Category Archives: rants

Roughly Half a Trillion Dollars Will Be Wasted on SaaS Spend This Year and up to One Trillion Dollars on IT Services. How Much Will You Waste?

Before we continue, yes, that is TRILLION, numerically represented as 1,000,000,000,000, repeated twice in the title and yes we mean US (as in United States of America) dollars!

Gartner projects that IT spend will surpass 5 Trillion this year. When you consider that 30% of IT spend is usually for software, and that one third (or more) of software spend is wasted (for unused licenses, which is why we have a whole category of IT and SaaS specialists that analyze your out-of-control SaaS and software spend and typically find 30% to 40% overspend in a few days), that means that roughly half a trillion dollars will be wasted on software this year.

Even worse, Gartner projects that spending on IT Services will reach 1.5 Trillion. And the waste here could be two thirds! Now, we all know that you need IT services to implement, integrate, and maintain those IT systems you buy. But how much do you need? And how much should you pay? Consider that an intermediate software developer should be making 150K a year (or 75/hour), that says that an intermediate implementation specialist shouldn’t be making any more than that, and not billed at more than 3 times that (or 225/hour). But how much are you being billed for relatively inexperienced implementation consultant, with maybe a few years of overall experience and maybe six months on the system that you are installing? the doctor knows that rates of $300 to $500 are not uncommon for these resources that are oversold and overcharged for.

But this isn’t the worst of it. As per our upcoming article Fraud And Waste Are Not The Same Thing, many implementation “partners” will try to get all they can get and make sure that when you go in for a penny, you go in for a pound and they will push for:

  • frequent change orders during implementation, usually billed at excessively high day rates as they have to “divert resources” or “work overtime”
  • unnecessary customizations or real-time integrations that are an extensive amount of work (and cost) when out-of-the-box or daily flat-file synchs are more than sufficient
  • extensive “process evaluation” or “process transformation” processes that are well beyond what you need to eat up consulting hours
  • extensive “best practice” education when your practices are good enough for now and/or those best practices are already encoded in the system you just bought and paid a pretty penny for and just following the default process gives you the same education

That will often double to triple the cost. But that’s not the worst of it. As per comments the doctor has made on LinkedIn, he regularly hears stories of niche providers losing 200K deals because customers said their quote was too low because all the Big X companies quoted over 1,000K for what should be 100K worth of work in their view (and, right or wrong, if a niche firm comes in less with a detailed proposal, they should be evaluated — maybe the Big X, with a very general request, over estimated your requirements and the effort, or maybe the niche firm completely underestimated it — how will you know if you don’t evaluate all the responses?). Literally. This is because, as the doctor has noted in previous posts and comments on LinkedIn:

  • they don’t have always have the talent in advanced tech (and even The Prophet has noted their lack of talent in areas of advanced tech in multiple LinkedIn posts, though he has been much more diplomatic than the doctor in discussing their lack thereof; but he did note in a 2024 advice post that consultancies are going to have a hard time attracting talent this year) — for every area, an average firm will have a team leader who’s a superstar, two or three handpicked lieutenants who are above average, and then 20 to 40 benchwarmers who are junior and not always worth the rate they are charging);  now, as with every general observation, there are exceptions (with some Big X recently acquiring a number of best-in-class technology, analytics, and AI vendors that give them top-notch world class talent, and others actively recruiting top talent form the best tech firms, but every firm is different, and, most importantly, every need is different — it’s up to you to fully qualify your need, review the proposal carefully, and vet the proposed talent, otherwise, it’s your fault if you overpay, fail miserably, and don’t get value
  • some of these firms have an incredible overhead — they got big in good times and built posh offices to house the partners making more than top lawyers who have a lifestyle to maintain (or, in some cases, they just acquired expensive real estate in premiere locations)
  • they don’t always have the knowledge of, or experience in, modern tools — some of which are ten times more powerful than last generation tools; this, of course, means that, in these situations, Big X benchwarmers are using last generation tools which take ten times the manual labour to extract value from
  • etc.

