Category Archives: RFX

SourceOne scores a Grand Slam with WhyAbe

Gartner recently named Source One’s (acquired by Corcentric) free WhyAbe.com (sunset) platform as a Cool Vendor in Procurement and Finance for 2008. This is a big score for the sourcing and contract management toolset, when you consider that not many sourcing providers get this recognition from Gartner and that previous winners have included FreeFlow, Vinimaya (rebranded Aquiire, acquired by Coupa), and BIQ (acquired by Opera Solutions, rebranded ElectrifAI) – the latter of which are really cool vendors.

Source One, a Procurement Service Provider (PSP), is a fairly major player in the strategic sourcing & cost reduction consulting marketplace, having been incorporated back in 1993 – well before companies like FreeMarkets (now part of Ariba) made strategic sourcing vogue, and many of their consultants have over 20 years of experience in the field. They take the traditional approach to sourcing projects with a two part project team (consisting of Source One personnel who do the project and Client personnel who sponsor and manage the project on the client site), as compared to the resource augmentation approach some of the newer consultancies take. The approach may seem heavy to a smaller organization, but the results speak for themselves. With an average savings of 18% across 60+ categories (whose average savings range from 5% to 25%, while some outliers, like cash management, are as high as 90%), when they say their aggregated purchasing power allows them to secure exceptionally competitive pricing, they mean it. And from what I hear, they’re doing so well that it’s a daily struggle to keep up with a constantly increasing demand for their services. (P.S. They’ll be making a big announcement at ISM next month. You might want to watch for it.)

But let’s talk about WhyAbe.com. From a technology perspective, RFX, Reverse Auction, and basic Contract Management is nothing new … basic solutions for the former has been available for over ten years and a basic solution for the latter for at least seven years. There’s nothing new about cookie-cutter on-line stores or stripped down supplier networks either. What is new is the fact that it’s totally free.  WhyAbe.com is cracking the sourcing mold and offering a free solution that companies new to sourcing and sourcing technology can use and experiment to find out what works for them, what doesn’t, and what they need help on. It’s a great way for a company to test the water as it provides a quick start to e-Sourcing with a price that can’t be beat. Then, when an organization has identified it’s needs, and, more importantly, identified what it can do well in house – and what it can not, it can always upgrade to a more extensive e-Sourcing platform and retain a PSP, like Source One, to help it with those categories that it doesn’t have the experience, or the leverage, to get savings on. Furthermore, should it retain Source One, it can still use the tool as a way to work with the PSP. In other words, even though there’s nothing new from a technology perspective, the model is very cool and I think they deserve the Cool Vendor award for it. If nothing else, it will force some of the stagnant providers in the e-Sourcing space that haven’t done much with their solution for 2, 3, 5, and in some cases, 7 years to update their offering to provide real value for the $$s they’re charging, or fall by the wayside to make room for the new innovators. And that’s a win for the space you can’t argue with!

The 6 Days of X-asperation: Day 2 – Questions to ask your e-RFX and e-Auction Vendor!

Just like we did in the X-emplification series, we’re going to start with e-RFX and e-Auction as we tackle the generic questions that you should be asking every vendor, and the types of answers you should be expecting.

1. What do I have to do to get a good handle on how to make effective use of this technology, and for an organization of my size, how long is it going to take?

Before you even consider selecting an e-RFX and e-Auctions platform, you should have reviewed your categories, divided them into projects, and achieved a good grip on what categories are appropriate for sealed bid RFX and what categories are appropriate for reverse auctions. Then, you should review these categories with the vendor and see if their recommendations match yours. If the vendor’s recommendations are different, they should be able to back them up with data and experience and an ability to transfer that knowledge to you if you go with their solution.

Furthermore, neither e-RFX nor e-Auction is new, and both offerings should be very straight forward. Therefore, it shouldn’t take long to install and deploy these solutions on your first project, once it is identified and the requirements determined. (A SaaS vendor should literally be able to set you up on the platform and help you get your first e-RFX and e-Auction up and running in a few days.)

2a. How much functionality is my organization realistically going to be using in 12 months?

e-RFX and e-Auction functionality is pretty basic compared to other e-Sourcing and e-Procurement offerings, and there’s no reason that you shouldn’t be using most of it within a year.

