Category Archives: SaaS

Best Practice Technology Vendor Selection for True Multi-Nationals 2025 Reprise Part I: RFX – You’re Asking for the Wrong Information!

This is a repost and reprise of a series that last ran (for the second time) in 2015. It’s as relevant, and important, today as it was then, if not more so, thanks to the I2O Hype and AI BS!

It’s that time of year again. Your budget is about to be approved — a few months later than you’d like — and you’re ready to begin the process of obtaining that Spend Analysis, e-Sourcing, e-Procurement, Source-to-Contract (S2C), Procure-to-Pay (P2P), Source-to-Pay (S2P), Supplier Management (SXM), Third Party Management (TPM), Intake-to-Orchestrate (I2O), or some other system you’ve been dreaming of that you believe is going to revolutionize your Sourcing and Procurement.

You think you know what you want, but you have to go through an RFP and, more importantly, you know that you’ve only had time to look at a few options while building the business case as you were doing it evenings and weekends on your own time because the project wasn’t approved. Now you want to go to market and either verify that you’ve identified the best solution or find the best solution to meet your needs. Since you are a sourcing organization, that process demands an RFP. However, this RFP is not like your RFP for direct materials or indirect spend. This is a very specific technology solution RFP for a platform to meet your needs and support all of the other RFP / sourcing / procurement / supply management processes of the organization. It’s crucial to get it right.

That’s what we are going to discuss in this series — the proper process and approach to acquiring the right Spend Analysis / e-Sourcing / e-Procurement / S2C / P2P (I2P/AP) / S2S / S2P / SXM / 3PM / CLM / & I2O solution for your needs. Furthermore, let us clearly state that this series is specific to the selection of technology and technology-based vendors to provide enterprise software platforms, and/or implementation services, back-office (processing) functions, or technology-driven consulting services for your multi-national organization. While some of the best practices contained herein should also apply to the selection of (strategic) suppliers for high-value and/or complex products and/or services, this series particularly relates to the selection of a vendor to provide an enterprise software backbone, and, in particular, a backbone for e-Procurement and/or e-Sourcing technology for your Supply Management organization. As one size does not fit all where RFX and category selection processes are concerned, no claims, express or implied, are made with respect to any other vendor selection process and, in fact, if you’re only buying paper and pencils, some of the best practices contained herein will, in all likelihood, be overkill.

Now that the preamble is out of the way, let us begin by noting that the traditional RFX processed is well understood, and well documented in many places, including in the e-RFx for Total Value Management wiki-paper, co-authored by the doctor on the classic e-Sourcing Wiki (now only available on the WayBackMachine) over seventeen years ago. And, in the wiki-paper in particular, the high-level process is still more-or-less correct almost two decades later.

As per the wiki-paper, you start with a two-stage RFI before an RFP, which is solution focussed (and not cost or contract focussed), which is issued before a final RFQ, which is when you collect quotes and start the actual selection / negotiation process. Specifically, the high-level process is:

  1. RFI #0: Stakeholder Requirements (collected internally)
  2. RFI #1: Vendor Interest
  3. RFI #2: Vendor Pre-Qualification
  4.    RFP: Solution Inquiry
  5.    RFQ: Clearly-Defined Specifications

So what are you doing wrong, especially if you’re a Multi-National? To answer that, let’s look at how this is typically translated:

  1. Product Needs, Service Needs, Preferred Vendors
  2. Vendor Info. Request, Vendor Interest, NDA
  3. Product & Service Capability Profiles
  4. Solution Design Request
  5. Explicit requirements, process definition, and bid request

See the problems?

  1. Stakeholders typically don’t know what they need in a solution. They aren’t technology experts. They aren’t supply management experts. They are domain experts. And if you ask them what they want, you are just going to get whatever the vendor spending the most on marketing is saying they need, or whatever they can find in a “Free RFP” (and There are NO Free RFPs). It doesn’t matter what they think they need in a product or a service, it matters what problems they are having today. You need those solved, not an array of feature/functions that will never be used! You need to ask the stakeholders what the problems they need to solve are, so that you can ultimately select a vendor with the solution that solves as many of your stakeholder’s pain points as possible. (And if you need that translated into more technical requirements that the vendors will understand, you hire a neutral consultant who does NOT have any vendor partnerships and does NOT do implementations, specializes in Project Assurance, and whose sole goal, and continued compensation, is based on your success (not the vendor’s and not the implementation partner’s).
  2. A preferred vendor is one that can offer you the best product or service from an organizational perspective, not from a single stakeholder / department perspective. For example, a stakeholder (team) might rate a vendor A+ because the representatives always responds quickly. But this is not necessarily indicative of great service (and is often indicative of desperation for a sale, which is never a good sign). If their answer to every system issue is always “we’ll get someone to fix that with 72 hours“, and you need the software up 95% of the time, that’s still poor service if the software crashes regularly because 3 days downtime every few weeks will not support an operational level of 95%.
  3. Asking a vendor if they can provide you with the necessary functionality or service levels after you have shortlisted them as a possibility based upon a review of their collateral is not likely to get you anything other than a “yes we can”, especially if the vendor also offers consulting or “value added services” (or the rep desperately needs to make a sale to keep his job because the company took too much funding at too high a valuation and everyone’s job is on the line). One has to remember that most (big) consulting (and value-add) organizations are driven by partners with a strong desire for as many dollars as possible, and the associate’s job security is dependent on constant sales and up-sells, and the reps are told to always say yes and take on as much work as possible, leaving the question of how to get it done (if the organization is already stretched or weak in that area) until after the ink on the contract is dry.

