Category Archives: SaaS

Why Are You Still Buying That Fancy New Piece of Software That

  • Could Get You Sued?
  • Increases The Chance You Will Be Hacked!
  • Could Result in a 100 Million Processing Error?
  • Could Shut Down Your Organization’s Systems for Days!
  • Helps Your Employees Commit Fraud?

If someone told you this when evaluating a piece of software, and asked if you wanted to buy it, I’m sure the vast majority of you would say HELL NO!

In which case I want you to please tell me, why are you all still riding the AI Hype Train, Buying, and Using Gen-AI everywhere?

It has already resulted in lawsuits and losses!
The Air Canada lawsuit over the Gen-AI chatbot is just one notable well publicized example.

AI systems are AI coded, and AI code has a much greater security risk
as it generates code using training repositories that contain large amounts of untested, unverified, and high risk code — generating code so full of security holes it’s a hacker’s dream! (See this great piece on the ACM on The Drunken Plagiarists.)

AI systems negotiate on the data they have
and with a single decimal point error and you could be paying 10X what you need to. Not to mention, they don’t always translate right. Remember, the Experimental AI DOGE used claimed an 8 Billion savings on an 8 Million contract!

Bad data generated by an AI system and fed into a legacy system with poor data validity checks can shut it down.
Plus, Gen-AI can also push out bad updates faster than any human can and you can easily have your own Crosslake situation!

Now it’s being used by employees to generate fake receipts
that look so real that, if the employee does a few seconds of research (to get the restaurant info, current menu prices, tax code, etc.), you can’t distinguish the generated image from the real thing. And, before you say “Ramp solves this”, well, it only does if the employee is lazy (which, let’s face it, is human nature, so you’ll catch about 90% of it). But what happens when a user strips the meta data which, FYI, can be as easy as taking a picture of the picture … oops! (And if you’re a hacker, running it through a meta data stripper/replacement routine is even easier as you’re just hotkeying a background task.)

AI is good. Gen-AI has its [limited] uses. But unrestricted and unhinged mass adoption of untested, unverified AI for inappropriate uses is bad. So why do you keep doing it?

Especially since it’s now proven it’s worse for you than some illegal drugs! (Source)

Features ARE NOT Applications; But Applications Require Features!

THE PROPHET recently asked What Procurement Tech Product Categories Were Really Just Features All Along? Which is a great question, except he cheated.

He cheated with the first 5!

  • Supplier performance management
  • Supplier quality management
  • Supplier information management / supplier master data management
  • Supplier diversity
  • Supplier risk management (not supply chain risk!)

We’ve known for years it should be one Supplier 360 solution! (Even though no one offers that when you consider all of the elements that should be there. Heck, none of them even offer the 10 basic CORNED QUIP requirements … in fact, good luck finding a solution that offers 5 of those requirements among the 100+ supplier management solutions).

He you cheated again with the next 3!

  • Should cost / cost modeling (for procurement, not design engineers)
  • RFX and reverse auctions (when not bundled with broader capabilities or services)
  • Sourcing optimization

We’ve also known for yours it should be cost-model and optimization backed sourcing (auction, RFX, hybrid, single source negotiation, etc.) … otherwise, it’s an incomplete solution. But only a fraction of the 80+ sourcing platforms offer true optimization (less than 10) and fewer still do extensive cost modelling. (Note that we are focussed on modelling, not cost estimation — that requires data, and that can, and probably should, be a third party data feed.)

And he was wrong on the last front.

Real Spend Analytics should be standalone. Wrapping restricts it! The modules you use should provide all the specific views you need, but the reason that spend analysis quickly becomes shelfware in most organizations today is the same reason it became shelfware 20 years ago … once you exhaust the limits of the interface its wrapped in, it becomes useless. Go back to the series Eric and I wrote 18 years ago (which you can since Sourcing Innovation didn’t delete everything more than a decade old when it had to change servers in 2024, unlike Spend Matters when it did its site upgrade in 2023).

But Very, Very right in that features are not applications!

And very, very right in that too many start-ups are launching today as features (which will only survive if acquired and rolled up into existing applications and platforms), and not solutions. While apps dominate the consumer world, in business there is not always an app for that, and, frankly, there shouldn’t be. This focus on point-based apps is ridiculous. It’s not features, it’s functions. It’s not apps, it’s platforms. It’s not orchestration (and definitely not spend orchestration), it’s ecosystems!

