Category Archives: SaaS

Want A Good Solution, Ask Vendors The Hardest Questions Off The Bat!

Even though they don’t always do so with their slimy sales and misleading marketing practices, be sure to keep it above the waist as you repeatedly hit them as hard and fast as you can. (You don’t want to dance around with a vendor unless you know they can take a few hits and are in it to win it, because once you start to dance they’ll duck and dodge until the end of time).

This post was inspired by THE REVELATOR who asked us What are the most important questions to ask a potential solution provider partner?

1) Can, and will, you show me (not tell me) live … preferably on use cases or data I give you on the spot?

I’ve said it before, and I’ll say it again: Dear Procurement Practitioner, when it comes to solution selection from today’s vendor, your mantra is Show Me, Don’t Tell Me! There’s too much hogwash out there today, buzzwords don’t solve problems, and when you dive into the marketing madness, you see there’s absolutely no value, or even core capability, in what’s being sold by many vendors.

You need solid solutions with substance, not glitzy fake-take UX, broken Gen-AI, or slack-like conversations that don’t do anything. You also need solutions that digitize and automate the 80% of Procurement / Sourcing / Supplier (Data) Management / etc. that you do day-in and day-out, week-in and week-out, month-in and month-out, and year-in and year-out and not the odd special case that comes up once a week, month, or year. And you definitely don’t need solutions that don’t fit your domain.

Moreover, you want relevant demos. If you’re buying janitorial and building maintenance supplies, you don’t want a demo on how the catalog makes it easy to buy sneakers and shoes. (FYI: I’m not being unnecessarily ridiculous here. I have been in demos where a primarily MRO buyer was demoing the top three platforms, and one showed them how to buy sneakers and shoes!) If you get such a ridiculous demo, you want to show that vendor the door as fast as possible because you have one of two situations: they didn’t do their homework on you (and don’t have a clue if their solution is appropriate), or their solution was built, and over customized, for one niche industry and will not easily support yours.

2) Once you show me the core use cases, can, and will, you explain the breadth of use cases you developed your solution for and how they are specific to my business?

You want someone who both understands what they are selling and how it might help your business. Any less and you might as well just roll the bones to select your solution provider. At the end of the day you need to understand the following:

  • there may be 666 logos on the mega map but there is no perfect solution; and nothing that will meet all of the requirements in your RFP
  • the best solution will meet the majority, and, more specifically, the requirements related to the tasks you do all the time, not the ones that you do once a quarter or once a year
  • the best solution for you will be one that comes close and comes from a vendor who both understands this and makes an effort to customize their solution for you in a manner that will achieve maximum results … from the first demo
  • the best solution provider will take the time to explain that which they don’t have time to demo, or can’t demo without your data; even the sales person will attempt it at a high level, and then bring in a product specialist for where more depth is needed

3) Once we tell you the extent of your solution we feel is appropriate, can you talk us through what the implementation and integration to our environment would require without bringing in a paid third party “expert” consultant? And how long will that take?

A great solution provider for you will be one that understands your needs, their platform, and what will need to be done in order to implement it for you, integrate it into your stack, and prepare it for you to extract the value they promise. They won’t need third party help to figure all this out and walk you through it. If a lot of integrations or data migrations are required, they, or you, may need to partner to get it done, but they should still know what’s required.

And, as we said in the introduction, while you should keep your rapid, one-two-three punch, above the belt until the vendor sales rep goes below in their tactics, you should also endeavour to hit ’em as hard as you can with that 1-2-3 combo. If they can’t take it, you want them knocked out before you waste any time on them, because any good vendor will be able to take them and come back with the best damn demo, details, and arguments as to why they are sure their solution will work for your problems, with concrete examples, in a very short timeframe. (And yes, odds are you could be unlucky and have to knock out the first 6 before you find that first 1/7 that is still there so solve problems. But the wait will be worth it.)

