Category Archives: rants

The B2B Software Marketplaces Will Rise. Then the Hammer will Fall!

Thanks to Apple, every consumer thinks there’s an app for that. And for most consumer desires, there probably is. Especially since Apple’s App Commerce climbed to 1.1 Trillion in 2022. Yes, that’s 1,100,000,000,000 US Dollars! That’s a lot of money, especially when most apps are being sold for a few bucks.

When you consider:

  • consumer app marketplaces are now a Trillion dollar business
  • enterprises are buying more SaaS than ever, as every employee in every department wants an app(lication) to support every task they do
  • enterprises pay 10X to 100X what individuals pay per user license, and, thus, the opportunity of enterprise app marketplaces is in the tens (to hundreds) of Trillions
  • enterprises want easy, centralized, acquisition to limit the number of vendors they need to deal with / handle subscription invoices from

It’s easy to see why all the big software / cloud vendors are opening their own app marketplaces. A recent article on IOT Analytics shouted the rise of the B2B software marketplaces while quoting their B2B Technology Marketplaces Market Report (2024-2030) that noted that:

  • they are the fastest growing procurement channel (for software)
  • dedicated platform providers are seeing success
  • some sellers make Billions

And they will continue to grow for a few years. But then, the hammer will fall.

What one has to remember is the following:

  • many of these marketplaces are taking a big cut, like 30% or more, which is what a sales partner would have taken to compensate its employee(s) that actively sold the product, but they are doing NOTHING but creating a listing, making it searchable, taking an order, collecting a payment, and providing a license key … even when you consider cloud fees, payment processor fees, platform maintenance fees, they could be very profitable at 13% (remember that recent article on how roughly half a trillion dollars will be wasted on SaaS spend this year … well, this is only going to increase that as you’re paying almost 20% more than you need to for the licenses you do need and use)
  • apps, licenses, and overspend is going to proliferate rapidly as “approved” app stores make it easy for every employee with a p-card to buy what they want, when they want
  • those SaaS audits and rationalizations that identify 33%+ overspend are only going to reclaim at most 20% of that, if you’re lucky, because, even if the software developer is willing to refund unused licenses, they’re not going to refund that 30%+ they already paid the marketplace … and that’s if they’ll even talk to you because you acquired the license through a third party
  • there’s no real negotiation opportunity when you buy from a marketplace

So as businesses race to digitization, they will embrace the marketplace as it will help them get part of the way there very quickly, but then when they realize just how much they are spending on app(lication)s, and turn Procurement on strategic procurement of SaaS, the first thing to go will be the app marketplace purchases … and then … it will be time for the hammer to fall.

Beware of Magical Thinking In Your Procurement!

Back in 2017 (yes, that was 7 years ago, but the subject is still relevant), the doctor penned a post asking if there was magical thinking in your procurement noting that:

the Procurement Department that is getting the worst deal is the one that hallucinates the most — and needs to — in order to keep their worldview intact

And, furthermore, it was these Procurement departments that were most against modernizing their processes or platforms because their worldview requires them to believe that the antiquated processes and (severely) outdated platforms they are (still) using are just fine. (And they don’t recognize that their Procurement departments still run on the island of misfit toys principle — staffed with people who are nearing retirement, related to the boss, or technologically adverse and have been doing it this way for far too long.)

the doctor also noted that the easiest way to identify these organizations was by their telltale arguments of:

  • our processes are just fine, we just need more people
  • our platform is just fine, we just need more people
  • it’s not worth the cost, and it will slow us down

which were soon augmented with the additional telltale arguments of:

  • the problem isn’t with us, it’s with logistics / risk management / compliance / support
  • the problem isn’t with us, it’s the suppliers who aren’t holding up their end of the contract
  • our needs are just too unique and there’s nothing out there that will close the gaps

as supply chains started to crumble under disruptions. Because, if you just gave them more time, money, and people, everything would work out fine with a little pixie dust.

But we know there’s no silver bullet, and the only answer is to implement the best technology, with the best processes, so you can identify the biggest risks, plan mitigations, detect when they have occurred, respond quickly, and, the rest of the time, deal with exceptions and not standard operating procedures that can be entirely automated.

And, in the late 2010s, that was the extent of the magical thinking theorem. But now, thanks to the Gen-AI garbage marketing overload, and the addition of tail end Millenials (who replaced those put out to the Procurement pasture when they called it quits during COVID or when companies tried to force their return to the office), we have a new corollary to the the Magical Thinking Theorem:

the Procurement department getting the worst deal is also the one that thinks they only way to solve their problem and get the best deal is to adopt and implement Gen-AI as fast as possible

because the Millenials, who grew up glued to their smartphones, and always received instant gratification via Google and Apple, believe there is an app-for-everything and that a natural language Gen-AI app combines the best of both worlds and will solve all their problems.