Recent stats, such as those published by Spendesk put the average number of apps a business uses at 371, with an average of 253 for SMBs and 473 for enterprise firms. WHAT. THE. F6CK? This is insane. How many departments does an average organization have? Less than 10. How many key functional areas? Less than 12. Often less than 10! How many core tasks in each function? Usually less than 6. That says, in the worst case, an enterprise might have 72 distinct critical tasks which might need their own application (but probably not). This says that SMBs have at least 3 times the app they should have, mid-size organizations at least 5 times, and enterprises at least 7 times. That is insane! No wonder there are so many carbon copy SaaS optimizers (as we covered in our piece on sacred cows), because if you have that many SaaS apps, you have features, not applications. And you need to replace sets of these with functional applications that solve your core problems.

(And if you want to know how to prevent app sprawl, before buying yet-another-app, ask yourself “is this supporting a function that should be done on its own, or just a task that should be part of an existing function” … if the latter, it’s a feature, not an application, and if the application it should be part of does not have an upgrade/module that supports the task, then you have the wrong application and it’s time to replace it, not pointlessly extend the ecosystem!)

Everyone In the Procurement Ecosystem Exists For a Reason — But Do You Know Why …

… and more importantly, when you should use them?

Joël Collin-Demers recently commented on a LinkedIn post that

Everyone in the ecosystem exists for a reason. Big consulting and analyst firms are great tools for organizations in particular contexts (e.g. a big firm is a great way to get a lot of smart people deployed on a problem quickly).

The point I’m trying to make is that we tend to over-rely on big consulting and analysts.

And he was correct. Big X consultancies, niche consultancies, implementors/integrators, analyst firms, suite vendors, best of breed vendors, etc. were all started for a reason and continue to exist for a reason. Understanding both of these helps you determine when you should use them, why, and what you should (and should not) expect. In this post on where we asked If You Really Want Success … or Just Say You Do, we made it abundantly clear that Analyst Firms, Big X, Implementors, and even Vendors (beyond a certain point) ultimately don’t care about your success because

Big Analyst Firms (that produce the pay-to-play maps) make money pushing the solutions of the vendors that pay them the most, not on making sure those solutions solve your problems. While there was a time you could always count on the best unbiased advice from an analyst firm, that was long ago. Ever since the first big vendor realized it was faster (and cheaper) to buy influence by sponsoring reports or cutting big research access POs, the end of unbiased recommendations began. (And it’s more your fault than the vendor’s because you came to expect free reports, but no one can work for free, which means the vendors had to pick up the entire cost, which means those reports say what the vendors sponsoring them want said, not what you need to hear.)

Big X need to keep their benches employed addressing your problems, and if a vendor’s solution took care of everything, what else would they do? This doesn’t mean they are going to screw you, but it does mean they are only going to address what you ask them to, that they are going to try to do it with a diamond/platinum/sycophant partner to keep their top-tier consultancy status, and assign the weakest resources they think they can get away with to keep their top tier resources free to top paying clients. Moreover, as we discussed in our article on When Should You Use Big X, the vast majority of Big X did not start out as IT consultancies or Procurement Tech shops and this is still their weakest area (as the “wild west” tech players and boutique consultancies get the majority of best talent), so even if they are doing their best, it’s only so good. (Compared to their core strengths, which, as we said in the latter post, you’d be foolish NOT to take advantage of.) The reality is, many Big X are now mostly body shops who have to keep those junior consultants employed while keeping their big software partners happy. And that’s a difficult balancing act, especially considering their overheads and the luxurious lifestyle these partners have grown accustomed to.

Implementors make money implementing solutions — if that solution solved everything for the next five to ten years, how would they keep their bench employed as well. Now, they are going to make sure it’s implemented to the best of their ability, but since they weren’t hired as a consultancy, they aren’t going to be the ones to tell you when a solution is not the best for a certain task — they are going to do what they are paid to do (so that, when you realize you need another solution in a year and then use the same Big X again to recommend it, they get that contract too).

Vendors need to keep their investors happy, which means securing sales as fast as possible, not ensuring they are the perfect fit and/or outlining where they will fall short. Now, of everyone in the ecosystem, they definitely want you to succeed, but the reality is, they can only spend so much time on you because they took too much money from investors at too high a multiple, aren’t growing at the expected rate, and the management and sales team risk being fired (and the entire company being shut down) if they don’t continually increase the rate they bring on new customers (whether they can reasonably support them or not). It’s all about “what their solution can do for you” and not about “is their solution right for you”.

And so on.

Niche Consultancies are the best IF they do not have preferred vendor partnerships (which require a certain level of business to maintain) as they know they have to perform to get their next contract, but these are few and far between. And even though it is critically important, almost no one does Project Assurance for their ProcureTech project (and then wonders why we have had Two and a Half Decades of Project Failure).

Short story, everyone in the ecosystem exists to make money off of YOU. While that’s not a bad thing IF they provide value (and heck, I’ll happily give you a dollar if I am guaranteed two dollars in return in a reasonable time frame), not all of them do … and those that do are not equal in the value they provide (primarily due to conflicting pressures, not intent). Until you understand that, your returns will be limited.

