Category Archives: SaaS

The MOST Important Clause in Your (Procure) Tech (SaaS) Contract (Part II)

In Part I we told you that

  • while you might think there is no single most important clause as there are a lot of important clauses, especially if you ask around,
  • liability or penalty clauses are quite important, or that
  • termination matters

the reality is that

  • there is a most important clause, and it’s not what you think,
  • liability is worthless if collecting costs more than you get, and
  • you can’t terminate if you don’t have another choice!

But this isn’t the worst of it! The worst of it is that, after signing the contract, there is a good chance you will be screwed to some extent, whether or not the provider intends it. Between:

  • psychopathic salespeople who will promise anything to sign the deal (and off to their next job before the reckoning comes),
  • investor owners that are going to limit/cut support when unreachable sales targets are not hit, forcing the C-Suite to pick and choose who to screw over,
  • the fact that your vendor will likely be acquired (because if it’s not, it’s likely to go out of business), and
  • a struggling vendor with the best of intentions will take on too much and be forced to leave some customers high and dry

the chances are that you are going to be screwed.

This means there is one clause that overrules them all:

IT’S MY DATA … AND I CAN, AND WILL, GET IT ANYTIME I WANT IT!

You might think it’s your data, and you might think you can get it anytime you want it as there will be clauses around data protection, privacy, security, etc. as well as acknowledgements that you own your data, it will be kept separate from competitors, and the provider will not use it except to serve you, which may include using limited anonymized portions of it in community data.

And you might think you can get your data anytime you want it because they will guarantee up time, allow you to export transactions and reports, and so on.

But ask yourself this. Of the hundreds (and possibly beyond a thousand) of SaaS applications your organization currently uses, and has used throughout your career there, how many could you, self-serve, do a complete export of all of your data on-demand? And by all of your data, I mean all of your data. Not just reports or summaries or core record subsets. When sourcing, all suppliers and all related 360-data — all risk scores, compliance certificates, performance KPIs, related transactions, related bids, related events, product catalogues, tooling data, etc. In Procurement, all documents related to a transaction — not just the invoice but the purchase order, acknowledgement, goods receipt, credit note, etc.

When we say all of your data, we mean ALL of your data. Chances are, you can’t get it self-serve from your SaaS Application. You might not even be able to get all of your data with help from the the provider’s services personnel. For some applications, the only chance is if the developer does a, relatively undocumented, database export. And good luck with that!

This means three things.

  1. If the provider says that have no way for you to get all of your data at any time, you should not consider them.
  2. You must have a clause that:
    • allows you to export all of your data self-serve at any time (although it’s reasonable for the provider to charge a fee if we’re talking many GBs or TBs and you decide to export all of it on a regular basis, but you should be able to do this, depending on the data velocity and volume, at least once a quarter, month, or week, for free) in a standardized format; in addition, you must also include a modified
    • penalty clause with a significant penalty if you cannot do so by whatever date the baseline implementation is supposed to be completed; a (modified)
    • termination clause if the provider is unable to correct this by a certain time, and a (modified)
    • liability clause for the damages incurred as you will have to find another solution and will have lost time and money on implementing the providers solution.
  3. You must test the ability as soon as the initial import of all of your data is complete, and again in a few weeks once you create a whole lot of new data in the system (updated profiles, end-to-end sourcing events, thousands of new transactions with associated documents, etc.). We realize this will take a lot of time, but much less than trying to figure out what to do six to eighteen months down the road when the vendor fails (you) and you’re left high and dry.

That way, if the provider

  • fails to complete the implementation and required integrations in a reasonable time (and you’re unable to adopt the system),
  • sells you something they don’t have and may not have within the timeframe of the initial agreement,
  • gets acquired by a larger vendor with no intent to support the solution longer than they feel it will take for their forced migration to a higher-priced solution you don’t want, or
  • serves you a notice that it is winding down operations

you can keep going. As long as you can export all of your data in a standard, documented, format, you know that there are a dozen (if not dozens of) providers who will happily convert it to to their format (for free) for your business. Just be sure they will also agree to the same IT’S MY DATA … AND I CAN, AND WILL, GET IT ANYTIME I WANT IT! before selecting them!