2b. How much functionality do I really need?

All of the basics. And all of the functionality that was outlined in the original X-emplification post, although you probably won’t be ready to use complex formulas, splits, and cross-lot rankings right away.

This means that you don’t need a 1001 template library or automatic project creation from a bundled spend analysis or reporting tool to be productive and, more importantly, get savings. If you have the flexibility to build any RFX you might need, you can always download a free template from a resource center and build it yourself. Sure a built-in one might save you a few hours, but how much is that few hours costing the organization relative to how much the total buy is costing and, more importantly, what if the bundled template isn’t quite right? In other words, be sure you’re not sacrificing core capabilities just to get a few frills.

Note that even though RFX is a mature technology, there are inflexibilities baked into many of the tools that analyst firms blindly label “best in class.” There have even been outright failures of RFX software, despite this maturity level (one might almost say, “because of it” — some companies have stopped innovating entirely in RFX as of several years ago). So when you evaluate RFX, make sure to pick a tough category with complex pricing grids and make sure the RFX solution you choose supports them. You might be unpleasantly surprised if you do not.

2c. And how does this functionality solve my #1 pain today, which is X?

Chances are, if you’re looking at e-RFX, you’re number one pain is sourcing cycle time. Make sure the tool automates as much as possible. If you’re looking at e-Auction, chances are your number one pain is cost. Make sure the tool supports a reasonable number of different auction formats, because empirical evidence seems to indicate that certain auction types get better results in some categories, while others get better results in other categories. (See Alan Buxton’s Where Next blog, for example.)

3. How much training is my team going to require to effectively use the software? How long is it going to take them to absorb this training?

e-RFX and e-Auction is very straight forward, but you still shouldn’t overlook some basic training. This training should include the set-up of a sealed-bid e-RFX project, the set up of a basic reverse auction, a review of what the supplier sees (so that the buyer can competently answer questions), an overview of the communication and collaboration capabilities, and troubleshooting techniques. This should only take a couple of days, but it’s an important couple of days.

4. How much is this software REALLY going to cost me in the first year and each subsequent year?

e-RFX and e-Auction software are a commodity now. Decent solutions are available in the low five-figure range. Furthermore, since the solutions are mature, updates, whether they are minor bug fixes or minor updates, should be few and far between, so maintenance should be low – in the 10% (or less) range per year. Installation should be free if delivered as true multi-tenant on-demand software, and if it’s behind the fire-wall or hosted ASP installation, no more than a couple of days of reasonably priced consulting time. Furthermore, there should be no need for technology services – the basic training should include everything you need to know to get started. (Although you might want to consider using them for category expertise consulting, if they have it.)

5. You say you care about your customers and that you are going to provide great service. Prove it!

Ask for references. Talk to them. If they have an upcoming user meeting or conference, ask to go to it. But most importantly, ask for examples of results their customers have achieved on the platforms recently, and how they can help you achieve the same.

6. Can I take it for a test drive or a short term lease?

Considering that all of this software is web-based, even if the provider isn’t delivering it using true multi-tenant on-demand SaaS, they should still have a test-drive platform up-and-running and they should be willing to let you do a test-drive at a very low, nominal, cost.

7. Can I buy it or implement it in pieces?

This is one of the few technologies, given that it is simplistic when compared to other e-Sourcing solutions and a commodity, that you may want to consider buying the technology up front rather than buying it on a per-event basis. You don’t have to use more than the basic reserve price reverse auction until you’re ready for more advanced features.

Having said that, though, nothing prevents you from using the technology for one or two events just to make sure that it works well, before signing a long term commitment.

the doctor’s Not Going To Stop Until He Exposes All Of The Elephants!

Late last fall in the doctor wonders why the elephants in the room are often so hard to see and the doctor exposes the elephants in the room I exposed the elephants in the room that were hiding behind the blinds, couch, lamp, and projection screen. But this is a very big room – and it is jam-packed with elephants. So today, in addition to the optimization, compliance, analysis, enablement, contract management, and hidden cost elephants, I’m going to expose the elephants hiding behind the coat rack, the bar, and the water cooler.