Is Your Potential Vendor a Dead Company Walking? Part 2

In Part 1 we reminded you that our space is filling up with dumb companies and that this number, at least in the view of the doctor, is likely at an all time high.

We also reminded you that the doctor believes that your favourite vendor likely won’t be around, or at least not in it’s current form, within two years (or less), as he’s predicting a failure rate of 20% (or more); which, while it sounds pretty significant, is actually a mild prediction compared to THE REVELATOR‘s bold prediction that 75% of companies won’t be around, or at least not in their current form, within 18 months. Wow!

Why? First of all, as highlighted in the doctor‘s revised Dumb Company article, the companies that are (finally) starting to panic (internally) are starting to make the classic mistakes that often signal the beginning of the end.

Secondly, they have been, or are starting to, make the Dead Company mistakes, first highlighted by the doctor in December, 2008, as well as some scary new mistakes that weren’t as common, or that were overlooked by the doctor, sixteen years ago.

And while we can’t compile an exhaustive list for a number of reasons, as per Part 1, we can identify a number of common mistakes that companies who are dead companies walking tend to make (in the final days, even though they don’t always know it’s the final days yet). So if you see these mistakes in spades as a buying organization, best to steer clear until the ship is righted (assuming the vendor recognizes they are off course before it is too late and takes action). (You don’t want to go down with a sinking ship!)

In Part 1, we identified the first six common mistakes we are seeing too often. Today, we identify the next six.

Buzz and Sound Bites are more important than timeless educational content

As the doctor has been lamenting for months and months, the marketing madness is apparently at an all time high, buzzwords have replaced meaningful messages, and the hogwash doesn’t convey any useful information a prospective buyer can use to figure out what the product actually does! (And that’s one of the major causes of the current Procurement Stink, as we hinted at in this article about the Vendor Contribution to the Procurement Stink.)

Sure the hype gets attention, but it doesn’t deliver results!

So if all your research uncovers is buzzwords, sound bites, and hogwash, then you best stay clear of that vendor. As THE PROPHET has stated, M&A is about to make a comeback and the best you can hope for is that they get bought and merged.

If there is interest, your product is the solution

Not only is the doctor seeing too much rapid fire sound bite marketing to see what sticks in the marketers equivalent of throwing pasta against the wall, doubling down on whatever is getting the mot interest, assuming that their solution is the perfect solution for whatever they sold and, finally, assuming that any organization that contacts them is a potential customer and that their product will be the solution, no matter who the organization is, what the organization needs, or what their product actually does.

In short, they are adopting the Big X consulting playbook, everyone’s a client, sell whatever they can, whenever they can, and then hope they can figure out how to deliver later (without the deep strength across domains or the deep bench depth to take on big projects that the Big X have). But they are not consulting firms, they don’t have a suite of third party vendors they can proffer up, and they certainly don’t have the budget or bench to build custom solutions on the fly.

So if the first thing you get to an inquiry off of a sound-bite marketing advert is a hard sell, take a hard pass. A good vendor learns about you and your problems before proffering up a potential solution.

Sales is about numbers, not solutions

As outlined in detail in our recent article on why are there so many tech failures, at the majority of tech enterprises:

  • sales people are compensated on how much they sell, not how successful the solution is for the customer
  • sales people are pressured to hit numbers, or be cut if they have even ONE quarter in the bottom 10% of performers
  • sales people don’t stick around long enough for success to matter

There’s a reason that THE REVELATOR has outright stated in a recent article that after 40-plus years, I say this with the deepest sincerity -– 90% of salespeople aren’t worth the gum stuck on the bottom of a shoe, and that’s because the majority of them are just focussed on selling, not on actually solving a customer’s problem.

If the sales person is rushed to sell, keeps making one time offers that expire at the end of the quarter, or promises rapid returns without a detailed use case analysis, you can be sure they only care about getting your cash in the door, not about whether or not the solution can actually solve any of your problems.

Any temporary price cut to get those initial clients can be made up later!

