Category Archives: Procurement Innovation

Procurement-as-a-Service: High Priority or HYPE HYPE HYPE!

Next month, the public defender will be hosting a webinar on the evolution of procurement: alignment, flexibility, and Procurement-as-a-Service where he will be discussing whether Procurement-as-a-Service (PaaS) is high priority for your Procurement organization or just hype. Guess which way SI is leaning?

First of all, let’s define what Procurement-as-a-Service (really) is. Procurement-as-a-Service is the new name for the service you get from a Managed Services Provider that combines technology, personnel, and expertise to take over part, or even all, of your Procurement operations in a transparent and effective way. They use technology to identify what you are spending on, what you need, and where savings likely are; choose categories for sourcing and assign category experts; modern technology to do the sourcing and procurement; and track the purchases and payments and do m-way matching to make sure you only pay for what you get and that you get what you are supposed to when you are supposed to. They also make the process visible through, at a minimum, a reporting and progress portal, and may even give you some access to the analytics and procurement tool to run your own reports, record inventory, and upload payments.

Second, let’s break it down.

1. Technology

Nothing new here. Given that MSPs are typically using someone else’s tech, there’s nothing new here. In fact, they’re probably using inferior tech as they are looking for something that works best at managing multiple client procurement portfolios and not at conducting that best sourcing event, bringing the best analytics or optimization solution to the table.

2. People

Note that we are using people here, not talent. MSPs have people. A lot of people. Because they have to fill a lot of seats, but not all are talented, or at least not talented with respect to your business. And this is key. Talent is appropriately educated, experienced, and relevant to your business. This brings us to:

3. Expertise

While there will likely be a number of people at the MSP with expertise in your categories, this number could be a dozen or two among thousands. And you won’t likely get them working your account, nor are you guaranteed to even get the results you would get from a GPO (Group Purchasing Organization).

Third, let’s analyze what we broke down. No guarantee of even best of breed technology. No guarantee of the right talent for your organization (based on your categories or industry). And no guarantee of the right expertise, or sufficient expertise to go around.

So what is PaaS? In SI’s view it’s a quick-fix band-aid for those organizations without enough tech, talent, or transition management capability to handle its own Procurement operations. But for any organization with any capability to acquire and manage even basic tech, attract talent, and acquire and employ expertise, what does a PaaS provider offer, especially when there are GPOs, niche consultancies, and SaaS solutions that have been offering the same, if not more, for quite some time now? The answer: so far, nothin’.

So, in SI’s view, it’s hype, hype, hype. But it will be interesting to see what the public defender has to say when he goes head to head with Comensura‘s Jon Milton on March 7, 11:00 EST, 16:00 GMT.

Why Isn’t Procurement Changing?

It’s a good question, and one the procurement dynamo recently tackled over on procurement.world. According to the dynamo, multiple factors are at play, including, but not limited to:

Big Jelly Theory

Attributed to Paul Finnerty, the ‘theory’ is that if you throw yourself and your team members, 100% mentally and physically, at the organization, in an attempt to change it, at best the organization will give a little shiver, momentarily, like a giant jelly, and then immediately return to its pre-existing shape and carry on, with business as usual, as though nothing has happened.

Irrational Actors

Attributed to Charles Jacobs, brain cience has found that human beings are anything but reasonable… When it comes to motivation, our approach is based on the view of classical economic theory that people are rational beings trying to maximize their economic return. This leads us to use the promise of rewards to motivate the behavior we need. But in direct defiance of the theory, people don’t respond reasonably or objectively to the rewards.

But are these the only reasons? There are two reasons that modern Procurement solutions aren’t adopted. The first is the people. They can resist, resist, and resist. The second is the management.

Management with Revolving Door Priorities

When Management falls for every fad of the day and changes priorities, processes, and even technologies every couple of years, employees get jaded and even more resistant to change then they’d naturally be. The Big Jelly gets bigger.

Maury the Management Moron

Sometimes the team, who want to do well and get their bonuses, will come to the conclusion they need a new solution, go through a detailed evaluation and select one they are willing to give an honest go. But, Maury the Management Moron, who will just see the price tag (and not the ROI) and correlate it with a potential negative impact on his bonus will say no. And that’s the end of the Procurement progression.

So, when trying to figure out a way around the conundrum, you have to go beyond just people and look at roles and how the values change as the role changes. And take that into consideration when applying your economic theory. (And, sometimes, wait for Maury to be shown the door.)

Cognitive Procurement is Coming …

But precisely what form will it take?

Over on LinkedIn, the procurement dynamo asks what is the role of machines in the future of Procurement? Why? Because, in some cases, machines are now, supposedly, threatening the knowledge workers because they can collect and process more information, memorize way more than we can, and enable us to do things that were previously impossible.

And that is true, but they are still not intelligent. They can emulate intelligence through (evolutionary) programming, they can make predictions (using advanced mathematical based algorithm) that hit the mark much more often than the average analyst, and they can find connections we miss. But at the same time they can emulate grave stupidity when they decide to direct you to the camping supply store when a Brit asks for a torch, make false predictions when they just compute the trend without taking into account supply and demand, or connect carpentry to stock trading because both deal with floors. All algorithms have breaking points, especially near untested boundaries. But you don’t know where they are or when they’ll be hit.