We’ll start with an RFX elephant, who’d have you believe that the number of pre-configured templates in the template libraries are an important selling point of an e-RFX tool. It’s not. After all, every business is different and, in reality, you’ll probably have to customize every single standard template that’s provided to meet your business needs before you can use it. That tells you it’s the flexibility of the tool when it comes to RFX creation that’s important – especially since, no matter how many templates are offered, there’ll always be templates that are missing that you need to create yourself.

Now we’ll move on to the e-Payment elephant who will tell you it’s the platform that matters – and, believe-it-or-not, who provides it. Although it’s important that the company that provides the platform be financially stable, it doesn’t have to be owned by a bank or the biggest player in the space to be useful, because, when it comes to e-Payment, it’s not the payment platform that matters – but whether or not it enables your organization. Does it support the types of payments you regularly make? (If you do a lot of p-card and ACH, and it only supports wires and ACH, then there’s a problem.) Does it automate the capture and transmission of all of the payment details that are required by your e-Procurement / EIPP systems as well as your accounting systems? Does it simplify the transactional processing, freeing up manpower for exception handling and more strategic purchasing responsibilities? Because these are the things that matter!

We won’t forget about the technology RFP elephant though – because this big-daddy of elephants, who is often willing to provide us with RFP templates for any technology we might want to put out to bid, will have us believe that you should be evaluating a solution based on the number of (pseudo-) standard features it has, and not whether it has the functionality you need. This is absurd – especially when you aren’t familiar with the technology! After all, why do you care whether or not it has 300 features you probably don’t need? And how do you evaluate solution A with 350 features vs solution B with 315 features vs solution C with 385 features when the common feature overlap between all three solutions is only 60% based upon your unduly long, inept, and inappropriate RFP that this technology elephant gave you. You need a solution that has the functionality that supports the business processes that you need. To do this, especially when you are unfamiliar with the solutions you’ll be evaluating, you need to send out a rather open-ended RFI that describes the processes you need and the problems that you are having and that asks the vendors to describe how their tool solves these problems. Then, you take the top 3 – 5 RFIs, figure out what your minimal baseline is with regards to key capabilities, and send back a more detailed RFP that outlines the core functionality you need (and any industry standard features you’re aware of that are also required), additional functionality you’d like, and the timeframe you’d like to deploy it in and note that formal submissions will not be considered until you get a full demo (if you haven’t had one already). But still, it should be short. Closer to 60 questions than the 600 or so “feature questions” that I’ve been hearing about from some vendors lately if you’re really focussing on what you need and not the market mumbo-jumbo that the elephants are feeding you.

So take heed, elephants hiding in the closet, behind the door, and under the boardroom table – because you’re next!

The 12 Days of X-emplification: Day 1 – RFx & e-Auction

So, I bet you’re all wondering – what’s to x-emplify? I’m sure you’re saying that it’s just RFx and e-Auction … it’s been around for 10 years … and it’s pretty self explanatory. My answer to that is that you’d think it should be, but given the wide range of capabilities that exist in the various products out there, as well as the even broader range of sales pitches, I’d argue that RFx and e-Auction are still not well understood.

To help you understand what RFx and e-Auction is, isn’t, and should be – in addition to my various posts on RFx and e-Auctions, my guest contributions to the topics over on the e-Sourcing Forum [WayBackMachine] (RFx and e-Auctions), and my contributions to the wiki-papers [WayBackMachine] (RFx and e-Auctions), I’m going to point out some questions for each technology that you should be asking, as well as the answers you should be hearing, to help you cut through the sizzle and get to the steak.

e-RFx

0. Do I really need e-RFx at all?
I’ll probably take a lot of heat from everyone in the eRFX business for this, friend and foe alike, but if all you’re looking for is some basic information, or an occasional quote on office supplies, sometimes all you needis a free-form questionnaire or spreadsheet that’s mailed directly to recipients. It’s always interesting to see how suppliers respond to free-form questions — do they use marketing B.S., or do they have something useful and informative to say? Do they answer your questions honestly, or try to side-step them like your average politician or stereotypical used car salesman?

If you don’t really know much about the space, supplier, or type of product that you’re investigating, how can you ask anything but open-ended questions, anyway?