When times start to get desperate, that’s when desperate organizations that know they need to sign customers now to keep the investors happy (including the venture capitalists and private equity investors) will offer “a few select marquis organizations an initial discount in exchange for joint press releases, quotes, case studies, and marketing sound-bites“, thinking that they can satiate the investors for a while by telling them that those success stories will allow the organization to jack the prices further and that they’ll be able to jack prices considerably at renewal time because of “all the added value” they will have built by then.

However, investors are not dumb and not going to fall for the “price cut now will lead to riches later”, because they’ve seen that fallacy over and over again (and they know that the prices never go back up). Plus, if the solution is really worth 1 Million, there’s no way any successful vendor is going to give you an introductory rate of 100K for a “case study and positive recommendation”. That’s a big red flag for any organization looking for a vendor with a successful solution.

Our tech works, any failure is the result of the implementation team/org

Going back to our recent article on why are there so many tech failures, we noted that one of the primary reasons there are so many tech failures is that, as also noted above, sales people are being forced to sell at any cost. And the reason that even those with a conscience can do this is because they have been told the solution can be adapted and customized as needed, and if it doesn’t work, then it’s the fault of the third party consulting partner’s implementation team for screwing it up.

But that’s bullcr@p, and you know it! First of all, it’s the vendor’s responsibility for selecting their partners as much as it is the partner’s responsibility for recommending the vendor. Secondly, even if the vendor has vetted the partner and assured that they are good people, it is still the vendor’s responsibility to train the partner’s people on their solution, implementation requirements, and best practices. Thirdly, and most importantly, it is the vendor’s responsibility to ensure they don’t make any promises the tech can’t keep, as well as insuring that any customer referrals don’t come with unrealistic expectations. (Heightened is okay if the vendor is willing to put the extra work in, but it must be within the realm of possibility with the current solution … not a future roadmap that may never materialize.)

We know what we’re doing

Just because a founder ran a Procurement Department or convinced an investment firm he knows how to run a company, that doesn’t mean he actually does, especially if it’s his first time. And it doesn’t matter how fast he can learn, how smart he is, how good he can sell, or how charismatic he is. Startup success requires a suite of critical skill sets (which are outlined in Garry Mansell’s Simplify to Succeed), each of which takes years to learn and sometimes a lifetime to master. You can’t wait to learn what you needed to do yesterday. Selling investors is not like selling Procurement technology buyers. And charisma only gets you in the door, on the stage, or an interview with Mr. X himself. It doesn’t necessarily get you the signature, the return invite, or the limelight.

This results in two major mistakes. Unless the founders raised (way) too much money and are under pressure from the investors to put a proper management team in place, they’ll go too light on real operational management (and sometimes marketing management, opting for the attention seeking sound-biters over the steady-state educationally focussed marketers that hook real customers with real problems the vendor’s solution might actually solve), thinking that all they need are a few rock-star developers, a sound-bite marketer, and aggressive sales people. Which isn’t a complete team and not a complete recipe for success.

The next mistake is believing they can do everything in house, and that they “don’t need no advice from no one“. Not other founders (including those who failed once or twice and know what not to do). Not consultants, who specialize in startups and helping companies operate successfully. Not analysts, who’ve seen hundreds of companies come and go (and seen the commonalities in successful solutions and successful companies). And definitely not independent Procurement technology experts who’ve had 20+ years in the space and seen thousands of companies come and go over the decades (and analyzed hundreds and hundreds in detail).

In the mid to late 2000s, even the above average companies, who (in hindsight) probably didn’t need any help, would look for any expert they could find with a decade of experience to help them survive the (coming) downturn (which came, as it always does), improve their solution offering, and grow. Today, a significant percentage of the new generation of founders, high on raising ridiculous amounts of early stage (often pre-beta) funding, running companies making a significant number of dumb company and dead company mistakes, won’t even consider that a third party with a decade or more of experience on them in the space could actually help them.