The important thing to remember is that if you’re just starting your best-in-class Procurement journey, you typically don’t need an end to end suite, and if you’re Procurement maturity is still elementary school, you don’t need a 7-figure mega suite when a low 6-figure mini suite, which can be implemented in 1/4 to 1/6 the time, can get you 80% of potential savings. Especially when this level of savings will take you 3-6 years to realize. Then, when you’re ready (and know how to get the additional ROI the mega-suite can provide), you can upgrade to the seven figure mega-suite in confidence you’ll achieve the same level of ROI. (Instead of being the next ProcureTech disaster. And while you may believe in a beautiful disaster, there is no such thing where tech is involved.)

Follow the Money to Find Future Opportunity — Which Will NOT Be Fully Found With Autonomous Sourcing!

Spend Matters has thrown caution to the wind and followed Gartner’s lead jumping onto the AI Hype Bus (with no steering and no brakes) that is still heading straight for the cliff and are wheeling out webinars on AI faster than a prairie fire with a tailwind. (Needless to say Sourcing Innovation does not think this is a good thing. There are valid uses for AI and automated processing, but fully handing over financial decisions is like wheeling in the Trojan Horse and leaving it unguarded in the server room with unrestricted access to your bank integration.)

Recently, The Maverick advertised yet another Spend Matters webinar on Autonomous and AI Sourcing where he said we should “follow the money”. Which we should, but there are a few things we need to clarify first.

1. No Money Changes Hands In Sourcing

It changes hands in Procurement … and it’s because most companies don’t follow the money after the contract is signed that 30 to 40 cents of negotiated savings never materialize in many companies, which The Maverick should remember from his AMR and Hackett days, as it was laid clear in Mickey North Rizza‘s famous 2009 “Reaching Sourcing Excellence” series, which we know is in his archives.

2. “Speed” is NOT a strategic edge if you don’t get it right!

If you don’t go out with the right strategy, don’t know the current market price, don’t know the reason for the current market price, and don’t have the knowledge to project if the trend is going to continue, stabilize or reverse, going to market is not a good decision … and it’s an even worse decision to automate the sourcing project and secure an award as fast as possible if you don’t know if it’s the best you could have done or the worst you could have done.

3. “Pecunia non olet”, but yet these vendors are asking you to treat it like it does!

They want you to automate spend analysis, sourcing, contracts, purchases, and everything else that involves money by turning over everything to their Agentric AI because, apparently, money stinks and you don’t want to touch it. (But they are quite happy to not only spend yours for you but takes as much of it as they can for their services.)

But here’s what they don’t tell you.

  • AI is NOT Intelligent.
    The level of intelligence in their “AI” is equivalent to the level of intelligence in a carpenter’s hammer. The level of effectiveness is entirely dependent on how skilled the person “training” the system and how skilled the person “using” the system is, just like the effectiveness of a hammer is dependent on how well the carpenter was trained and how experienced he is in it’s use.
  • AI Does Not Know What it Does Not Know.
    If the data is incomplete, the recommendation is very likely incorrect.
  • AI Cannot Do Better than the Best A Human Has Ever Done in Decision Making.
    So, if none of the situations it was trained on led to great results, neither will what it recommends for you.

You need to remember how Gen-AI does its work (or should we say does not work). It is large document search and summarization and chain of compute. Now, the more advanced players are trying to embed knowledge graphs into this, but these are not perfect either. With good training examples, and a very similar situation, the probability it will work well is very good, but it’s still only a probability. As a result, nothing should ever be fully automated where money is concerned. The tools should be used for their recommendations, and if the recommendations are good, and the risk is low, most of the tactical data processing and event management should be automated, but the decisions should ALWAYS be made by a human, who should be involved at every decision point. Even if that decision is verifying the system recommendation. It only takes one miscalculation due to an incomplete data source to project a wrong trend, rush an auction, lock in a price 3X what you are paying now, only for it to fall in a month later when a factory (which went offline temporarily due to a manmade or natural disaster) comes back online and the supply-demand balance returns to normal. And while you may have stocked out for two weeks, those losses will be orders of magnitude less than paying 3X at a contract you have to honour (unless you want to get dragged into court).

Now, if you really want to make money, forget all this Autonomous and Agentric AI BS, look for Augmented Intelligence solutions that make your staff two, three, five, and even ten times more efficient, purchase those, and, remembering that the US infrastructure is crumbling fast (and not going to get renewed under a Republican administration that is more interest in trickle-on economic tax cuts for its billionaires than ensuring you have running water), it’s time to remember how the smart made money in ancient Rome — public bathhouses and latrines. Time to invest in your own desalination facilities and be ready when the public wells run dry. After all, “Pecunia Non Olet“.