The reality is that even though some knowledge workers are being displaced, the need for knowledge workers to create, maintain, and improve these algorithms … and find new areas in which they can push capability forward. Every time an algorithm or machine displaces someone out of an existing job, a new job is created, even if it’s not that apparent. True, a good software solution can replace 10 to 100 workers doing brute force tactical or grunt work with one or two drivers, but someone has to build the software, sell the software, maintain the software, and start a new initiative to build the next generation. Plus, when a company isn’t focussed on non-value add activities, they can dedicate teams to identifying and chasing value-add activities — who might even create new lines of business, and new jobs, in the process.

So yes, the procurement dynamo is right, the future will be man and machine, in a delicate dance, and the focus will be on cognitive activities, but mainly on the human side … finding ways to properly apply, and verify, new technology. Weeding out the false positives with intelligence, identifying the false negatives with insight, and finding new applications the machines themselves will not.

Thus, the true form of cognitive procurement is smarter Procurement Professionals with more TQ than they have today.

The Key to e-Sourcing Success (Free Webinar)

e-Sourcing has been touted as the key to Sourcing and Procurement success and savings for almost two decades, with many providers promising double digit ROIs from their platform. While it is possible for any organization to reach this level of savings with a good e-Sourcing process and platform, the reality is that only a fraction do. But why? Especially when this should be a mature technology, when over a dozen players seem to have all of the same foundation technology, and when the process is well known?

The answer: the platforms are bought, but not used. A little overlooked statistic is that even though close to half of modern Sourcing and Procurement organizations have some form of a modern platform, the average utilization of the platform is typically 25%. In other words, only 1 in 4 people are using it or only 1 in 4 events are being put through it. If the promised ROI depends on 90% utilization but the utilization is less than a third of that, of course the ROI will never materialize.

So why aren’t platforms adopted? It’s proven that they can deliver the savings, so they are effective. Their online nature means that you don’t need fax and e-mail, so there is some efficiency. So what’s the problem? Just because a platform checks the functional boxes, it doesn’t mean it meets the organizational need. And if a platform doesn’t meet the need, it will be avoided, not adopted.

The key to e-Sourcing success is platform adoption, which means that the most important characteristic in platform selection is adoptability — which is often the least evaluated characteristic when organizations are comparing feature function check lists, estimated ROI, value-add, etc. And the key to adoption is adoptability. What makes a platform adoptable? That’s what this webinar will focus on … because the reality is that even a mediocre platform that is adopted 100% will deliver a 3X return over a best of breed platform that is adopted 25%. So imagine the return your organization could see if it replaced its unused e-Sourcing with an adoptable best of breed platform. Curious? Join us next Tuesday, February 7, 2016 @ 10:30 Pacific, 12:30 Central, 13:30 Eastern, 18:30 GMT for our webinar on The Key to e-Sourcing Success.

Simeno – Global Catalogs for Global Businesses

Simeno, which is not yet a household Procurement name in North America, is a provider of a SaaS-based e-Procurement that has been around since 2000 and that has been offering catalog management solutions and services since 2002. Headquartered in Basel, Switzerland, Simeno has grown to be a rather large provider of such solutions in the EU and around the world. With 250,000 users in 60 countries, including users from dozens of Global 3000 companies, Simeno is still growing steadily, having recently opened offices in Germany (Hannover) and the USA (Chicago).

In addition to offering catalog management, Simeno also offers supplier-onboarding, catalog maintenance, and the custom requisition form creation services for their clients so all of their client spend — product and service — can flow through the system. But they are heavily focussed on selling long-term Procurement solutions centered around their catalog-based Procurement solution that can be integrated with the ERP, AP, and other relevant Supply Management solutions that can support the relevant parts of the Source-to-Pay cycle.

The core of the SIMENO solution is the catalog management capability which, like other leading platforms, allows clients to integrate punch-out catalogs, their-own catalogs, and vendor-provided catalogs (in various file formats) and search across all catalogs in real time. Simeno not only focusses on integration, but on fast upload and even faster search. Simeno can process extremely large updates (in the GB) in minutes, search catalogs of up to 10M items in 1.5 seconds and provide a real-time glimpse into what’s happening from a buying perspective in their global organization in just a few seconds.

This catalog solution is offered as a private cloud solution, where access to public catalogs and punch-outs can be as broad, or restrictive, as the organization wants it to be. The platform can be used in conjunction with, or as a replacement for, other catalog and purchasing systems, and can integrate with, or replace Oracle iProcure and SAP SRM UI5. Simeno regularly integrates with a host of ERP solutions and best-of-breed Sourcing / AP systems and can set up workflows to take data in and push data out as needed, which is all part of the initial set-up.

The catalog also supports 22 languages simultaneously, including accents and special characters, product and supplier centric views, and very easy requisition and purchase order creation. The form-based “guided-buying” solution works so well that some organizations have over 1,000 predefined forms, and define more as needed using the detailed form builder that can be used to create forms customized to the organization’s needs.

Simeno is very powerful, and there is a full solution around the platform with RFX, contract management, requisition, purchase order, and invoice management. For more information on these extended capabilities, and deeper insight into Simeno, check out the recent >Spend Matters Pro series (Part I, membership required) by the doctor and the prophet. The deep coverage is worth the time it takes to review it.