And while this is a hard mistake to tell directly (as the smart companies won’t necessarily disclose the experts they are working with to give them an edge), if you pay attention to their messages, their speech, and their words, you’ll get some indirect hints as to where the egos might still be too inflated for the company to see success (and you can hence identify it as a company that needs to be evaluated against the dumb company and dead company walking checklists). Phrases such as “I was a buyer for F500 for years managing $B categories“, “We raised 100M because our investors know that we know what the next generation of tech is“, “I’m not a sales guy, I’m a practitioner like you“, “Don’t worry, we know what you need” even before they’ve even asked a single question about your problems and reason for reaching out, etc.

Before we conclude we’d like to again remind you that this is not a complete list of mistakes soon to be dead companies often make, but a starting list of red flags you should look for as a potential buyer of their solutions. There are real, solid, solutions out there from real, solid, vendors who care about your success and who will likely survive the coming implosion. You might have to look quite hard to find them (especially if THE REVELATOR is right and 3/4 will not survive unscathed), but the effort will be worth it because the last thing you want is your solution to fall out from under you just after the implementation is complete.

(And it’s critical to remember that any deep solution is going to take multiple quarters to implement, especially if you need to collect, classify, cleanse, and map years of historical data from multiple systems. For a mini-suite, always expect six [6] to twelve [12] months as a mid-market, and more for a full suite. Yes, some functionality that doesn’t require historical data will be available day one, and other functionality that only requires a year or two of data to get going will be available day ninety one, but no solution with depth is going to be completely implemented in under a quarter. So the next time a vendor says they can do an end to end complete enterprise Procurement installation in 60 days, they don’t have anything deep besides a shiny faketake-to-nowhere UX or a wrapper on third party tech from a company that poses more risk than they do.)

Is Your Potential Vendor a Dead Company Walking? Part 1

Not long ago we noted that our space is filling up with dumb companies and that this number, at least in the view of the doctor, is likely at an all time high.

the doctor believes that your favourite vendor likely won’t be around, or at least not in it’s current form, within two years (or less), with the doctor predicting a failure rate of 20% (or more); which, while it sounds pretty significant, is actually a mild prediction compared to THE REVELATOR‘s bold prediction that 75% of companies won’t be around, or at least not in their current form, within 18 months. Wow!

Why? First of all, as highlighted in the doctor‘s revised Dumb Company article, the companies that are (finally) starting to panic (internally) are starting to make the classic mistakes that signal the beginning of the end. (Considering the marketing madness, the buzzword overload, and the hogwash still coming from the firehose, you wouldn’t know it yet, but early warning signs are starting to appear.)

Secondly, they have been, or are starting to, make the Dead Company mistakes, first highlighted by the doctor in December, 2008, as well as some scary new mistakes that weren’t as common, or that were overlooked by the doctor, sixteen years ago.

While there are a large number of mistakes, often with individual nuances, that vary from company to company, and an exhaustive list would be too long to digest (if it could even be compiled by one person), there are still a number of common mistakes that can be identified and the elimination of these, or at least an immediate course correction (as some mistakes can’t be undone) with respect to these mistakes, will go a long way to making sure that their company is not the next dead company walking. If you see these mistakes in spades as a buying organization, it’s probably best to steer clear until the ship is righted. (You don’t want to go down with a sinking ship!)

The top 12 the doctor is currently seeing are:

Too Many Assumptions, Too Few Verifications

Too many founders didn’t do their research, assumed that just because tool X they were forced to use at their last job didn’t do something then no tool did it, or assumed that because they were a buyer buying a few categories at one company in one industry they know what every buyer wants. And, thus, they know enough to design the tool that is going to take the Procurement world by storm! This is rarely the case. Especially if they only ever saw three potential solutions of the 40 to 200 that were out there (depending on the module they were looking for, see the Mega Map).