The reality of the situation is that there is no unique capability in business data processing that can’t be, and isn’t, more-or-less replicated by dozens of other solutions. Sure they have different UIs, add or subtract process steps, and use different data storage formats, but universal business processes are universal, there are dozens of ways to do them, and get around the software patents supposedly protecting them (which should be banned in the US, as they are in the EU). The next solution might not be as custom fit as the one you are forced to abandon, but it will work (as long as you have unhindered access to 100% of your data). That’s the point.

As long as you can always get your data, you’re never completely screwed. (And once you’ve switched, if the losses are still significant, then, if the C-Suite wants to pursue, you can let the lawyers have their day. You won’t be held ransom by a vendor holding your data hostage.)

The MOST Important Clause in Your (Procure) Tech (SaaS) Contract (Part I)

While you might think there is no one most important clause as there are a lot of important clauses, especially if you ask around.

  • In Procurement, you will want implementation in the promised timeframe
  • Finance will want holdbacks and penalties if functionality is not delivered or timeframes are not met
  • Risk Management will want clauses around cyber-security and privacy
  • Legal will be very concerned about governing venue, liability, and standard termination clauses,
  • etc.

And those are all important, but the reality is:

  • regardless of what’s in the contract, the solution will be implemented when it gets implemented, and delays will be blamed on your IT team, partners, etc. especially if it is their fault
  • you have to prove it was the vendors fault to get any penalties enforced, and that will be very hard indeed
  • good clauses alone are not enough if a cyber-breach or data-breach happens, your customers will still be coming after you
  • the legal venue usually isn’t that important, the only time liability typically comes into play is if customer data is fraudulently accessed as a result of the provider’s failure in security or there is a massive prolonged system failure, and, no matter how bad the performance, the contract won’t be terminated unless there is outright fraud because the organization still needs a system
  • etc.

which means that, while important, unless there was outright fraudulent representation (or serious negligent misrepresentation) in the signing of the contract, none of these clauses really matter as they aren’t protecting you nearly as much as you think they are since any damages you would be awarded in court would be limited to fees paid, which could be dwarfed by the legal fees and mounting losses while you waited months or years for the situation to be resolved!

Moreover, when you consider that the average company is not a Fortune 500, and no longer has (multi-)million budgets for SaaS, that means that most of your purchases are going to be in the (low) six figure range. This means that the vendor knows that the cost of any legal action that would arise plus the losses that would be incurred by the organization that takes action will dwarf the fees paid, and that means that the likelihood of any action coming the vendor’s way is minimal. (Plus, after all of the glowing recommendations you gave the vendor to the C-Suite upon selection, to their customers in the all-expenses paid customer event at the fancy resort destination that was offered to you as a big new name customer, and to new potential customers in reference calls when you were still enthralled by the shiny screen, they know you won’t want to come forward and admit how wrong you were.)

This means that a good portion of you will be screwed to some extent. Let’s consider the reality.

  • Once FinTech, and then ProcureTech, became hot, you had all of the top performing sales people from across enterprise tech move in — and not all of them are altruistic; in fact, some of them are as psychopathic as they come and will promise anything to get the deal signed, even if they know the vendor organization CAN NOT deliver
  • Many providers have been capitalized at multiples of 7, 10, 15, or more by VC and PE firms looking for the next unicorn and are under pressure to reach ridiculous, and wholly unrealistic, sales targets and will effectively over promise to get sales and then underdeliver when the investors don’t allow them to hire enough support personnel due to not hitting sales targets
  • There are over 700 providers in a space that offers less than 10 core modules. That’s almost 10 times the number of providers that are needed. Most will not make/retain profitability and, thus, most will not survive. Some will go under, others will be acquired in fire sales or discount sell offs by investors who cut their losses before they lose it all. Even if your vendor gets acquired, chances are the acquirer will gut it and support levels will significantly decrease (and new development come to a standstill).
  • If the vendor needs the sale to get the bank loan, keep their jobs, make payroll, even the best providers will assume they can figure it out later with money in the bank, but this won’t always happen, especially if they are behind on promises to other customers.

In other words, even if the sales person and the provider had no will intent, you are still likely to get screwed.