Unless you want to pay 1K an hour, at some of these firms, you’re not guaranteed getting that one superstar resource trying to be the front end to two dozen projects that his three lieutenants are trying to manage, all of which are staffed by junior to intermediate individuals who can barely follow the three to five year old playbook.   (While if you chose a different Big X firm that just acquired a whole consultancy with dozens of top analysts, it’s a different story.)

There’s a reason that The Prophet predicted in his 9th prediction that SaaS Management Solutions [will] Start to Eat Services Procurement Tech and that many companies will go in house if they have tech expertise. Because he realizes that these consultancies will have a hard time not only hiring, but retaining, tech talent when they have hiring freezes, salary freezes, and reduced engagements as more and more companies can’t afford the ridiculous rates they’ve been charging recently. (Companies may not have had a choice during COVID where it was implement on-line collaboration and B2B tech or perish, but now they do.)

But there are still many companies who will, when they encounter a (perceived) tech need, immediately pick up the phone and call their favorite Big X firm and bring them in to help them understand who to bring in for an engagement, instead of widening the net to niche providers who might be 3 to 5 times cheaper, and who will deliver results at least as good, if not better, or, if their proposals won’t cut it, will validate when that multi-million proposal is a great value and will deliver the expected ROI.

Now, again, the doctor would like to stress that, despite how much he insists they are usually not the right solution for specialist advanced tech implementations that aren’t the enterprise systems and suites they usually implement, that Big X are not all bad, and sometimes worth many times more than the high fees they charge. [See when should you use Big X?] Most of these companies started off as management/operational/finance/strategy consultants and grew big because they were one of the best, and in certain domains, each of these companies still are. As they grew, they added more areas and became experts in those.  But no company can, and should, be expected to be an expert in everything!

And while there will be exceptions to the rule (as every one of these companies has some tech geniuses), the reality is that when you need more bodies than there are talented bodies in an entire industry, you’re not going to get them and, because consultancies are not cool when you want to be a tech superstar (and join a startup that becomes a unicorn), the ratio of superstar to above average to average to below average talent in these organizations is much thinner than in multinational tech companies (like Alphabet, Apple, Meta, Microsoft, etc.)  (Because if they were the best of the best, there’s no way they’d lay off 10,000 employees at a time every time the market jitters.)

In short, manage that IT services spend carefully, or you’ll be double paying, triple paying, or worse and providing a big chunk of the roughly ONE TRILLION DOLLARS in IT services overspend that the doctor predicts will happen (again) this year. (Unless, of course, you agree with Doctor Evil who says, why make trillions when we could make … billions. Because that’s exactly what happens when you overpay for software and services. Don’t expect the Big X or Mid-Market to say anything as they get the majority that overspend, and that’s how they stay so profitable.  Plus, they usually need those revenues to deliver what you’re asking for, as ill-defined projects mean they need to make a lot of assumptions and often over engineer to decrease the chance you will be disappointed in the result!  In other words, if you overpay due to your lack of research and preparation, it’s on you. )

Forget Consequence Free. I wanna be Gen-AI Free!

To the tune of Consequence Free by Great Big Sea.

Na na-na, na na na-na na na!
Na na-na, na na na-na na na!

Wouldn’t it be great,
if no one ever was redundant?
Wouldn’t it be great,
if we made all the decisions?

I’ve always said,
All the rules are made for bending.
And if I did the right thing,
What’s wrong with that vision?

I wanna be Gen-AI free!
I wanna be where humans always matter.
I wanna be Gen-AI free!
And say: Na na-na, na na na-na na na!
Oh! Na na-na, na na na-na na na!

I could really use,
To lose my ethical conscience.
Cause I’m getting sick,
Of feeling angry all the time.

I won’t abuse it,
Yeah I’ve got the best intentions.
For a little bit of anarchy,
But not the hurting kind.

I wanna be Gen-AI free!
I wanna be where humans always matter.
I wanna be Gen-AI free!
And say: Na na-na, na na na-na na na!
Oh! Na na-na, na na na-na na na!

Oh! I couldn’t sleep at all last night,
‘Cause I had AI on my mind.
Why can’t we leave it all behind,
You know it could be that easy.

It just takes one person
Wouldn’t it be great,
If the CEO made that call
We could do the work,
And we would never get the slip.

Wouldn’t need to worry about illogic or bad data.
We could slip off the edge,
And never worry about the fall.