While it’s hard to tell what is in someone’s head, the words, directions (to the marketing and sales teams), and outputs (in terms of product) speak volumes. They tend to focus on how they were a buyer and know all the problems (without even asking about your problem), focus on user experience more than actual process or solution (look how easy it is for Bob to make a request on his phone and see a virtual avatar of Alice receiving it — woo hoo), and direct their marketing and sales team to sell sizzle, not steak.

A shiny exterior is more important than a modern engine

As hinted in our last point, too many founders today are too focussed on the UI and the UX, the “user experience” and not on the processes that the users actually have to do on a daily basis. As a result, while it may taste great to the eyes, it’s significantly less filling as an actual solution and leaves users wanting more, sometimes to the point where they quickly abandon the solution. As such, it doesn’t matter how quick that shiny new intake-to-orchestrate solution can be implemented if there isn’t actually a solid procurement capability backing it up that does more than allow an employee to make a request and see a shiny avatar of Alice saying “your request has been received”. If Alice can’t actually do the Procurement in tool, what good is it?

So if the “intake” demo stops with the intake, run to the hills, run for your lives! Of if when you ask them about a competitive functionality, all they talk about is the experience their solution offers, they don’t actually have deep capability.

Shiny new tech is more important than a tried-and-true methodology

At least 6 in 7 vendors have jumped on the AI-backed/AI-driven/AI-enabled/AI-enhanced/AI-powered bandwagon, even if they don’t have any AI at all and/or any AI that actually solves a real problem in a predictable, valuable fashion. Too many vendors are popping up with “intake”, which the doctor prefers to call “fake-take” solutions that, as per above, can take a request in a shiny web-based UX and then … do nothing with it, or, in the best case, act as an overpriced pay-per-view on your data!

The sad part about this situation is that a number of real, modern Procurement 2.0+ (and esp. 3.0+) applications have had “intake” built in since day one, like Vroozi that has had it since launch in 2013 and Eyvo that has had it since the mid 2010s. Even Coupa had intake support for catalog-based purchases when it launched on Procurement Independence Day in 2006 (and still does to a large extent, although the user-based pricing model does make it prohibitive for many organizations)! And when it comes to AI, the doctor has yet to see any new “AI” play offer any new capability that hasn’t existed, or been in development, since the last decade! (When the doctor did his AI in X today, tomorrow, and the day after tomorrow series for Procurement, Sourcing, Supplier Discovery, Supplier Management, and Optimization in 2018 and 2019 on Spend Matters. These are all still in the Content-Hub archives, so if you have access, check them out.) (Now, while the doctor will admit that Gen-AI can do conversational interactions better, and summarize larger bodies of documentation as it is a bigger model, that is about it … as it cannot do any task that requires basic logic or math, and thus just about any real Procurement task. Moreover, we have had semantic technology that has done a good job since the early 2010s! Sure it might have sounded a bit robotic at times, but it worked just fine.)

So if all the vendor talks about is buzzwords, find one that talks about how they solve your problem. At the end of the day, it is command line code executing on a server somewhere that solves your difficult business problems, not fancy UIs.

Over-reliance on third party tech is a sustainable business, especially if it’s (Gen-)AI

If a lot of your potential vendor’s functionality is dependent on yet another a new third party vendor (or offering that will be pulled if it causes the company to bleed money), what do you think is going to happen when it goes away? Nothing good, and that’s for certain. That’s why you want vendors who build real applications in languages supported on multiple platforms that use data stores supported by multiple vendors and cloud service providers. You don’t want a single point of external failure taking down your entire business. Especially when the third party tech has limited use (on its own) in the first place.