The Pundits Agree. Winter is Coming!

In a recent LinkedIn Post, THE PROPHET, a year late to the party (see the SI and Procurement Insights archives, and our Marketplace Madness post in particular), finally announced that Winter is Coming: The Great Procurement (and Broader) Legacy SaaS Rationalization and that it is going to be a very cold winter that will be Swift. Brutal. And very, very final.

There’s too many companies that took too much funding at too high a valuation with nothing to show. PE firms will be dropping these companies faster than a hot potato into boiling lava pits to focus on the companies in their portfolio with current year-over-year growth in hopes of making some of their losses back. Too many companies started without doing any research and literally built the 10th AP clone, SXM clone, RFX clone etc. of a dozen already existing solutions. (Just check the mega map if you don’t believe me.) In a race to the bottom (which helps no one), they’ll lose due to their lack of a bank account as they slash prices too deep in hopes of getting customers. Too many applications took a silo focus, didn’t build Open API centric, and the hurdles of plugging them in will be too much or too costly, and no matter how good the tech is, they won’t get bought.

And then Agentric AI will thin what remains (but not lead the cull as THE PROPHET predicts, because these AI solutions still cost money, and sometimes a lot of it, and for what they cost you can hire a real expert and not a fake one, license a few augmented intelligence tools for a quarter of what these over hyped Agentric AI platforms are charging (because they raised, and wasted, too much cash and have to recoup that before they become the next hot potato dropped into the lava pit by their PE investors), and have a super-human employee who does the work of an entire team, error free (with little to no risk of that skilled employee getting you sued as a result of a conversation, installing a back door for hackers on your systems, shutting down your systems for days, costing you 10X on a purchase due to a dot transcription error, or increasing your internal fraud [link]).

And for some of these companies, it’s already too late to pivot. For others, there are actions they can do. THE PROPHET offered some:

  • risk over-cutting
    (if done smartly)
  • consumption-based models
    (which will be more attractive to some potential customers)
  • challenge the team to earn their existence
    (but that doesn’t necessarily mean prompting GPT like a pro: you don’t want junkies)
  • redefine the sales org
    (a better playbook is key, and it needs to be differentiated)
  • Skip the Fairy Dust and Buzzwords
    (Hear! Hear! I’ve been shouting that for years! Unfortunately, not sure most of the companies out there know how to do that though! I know for a fact only the squirrels have been listening to me, and they are getting very tired of that rant. They like variety. Basically, it’s been a long, long time since marketing focussed on education and value and startups priced based on that.)

And that’s just the tip of the iceberg. SI has posted entire series on:

Failures from those who raised too much and offer too little will be coming fast and furious. This needs to be repeated. You need to be very careful which vendor you buy from and what protections you have in place if they don’t make it. (In particular, there must be a “we own our data” clause which gives you the right to all of your data and the right to export all of it into a standard file format at any time, and that specifies your data includes rules and workflow configurations and the right to export those too — for example, in spend analysis, it’s not just the data, it’s the rules that create the cubes; in invoice processing, it’s the workflow and approval rules … you won’t be able to migrate to another system quickly if all you have is the transaction data, the data that defines the processes and rules is just as important. And if you can’t export all of your data, rules, templates, etc., at any time, then don’t buy the system!)

However, while the app consolidation will be brutal, as will the renegotiations if you want to be one of the apps that make it (now that organizations are realizing they don’t need 17 apps for S&M and probably shouldn’t have 17 apps in any function, including Procurement), Agentric AI (especially at 20K a month when you can hire a REAL person for 1/4 of that) will not replace people en masse (but AI-enabled technology will). Teams will be cut and replaced by two individuals who can use next generation augmented intelligence solutions that can truncate months of research and analysis to a few days and allow strategic decisions to be made in hours, not weeks, and shifts to be made seemingly overnight while eventually allowing 99% of all tactical data processing to be automated through evolving rules and workflows under expert guidance.

Moreover, at the end of the day, relationships are not built on 1s and 0s, and they are needed now more than ever. So not only will we have skilled technologists, but skilled relationship managers. (While everyone else who does nothing but push e-paper 90% of the time or code spreadsheets will slowly be eliminated.) Of course, this means if you don’t understand optimization, analytics, statistics, game theory, economics, and logic, or you’re not an expert in relationship management, you’re screwed, but everyone had a chance to study STEM in University (and skip the woke liberal arts) and learn the technical skills for the first set of jobs.

So this also means if the platform is not enabling this next generation of employees to become more and more productive over time, its lifespan is probably short.

So get focussed in your diligence efforts on solution acquisition if you don’t want your platforms disappearing out from under your virtual feet, and if you need help, call an expert!