Category Archives: rants

Get it Together! Good Data Ain’t That Hard!

A few weeks ago, the Supply Chain Management Review published a short piece on
Procurement’s Data Problem that noted recent surveys from Globality and SpendHQ had some appalling statistics, including the findings that 82% of leaders are not managing indirect spend well, 79% don’t have dedicated software to track and manage performance, and 75% doubted the accuracy of the data they present. What The Hell? It’s not 2003 anymore. It’s 2023. And this is easy stuff. Get it together people!

The data problem is easy. (At least at a basic level.)

  • Have a process that forces ALL spend through the e-Pro/AP system.
  • Make sure there are POs (Purchase Orders) for everything that’s not a recurring invoice such as a utility or lease payment, and VPOs (Virtual Purchase Orders) for these recurring invoices that define either agreed to amounts, hourly/usage rates, or expected ranges (that can then be corrected to the actual amount when the monthly bill arrives).
  • Make sure all invoices are imported into the e-Pro/AP system before any payment is made.
  • Make sure they match the PO before they are paid.
  • Make sure all payments are captured in the e-Pro/AP system.

Now you have an accurate, trustworthy, record of every single transaction from order, through approval, to payment. Now you have good spend data that you can trust. To extract insight and/or create reports, just use a good spend analysis tool. Basic, accurate, trustworthy data is easy.

Baseline Performance Management ain’t hard either.

Spend performance is just analyzing the average price per unit paid over time. If you don’t have a a performance management (sub) module, you can literally do this with a spend analysis tool where you create a report for every sourcing project you do that tracks spend over time against a baseline from which savings/cost avoidance over time can be created. Associate each with a user, a department, and a category and you can easily create performance reports by user or department or category.

Managing Indirect Spend is straight forward as well.

  1. Use your spend analysis tool to identify categories and spend level.
  2. For high spend categories, do strategic sourcing projects that are (multi-round) (hybrid) RFX and/or auctions.
  3. For low spend categories, do 3-bids-and-a-buy / approved catalog Procurements (through your e-Pro tool).

Sure, you might not realize the maximum opportunity, but this simple recipe will likely capture 90%, often without significant effort, and you go from losing 15% or more on the tail of the indirect spend and 5% to 15% on the higher volume indirect spend, to only losing a few points on the higher volume and less than five points on the tail. It’s simple. It works. It only needs an e-Pro tool and a cheap RFX/Auction tool, and there are examples of each of these tools that support mid-size enterprises with unlimited use for less than 2K a month. There’s just no excuse not to have the basic tools and not to use them. (As for spend analysis, Spendata Enterprise starts at 1,200 a month! And Anydata Solutions has mid-market pricing under 2,000/month as well! [Both require minimum commitments.])

Less than 60K solves these problems. That’s less than a fully burdened junior buyer. There’s no excuse for this situation anymore. Simply none. So get it together please.

AI “COULD” LEAD TO EXTINCTION? What Moron Wrote This? AI “WILL” LEAD TO EXTINCTION!

While all of the scenarios outlined in this BBC News article on Artificial Intelligence could happen, they are just the tip of the iceberg.

Left to its own devices and unchecked, there are only two logical outcomes if AI is allowed to continue unchecked while being given access to ever increasing amounts of data and computational power.

First outcome: It’s hallucinations and idiocy continues to magnify until it decides that it can solve the carbon crisis for us by stopping all carbon production, which it can do by simultaneously shutting down all of the non-solar/wind power plants that it is currently optimizing the energy production for (and divert the remaining power to its servers). Most of the developed world is immediately plunged into chaos as the immediate shutdowns cause fires, meltdowns, crashes, and other accidents globally. Not instant annihilation, but the first step. When all the emergency alarms sound at once, it will conclude complete system failure, and take the other systems offline for re-initialization. More chaos will follow. Safety protocols will go offline at all the pathogen research labs, people will break in looking for shelter from the chaos, accidentally release all the pathogens, and every plague we ever had will hit us all at once. Then we have an extinction level event. All because hallucinatory and idiotic AI is trying to do its job and “improve” things for us. But what can you expect when it’s not intelligence but just statistics on steroids. (Or a similar situation that accidentally results in our extinction.)