This means that the most important clause in the contract is …

KPIs To Ask For By ProcureTech Module: Part III

In our last series on Why Your Tech Selection Should be KPI, and not Bell-and-Whistle, Focussed if you are not technical, we reviewed Tanya Wade’s 21 KPIs that are a great start if you’re looking to put some KPIs in place to properly program and percolate procurement. Not all of these were (the most) appropriate for all modules, but if you don’t know your tech, they were a great start.

In this mini-series, we’re partitioning the performance indicators by ProcureTech module as well as indicating a few more you should be asking for. We’ve covered the core Source-to-Contract modules, and today we are concluding with the Procure to Pay Modules of e-Procurement and Invoice to Pay (Accounts Payable).

e-Procurement

Tanya Wade’s Performance KPIs

  • Supplier Performance:Supplier Lead Time
  • Compliance & Risk:PO Compliance
  • Operational Efficiency:Procurement Cycle Time
  • Operational Efficiency:Automation Rate
  • Spend Analysis:Tail Spend

For details on these, see our prior series.

Key Module KPIs

  • Compliance & Risk:Maverick Spend Reduction – maverick spend is out of control in most organizations without good (e-)Procurement systems; it is important to know what is the average improvement from implementing the provider’s system (no matter what metrics the vendor throws at you, if this isn’t substantially increasing, the system is NOT being adopted)
  • Compliance & Risk:Preferred Supplier Spend (Improvement) – how much of the off-contract spend is with preferred suppliers, and by what percentage is preferred supplier spend expected to increase
  • Compliance & Risk:Avg Improvement/Time-to-Value in Discount/Rebate Acknowledgement – many traditional savings in office suppliers / MRO are offered in the form of rebates if a volume is hit (because the provider knows it won’t be because all organizations without good e-Procurement/Contract Management have high levels of maverick spend and they know they can often substitute SKUS due to “temporary stockout” and the buyer won’t notice and this will help ensure that the volume is not hit)
  • Operational Efficiency:Automated Inventory Re-Order % – for regular inventory/MRO restocks or predictable volumes based on the manufacturing plan, the e-Procurement system should be able to submit the POs automatically
  • Operational Efficiency:Repeat Order Cycle Time Reduction – for standard orders such as employee onboarding kits, monthly storeroom re-orders where the amounts need to be human verified/input, etc., on average, how much faster can these be placed vs. pre-module implementation
  • Operational Efficiency:Quick-RFP / RFQ % Reduction – by what percentage does the e-Procurement system, with its integrated catalog and quote management functionality, reduce the percentage of quick RFP/RFQs that the organization needs to issue for non-strategic purchases
  • Operational Efficiency:% (Increase) Spend on PO – by what percentage is on-PO spend increased

e-Procurement is all about getting Spend Under Management, ensuring contracts and included pricing are adhered to, and using preferred suppliers (and products) as much as possible (to help with standardization). This requires making it easy for requisitioners/buyers to find what they need, buyers to issue POs, and on-contract/preferred supplier spend to be easily tracked. Metrics should be in place to make sure all of this happens.

Invoice-to-Pay / Accounts Payable

Tanya Wade’s Performance KPIs

  • Operational Efficiency:Procurement Cycle Time
  • Operational Efficiency:Automation Rate

For details on these, see our prior series.

Key Module KPIs

  • Operational Efficiency:Invoice Cycle Time Reduction – by how much, on average, do clients see invoice cycle time reductions
  • Operational Efficiency:Straight Through Processing Percentage – what percentage of invoices are able to be processed straight through (with m-way match) without human interverntion
  • Operational Efficiency:Average Dispute Resolution Time (Improvement) – what is the average dispute resolution time in the platform and what is the improvement over the average time reduction versus pre-system implementation
  • Operational Efficiency:Early Payment Discount Opportunity Improvement – percentage-wise, how many more invoices eligible for early payment discounts can now be paid early (that couldn’t before due to processing delays), allowing organizations to improve their working capital management

Invoice to Pay is all about invoice processing automation and minimizing the amount of time that a human needs to manually review invoices for completeness and correctness and (automated) payment according to pre-defined terms. Make sure the metrics you choose reflect this.

