Category Archives: rants

The Public Sector is Giving Procurement Integrity A Bad Name … Can the Private Sector Fix It?

A recent article over on Global Government Forum on Procurement Integrity: A Big Problem That’s Worse Than Most Organizations Think, pointed out that errors, fraud and abuse in procurement cost governments and organizations millions of dollars every year, and even though recent headlines in the US (TriMark, Booz Allen Hamilton), UK (NHS, Royal Mail), and Canada (ArriveCan) are starting to shine the light on the extent of (public sector) procurement fraud, the problem is still bigger than you think. Much bigger.

Current estimates are that organizations, across the public and private sectors, lose 5% per year due to procurement errors, abuse, and fraud. Given that Global GDP is about 85 Trillion dollars, at 5%, that’s 4 TRILLION dollars estimated to be lost annually to errors, abuse, and fraud. And that’s probably a low-ball estimate due to the fact that we just calculated that Over One TRILLION dollars will be wasted on IT software and services due, primarily, to lack of knowledge and/or outright stupidity (and not malicious intent, but if it’s easy for consultancies and third parties to considerably over bill for legitimate goods and services that you need, imagine how much they are fleecing you for goods and services that you don’t need and may not even receive).

It’s highly likely that the true cost of errors, abuse, and fraud (internal, collusion, and external) is closer to 10% of total GDP, or close to EIGHT TRILLION. That’s at least twice the GDP of every country on the planet except China and the United States. That’s a BIG PROBLEM, which is definitely not being helped by the 100M to Multi Billion Procurement Frauds being reported almost monthly across major western economies — and multi-million dollar fines don’t repair the damage. (They don’t even come close.)

This is damage which Procurement needs to repair — because Procurement is the only department that has any hope of putting proper procedures, processes, and platforms in place to minimize the errors; training the organizational employees on proper procedures and monitoring the implementations to prevent abuse; and putting in place proper detection systems to detect, and prevent, potential fraud and quickly identify and track it when it happens.

Unless all the bucks go through, and stop at, a modern Procurement department run by a CPO who puts in place proper people, processes, and platforms, loss is going to continue to run rampant. Which means that while the public sector is failing us daily, the Private sector has to step up and restore the integrity of Procurement. It can start by utilizing some of the the techniques in the linked article, and continue by continually learning and implementing the best technology and processes it finds to not only uncover significant savings in inflationary times, but return integrity and trust into big business, and give governments who have lost their way a model to follow.

And for more details on Bad Buying to avoid, and how to achieve Procurement with Purpose, the doctor suggests you start by following the great public procurement defender, Peter Smith.

One of these things is not like the other — it’s the right choice!

Note the Sourcing Innovation Editorial Disclaimers and note this is a very opinionated rant!  Your mileage will vary!  (And not about any firm in particular.)

Three bids for that spend analytics project from the three leading Big X firms come in at 1 Million. One bid for that spend analytics project from a specialized niche consultancy you pulled out of the hat for bid diversity comes in at 250 Thousand. Which one is right?

Those of you who only partially paid attention to the education Sesame Street was trying to impart upon you when you were growing up will simply remember the “one of these things is not like the other” song and think that any of the bids from the Big X firm is right and the niche consultancy is wrong because it’s different, and therefore must be thrown out because it’s too low when, in fact, it’s just as likely that the three bids from the Big X firms that are wrong and the bid from the niche consultancy that was right.

Those of us who paid attention knew that Sesame Street was trying to show us how to detect underlying similarities so we could properly cluster objects for further analysis. What we should have learned is that the Big X bids were all the same, built on the same assumption, and can be compared equally. And that the outlier bid needed further investigation — a further investigation that can only be undertaken against an appropriately sized set of sample set of bids from other specialized niche consultancies to compare against. And without that sample set of bids, you can’t properly evaluate the lower bid, which, the doctor can tell you, is just as likely to be closer to correct than what could be wildly overpriced Big X bids.  (Newer firms often have newer tech and methods — and if these are the right methods and tech for your problem … )