I wanna be Gen-AI free!
I wanna be where humans always matter.
I wanna be Gen-AI free!
And say: Na na-na, na na na-na na na!
Oh! Na na-na, na na na-na na na!
Oh! Na na-na, na na na-na na na!

the doctor, while an early adopter of SSDO, rule-based RPA, Machine Learning, and other “AI” technologies, is serious here. Gen-AI is garbage at best, bull crap the majority of the time, and toxic waste when it fails. What other technology produces hallucinations, hate speech, and hot (as in stolen) data on a regular basis? What other technology has literally convinced people to commit suicide?

It’s not ready for prime-time, and may never be. Go back to carefully constructed NLP solutions on carefully designed data sets that actually work. We don’t need Artificial Idiocy where you need more training in prompting to have a chance at solving a problem than developers need training in coding to write a reliable deterministic algorithm that actually solves the problem. Sure it seems to work “okay” 90% of the time with normal usage, but what about that 9% of the time it doesn’t or the 1% it fails so drastically it could cost you millions of dollars in direct and indirect damages? Is it worth it? (The answer is NO!)

Some light reading. More can be found by Googling Gen-AI Fails and similar search terms.

It Was Nice to See Procurement Get a USA Today Headline, But …

… it would be nicer still if the article made any sense!

Last month, the USA Today ran an article on How to Optimize the Procurement Lifecycle of Your Business that gave the doctor hope that maybe Procurement would get a sliver of the just desert it deserves. But, alas, the article was yet another example of how the big publications don’t care, don’t actually verify the content, and allow whatever big company gets their attention to push their agenda.

Because SEO has no place in any article on “How to Optimize the Procurement Lifecycle of Your Business”. Sales cycle, maybe. But Procurement cycle? Not a chance!

Let’s back up.

The article starts off by noting that understanding the procurement process is vital to improving cost efficiency, ensuring quality procurement solutions, and staying compliant with regulations, which is all true, and all critical to any business (among other things, but you can’t overwhelm the average reader who’s likely not a Procurement expert). It also notes that the procurement process is fraught with complexities and challenges which is also true, and also critically important for a non-Procurement person to understand.

Then it says that optimizing the procurement process entails the use of modern technologies, insights, and strategies, which gave the doctor hope that maybe it would help an average user understand what kind of technologies the organization needed, what insights the technologies should provide, and what types of procurement strategies the organization might want to consider.

But instead of actually providing these key insights it goes on to say that inefficiencies in procurement management can lead to increased costs, delayed deliveries, and compromised quality, which, while also true, is not that helpful at this point (and should have been listed as examples of the complexities and challenges highlighted above). It used this as a lead in to how modern point-of-sale (POS) systems are instrumental in dealing with inefficiencies, WHAT THE HELL?, which is used as a lead in to a whole section on digital transformation: incorporating SEO for Procurement Optimization, WHAT THE FUCK?

A POS solution is NOT a Procurement solution, and it’s certainly NOT instrumental in dealing with inefficiencies in Procurement management. Procurement is about acquiring the product an organization needs when — and where — it needs it. While a modern POS system can push roll up data into the inventory management system which, in turn, can generate forecasts to feed Procurement, a modern POS system is not necessary because all Procurement needs is sales projections, and if the delivery timeline from the source in Bangladesh or Shanghai is 45 to 60 days, it only needs 60 days of granularity, not sales data by the hour! Logistics will need that granularity to do finer forecasts to push stock where it is needed before it is needed, but NOT Procurement.

But the cardinal sin of this article is claiming that incorporating SEO techniques into the digital transformation strategy of the business can add another dimension to procurement optimization. No NO NO NO NO! The article claims that with SEO techniques, businesses can reach out to a wider pool of global suppliers, which is completely false because THAT’S NOT HOW SEO WORKS! SEO helps people doing searches find sites that match certain keyword searches, and, thus, would only work if the potential supplier has a sales person who is actively using the internet looking for new customers, who is using the keywords that the site has been SEO’d for, and who is searching in the organization’s language and in the organization’s geography (as most search engines prioritize same language results in the region). In other words, the chances of a supplier you might actually consider finding your SEO-optimized site and reaching out to the right person at your organization is only slightly better than you winning the grand prize in a mega-millions lottery.