But way too many vendors are building these Gen-AI or intake-plus solutions first, which are totally reliant on third vendor tech that can destroy their company in an instant. And it doesn’t matter if they only build on big company tech from companies like Microsoft or Google that you know aren’t going out of business, because even these goliaths can, and will, end support for tech pretty fast if it’s not profitable. (And, if it looks like one day an application will be very profitable, cut your access to it to prevent competition with their new, inferior, in-house tech.) The fact of the matter is, they are Goliath 2.0 with full armour plating, a helmet no stone is getting through, and a legal team who will bankrupt you if you even try to fight them. So if they decide the tech is done, or at least your access to it is done, you’re done, and there’s nothing you can do. (the doctor has seen this multiple time and experienced this firsthand. And it doesn’t matter if your vendor has a signed agreement in hand, the Goliath’s legal team will find an out clause and that will be it for your vendor.)

So avoid these vendors like the plague. A vendor with great tech can still fail, but it’s not as likely to do so without a lot of early warning signs if it owns the tech and employs the people.

An innovation burst is enough, especially if it is disruptive

Another increasingly common mistake these dead companies walking make is thinking that once they have a shiny new piece of actual tech that they don’t think anyone else has (which is rarer than you think), they can slow down the pace of development and rev up marketing and sales. That’s the exact opposite of what needs to be done. If you want sustainability as a vendor, you need a big lead, not a small one that can, and will, be quickly replicated by the next startup that has the same idea and gets too much money (and is smart enough to, or lucks into, hir[e][ing] the best). Success as a vendor requires consistent product development for years, and the only reason R&D becomes a smaller percentage of the budget as time goes on is because, one the core module(s) of the product (suite) is (/are) ready for prime-time, marketing and sales spending starts increasing from 0, not because R&D spend decreases!

Make sure your potential vendor has a concrete, detailed roadmap for the next year and vision for the next three. Significant function-spanning developments take time, and vendors in it for the long haul realize that — and they start with the foundations first.

Too much investment, too soon, against an overly ambitious plan

This is one of the worst mistakes, and one we’re definitely seeing too much of recently. Too many companies getting tens, or hundreds, of millions of investment just because they are building intake-to-orchestrate or Gen-AI solutions, neither of which do anything on their own, and neither of which do anything significant without a lot of solid tech (and data) to back them up (for the use cases where they are good). In some cases, the investment is at stupid levels an there is no way the company is going to deliver on the investment to the expectations of the investors, which means that the company will likely be dropped faster than a hot potato when the coffers start running dry as a smart investment firm would rather eat a sunk cost than have an ongoing investment sink their entire fund. In the best case, they’ll be sold off to a bigger VC or PE (at a loss) who can right the sails and extract some value as part of a larger solution suite. In the worst case, the company will just be folded entirely.

So, before buying from any vendor, research their investment to sales ratio at investment time and now, and if they took 100M on 0, and still only have a handful of customers, that’s not a good sign … unless they are building to a very specific niche need with the intent to get them scooped up by a bigger player who needs to fill that hole, their chances of long term survival are slim to none.

 

These are just the first six mistakes we’re starting to see too often. Stay tuned for part two where we’ll go over the next six.

Want Procurement Technology Success? This is Your Anthem!

Show Don’t Tell by Rush

From now on, when you are contacted by a vendor, the first thing(s) you do is

  • refuse to listen to (or read) any marketing material, especially if they use any buzzwords (and, in fact, point out the minute they say one that you will hang up on them if they say it, or a prepared list of buzzwords you keep beside your phone, because it’s all Hogwash)
  • refuse to review any “case studies” until you see the solution in action, and even then refuse them unless they contain hard numbers based on standard metrics that you can compute yourself pre- and post-implementation (a client stating they saw “significant” savings is NOT a case study, it’s hearsay)
  • refuse their pre-recorded / scripted 30 minute intro demo until they tell you, in plain English, what problems their platform solves and why they think it will help you (and maybe even ensure the contract they will ask you to sign is also in plain English)

Once the vendor tells you:

  • what procurement problems and pain points their platform solves
  • how it does it (no techno-babble bullcr@p, plain English; no mention of AI, and definitely no mention of Gen-AI [which is bad for Procurement] because if it uses real ML then they can tell you what algorithms they use, and what confidence you can have based on what level of data is available)
  • and why the vendor is the right vendor to deliver the solution to you