1. How much flexibility do I have in form definition?
Let’s face it – large template libraries are great ONLY if they offer the templates you need for the categories and commodities you need to source. You need to be able to create your own forms, from scratch, and have all of the form elements you need at your immediate disposal. You also need to be able to control and validate the data that gets entered into the form so that you can automatically compute scores on scorecards and identify important differences between respondents. You need more than free-form text-boxes – you need text boxes, check boxes, radio buttons, and tables (for starters), and you need the ability to define checks not only on individual elements but across elements and across rows and columns of tables.

If you’re building a weighting function, the weights should add up to a pre-specified number, like 100. If you’re asking the vendor to enter a delivery time, it should between 1 day and the maximum amount of time you can allow, like 60 days. “Next month” should not be an allowable response. If you’re sending out a survey to your internal departments to determine an order of priority between 10 sourcing projects, you should be able to enforce that each priority number between 1 and 10 is used only once. (Otherwise, they might all be ones and twos, and that won’t help you.)

Furthermore, it should be really easy to create such a form, re-organize the questions, create sub-sections (or pages), and enable or disable sections by vendors. (If you’re creating a general purpose vendor qualification form, you might not care about the “technical infrastructure” of your office supplies vendor.)

1a. Can I build advanced sourcing grids?
After 10 or more years of RFx software development, you’d think that this question would be a no-brainer. You’d be wrong. There are deep differences in the way that different eRFX products build grids, and there are deep limitations in many of them as to how big the grids can get, and how manageable/unmanageable the process may be. Every sourcing consultant worth his or her salt has recent horror stories of users unable to build the grids that they needed, period.

So don’t believe anyone who claims that”all of the sourcing vendors in this very-long list have ‘good’ RFx platforms.” They all have RFX platforms, but you will often find that there are profound differences between them and that many may not be suited to your needs.

2. Can the forms be completed by the vendors off-line?

Let’s face it – if you’re diligent about supplier and product qualification, and quality, you’ll be collecting a lot of information. Information that the individual assigned to complete the form is not likely to have at her fingertips, information that might take a long time to collect, and information that might take a long time to input. The individual should have the option of completing the form off-line, at her convenience, wherever she is – on the shop floor, on an airplane, or at the wifi-less beach.

Also, in this situation it is beneficial if the vendor can designate multiple individuals to handle multiple sections of the RFx, and if each individual can access, and complete, only their sections off-line.

3. Are the forms secure and uniquely identified?

Let’s face it, if you’re going to allow off-line completion, you want to make sure that the forms that are uploaded were actually filled out by the intending party. (Otherwise, their competition could fill out the forms and answer “no” to all the required regulation compliance questions, causing you to immediately disqualify what could be your best new vendor.) Furthermore, if your vendor doesn’t have unique identification built in, then you’re going to have to come up with your own unique identification method to insure that attachments don’t overwrite each other when a vendor uploads their form, or, even worse, that the different users who upload the forms that contain just their sections filled out do not overwrite the filled out sections completed by other users with blank data.

I’m going to tell you right now – point blank – that most RFX vendors don’t have this capability – and that they’ll probably try to skirt the issue by pointing out that “their user authentication algorithm insures that only designated supplier representatives can log in to the system and access their forms, and this will imply that only they will have access to the forms, and that since they will be uploading the forms through their login, the form is automatically identified” except they’ll use significantly more words while blowing though the well-practiced demo at breakneck speed in an attempt to woo you with their sizzle in an attempt to leave you too stunned to realize that this most of what they are saying is BS.

The answer you want to hear is:Yes. We use built in DEC/RSA 256-bit or better encryption combined with a unique secure digital id that uniquely identifies the form instance by user, by supplier, by buyer, and by original template instance id. And you want to hear this within three seconds of asking your question, delivered in a confident tone with eye-contact and no squirming. Otherwise, what the vendor has doesn’t even come close and they’re trying the above weasel-tactic.

Why is all that identification important? If it was just by supplier and form template and user id, then if the supplier serviced multiple buyers through the same on-demand platform, the form could be uploaded to a different buyer! If it was just by buyer and supplier and form template, then each user’s upload could overwrite the previous user’s upload when multiple users are filling out a form on behalf of a supplier! If it was just by buyer and user and supplier, then you wouldn’t know what template to attach it to if the user had mistakenly created two forms with the same name (but in two different projects)! And of course, if it was just by buyer, supplier representative, and form template id, then if the supplier representative was actually an employee of a 3PL working on behalf of the supplier, the data could be attached to the wrong project and exposed to other suppliers!