The proper solution for finding new suppliers is a supplier discovery / network solution like
Apex Analytix,
Graphite Connect,
MFG,
Onventis,
Promena,
ScoutBee,
Supplhi,
supplier.io, and
Tealbook.

NOT SEO!!!

So, even though Procurement is the life blood of the business, when it comes to mainstream coverage, Procurement Don’t Get No Regard, No Regard At All!

14% of Procurement Leaders Have Adequate Talent to Meet Future Needs? Bull Crap!

the doctor has to stop looking at headlines, especially those on surveys of Procurement Leaders. Because there is no way that 14% of companies have adequate talent to meet future Procurement Needs. Why? Because there’s no way that 14% of companies have adequate talent to meet current Procurement Needs. Adding this survey result from Gartner with the recent survey result from Forbes who said that 9% of companies claim to be ready to manage risks posed by AI, and the doctor is starting to wonder who they h3ll they are asking to fill out these surveys … because it’s clear that these people either have no connection to reality, are drowning so deep in despair in their job that the only way they can keep their sanity is to pretend that the future is going to be way better than it is today (even though there’s no way that can be true if the company doesn’t fix the problems it has now because problems in companies multiply faster than European Rabbits in Australia), or are higher than a kite on drugs (as that’s how they deal).

The reality is that just about every company has problems in Procurement around:

  • Tech: they don’t have enough modern Sourcing and Procurement systems, sometimes it’s because they are cheap are not-forward thinking (another problem), other times it’s because they aren’t technologically proficient enough (to even know what they need)
  • Risk: otherwise, there’d be a lot less disruptions (even when pandemics hit as they would be doing more near-sourcing, have backup plans ready to go, etc.)
  • Contracts: ask them where there contracts are, and what they are usually protected from and what they are usually not
  • Logistics: beyond risk, chances are they don’t have the right network for the logistics they need or the right carriers for the network they are forced into
  • Spend Under Management: they aren’t able to do nearly enough projects in a year to address enough significant/strategic/critical spend (either due to lack of talent, tech, turbidness [of spend], etc.)
  • Negotiation: some companies are paying more on contract than the spot market, sometimes this is bad negotiation, sometimes this is lack of insight, but regardless, it’s problematic
  • Forecasting: both actual demand (because you can’t trust Sales & Marketing) and future supply/demand imbalances and prices
  • inventory management: (because JIT sometimes stands for just-in-trouble)
  • Spend Visibility: for every dollar: who, what, when, where, why, and how … they just don’t know
  • etc. etc. etc.

If companies had enough talent today, they wouldn’t have the majority of these problems.

But here’s the thing, even if the mythical company existed that had none of these problems, Procurement is still constantly evolving. The suppliers they need to buy from are constantly evolving. The supply networks from the supplier to the company to their consumers are constantly evolving. Technology is constantly evolving. You don’t even know what’s coming, so you can’t know what skills you need, or if your talent will be ready. (Hint: They won’t. Because, even though we keep telling you, you won’t Train Them! [Even though educated, efficient talent are way more productive, you still cut the training budget first for reasons the doctor can’t fathom!])

In other words, it’s ludicrous for any company in the real world that buys and sells products and services in the real world who is, more than likely, barely treading water today to think they are prepared for tomorrow! (Now, they might be in good shape if they have top talent today, but they still need to keep that talent trained and at the top of their game to have any chance of being ready for tomorrow.)

But one thing this survey exposed is the fundamental problem with surveys — people can overestimate their knowledge or readiness (or score themselves higher than they should because they won’t publicly admit they aren’t doing as well as they could be) and then the analyst firm is stuck publishing the results it collects.  Even if they don’t seem plausible when you dig deep.

Global Sourcing Agencies — Are They The Hidden Evil of the Outsourcing World?

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.)