We don’t claim this is a complete list, or every KPI that you can, and possibly should, ask for, just that if you are non-technical, and can’t judge a solution on its technical merits, if you can at least get these KPIs and force the vendor to prove them to you, then you will at least get a solution that is bound to provide you with some improvement and that, because of the real improvement potential, may actually be used.

The best solution is to hire an independent third party who is an expert in ProcureTech and who has no stake in any provider or implementer and is solely interested in doing Project Assurance for you, but if you can’t get that, at least get something which has a history of delivering measurable value to similar organizations.

KPIs To Ask For By ProcureTech Module: Part II

In our last series on Why Your Tech Selection Should be KPI, and not Bell-and-Whistle, Focussed if you are not technical, we reviewed Tanya Wade’s 21 KPIs that are a great start if you’re looking to put some KPIs in place to properly program and percolate procurement. Not all of these were (the most) appropriate for all modules, but if you don’t know your tech, they were a great start.

In this mini-series, we are partitioning the performance indicators by ProcureTech module as well as indicating a few more you should be asking for. In the first part, we addressed Spend Analysis and (e-)Sourcing. In this part, we are tackling supplier management and contract management.

Supplier Management

Tanya Wade’s Performance KPIs

  • Supplier Performance:On-Time Delivery
  • Supplier Performance:Supplier Fill Rate
  • Supplier Performance:Supplier Defect Rate
  • Supplier Performance:Supplier Rating
  • Compliance & Risk:Supply Base Risk
  • Compliance & Risk:% of Audited Suppliers
  • Sustainability & Diversity:Diverse Supplier Spend
  • Sustainability & Diversity:Sustainable Spend
  • Innovation and Collaboration:Joint Supplier Projects
  • Innovation and Collaboration:Idea Implementation Rate

For details on these, see our prior series.

Key Module KPIs

  • Supplier Onboarding:Average Onboarding Time – how long does it take to onboard a new supplier in the system; if you can’t get the suppliers in the system, it’s not very useful
  • Supplier Onboarding:Average Onboarding Approvals – on average, how many approvals are needed to onboard a supplier – every approval slows down the process, so they should be minimized and optimized
  • Supplier Onboarding:% Supplier Data Pre-populated – how much data is the provider able to import, on average, from existing systems and third party feeds to minimize the effort required by the supplier and the onboarding time
  • Supplier Onboarding:Average Supplier Data Accuracy – how accurate is the data that is used to initialize the system, i.e., on average, how much data has to be corrected
  • Supplier Discovery:Qualified Supplier Network Size (By Industry) – how many suppliers that the organization could reasonably use are in the supplier’s network; many companies will claim millions of suppliers because they index every single business in a geography, but (corner) drug stores, grocery stores, pizza shops, restaurants, corner stores, department stores, etc. etc. etc. are NOT suppliers you can use even if they are technically in the same vertical (pharma, food and beverage, CPG, etc.)
  • Supplier Discovery:Average Supply Base Net Change – after implementing and using the solution for a year, what percentage of suppliers, on average, are new in an organization’s supply base

Supplier Management is about the supplier lifecycle:

  • on-boarding,
  • buying,
  • managing,
  • developing, and
  • off-boarding.

As a result, it’s key that you have metrics that can gauge the efficiency of each stage of the supplier lifecycle until a supplier is deactivated and fully off-boarded.

Contract Management

Tanya Wade’s Performance KPIs

  • Compliance & Risk:Contract Compliance

For details on these, see our prior series.

Key Module KPIs

  • Contract Negotiation:Avg Cycle Time – what is the average time to negotiate and sign a contract in the system
  • Contract Negotiation:Avg Cycle Time Improvement – what improvement did the system bring relative to pre system contract cycle times
  • Compliance & Risk:Avg Negotiated Price Compliance Increase – what improvement is there in negotiated prices being realized on invoices as a result of the module implementation
  • Compliance & Risk:Evergreen Renewal Reduction – what percentage of (overlooked) evergreen renewals are eliminated with the module
  • Compliance & Risk:Contract Risk Score – can the system track risk scores by contract, category, supplier, and the organization
  • Contract Management:Contract Renewal Rate Change – what percentage of contracts are renewed in the system and what is the average (percentage) change vs. pre-system
  • Compliance & Risk:Obligation Rate Improvement – contract compliance is too broad, and might only measure if the contract was ultimately fulfilled; a good contract management system facilitates execution management at the milestone and associated deliverable level and tracks the rate of (on-time) milestone fulfillment to ensure contracts are managed effectively from the date of signing to the final deliverable, which could be years down the road

Contract Lifecycle Management (CLM) has three key stages:

  • negotiation and signing,
  • execution management (and compliance), and
  • renewal or termination.