As per our recent post, if you want to get analytics and AI right, most of these guys don’t have the breadth and depth of expertise they claim to have (as most don’t have the educational background to know just how broad, deep, and advanced AI and analytics can get, especially when you dig deep into the math and computer science and all of the variable models and strengths and weaknesses, and instead are trained on what is essentially marketing content from AI and analytics providers). In the group that sells you, there will be a leader who is a true expert (and worth his or her weight in platinum), a few handpicked lieutenants who are above average and run the projects, and a rafter of juniors straight out of private college with more training in how to dress, talk, and follow orders than training in actual analytics … and no guarantee they even have any real university level mathematics beyond basic analysis in operational research (and thus a knowledge of what analytics is and isn’t and can and can’t do).  And unless you know what you need, and why, you can’t judge the response.  (Furthermore, you can’t expect them to figure out your problem and goals with only partial information!)

While there was a time big analytics projects were (multi) million dollar projects, that was twenty years ago when Spend Analysis 1.0 was still hitting the market; when there were limited tools for data integration, mapping, cleansing, and enrichment; and when there weren’t a lot of statistics on average savings opportunities across internal and external spend categories. Now we have mature Spend Analysis 3.0 technologies (some taking steps towards spend analysis 4.0 technologies); advanced technologies for automatic data integration, mapping, cleansing, and even enrichment; deep databases on projects and results by vertical and industry size; extensive libraries for out-of-the-box analytics across categories and potential opportunities; and a whole toolkit for spend analysis that didn’t exist two decades ago. This new toolkit, built by best of breed vendors used, and sometimes [co-]owned by these best of breed niche consultancies (that don’t try to do everything, and definitely don’t pretend they can), allows modern spend analysis projects to be done ten times as efficiently and effectively, in the hands of a master — a master that isn’t necessarily on your project if you hire a Big X or Mid-Sized Consultancy without doing your homework, vetting the proposal, and vetting the people. [See when should you be using Big X.]

In contrast, a dedicated niche consultancy should have all these tools, and only have masters on the project who do these projects day in and day out. Compared to the bigger consultancies who don’t specialize in these projects, which will have a team of juniors using the manual playbook from the early 2000s, and one lieutenant to guide them. That’s often why sometimes their project bids are five times as much — and why you should be inviting multiple niche best-of-breed consultancies to bid on your project as well as multiple Big X consultancies (including those that are truly focusing on analytics and AI, and you can identify some of these by their recent acquisitions in the area) and be focusing in just as much on the six figure bids for the one that provides the best value, not just the seven figure Big X bids.  (And, FYI, if you invite enough Big X, you might find some come in at six figures and not seven because they have acquired the newer tech, took the time to understand your request, and figured out how they could get you the same value for less cost, leaving you funds for the follow on project where you should consider the Big X!)

(This is also the case for implementations. The Big X always have a rafter on the bench to assign to any project you give them, but there’s no guarantee any of them have ever implemented the system you chose before, or if they did, no guarantee they’ve ever connected it to the systems you need to connect to. You need specialists if you want a new system implemented as cost effectively as possible, especially if its a narrow focused specialist application and not a big enterprise application the Big X always implements. At the end of the day, even if you’re paying those specialists 500 or more an hour because getting a system up in 2 months at 40K is considerably better than a small team of juniors taking 4 months at 200 an hour and a total cost of 80K.  But again, mileage will vary — if the solution you select is a Big X partner, then the Big X will be best.  If it’s a solution they never heard of, you will need to evaluate multiple bids from multiple parties. )

Remember, where any group of vendors on the same page are concerned, All of us is as dumb as One of us!

Don’t fall for the Collectivism MindF6ck! that if multiple parties agree on something, that’s the right answer!  the doctor does NOT want to do say it again, but since a month still is not going by where he’s hearing about niche consultancies being thrown out for “being too cheap” or “obviously not understanding the problem” (which means the enterprise throwing them out is too uninformed and not recognizing that the Big X bids could just as likely the outliers because they aren’t inviting enough expert consultancies to the table), apparently he has to keep writing (and screaming) this truth. (the doctor isn’t saying that you can’t get a million dollars of value from some of these consultancies, just that you won’t by giving them a project they are not suited for;  again, see when should you use big X to identify when that million dollar project will generate a five million ROI — it’s people doing these projects at the end of the day, and where are those people?)