Which brings us to the biggest problems with the current selection process, which we will discuss in Part II.

Even in the age of “AI”, SaaS Startup Valuation Isn’t That Hard

The Prophet recently penned a long LinkedIn post on The New Diligence Questions for SaaS in an “AI”-dominated world that, on a first read, makes it sound like diligence is going to get insanely difficult unless you’re backing AI (because, apparently, AI is going to replace everything and everyone).

The reality is that AI doesn’t really complicate the equation, especially if you already realized that a lot of software is becoming a commodity and making the right investment is all about focussing on what’s not commodity and then, when you find that subset of potential investments, which one of those is the most user friendly. And you can narrow down to a good potential investment pretty quick with just 3 short questions:

What data is being captured, created, or curated?
Tech replicates quickly, and easier to build now than ever. But good data is scarcer and scarcer.
What unique algorithmic capabilities does the platform possess that can’t be accomplished by today’s, and likely tomorrow’s, AI?
Orchestration, workflow, NLP, et.? Sorry but that’s all pretty common place. We’ve had we-based middleware since a year after the world wide web was invented (and orchestration is just middleware 3.0), workflow for decades longer, NLP for decades (although LLMs now make it easier to use and more accessible), etc. You need to look for unique algorithmic capability that can’t be plug and play from open source components or learned by dumb AI (like advanced optimization, new types of mathematically sound predictive analytics algorithms, etc.)
Does the platform enable users, through Augmented Intelligence capabilities, to be 10X as productive as they would be without it?
i.e. where data collection, processing, workflow, etc. etc. etc. can be fully automated, is it? does it employ NLP interfaces to the extent possible for non-technical users?

This is what defines winning software, not plugging in overhyped 3rd party LLMs and AI tech that is still, more-or-less, experimental, hallucinatory, and fundamentally flawed.

Once you have successfully answered these questions, chances are that there is nothing else super significant to answer about the tech (beyond the standard due diligence process, inc. security and privacy reviews where needed) and you can focus on the business and market questions. Does the market exist, and does the business have the right people, processes, and support to capture the market.

So, in other words, if the platform

The SaaS play has value, and you can move onto the business and market analysis.

The only real question will be how to define the market and the new market value in an age of (temporarily) overhyped AI / Agentic plays (when, as we have pointed out many times, it’s not new, just better) to determine its real valuation (when you are being flooded with nonsense).

And of course,

  • beyond pure S2P,
  • easy agentic co-worker interfaces, and
  • plays well with “AI”,

as pointed out by The Prophet, will increase value, but that’s not the core of what you’re looking for.

There is No Super-Selection Map for Source-to-Pay

In a post on comparing the Hansen Fit Score to other analyst ranking maps and methodologies, THE REVELATOR asks “which would you choose, and why”, to which the doctor responds that THE REVELATOR has to be a lot more specific, because, depending on your context, there could be three choices

1) The Hackett Group Inc. KPIs for zeroing in on what type of technology you should choose for the biggest boost to your business as there’s no arguing with their book of numbers. But this doesn’t give you a shortlist.

2) Spend Matters, A Hackett Group Company Solution Map for deep tech assessments, allowing you to qualify tech for consideration before doing a deep dive assessment on business needs (and we all know that most people can’t do this effectively). Once you know what module, or modules, you need, SolutionMap will give you a qualified list of the best, rated, vendors with those modules.

3) Jon W. Hansen fit score for sieving a shortlist of relevant vendors who make the tech cut into the 3 most likely to be the best organizational fit to invite to the RFP where they can prove their worth AND interest in actually making your organization successful

However, the optimal route, if you have the time and money, is 1, 2, 3 … (and let’s face it, since this could save you millions, you likely do). Why? When you use

1) you focus in on the specific problem set/module (set) to attack first for the biggest impact

2) you filter down to those providers who have the tech to do it

3) you filter down to those that would be right for your business on the other dimensions 1 and 2 does not address.

However, none of these approaches can

0) perform a gap analysis, determine what problems you need to solve, and help you center your analysis on the right metrics or numbers or

5) take the short-list you are left with after using Spend Matters Tech Match (built on Spend Matters Solution Match) or the Hansen fit score and construct a proper RFX to help you determine which vendor will provide you with more than a license but work with you to implement, and execute, a proper solution.

And that’s why there’s no super selection map for source-to-pay!

(And please remember, never use a big analyst firm quadrant map because vendors have lured big analyst firms astray.)