Their thinking is not only as magical as the last generation thinking (that more time, money, and people can solve anything), but more dangerous (because their answer is to just turn their problems over to the artificial idiocy machine and blindly accept whatever comes out of it, no matter how hallucinatory or ridiculous the answer is).

the doctor said it before and he’ll say it again. There’s no room for magical thinking in Procurement. Just like alchemy needed to be replaced with science, magical thinking needs to be replaced with realist thinking, and random unpredictable Gen-AI replaced with proven deterministic procedural (rules-based) solutions that use tried and true mathematical techniques. (Because, the classic analytics, optimization, and machine learning that you have been ignoring for two decades will do just fine.)

Supply Chain Certifications Lost Value Quite a While Ago …

… and they won’t ever reclaim any value until they start offering training on digitally friendly processes and the core of modern digital technology. That’s why it was no surprise to the doctor to see this recent article over on the Acceleration Economy that noted that Supply Chain Certifications Lose Value as Product Expertise Gains Traction.

He was surprised to hear that the research foundation found that a whopping 18% of certifications issued through career and tech education programs are sought by employers. As someone with a background in tech, he can honestly say that he’s never worked for, or with, any employer that actually valued a tech certification because they were outdated before they were issued — the leading tech employers valued good education and experience that provided a candidate with the ability to learn and adapt on the job. Which, by the way, is exactly what a Procurement professional has to do.

As the article notes, since the machine has taken over the task of doing the calculations — computing the inventory, creating demand plans, and analyzing lead times — we don’t need in depth courses on how to do this manually, we need certifications in whatever technologies our companies have chosen to use so we can take the utmost advantage of that technology, or at least a certification that covers the basics across all technologies of that type.

But even though it’s now the mid-2020s, we still don’t have any certifications that even cover the basics of the tech that hit the scene across Source-to-Pay in the mid 2000s. After all, the basics they convey haven’t change either. So, as some have noted, while they are a decent starting point for someone just getting into Procurement, it won’t get them very far. And they certainly don’t add any value to anyone with more than 3 years of experience.

Hopefully this will change, because it would be nice if Procurement professionals had a certification option that would allow them the opportunity for a lifetime of learning, vs. checking the box for a certification where they know more than the teacher.

Will AI Make Us Irrelevant?

Short Answer: No. But Improper Use Will Make Us “Redundant.

James Meads asks “Will AI in Procurement make us all irrelevant?”

So I will answer. No, it won’t! But it will make those companies who dive off the deep-end on Gen-AI irrelevant as their supply chains crumble with no real human intelligence there to save them when the next crisis hits. (See the myriad of rants here on Sourcing Innovation on just how over-hyped Open Gen-AI technology is and what you actually need to solve your problems.) Also, if we’re lucky, they will take a few providers with no actual platform capability (or Procurement value) down with them. (We need them to get out of the way for those platforms that have been offering real, deterministic, math-based, tried-and-true analytics, optimization, and machine learning solutions [for up to two decades] as there are many companies that need those solutions today.)

While custom-trained closed LLMs can seemingly do a lot of the work for us, they are NOT intelligent, they don’t know good from bad, they don’t know right from wrong, and they definitely don’t know critical from irrelevant. Thus, even though they can put together an NDA or RFP in seconds, it doesn’t mean it’s “fully functional”, that it protects you from all the risks, or that it captures all your requirements. Only an expert human can verify that. [And it doesn’t matter how good your “prompting” is. It can still fail, with a reasonably high probability to boot! (Which is what you can give it!) There’s a reason that Tonkean, an intake automation/enterprise orchestration solution provider, ALWAYS does pre-validation on inputs and-post validation on outputs before showing you anything when it incorporates your LLM technology, because they know just how often it fails and if the response doesn’t closely resemble something expected with very high probability, they won’t even show it to you.]

“AI”, or, more accurately, rules-based automation, will replace humans who are just doing tactical data processing, but it cannot replace humans who can do real strategic analysis, interpretation, and problem solving. Unfortunately for Procurement, given that 80%+ of the time is tactical data processing and fire-fighting, this will cause companies to think they can eliminate 80% of the Procurement team, even though the reality is that the Procurement team isn’t even addressing 20% of spend strategically in any given year, meaning that they should be augmenting the Procurement team with every useful technology they can find to try and get that spend coverage above 80%!

And if you want to know what companies are truly offering valuable “AI” (where the best you will get is Augmented Intelligence, level 2 on the 4 tier scale, as there is no such thing as Artificial Intelligence and many companies still don’t even offer Assisted Intelligence, level 1, and instead disguise their Artificial Idiocy in slick marketing), talk to an analyst who CAN do the math AND the programming.

First published on LinkedIn.

Even Forbes is Falling for the the Gen-AI Garbage!