Remember, most of these firms got big in management, or accounting and tax, or marketing and sales consulting, not technology consulting. The only reason these big consultancies started offering these services is because of the amount of money flowing into technology, money which they want, but while the best of the best of the best in more traditional accounting, management, and marketing fields flocked to them, the best of the best in technology flocked to startups and c00l big tech firms  Now, some of these firms double downed, went and recruited those people, built small teams, learned, bought tech companies to expand the team, and now have great offerings in a number of areas.  But we have tens of thousands of tech companies for a reason, not everyone can build every type of technology, and not everyone can be an expert in every type of technology.  So while they will have expertise in some areas, they just can’t have expertise in all areas.  No one can.  Find the best provider for you.  Sometimes it will be Big X.  Sometimes Mid-Market.  Sometimes Niche.  It all depends on your problem at hand.)

And yes, sometimes the niche vendor will be wrong and woefully undersize the project or your needs.  But as per the above, if you don’t do give them a chance, and deep dive into their bid, how will you know?

 

Did you ever try eating a mitten? the doctor bets some of those clients did! (He feels you’re not all there if you think glorified reporting projects should still cost One Million Dollars by default and might actually try to eat your mittens! [Joking, but you get the point.]  Deep analytics projects that require the most advanced tech, especially AI tech, will cost a lot, but standard spend analysis, sales analysis, etc. where we have been iterating and improving on the technology for two decades should not.)

Be Wary of Top X Lists That Only Have ONE Specialist Vendor!

For every area of Source-to-Pay, including, but not limited to Sourcing, Supplier Management, Contract Management, Spend Analysis, e-Procurement, Invoice-to-Pay, Accounts Payable, Intake, Orchestration, and Spend Management, you can find a Top 10 vendor list. In fact, you can find multiple … just do a Google or Chat-J’ai Pété! search. However, if you compare them all side by side, you’re likely going to see the same vendors over and over again. Specifically, in all but one of the lists, you’re likely going to see the following vendors: SAP Ariba, Coupa, iValua, GEP, Jaggaer, and Oracle. In other words, you’re going to see the same six vendors over and over again.

And therein lies the problem. These are top suites. Suites may be best in breed in the one or two modules they started off with when they were startups, or the one or two startups they just acquired, but they are NOT best of breed across the board. Not even close. If you’re looking at a Top X Supplier Management list, you want a vendor that is best of breed in (at least one aspect of) Supplier Management. If you wanted a top suite, you’d look at a top suite list.

And it wouldn’t be so bad if you knew this, but you don’t. You’re looking for these lists because you are looking for a solution, don’t know what the options are, or where to find them. So when there’s only one specialist vendor on the list, and the list is on a major site like Supply Chain Digital or CIO, how is an average Procurement Professional supposed to find out what vendors even offer the type of solution they are looking for, let alone who the best vendors may be?

The answer is they don’t. And who does help? No one! The reality is that those suites are enterprise suites, all designed for, and going after, the same Fortune 500 / Global 3000. All are great baseline end-to-end solutions. But this also means they are not designed for the next 30,000 companies in the mid-market. That they don’t have end-to-end deep capability, and may not have specialized capability in the one-or-two modules the organization needs deep capability in due to the organization’s specific needs. If the organization is a utility, it needs deep contractor vetting (which is a specialized type of supplier compliance management), especially when those contractors send people to consumer sites and a safety violation could not only harm them, but also harm the consumer. If the organization is a financial institution, contracts need to be extensive and iron clad when it comes to risk, compliance, and security and a top of the line contract management solution is needed. If the organization does a lot of small purchases, it probably needs a best-of-breed catalog management solution with easy search and request so the average organizational buyer can request it. If you examine each of these requirements, none of those suites due specialized contractor vetting. Only one has a best of breed CLM, and only one other has a partnership with a best of breed CLM (and while they’ll tell you otherwise, remember that the doctor was a Spend Matters Analyst, designed ALL of the original Source-to-Contract Solution Map evaluations [which are still the deepest technical evaluations in the analyst space], as well as led the development of the common stack and infrastructure sections across all of the Maps and knows with authority what the “best” solutions are in each of these categories when you go broad and deep technically*). With respect to catalog management, half of these suites do it quite well, but with regards to organizational roll-out and tail-spend capture, most don’t get good adoption and that’s why you have intake/orchestration specialists (like Zip, Oro, and Tonkean) providing easy to use, consumer friendly, natural language interfaces to the organizational users beyond Procurement (and sitting on top of these suites).