Data is Too Darn Expensive Today … But It Won’t Be For Long

THE PROPHET, who has recently discovered ranting is his new favourite thing to do (on LinkedIn), recently complained that Procurement, Commodity, and Supplier Data is Too Darn Expensive.

And while he’s right in that data is often too expensive for what it is, it’s not going to stay that way. Next generation providers are going to commoditize quality data and lower anonymized community data subscriptions to win (and keep) clients, because they know that there’s no value in advanced technology alone (and especially in analytics, optimization, and AI wihtout quality data to feed it) but there are three key points he missed in his rant where he complained about data prices and advocated the use of LLMs and Gen-AI as a substitute (which they are not, and considering how much they hallucinate, we wouldn’t even trust them to be directionally accurate — just feed the historical data you can get your hands on into Excel and do some basic trend plotting if directionality is enough).

1) As Lisa Reisman noted in the comments, sometimes you need highly granular accurate data by geography, volume, and production methodology. When pennies make a difference, because you are buying tens or hundreds of millions worth of the material for a global operation, it matters.

2) Most firms are still ignoring their own data, which, when run through something like Covalyze (which THE PROPHET should love as it was founded and designed by economists), gives very accurate target cost models on any category the firm has enough historical data on, allowing them to pinpoint where they need more data and why for cost breakdowns (and should cost models to refine the target cost models), and which suppliers they actually need those expensive profiles on. Then they can go to pay by the sip providers like Veridion for basic supplier data or other emerging commodity and supplier data portals.

3) The amount of data most firms need is much less than they think. In the tail, most of the spend is not significant enough for any market data to provide insight on a significant savings potential beyond what you will get from analyzing your own historical data and market quotes. When pennies won’t make a difference, you don’t do detailed cost breakdowns by raw material. When the product is a commodity that can be supplied by multiple suppliers at similar price points and equal quality levels, you don’t do deep risk profiles because you can just go to the next supplier in the queue if the first one fails you. And so on. You only do detailed analysis where there is statistical likelihood of a real opportunity or a real risk. Otherwise it’s a waste of time, money, and resources as no organization today even comes close to fully analyzing the significant categories and risks they have in any given year. Thinking you will do more is delusional and not worth it if you don’t have the basics covered.

By the time firms actually need more data, you can bet a next generation of data providers will have it readily available and cheap by today’s standards.

Despite Attempts to Simplify It, There Are MANY Categories of ProcureTech Solutions

When selecting a ProcureTech Solution, you have all the following buckets:

Function X Classic Type X SaaS Category X Integration
Sourcing
SXM
CLM
Analytics
e-Procurement Best-of-Breed Standalone App
(full function)		 Suite EcoSystem
Invoice-to-Pay Mini-Suite Lightweight App
(task specific)		 I2O Ecosystem(s)
ESG/Sustainability Suite Bolt-On
(extends a module)		 Open API
GRC
Category/Cost Intel
Niche (Legal, Marketing,
Hospitality, SaaS/Tech, etc.)
I2O

And if you do the multiplication, that’s 297 combinations … and that’s just the tip of the iceberg when there are 10 core areas of SXM, multiple niche areas being addressed (some classic solutions were just for print/telco), multiple buckets of risk management solution, generic and scope-3 specific sustainability solutions, different approaches to intake-to-orchestrate, and that’s just addressing the functional areas of Source-to-Pay+.

Then you have the situation where some vendors only offer a single best of breed (BoB) module, others offer a mini-suite, and others still offer a mega-suite with all of the core modules and often a half dozen more on top of that.

While most are SaaS apps these days, they vary from heavy standalone apps that implement full functions to lightweight apps designed for specific tasks (that are usually missing from larger standalone apps that purport to completely cover a function but don’t) to bolt-ons that offer advanced functionality, but require a core module to work on top of.

One also has to consider how you integrate them into a comprehensive workflow that supports Source-to-Pay+. Sometime modules integrate into one-or-more suite ecosystems out of the box (like the SAP Store or The Coupa Store), other times they just come with a (semi) open API, and now some, not built for integration, are integrating into one or more of the new orchestration ecosystems.

And while functionality should come first, you have to consider all of these other factors as well because if you select a suite for a module, you’re probably locking yourself into the other modules you need as those the suite offers due to cost and integration cost considerations, if you select light-weight or bolt-on apps, then you better have something to integrate them into, and you better be sure the ecosystem has all of the modules you will need to implement over the next five years or so before locking yourself into an ecosystem.

So even though THE REVELATOR believes that everything is going to be a bolt-on or an app and that’s all your going to have to worry about, unfortunately the ProcureTech world is NOT going to make it that simple. Overlooking traditional category and integration can completely destroy the value you require if you can’t easily integrate with complementary modules/apps (and especially if you are in a [primarily] direct industry and need to integrate with supply chain applications for the data you need to make good supply chain aware decisions).

However, it will be interesting to see the primary solution category, breadth, and integration of ProcureTech Solutions (by, and independent of, function) in the future.