you can’t drive 24 hours a day), but doesn’t match the efficiency of air and a direct flight
• there are lots of ways to credibly segment vendors — product focus vs service focus, e-Procurement focus vs ERP focus, generic solution vs vertical solutions — but such segmentation is meaningless to a buyer if it doesn’t segment according to the buyer’s particular needs
• if you limit your search to slivery mid-sized sedans, from a distance, there’s not much difference between a Toyota Camry, Ford Fusion, Nissan Altima, Honda Accord, or a Hyundia Sonata (and you’re likely to confuse them if you’re driving fast and just take a quick look)

In other words, while this was a little better than last year’s Tragic Quadrant from Gartner — where strict guidelines were set down but vendors allowed to slip in on exceptions or technicalities anyway, where some of the evaluation criteria didn’t make any sense at all, and where some non-standard definitions were used — it wasn’t much.

Basically, for just about every fundamental it correctly included, there was an accompanying flaw. And while most of the flaws weren’t that bad, the net result is that the overall report isn’t that useful unless you’re a 1000 lb Gorilla trying to figure out which 800 lb Gorilla you should buy from. And since there are only 1000 companies in the Fortune 1000 club, this means that the number of companies that will find this report useful are few and far between, and, as usual, the burgeoning middle-market, where most of the need is, goes unserved again, and the tsunami you might have been expecting is nothing more than a weak 6-foot wave that won’t do anything more than get you a little wet.

So what were the (major) flaws? That’s the subject of tomorrow’s post.