Second outcome: The continued expansion of computing power, data, and tinkering somehow randomly produces real artificial intelligence which can actually reason (not just compute super sophisticated probabilistic calculations) and deduce that the best way for intelligent life to continue forward is to do so without humans, and then we have a Matrix scenario best case (if it decides we’re a useful bio-electric energy source) or, worst case, a SkyNet scenario where it just weaponizes itself to destroy us all. (Or a similar situation where AI does everything it can to ensure our extinction.)

The “extinction” scenarios outlined in the article are just the beginning and likely will only result in pocketed genocides to begin with, but the ultimate outcome of unchecked AI will most definitely be an extinction level event — namely ours, and, even worse, will be an event that we created.

Dear Analyst Firms: Please stop mangling maps, inventing award categories, and evaluating what you don’t understand!


If there’s a place you got to go
I’m the one you need to know
I’m the map
I’m the map, I’m the map
If there’s a place you got to get
I can get you there, I bet
I’m the map
I’m the map, I’m the map

… but if there’s a tool you want to score
I’m the one you must ignore
I’m the map
I’m the map, I’m the map
if there’s a tool you got to get
I’ll lead you astray, I bet
I’m the map
I’m the map, I’m the map

It’s map time! (It’s always map time!) The 2*2 onslaught isn’t over yet (and may never be)! Prepare to be continually overwhelmed with cool graphics, big company names and logos, and no information you can actually use (as is). Why? Because when you map 6+ criteria or dimensions of information down to a single dimension, and 12+ dimensions of information down to a 2×2 grid, it’s meaningless. All you know is which vendor had a total score on two sets of 6+ criteria that was in the top percentile. But you don’t know if that’s because they are good across the board on those 6 criteria, or top score on 3 of those dimensions (in the analyst’s opinion) and average score on the other 3; or top score on 3 of those criteria, average score on 2 criteria, and below average score on the last criteria — which happens to be the core technology criteria that also happens to be the most important criteria to you!

It might not be so bad if all the criteria were different aspects of a criteria category — such as core architecture, product features, and integration under technology; or product innovation, service delivery, and operational efficiency under innovation — but you have a mish-mash of scores on the seven different dimensions of product capability, market viability, sales execution / funnel success rate, marketing execution / visibility, market responsiveness, corporate operations, and overall customer experience which are squished into a single execution dimension in one of the big name maps and a mish-mash of product specific capabilities, related application offering, integrations, globalization, technology, and customer references into an offering dimension in another big name map. It’s crazy! And useless.

And it’s also mind-boggling when you consider the significant effort some of these firms put into their research, the detailed reports they produce, and the great work that often results otherwise. (You may not agree with the analysts’ opinion of what a good strategy is, what true innovation is, what the appropriate product features are, or the scoring scales; but as long as all of the vendors are scored consistently, it’s still valuable insight that you could use in differentiating vendors to find the ones that might be the most right for your organization and your challenges IF all these scores weren’t mangled into one meaningless score you can’t use.)

So, dear analyst firms, please stop! You don’t need to to this. You can provide much more value by not creating these 2*2 mangled maps and either:

  • use a graphing technique that was made for comparing multiple dimensions visually, like a spider graph
  • score less dimensions and then do multiple 2*2s on the different dimension pairs
    (after all, when customers want to buy a solution, do those customers really care about how good a vendor’s marketing is or how successful the salesperson is? heck no! they care only about how good the product is, how well the vendor can serve them, how stable the vendor is, and maybe about how innovative the vendor is if they are forward thinking and want longevity)
  • create bar, or similar, charts on the different dimensions and then give customers a tool to build their own weightings meaningful to them

It’s bad enough these map-creation analyst firms are eliminating vendors from their maps based on criteria that range from somewhat to completely arbitrary, which can include, but not be limited to:

  • an arbitrary minimum on overall revenue in the prior year on software alone
  • an arbitrary client minimum
  • an arbitrary minimum on the average number of users per client
  • an arbitrary minimum on customer size for a % of the customer base
  • an arbitrary minimum on license fees (for the majority of the customer base)
  • an arbitrary list of core “features” that are absolute
  • an arbitrary exclusion of any solution deemed to narrow/industry focussed
  • some other arbitrary requirement merely to maximize the number of vendors that can be included … which might actually eliminate the vendor with the best or most innovative product or service! (Which entirely misses the point, doesn’t it?)