4. How easy is it to export the response grids for analysis? To Excel? To Access? To an OLAP analysis tool?
Automated scoring mechanisms are usually not good enough to select a vendor, and they often eliminate vendors that ought not to be eliminated. How can you write a fair scoring algorithm for a space you don’t know that well? You could be building in your own uninformed bias, or (worse) that of a vendor who has “helpfully” provided you with an RFP template! (And I think you know what I think about some of those templates!)

In fact, your analysts will want to pull the data into their own tools. These could be just about anything, from Excel models to Access databases to OLAP analysis tools. The ease with which data can be moved out of the RFx tool and into desktop analysis tools is an extremely important consideration. Sure, e-sourcing vendors will tell you that all the analysis can be done within the tool. And in some cases they’re right. But don’t limit your flexibility, because what if they’re wrong? And furthermore, what if you just don’t have enough hours in the day to learn somebody’s custom tool set? That can be a big investment in time and effort, especially if you only run one event a quarter. You could forget everything you learned, and have to re-learn it all over again each and every time. Sometimes it’s better to forget about the vendor’s tools, and just dump the data to a product you know.

e-Auction

1. Can I define my own bid type?

Let’s face it – not every bid is as simple as a price per unit – especially since you should be taking landed cost into account. Furthermore, this is more than just allowing a user to define a unit bid and a freight bid per unit – it’s also allowing the user to define a fixed processing cost per unit while the application automatically factors in an expected value for a variable fuel cost and it is defining your own adjustment that corresponds to the various utilization costs associated with different products from different vendors. For example, if you’re in food service, each type of sauce packaging implies a different amount of waste – metal cans and plastic bags and lined box-board have different “stick” factors, and the easiness of “scraping” or “draining” the contents from the package often varies by package design (such as cube vs cylinder vs tetrahedron).

2. Can the tool support complex formulas, splits, and cross-lot rankings?

Building on question one, not only do you want the be able to support bids based on complex formulas, but you also want to be able to rank bidders based on their individual bids on different lots and based on their entire package bids. A supplier might bid 100K for lot 1, 200K for lot 2, 300K for lot 3, and 400K for lot 4, but be willing to bid 900K for all four lots (equal to a 10% discount if they get everything). Without complex formulas and cross-lot rankings, the supplier couldn’t enter entire package bids or discounts, and you will not be able to capture the full value available to you through the auction.

3. Does the tool integrate with an optimization solution?

Complex formulas and cross-lot rankings are a good start to getting the lowest bids, but they do not capture all of the complexity associated with a sourcing scenario, and, thus, do not guarantee that the outcome of the auction will be an allocation that optimizes your total cost of ownership. Simply put, a dual-source strategy is preferable to a single-source strategy from a risk management perspective. A given supplier might be willing to make considerable infrastructure improvement investments if they get the business, resulting in year-over-year cost reductions that could, over a three year time-frame, significantly undercut the lowest bid another supplier is willing to give you today.

The reality is that most auction tools don’t support real-time optimization, and most of those that do support real-time “optimization” don’t support it very well, but that’s okay. The point is do they integrate with an optimization solution – since any high-value scenario on strategic categories or commodities should involve a separate optimization step where you run multiple what-if scenarios to understand what your business rules are costing you, what risks the lowest-cost solutions are exposing you to, and what the most valuable award is when you balance cost and risk. Thus, you should be able to easily import the results of the auction that you use to collect the initial bids, as well as easily create rules that guarantee the winner(s) of the auction receive a minimum amount of the award. (Remember your auction etiquette – if you don’t award to the winning supplier(s), you’ll damage your reputation. If you’re going to use auctions to collect bids for optimization, you should be willing to guarantee a minimum award to the winning suppliers. And if you properly define the bids and rankings, with an appropriate multi-source strategy, this shouldn’t be a problem. If you have a special situation where you think it might be, then use a multi-round sealed-bid auction instead of an open auction.)

the doctor On Technology RFPs: Don’t Put The Cart Before The Horse!