Then you agree to a demo that covers the specific pain points you want addressed, provided that, if you like what you see, you can take it for a test drive. Nothing stops a true multi-tenant SaaS solution provider from spinning up a sandbox instance for you to play with, at zero cost, as it should literally be the flick of a switch (or letting you run one real sourcing event at a trial cost). The only significant charge should be if you want to see it in action on your data, in which case you should be prepared to pay a standard daily consulting rate to load your data (but, to be honest, you shouldn’t do this until you are sure the vendor is going to be the finalist, or the runner up, in your selection process as a final step, since a test drive on standard dummy data will illuminate most of the functionality supported).

You need to see a platform in action to understand if you can, and will, use it to solve your problems.

So, if it isn’t already, your new mantra for procurement software solution providers is Show Don’t Tell!

M&A Mania is Coming Again … but will it be the same as last time?

the doctor agrees with THE PROPHET that M&A in Procurement, Supply Chain and Finance Tech is Back On For Q4 and 2025, because M&A Mania is part and parcel with the The Marketplace Madness that the doctor told you is coming back in May. The only question is, will this M&A cycle look like the last few during Covid (when every investment firm had to have an online collaboration platform, since they couldn’t do business in person, and an online e-Payment FinTech solution, since they still needed to make, and most importantly receive, payments) and in the late 2010s when companies were getting scooped up left, right, and centre. It was kind of like that first year in Chemistry where you were told to look to your left, look to your right, and look in the mirror and realize that only one of you would survive the end of the course (except the odds had worsened and there was only a 1/6 chance that any of you would be left standing at the end of the M&A cycle and less than a 1/9 chance that more than one of you would be left standing).

But first, let’s review THE PROPHET‘s reasons why:

Reduced interest rate climate coming
Not necessarily in your country, but in the US and a few other major investment markets, and for global funds, that’s enough.
Valuations back up (including a recent one)
the doctor is seeing a bit of this beyond just over-hyped fake-take and (now failing daily) Gen-AI, which indicates a return to value for real solution capability that solves real problems, and not just glam UX or tech buzzwords, could soon be coming.
Dry powder is the size of an ammo depot
And this is a rather conservative estimate. Broaden your definition of our Source-to-Pay space, and it could go well beyond the 666 providers in the mega-map.
Constrained target/asset pool to pursue
Too many providers not focussed on Gen-AI bullcr@p were not (well) funded and in need of funding to grow and too many providers who raised too much on Gen-AI bullcr@p blew too much on failed dev and marketing and need someone to infuse them with fresh funding while taking in the reigns and refocussing them on core problems.
No clear leader in many markets
Even if you constrain by target enterprise size, vertical groupings, and module, you’re usually looking at over a dozen vendors. Too many. By core module alone, you’re usually looking at over eighty (80) potential providers.
Counter-cyclical sector defensibility as a hedge
Most definitely. the doctor has always said the best time to develop/expand is on the verge of a coming financial or supply chain crisis, and it’s even better if it corresponds with the end of a hype-cycle (when everyone realizes that grandiose claims are just that, claims, and usually not realized and it’s time to return to the next generation of tried and true technology).
Times of increasing global uncertainty favours supply chain, supply and supplier risk management
Yes, and this will be constant for years. The outsourcing crisis the doctor and a handful of others have been predicting for over a decade (which is why he was telling you to near-source and home-source in the late 2000s) materialized during COVID, anti-globalization is at a high not seen in the remembered lifetime of most of the global population (and increasing by the day), we likely haven’t been this close to World War III since the cuban missile crisis of 1962 (since the Soviet radar malfunction of 1983 was caught by an alert Soviet air defence forces officer) putting global political tensions at a near all time high since World War II, ever increasing natural disasters and supply shortages are escalating costs at levels of inflation not seen since the 1970s, and in some markets, since the late 1920s (and the Depression era), and it’s just doom and gloom all around. Only our space has the tech to combat this.
Corporate spend flowing into tech, not new jobs
This is unfortunately true since