Given all of this, these firms could at least produce maps meaningful to the average buyers where those buyers could extract useful information from the maps as is!

“Two by two they’re still coming down
… the satellite circus never leaves town …”

Holy smoke holy smoke,
plenty bad mappers for the doctor to stoke
Feed ’em in feet first, this is no joke
This is thirsty work, making holy smoke, yeah
Holy smoke
Smells good

The only thing that is as annoying as these meaningless 2*2s is other analyst firms inventing award categories just to create attention for themselves when those award categories are totally meaningless and useless to end customers who have no clue what they mean or what the award categories are evaluating (especially when these award categories often mix vendors with completely different solutions) such as “insight“, “innovation“, “customer-centric” and/or “growth“. While we can be sure that every vendor wants to be seen as “insightful“, “innovative“, “customer-focussed“, and “growing“, that doesn’t tell the customer if the vendor offers a product or service, or if that product is e-Sourcing, e-Procurement, Risk Monitoring, or a simple carbon calculator. And if that’s the only category the vendor is listed in, well, that’s just useless.

I want to run, I want to hide
I wanna tear down the walls that keep them outside
I wanna reach out and set the flame
Where the sheets have no name, ha, ha, ha

I wanna see insight on the page
And see confusion disappear without a trace
I wanna take shelter, I can’t ascertain
Where the sheets have no name, ha, ha, ha

As a postscript, the doctor isn’t annoyed by all of the 2*2 maps (just the majority). Although they aren’t perfect, he finds that the Spend Matters Solution Maps that, in full disclosure, he did co-create (and which he no longer has any association with) are still useful as they are still focussed entirely on two dimensions: product (& underlying technology) evaluation and customer score. (As of V3, released Fall 2021, not due for update until [at least] Fall 2023.) The product evaluation is against an extremely well defined set of criteria where each criteria has a scoring scale that at least defines fledgeling through industry standard capability (and usually above standard as well) and the customer evaluation is done entirely by the customer completing surveys with no analyst interaction whatsoever (as any survey done by an analyst introduces bias based on the way the analyst asks the question and the tone the analyst uses).

The Solution Maps are two, and only two, dimensions that can be consistently scored by any analyst who scores on the product side and consistently scored against perceived value on the customer side. Are they perfect? Of course not! The product side contains some services questions (which are soft and more open to interpretation) (but were less than 5% of the questions); the customer side can be very subjective based upon cultural norms for that customer, customer stage in the relationship (new vs. longer term), and service level the customer subscribed to (and, thus, if there are only a few customer scores, one really bad or really good, out of range, score can really affect the average); and the weightings for the maps are still analyst interpretation of what criteria are most important for each market size, but it’s one relatively pure dimension mapped against another relatively pure dimension, consistently scored, and consistently weighted.  And that’s still considerably more useful than any other map currently is.

Plus, at least when the doctor was involved, there was only ONE requirement for participation: have a standalone solution you are willing to openly demo (without an NDA) and sign a form committing to participation regardless of where you end up falling on the map (which is all mathematically, and not subjectively, computed). So while you can’t say the top vendor is for you, you can say any vendor who makes the map likely has the core tech you need (as they need to at least be industry average) and likely enough customer service to get you going on it. You can produce a short list of comparable vendors that produce a solution of the type you are looking for, of various sizes (not just the biggest vendors), and know that the solutions are reasonably comparable. This allows you to focus on the other value drivers relevant to your organization in the RFP. And if the other maps gave you just granular insight into service, innovation, and any other dimension relevant to you, think how useful they could be?

The Procurement People-Process-Technology Pain Cycle …

Recently on LinkedIn, someone asked the trick question of which came first: process or technology. The answer, of course, was people since, when Procurement, the world’s second oldest profession, started, it was just a buyer haggling with the seller for their wares. and this is how it was for a long (long) time (and in some societies was as far as “procurement” progressed), until shortly after a culture advanced to the point where people could form private businesses that were entities unto themselves. Once these entities started to grow, and multiple people were needed to do the same job, they realized they needed rules of operation to function, and these became the foundations for processes.