In other words, these lists are junk, and besides presumably keeping the advertisers happy, they offer no value to anyone. In fact, they are so junk that, if they are not clearly labelled as advertorials (because that’s what they effectively are), they could be in violation of Competition Acts (introduced to bring transparency into journalism and “influencing”) in some states and countries if it wasn’t for the inclusion of exactly one best-of-breed vendor on the list who clearly wasn’t paying the publication anything (because they are small and definitely couldn’t afford the advertising rates).

In short, if half of a “Best Of” list for a Procurement module is suites, it’s junk and you should completely ignore it, and the publication should do better (or not do it at all).

And while the doctor can’t point you to any Top X lists that are suite/advertiser free (as he’s never found any), what he can do is point you to non-exclusionary vendor lists that you can start from to do your own research.

ProcurementSoftware.site has an open directory of a large number of Procurement software companies organized across 20 categories and the Spend Matters Vendor Directory has an open directory of vendors across 26 categories. And while neither of their category definitions or segmentations is perfect, they’re pretty close and a great start (and infinitely better than useless suite-filled Top X lists).

Also, the doctor regularly posts easy access lists of vendors when he does a(n update of a) summary of an area, and so far has listed hundreds and hundreds of vendors across the main areas of S2P in these posts (with almost 100 vendors addressing some area of Supplier Management, over 80 of which ARE NOT SUITES — which means this recent Top 10: SRM Providers list on Supply Chain Digital was very, very, sad when it had 6 suites: Ariba, Coupa, GEP, iValua, Jaggaer, and Oracle; 2 Supply Chain ERPs: Blue Yonder and Epicor [well, 4 actually as SAP and Oracle are ERPs, but at least they have specialist Procurement suites]; 1 trade network (which isn’t actually SRM by the way); and EXACTLY ONE best of breed SRM solution: Vizibl. FYI: SI’s list of over 100 SXM platforms has over 20 SRM specialists … just sayin’.)

For easy consumption, here are:
75+ Sourcing Vendors
90+ Supplier Management Vendors
80+ Contract Management Vendors
40+ Spend Analysis Vendors
70+ e-Procurement Vendors
75+ Invoice-to-Pay/Accounts Payable Vendors
20+ Intake/Orchestrate Vendors
10+, 5+, and 20+ Legal, Marketing, and SaaS Management Vendors
55+ Supply Chain Risk Vendors

And if you’re wondering why the doctor doesn’t do Top X lists, it’s twofold. One, in no area are there exactly 10 best vendors, so it’s a disservice to you to leave vendors out or add vendors in just to make a round number. Two, and most importantly, the top X vendors are predicated on the specific functionality you are looking for and the ability of the vendor to plug into your software ecosystem. For example, in Supplier Management, there are over a dozen different areas of focus. the doctor‘s coverage included 10 major areas of functionality, of which “R”elationship was just one, and while a large number of vendors “do” relationship, there are a number of different definitions as to what that is (and what functionality must be included). So, without a good definition accompanied by an ecosystem definition, there’s 40-ish vendors that may or may not be on that list. Every module has 3 to 10 major functionalities it has to support, and then sub-functionalities you may want. Without that context, no one can provide you a Top 10. (But if you engage an advisor who knows all those vendors at a high level, and provide your requirements, that person can help you get to a relevant short-list quickly so that you are making meaningful comparisons at decision time.)

* the doctor also knows that you don’t always need the absolute best, that sometimes the 80% solution [compared to the absolute best] is more than enough for most organizations, and that’s why a suite is often the right starting point for a large enterprise; especially if the enterprise augments the suite with one or two specific best-of-breed applications for specific use cases, as needed; but that’s your decision, not the suite, and not an uniformed third party hiding potential solutions from you

Open Gen-AI Isn’t Just Dumbing Your Business, It’s Killing the Planet!