I’m not sure what the reason for this is, maybe it’s the “Free RFP Templates” for e-Sourcing (RFPs & e-Auctions), Supplier Management, Contract Management, and Spend Analysis brought to you by Procuri & Co., maybe it’s an over-inflated sense of technical knowledge, or maybe it’s just plain stupidity – but more and more I’m hearing about buyers looking for spend and supply management solutions that are putting together ridiculously over-specified and complex RFPs that are often eliminating all but the worst solution one could possibly imagine before the first response is even received.

The fact of the matter is that, when you are looking for a solution, there’s more than just one correct architecture, the number of features isn’t important, multiple deployment models may be satisfactory, advanced payment models and complex SLAs may not be necessary, and the processes you assume you need may not be the right processes for your business.

If the solution works on your current platform, does it really matter if its written in J2EE, C++, or Ruby on Rails (as long as it was put together properly)? Does it really matter if one solution has 800 “features” and another solution has 1000 “features” if all you need to support your processes are 200 “features”? And more importantly, do the features even address the critical functions you need to get the most out of the solutions? Although on-demand SaaS has advantages over ASP, and ASP has advantages over localized deployments from TCO perspectives, from a security and control perspective, assuming you have a crack IT team in house that knows what they’re doing, arguments can always be made in the other direction. (However, most non-technical companies don’t have crack IT teams, regardless of what they think, and that’s why I’m such a proponent of the on-demand SaaS model.) Not everyone uses the complex payment models pioneered by Oracle and SAP – some vendors use very simple pay-as-you-go models – especially on-demand vendors who charge you one fixed fee a month for the license, including maintenance, and one variable fee a month for how many days of consulting you utilize, easily calculated as number of days * resource rate. Finally, have you taken the time to evaluate your current processes from an efficiency and effectiveness standpoint? Maybe they are not optimal – in fact, if you haven’t reviewed them lately – chances are they are not optimal and a good time to change them might be upon implementation of a new system that can support the processes you should have, versus the processes you have today.

Thus, when constructing your RFP, if you’re not an expert in technology, and unless you’re an IT company – you’re not, don’t pretend you are. If you’re not an expert in what today’s solutions can do – and unless you’ve spent a significant amount of time researching large and small vendors alike – you’re not, don’t assume feature function lists, and definitely don’t assume that one vendor’s template is the best feature function list that’s out there. And definitely don’t use a template provided by a vendor being invited – that template was written to make them look good from a comparison perspective with their primary competition – which may not have any correlation to the solution you actually need.

Leave the technical and feature specifications open-ended. Instead of describing a proposed solution, describe the problems you’re having and the problems that you expect the solution to solve and let the vendors describe how their solution could meet your needs. And if you’re worried about the responses being too apples-to-oranges to make a decision, do a two-stage RFP. Issue a preliminary, open, RFP that describes the type of solution you’re looking for, the problems you want it to solve, and asks the vendors to describe how their solution meets this need and what key functions it offers and tell them that the best submissions will be invited back for round two, which will be closed.

Review the submissions to the initial RFP, invite clarifications and demonstrations (on the grounds that price and terms will not be discussed), flesh out your requirements, and then issue a closed RFQ with more detail on any architecture or deployment restrictions, the core functions you desire, your minimum SLA requirements, and your criteria for scoring the responses and selecting a solution. (For example, saying you can’t do on-premise Linux because you don’t have the tech resources is good, unlike saying that only on-premise Windows works when in fact you could consider on-demand with Windows Thick client. Saying you need a centralized contract repository as part of your CM solution, once you understand what that is, is fine, whereas saying you want a repository that uses Oracle 10.X, because that’s what you have a license for, when in fact the solution might come with a built in database or license for the database it uses, is overly restrictive.)

If you’re smart about the RFP process, then the solution you end up with will surprise you in its effectiveness and efficiency. However, if you just follow the herd, then you might find that you add to the statistics that say at least 70% of all IT-based projects are at least partial failures, because the system will likely not live up to your expectations of it. I guess what I’m saying is, don’t be an RFP-lemming. (As a reader of this blog, I know you’re smarter than that – but I need you to help spread the word!)