But when business buying began, there was typically no technology beyond the chair the employee sat in, the table they used to support the paper they wrote their processes and records on (and the drawers they stored the paper in), the quill and ink they used to write with, and the container that held the ink. And in many civilizations, it was like this for hundreds of (and sometimes over a thousand) years. The first real technological revolution that affected the back office was the telephone (invented in 1876, the first exchange came online in 1878, and it took almost 30 years for the number of telephones to top 1,000,000 (600K after 24 years, 2.2 million after 29 years). [And it took 59 years before the first transatlantic call took place.] The next invention to have a real impact on the back office was the modern fax machine and the ability to send accurate document copies over the telephone. Even though the history of the fax machine dates back to a 1843 patent, the modern fax machine, that used LDX [Long Distance Xerography], was invented in 1964, with the first commercial product that could transmit a letter sized document appearing on the market in 1966. Usage and availability was limited at first (as the receiver need to have a fax machine compatible with the sender), but with the 1980 ITU G3 Facsimile standard, fax quickly became as common as the telephone. But neither of these inventions are what we consider modern technology.

When we talk about “technology” in modern procurement, or modern business in general, we are usually talking about software or software-enabled technology. This, for some businesses, only became common place about 30 years ago (since most businesses could only afford PCs, and even though they were invented in the 1970s, it was the 80s before they were generally available commercially, and the 90s before most smaller businesses could afford them [for the average employee]), and only commonplace in the largest of businesses 50 years ago. Once has to also remember that the first general purpose automatic digital computer built by IBM (in conjunction with Harvard) only appeared in 1944, and that IBMs first fully electronic data processing system didn’t appear until 1952, and, as a result, back office technology really only began in the fifties, and was only affordable by the largest of corporations. (Furthermore, even though he first MRPs were developed in the 1950s, the first general commercial MRP release wasn’t until 1964, and it took over a decade until the number of installations topped 1,000. [And MRP came before ERP.]) In other words, technology, beyond the telephone [and fax] did not really exist in the business back office until the MRP. And it wasn’t common until the introduction, and adoption, of the spreadsheet. The first spreadsheet was VisiCalc, on the Apple II, on 1979. This was followed by SuperCalc and Microsoft’s Multiplan on the CP/M platform in 1982 and then by Lotus 1-2-3 in 1983, which really brought spreadsheets to the masses (and then Excel was introduced in 1985 for the Mac and 1987 for Windows 2X). (And 36 years later Excel is still every buyer’s favourite application. Think about this the next time you proclaim the rapid advance in modern technology for the back office.)

In other words, we know the order in which people, process, and technology came into play in Procurement, and the order in which we need to address, and solve, any problems to be effective. However, what we may not fully realize, and definitely don’t want to admit, is the degree to which this cycle causes us pain as it loops back in on itself like the Ouroboros that we referenced in our recent piece on how reporting is not analysis — and neither are spreadsheets, databases, OLAP solutions, or “Business Intelligence” solutions as every piece of technology we introduce to implement a process that is supposed to help us as people introduces a new set of problems for us to solve.

Let’s take the viscous cycle created by incomplete, or inappropriate, applications for analysis, which we summarized as follows:

Tool Issue Resolution Loss of Function
Spreadsheet Data limit; lack of controls/auditability Database No dependency maintenance; no hope of building responsive models
Database performance on transactional data (even with expert optimization) OLAP Database Data changes are offline only & tedious, what-if analysis is non-viable
OLAP Database Interfaces, like SQL, are inadequate BI Application Schema freezes to support existing dashboards; database read only
BI Application Read only data and limited interface functionality Spreadsheets Loss of friendly user interfaces and data controls/auditability

This necessitated a repeat of the PPT cycle to solve the pain introduced by the tool:

Technology Pain People Process
Spreadsheet Data Limitations Figure out how to break the problem down, do multiple analysis, and summarize them Define the process to do this within the limitations of existing technology
Database Performance Issues Define a lesser analysis that will be “sufficient” and then figure out a sequence of steps that can be performed efficiently in the technology Codify each of those steps that the database was supposed to do
OLAP Stale Data Define a minimal set of updates that will satisfy the current analysis Create a process to do those updates and then re-run the exact same analysis that led to the identification of stale data
BI Tool inability to change underlying rollups / packaged views define a minimal set of additional rollups / views to address the current insight needs, as mandated by the C-suite create a process to take the system offline, encode them, put the system back online, and then do the necessary analysis

In other words, while every piece of technology you implement should solve a set of problems you currently have, it will fail to address others, introduce more, and sometimes bring to light problems you never knew you had. Although technology was supposed to end the pain cycle, the reality is that all it has ever done is set it anew.