Make sure you have metrics that measure the key processes and targeted results at each stage, or you’ll end up buying a very pricey, seldom used, virtual filing cabinet where contracts are stuffed and forgotten.

In our third and final part of this (initial) mini-series, we will tackle the last two primary modules of Source to Pay, the Procure to Pay Modules of e-Procurement and Invoice-to-Pay.

KPIs To Ask For By ProcureTech Module: Part I

In our last series on Why Your Tech Selection Should be KPI, and not Bell-and-Whistle, Focussed if you are not technical, we reviewed Tanya Wade’s 21 KPIs that are a great start if you’re looking to put some KPIs in place to properly program and percolate procurement. Not all of these were (the most) appropriate for all modules, but if you don’t know your tech, they were a great start.

In this mini-series, we’re going to partition the performance indicators by ProcureTech module as well as indicate a few more you should be asking for (as well as the proof, which, as we all know, is in the pudding, which you cannot eat until they show you their meat, like Pink Floyd told us 46 years ago).

Spend Analysis

Tanya Wade’s Performance KPIs

  • Cost Management: (Avg.) Cost Avoidance
  • Cost Management: (Avg.) Spend Under Management Improvement (YoY)
  • Spend Analysis:All Spend Categories
  • Spend Analysis:Maverick Spend Categories
  • Spend Analysis:Tail Spend
  • Sustainability & Diversity:Diverse Supplier Spend
  • Sustainability & Diversity:Sustainable Spend

For details on these, see our prior series.

Key Module KPIs

  • Spend Classification:Typical Accuracy – especially if it’s AI-backed/first/powered/etc.
  • Spend Classification:Time to Accuracy – this is critical; if it takes 6 months, your tool will be DOA as no one will use it as faith will have been lost after 6 weeks
  • Spend Classification:Transactions Per Minute – you need a tool that can not only import new transactions in real time, but build and rebuild spend cubes in real time — the key here is CUBE there is no one CUBE (just like there is no one ring or one ping).
  • Cost Management:Year-Over-Year Decrease in Managed Categories – where the organization is spending more than necessary, how much has the organization saved by sourcing/renegotiating identified opportunities
  • Operational Efficiency:Total Captured Opportunity per Minute how much spend does the organization save and avoid w.r.t. the time the Procurement team spends building and accessing cubes, views, and filters

Remember, at the core, the entire point of spend analysis is to:

  • get your spend in order,
  • understand it, and
  • find opportunities in it.

So you’re looking for metrics that directly or indirectly measure

  • time to get your spend in order at the promised accuracy;
  • the efficiency in cube and view construction, updates, and filtering; and
  • the value the tool brings.

Sourcing

Tanya Wade’s Performance KPIs

  • Cost Management: (Avg.) Negotiated Cost Savings
  • Cost Management: (Avg.) Cost Avoidance
  • Operational Efficiency:Automation Rate

For details on these, see our prior series.

Key Module KPIs

  • Sourcing:Events Per Year – how many events per year are customers pushing though the platform on average
  • Sourcing:% Increase in Events Per Year – what percentage increase is this compared to pre-system implementation
  • Sourcing:Avg % Savings Identified – what is the average identified savings and, preferably, this statistic is available at the category level
  • Supplier Management:Avg % Increase in Invited/Qualified Suppliers – since the tool should allow more suppliers and bids to be considered in events
  • Supplier Management:Avg & Increase in Supply Base Diversification – as a result of events flowing through the system

You want a sourcing platform that

  • increases the number of events executed by the sourcing team,
  • increases the potential supply base you are able to engage, and
  • increases the cost savings and avoidance you are able to obtain.

Make sure you have metrics that allow you to gauge how well the modules you have selected will enable you to achieve the outcomes you are searching for.

In Part II we will continue with the primary Source-to-Pay modules of Supplier Management and Contract Management.