Open Gen-AI is not just one of the most dangerous technologies we’ve ever invented* (as it lulls the uninformed into a false sense of security who will depend on it to make increasingly more critical decisions that could have increasingly more disastrous consequences), it’s also about to pose the biggest threat to planetary survival!

As it is, an average Data Center requires at least 10X the energy consumption of an average American home per square meter, with Open Gen AI data centers (which require ultra dense servers with cores running flat out all the time) requiring even more energy than that. However, whereas traditional AI models, including traditional Deep Learning Neural Nets which can be optimized post-training to often 10% of their original size using techniques developed by MIT researchers (including those described in this article) are now smaller and more stable than they used to be, these models just keep expanding exponentially in a futile quest to have them do more and now require models thousands of times bigger (and more energy intensive) than traditional models, often to generate output that wouldn’t even net a C grade in a high school class!

Think about that and read this article by Kate Crawford on Nature on how AI’s environmental costs are soaring (which notes that even OpenAI’s CEO has finally admitted that the AI industry is heading towards an energy crisis as there just isn’t enough power to keep up with the exponential energy demands [with ChatGPT already requiring more power than 33,000 average American homes … think about that, if you shut down just TWO Open Gen-AI models, you could power an entire small city]) before needlessly throwing a solution you don’t understand at a problem you don’t even have (when a better process would eliminate that problem and replace it with a smaller, different, problem that traditional technology and a human with just a bit of training could completely solve).

Because Open Gen-AI is just NOT ready for prime time, and just because these companies raised Billions of dollars on false promises that it would be ready years or decades sooner than AI development has traditionally taken, that doesn’t make it our responsibility to adopt the technology before it’s ready.

* And if a man afraid of nothing acknowledges this, we really should listen! (See this article.)

Another “think tank” article on digitizing procurement that’s off-the-mark!

A recent article in Supply Chain Brain noted that you should be seizing the opportunity for digitizing procurement and the doctor completely agrees. Nothing should be paper based in Procurement today. There’s no excuse for it.

And yes, multiple developments in supply chain are converging to create an unprecedented digital opportunity for procurement professionals. Furthermore, if you work on mastering and combining emerging and maturing technologies in strategic ways since procurement teams are in a position to reshape how they work, and create value across the supply chain, you can revolutionize Procurement and business performance.

But digitizing, by definition, means moving processes from scrolls to systems, from the dark basement to the illuminated screens. It DOES NOT mean that:

  • you use Gen-AI or even machine learning
    there may be tasks where you apply point-based ML, but that comes after the digitization of an appropriate process
  • you use cognification to illuminate (concealed) processes
    especially when it could illuminate you should never have digitized the process in the first place
  • you accelerate workflow through automation
    you automate what you can, and while that includes the acceleration of tactical paperwork processing and thunking, sometimes humans have to step back and think about the data received, insights produced, and options available before making a decision … you don’t accelerate whatever amount of time it takes a human to make a good decision (and, instead, focus on automating and accelerating any non-strategic tactical “thunking” tasks that prevent them from focussing their brain power where it’s really needed)
  • you go straight to content personalization
    when the users might not even know how to use the baseline systems (and, in the process, create a nightmare for the support personnel)

Digitizing Procurement starts by:

  • understanding what processes you are using now
  • understanding if they are appropriate or they should be optimized
  • identifying off-the-shelf best-of-breed modules, mini-suites, suites, and/or
    intake-to-orchestrate platforms and implementing them
  • identifying key points where RPA, ML, or other advanced techs can make the process even more efficient
  • then identifying the right advanced tech to use

Not starting with it. You should never try to run a race before you can walk. The only “impactful opportunity” identified in the article you should start with is

  • adopting ecosystem thinking to enhance data

At the end of the day, nothing works well without good data. So get the data right, and everyone aligned to get the data right, and that will get you further, and help you do better, than any piece of modern tech you can try to throw at the problem.