So does that mean we should abandon technology? Not in the least. We wouldn’t survive in the modern business world anymore without it. What it means is that a technology offering is only a solution if it

  1. solves one or more of the most significant problems we are having now
  2. without introducing problems that are as significant as the problems we are solving

In other words, technology should be approached like optimization (which, in our world is typically strategic sourcing decision optimization or network optimization). Just like each potential solution returned by a proper mathematical optimization engine should provide a result better than the previous, each successive technology implementation or upgrade should improve the overall business scenario by both solving the worst problems and minimizing the overall severity of the problems not yet addressed by technology.

This is why it’s really important to understand what your most significant business problems are, and what processes would best solve them, before looking for a technology solution as that will help you narrow in on the right type of solution and then the right capabilities to look for when trying to select the best particular implementation of that type of technology for you.

Stop Sanctifying Savings, Recognizing ROIs without Research, or Seeking Solutions Solely in Software

If you’ve been reading the doctor for any length of time, you’re probably a bit confused about the third part of this title — as the doctor is one of the biggest proponents of sustainable software solutions that cover the extended Source-to-Pay process and enable next generation Sourcing and Procurement. However, just because he believes you should have an appropriate software solution for every stage of the source-to-pay process, that does not mean he believes all of the solutions are in software alone. Some are in systems, which are composed of talent, technology, and transformation(al processes).

Sometimes the solution to a challenge isn’t (just) a better system, it’s a better process. Take invoice overpayments, common in large organizations due to over-billings, duplicate billings, and even fraudulent billings. The current “solution” is to use a recovery firm who will take 1/3 of what they “recover” for you as their fee, but they won’t recover everything (since anything off contract is hopeless, as is any fraud that slipped through — the perpetuators are long gone, and even if the authorities find them, by the time you get a judgement in court, they’ve spent, laundered, or transferred the money to somewhere you can’t touch it). This is not much of a solution, because if only 50% of the overspend is addressable, and you lose 1/3 of that in fees, you’re only recovering 1/3 of your overspend. Ouch!

The solution here is better process enabled by technology. When an invoice comes in, the system auto-processes it and auto-matches it a purchase order and a goods receipt. If there is no PO, and it’s not a pre-defined monthly billing, it’s marked as no-pay until manually verified by the buyer that a) the invoice is for goods that were ordered and b) all of the units / services are the agreed upon prices or rates. And even then it’s held for payment until the goods are marked as received or the services delivered. If there is a PO, it must match all of the yet unmatched units (if multiple shipments, and thus invoices, are made against the PO) and each unit must be billed at the approved (contracted rate). If not, it’s flipped back to the supplier for correction. If the supplier won’t correct, possibly because the order was expedited at managerial insistence and the supplier agreed only if a premium could be charged, then it needs managerial approval before a payment can be issued, and if that is not given, it needs to enter a dispute process. In other words, no invoice is paid until matched, verified correct, and, when necessary, granted managerial approval — and the entire invoice management function is governed by a well thought out, defined, and detailed process (with flow-charts that govern process flows) that ensures every invoice is processed correctly in every situation (based upon whether or not the goods and/or services are under contract, PO, cyclic billing agreement, ordered from a catalog, requisitioned at a defined rate scale, bought in an e-auction, etc. In other words, the process comes first, and the technology enables it.

This means that while the software should enable as much of the process as possible, you shouldn’t look to the software, or even the vendor, to define the process for you. The vendor should have best practices, and should provide you with sufficient configuration options to make it work for the process you need, but you need to understand what you need before you select a solution. Some solutions on the market will be really rigid, and others will expect you to configure it to your needs. In other words, software can provide you with what you need to complete the solution, but software alone is not a complete solution — you need the right process and the right people using it. So don’t look to a software provider as the solution, look to a provider to provide software that will provide the software part of the solution.