This recent article in Forbes on the Supply Chain Shift to Intelligent Technology is what inspired last week’s and this week’s rant because, while supply chains should be shifting to intelligent technology, the situations in which that is Gen-AI are still extremely rare (to the point that a blue moon is much more common). But what really got the doctor‘s goat is the ridiculous claims as to what Gen-AI can do. Claims with are simultaneously maddening and saddening because, if they just left out Gen-AI, then everything they claimed is not only doable, but doable with fantastic results.

Of the first three claims, Gen-AI can only be used to solve one — and only partially.

Procurement and Regulatory Compliance
This is one example where a Closed Private Gen-AI LLM is half the battle — it can process, summarize, and highlight key areas of hundred page texts faster and better than prior NLP tech. But it can’t tell you if your current contracts, processes, efforts, or plans will meet the requirements. Not even close. In fact, no AI can — the best AI can just indicate the presence or absence of data, processes, or tech that are most likely to be relevant and then an intelligent human needs to make the decision, possibly only after obtaining appropriate expert Legal advice.
Manufacturing Efficiency
streamline production workflows? optimize processes? reduce errors? No, Hell No, and even the Joker wouldn’t make that joke! You want streamlining? You first have to do a deep process cycle time analysis, compare it to whatever benchmarks you can get, identify the inefficiencies, identify potential processes and tech for improvement, and implement them. Optimize processes? Detailed step by step analysis, identification of opportunities, expert process redesign, training, implementation, and monitoring. Reduce errors? No! People and tech do the processes, not Gen-AI — implement better monitoring, rules, and safeguards.
Virtual Supply Collaboration
A super-charged chatbot on steroids is NOT a virtual assistant. Now, properly sandwiched between classical AI and rules-based intelligence it can deal with 80% of routine inquiries, but not on its own, and it’s arguable if it’s even worth it when a well designed app can get the user to the info they need 10 times faster with just a couple of clicks. Supply chain communicating? People HATE getting a “robot” on a support line as much as you do, to the point some of us start screaming profanities at it if we don’t get a real operator within 10 seconds. Based on this, do you really think your supplier wants to talk to a dumb bot that has NO authority to make a decision (or, at least, should NEVER have the authority — though the doctor is sure someone’s going to be dumb enough to give the bot the authority … let’s just hope they can live with the inevitable consequences)?

And maybe if the article had stopped there the doctor would let it pass, but
first of all, it went on to state the following for “AI”, without clarifying that Gen-AI doesn’t fit in the process, leading us to conclude that, since the first part of the article is about Gen-AI, this part is too, and thus is totally wrong when it claims that:

“AI” understands dirty data
with about 70% accuracy where it counts IF you’re lucky; that’s about how accurate it is at identifying a supplier from your ERP/AP transaction records; an admin assistant will get about 98% accuracy by comparison
it can “confirm” inventories
all it can do is regurgitate what’s in the inventory system — that’s not confirmation!
it can identify duplicate materials
first it has to identify two records that are actually duplicates;
and how likely do you think this is with a supplier mapping accuracy of 70%?
it can identify materials to be shared among facilities
well, okay, it can identify materials that are used across facilities and could be located in a central location — but how useful is that? it’s not because, first of all, YOU ALREADY KNOW THIS, and, second, IT CAN’T DO SUPPLY CHAIN OPTIMIZATION — THAT’S WHAT A SUPPLY CHAIN OPTIMIZATION SOLUTION IS FOR! OPTIMIZATION!!! We’ll break it down syllabically for you so you know what to ask for. OP – TUH – MY – ZAY – SHUN!
it can recommend ideal storage locations
again, NO! This requires solving a very sophisticated optimization model it doesn’t have the data for, doesn’t know how to build, and definitely doesn’t know how to solve.
it can revamp outdated stocking policies
well, only the solution of a proper Inventory OPTIMIZATION Model that identifies the appropriate locations and safety stock levels can identify how these should be revamped
it can recommend order patterns by consumption and lead time
that’s classical curve fitting and tend projection

And, secondly, as the doctor just explained, most of what they were saying AI could do CAN’T be done with AI, and instead can only be done with analytics, optimization, and advanced mathematical models! (You know, the advanced tech (that works) that you’ve been ignoring for over two decades!)

The Gen-AI garbage is getting out of control. It’s time to stop putting up with it and start pushing back against any provider who’s trying to sell you this miracle cure silicon snake oil and show them the door. There are real solutions that work, and have worked, for two decades that will revolutionize your supply chain. You don’t need false promises and tech that isn’t ready for prime time.

Somedays the doctor just wishes he was the Scarecrow. Only someone without a brain can deal with this constant level of Gen-AI bullsh!t and not be stressed about the deluge of misinformation being spread on a daily basis! But then again, without a brain, he might be fooled by the slick salespeople that Gen-AI could give him one, instead of remembering the wise words of the True Scarecrow.