We all like to blame the Big X (and the larger Mid-Sized consultancies) for the outsourcing revolution that put the whole world in sh!t when the pandemic started (because they spent three decades convincing every CEO and their favourite corporate lap-dog they would get immediate savings [which was true] by outsourcing everything possible to China, a country that then proceeded to do mandatory city-wide lockdowns for three years every time a single COVID case was confirmed). Not only did sudden unavailability in a single geographic source break many supply chains, but the three decades of unnecessary outsourcing also significantly contributed to GHGs and hastened our trajectory to a global 2C temperature increase as transportation GHG emissions have approximately doubled over the last 30 years (and are now responsible for about 30% of global emissions, especially since just 15 older ships contribute more GHG emissions annually than 50 Million cars).

But it’s not just the Big X and Mid-Sized pushing us towards “low cost countries” on the other side of the world (where they have to help with the introductions, organizational transition management, on-site audits, etc. etc. etc. to pocket 33% of those ephemeral savings as consulting fees), it’s Global Sourcing Agencies that are adopting their fee models, tactics, and strategies to help you find the right “partners” with their “in-country” consultants who can help you on the ground, except at slightly lower costs and with slightly more focussed industry expertise.

And the truth of the situation is that if you can’t produce the products (assemblies, components, parts) you need at home, you need to outsource. But the reality is that, today, you should be outsourcing as close to “home” (where “home” is the market you’re sourcing for, so if you’re a true global multi-national, sourcing near the US for the American market, in/near Europe for the European Market, in/near Australia and New Zealand for the Australasia market, and so on). You’re not sourcing from Russia for Argentina or China for the US. It makes no sense (and, at the end of the day, when you compound the disruption costs on top of the outsourced management and super high logistics costs, costs too many extra cents).

And chances are, now that you are trying to move to a closer to “home” market, you have no clue what suppliers are there, what their real production capabilities are, how well they have served other customers in your industry, how easy they are to work with, what your chances of (eventually) becoming a customer of choice really are, and how much help you can get on the ground if you need it. So you need a Global Sourcing Agency to help you, just like you will often need a Big Consulting Agency to help you with Procurement Transformation. But in this situation, it is many times more critical you choose the right one. If you choose a Global Sourcing Agency that specializes in China manufacturers when you are trying to pull out of China sourcing for your North American Market (and thus need deep insight into the Mexican and Brazilian manufacturing market), you’re not going to get many (if any) good options and end up being convinced that, for worse or for even worse, you need to stay in China.

So where’s all this coming from? What appears to be sponsored business spam. For example, the Business NewsWire and the Big News Network are pushing an unattributed* article titled The Role of Global Sourcing Agencies in Business across any business press release site that will accept it.  In our opinion, it’s a thinly veiled attempt to ensure that, with the current (long overdue) focus on “near-sourcing” (which you should have been doing since the initial rise of Mexican outsourcing half a century ago as a response to the introduction of Maquiladoras in the 1960s), that you stay in China (which is, of course, likely the LAST thing you should do unless you are also selling that product to China or nearby [Austral]Asia).

It’s yet another article making generalized good points about how Global Sourcing Agencies can help in theory, but whether they achieve that in practice depends on whether they have the right people, the right relationships, and the right technology — in the region you need them to be in. (Which, and we can not say this enough, is often NOT China!)

Now, if you are a global firm that sells to EurAsia or Austalasia, please use these firms that specialize in china.  You don’t want to be sourcing from South America or Africa for something you can build in Asia!   And if you want to re-shore from China to South America for your American market, find a firm that specializes in South America.

Just like every Big X has their areas of specialty (see when should you use a Big X), every Global Sourcing Agency has theirs.  Use them wisely.   While the right partner can help you reap long term rewards, the wrong partner will lead you deep into the dark woods of fabled nightmares from which you will never emerge again. (And, just like when you select the wrong Big X, it will be your fault.  If you select a Global Sourcing Agency that specializes in China, they will reasonably expect you want China.  Again, if that’s the case, great.  If not … )

 

* We’re glad the article it’s unattributed. We don’t want to single out any company in particular here. It’s the entire outsourcing business model we’re questioning!  We hope it evolves into a model that helps you outsource to near-source countries!  After all, just like America should not be buying something in China it could make in America to sell in America, America should not be buying something in America to sell in China it can make in China!  Sourcing needs to be re-shored to the nearest available source to minimize transport needs, costs, and delivery times.  Not one focus on whatever country looks to be the cheapest or best in the short term!