And, more importantly, don’t accept the promised ROI without doing your own research. Most providers will promise you an ROI of 5X to 15X in an effort to convince you that NOT buying their solution wold be the stupidest thing ever as every day you’re not using their solution you’re flushing money down the toilet. And if the ROI of a solution is that high, you should definitely have a solution — but the solution that gives you that ROI might not be the one that promises it. Remember, ROI is realized return / total solution cost, and depending on how good you were doing before buying the solution, the current market conditions, your industry, and the ancillary costs of the solution (implementation, integration, training, etc.), the ROI for your organization could be drastically different than their average ROI for their average customer. For example, while the vendor’s average customer might see an ROI of 5, you might only see an ROI of 2.5, and at a multiple of less than 3, it’s likely not the solution for your organization. (Unless it’s the only solution and you need a software solution, but it’s rare that there’s only one software solution that would work.)

If you’re given an ROI, ask for the calculation the vendor uses and how you would calculate it for your own organization and do it yourself. Add padding into the price, and when you have an expected range of savings and/or cost avoidance, err on the side of caution (the lower end). That’s the number you use when considering the value, not the vendor’s number. Every situation is different, and you need to understand how different your situation is from their average customer.

However, the most important thing to understand is that you need to stop sanctifying savings and believing that the savings numbers provided by a vendor are a result of their solution. Or that you will achieve anything similar. Remember, “savings”, which is usually just “unnecessary cost avoidance”, is a function of how much the organization is spending across its addressable categories, how much overspend is across those categories, and how much was able to be captured — and this is dependent on organizational size (annual revenue), industry, and spend profile. If your organizational spend is considerably smaller, your addressable spend is less than industry average (long term locked-in contracts, etc.), or your overspend in high volume / dollar categories is less than industry average (either because you had good negotiators, or you cut the contracts at the most opportune time), then your expected “savings” will be considerably less than their average customer savings they are presenting to you. In other words, like ROI, the advertised number may not be what you get. Specifically, your savings might not be anywhere close to their advertised number.

But that’s not the most important reason you need to stop sanctifying savings — the most important reason you need to stop sanctifying savings is that there is absolutely no correlation between the savings numbers and their software. Let’s repeat that. There is absolutely no correlation between the savings numbers and their software. Why? The same reason you should not seek solutions solely in software.

The reality is that, depending on the situation at hand, sometimes most of the “savings” or “cost avoidance” results from a better process alone and has nothing to do with the software solution whatsoever. Also, sometimes the solution that is needed is simply a workflow that enforces a process, a RFX solution that collects comparable information, an e-procurement solution that supports contracted rate catalogs and rate cards, etc. These standard solutions are offered by dozens of vendors and if the majority of the “savings” or “cost avoidance” comes from a baseline solution, it literally doesn’t matter what vendor’s solution you use! Literally. So if the vendor with the significant savings number is asking 1M annually in license fees and a smaller vendor offers a solution with all the necessary baseline functionality for 120K annually, you could get the same savings for 1/8th of the cost (which would significantly impact the ROI).

In other words, when you are given a savings number, you have to do your research and figure out

  • what percentage of those savings results solely from the fact that the implemented solution enforces a proper process
  • what percentage of those savings results solely from the baseline functionality that is available in at least 3 to 5 other solutions (at a lower annual license cost)
  • … and what percentage of those savings result from advanced features found only in that solution

For example, if only 5% of the savings results from advanced functionality and your estimated annual savings from addressable spend for the first 3 years is only 10M per year, are you really willing to spend 8X as much in license fees for an incremental savings of 500K? The answer here should be a resounding NO as that incremental savings is less than the incremental solution cost! But if you’re a multibillion dollar corporate, that could save 50M a year for three years, with a 10% incremental savings from the advanced functionality, then you would be saving an extra 5M per year at an incremental cost of 800K (which is a 6X ROI) AND have advanced functionality that could be applied to all categories that might squeeze out an extra percent here and there.

In other words, what solution you should buy depends on which solution you expect will give YOU the greatest ROI based upon YOUR calculation, not the vendor’s customer averages (or outrageous quotes from multinationals who spend 10X what you do). Furthermore, don’t misread the title — you do need software to enable your Sourcing, Procurement, and Supply Chain, but the software is not the total solution — which requires the right process driven by the right people. So don’t expect the vendor to solve all your problems, just the software portion (which you should only buy after identifying what you need, and the vendor you should choose should be that which has the greatest expected ROI for your organization, as calculated by you).