  • most executives don’t realize that tech only increases productivity and success in the hands of a human, it doesn’t replace them (since Aritificial Idiocy can’t even replace real idiocy, how can you expect it to replace Human Intelligence [HI!])
  • big companies don’t like high fixed costs, and the see people has the highest fixed cost
  • the dream of the new robber baron billionaires is to replace people with machines, which they think will help them realize their vision of constantly increasing profits from constantly increasing revenue (from a workforce that never needs to take a break) at a constantly declining cost to serve (not possible, but that’s their dream)
Nearly all big tech firms (ERP, business applications and stack) aside from SAP have not made any material moves yet — and will need to at some point
You can’t wait for a lumbering giant … by the time they buy someone, it’s ready for sunset. Remember IBM and Emptoris? A sad end to the APE circus! That means that the time to strike as an investor is before they awake!

Add add the following:

  • money has been idling in these funds from lack of investment over the last couple of years (as they got antsy last year with the predicted recession and the SVB failure and the fallout of both), and their investors aren’t happy
  • many of the more progressive funds have realized that fintech is useless if there’s no money moving through it, which means you have to look for broader business solutions that can assure the flow of money as well as information
  • companies are starting to realize that ridiculous 10X, 15X, 20X valuations are a thing of the past (or at least until we get a whole new generation of freshly minted investors who didn’t bother to study their history, like the new generation of founders that didn’t study theirs) and that if you can get a solid 5X to 7X valuation (which is the most a company can expect to realize at an aggressive 40% annual growth rate, which is the most they can hope to realistically support) for tech, that’s great, and this makes acquisitions a lot more attractive than during the last cycle when you’d have to bid 10X on something that might not scale as an investor just to get invited to the table

The M&A market is returning. But there will be some differences this time. The last two times it was valuation run up until the money ran dry or there were no companies left that were worth it. This time will be more reminiscent of the first M&A Mania to hit our space in the late 2000s and it will come with a little kiss, like this:

1. Valuations will be more realistic.

As simply stated, 10X, 15X, 20X growth doesn’t happen in five years for anything but a Unicorn, and even then it’s rare, and investors aren’t going to pay this any more. That being said, they will invest for value and firms who focussed on building real solutions, not slick UX with no substance, will be valuated quite well (at first).

2. The cycle will have 3 parts.

2A. Existing Growth Opportunities

Look for PE firms to buy suites or modules that can be sold and grown stand-alone or as complementary solutions to offerings in their stable. The market for these solutions could mature quickly as the Gen-AI and intake hype cycles crash and the global situation destabilizes and risk-focussed Sourcing and Procurement become paramount. This will be done at fair to very good valuations, depending on the offering and the financial situation of the firm being acquired … those that can wait and play the field will get better valuations.

2B. Fill the Gaps

As new competitors enter the scene, existing providers with aging tech are going to want to counter them and will start buying up point-plays to fill the gaps. This will take two forms.

  1. stable, stand-alone players who can survive without investment will wait for the right offer, get a very good to great valuation, and survive relatively unscathed in personnel and offering (and will continue to be available standalone for some time)
  2. cash-crunched desperate players who won’t survive long without a cash infusion will be bought in a fire sale, folded in quickly, and only key personnel will remain

2C. Liquidation Opportunities

Everyone loves a steal, err, deal. Investors included. As companies start to run out of money left, right and centre because they were underfunded (and struggled to compete with the overfunded overhyped companies) or overfunded and burned money like it grew on Central American fruit trees that produce two healthy crops a year, investors and buyers will be looking for companies with pieces of tech they can use to enhance their offering for pennies on the dollar. These companies will be broken up across talent and technology, with the acquirer keeping only what they want.