Category Archives: Services

The Lost Art of Service Management

In the age of Services-as-Software, Agentic AI, and BS AI Employees, service management has officially become a lost art!

By definition, a service is an act or work performed by a person or group that benefits another. The key word is “person“. Not software. Not machines. Not fake AI. People with Human Intelligence (HI!).

Since service management is the systematic practice of creating, designing, delivering, supporting, and managing the lifecycle of services an organization provides to its customers, that means that the art of service management is using Human Intelligence (HI!) to appropriately design, create, deliver/perform, and support the outcome of the services the organization offers to its customers. Human Intelligence (HI!), NOT AI.

More importantly, it’s the art of:

  • creating services that will provide value
  • designing delivery methods that will be efficient and effective for the provider and the customer in the delivery of the value
  • delivering the services with a human touch
  • supporting the customer through the delivery when they need help fulfilling their end of the service (such as providing data, organizing meetings, making decisions, opening up systems, etc.)

And, generally, delighting the customer with the service by actually providing value. Something that can only be done by an intelligent human that understands what the customer actually values. And that’s a return on their money. It’s not just a strategy in a powerpoint deck (and certainly not one created by hallucinatory Gen-AI), a GPO that takes 10% off of insignificant tail spend, or a flip the switch system integration with no training, ongoing monitoring, or project assurance.

It’s a step-by-step strategy with implementation support at each step; a self-serve Procurement process setup and managed by the GPO in a manner that doesn’t require Procurement to need them on a day-to-day basis; and on-going onboarding training, adoption monitoring, and support process to ensure the system is used, tested, and improved by the daily users as soon as key functions come online.

Service management is becoming a lost art just as art itself is becoming lost in the age of unintelligent Gen-AI. Like art, service management requires humanity to get it right. By definition, humanity is something systems do not have!

Phil’s new HfS Services-as-Software FlyWheel Is Right On the Mark From a Customer-Centric Viewpoint

… but hides the full support required on the back-end!

This is important to point out for two reasons:

  • Gen-AI Hype-mongers will use this as another excuse to claim most white-collar functions will be entirely eliminated when, in fact, it strengthens the need for true back-office white-collar workers and real software engineers
  • Expert human support becomes more critical at each stage of the process (while bit pushers became less and less useful)

But let’s backup. In his most recent piece where he (re-)introduced the SaS Flywheel, Phil made one critical statement which is constantly overlooked by the industry: Stop treating FDE as optional: Your AI Flywheel will not spin without it.

As Phil astutely points out: the hard question nobody is answering is this: who actually wires AI into your live systems, governs it in production, and makes it keep working when the AI software vendors leave the room. The answer is, of course, your Forward Deployed Engineer (FDE) — and if your transformation strategy does not have it, you are building an AI theatre, not an AI operating model. (Which, FYI, is what most companies are building — and, as Stephen Klein astutely points out, putting on puppet shows. Great for entertainment, but not so great for getting anything done. Especially since they all overlook what AI can actually do.)

Now, a forward deployed engineer alone will not get you out of pilot purgatory, but it is an essential condition — just like you can’t climb out of a deep wide hole with smooth 90° vertical surfaces on all sides without a rope or a ladder, you can’t fly your way out of a pilot without a working plane, which you don’t have without an engineer to keep it running.

As Phil continues, FDE is not implementation – it is the engineering layer that makes AI governable this is because FDE teams build ontologies that reflect how the enterprise actually operates, wire models into real data with real permissions, and design the governance architecture that keeps autonomous systems accountable, which will, and for quite some time into the future, wire in non-overridable human oversight, approval, and review.

Phil goes on to list a few key things that LLMs cannot do on their own. (It’s in no way a complete list, but hopefully enough to get executives questioning all the AI-BS form the AI-Hype-mongers presenting grandiose claims that likely won’t be a reality within most of our professional life-times. Even better, Phil points out that Agentic AI without FDE governance is not transformation. It is risk accumulation!, and points out five key requirements of workable AI that can’t be achieved without an FDE. (There are more, but again, these should be enough key points to help executives realize that not only are LLMs sorely insufficient for almost every task they are being promoted for, but they aren’t even usable at all without the help of a FDE team.)

Phil also does us a great service by pointing out that while vibe coding creates velocity, FDE prevents it from becoming chaos — which is what happens every single time you employe vibe coding without FDEs (and a real engineering team — but we’ll get to that).

Vibe coding is simultaneously one of the biggest boons to software development and the greatest destructors, especially since it is almost universally misunderstood and misapplied. For example, while Phil’s statement that business analysts can express intent and receive working agent code in return is technically correct, it’s not practically correct. That’s because vibe coding produces code that is insecure, inefficient, and not appropriate for enterprise software. In fact, just about every startup that tried to launch an enterprise app on vibe-coding alone have lost hundreds of thousands (or more) attempting to do so — see this great post from Alex Turnbull.

Vibe Coding is super useful because, with the help of an FDE team with a good business analyst, the end user organization can quickly create functional prototypes that demonstrate precisely what they are looking for, which are much more powerful functional specifications than traditional functional specification documents with text descriptions of required functionality and powerpoint mockups. Plus, these prototype specifications can be created in a fraction of the time. But that’s all they are, prototypes. Real applications still need to be built by real software engineering teams who can build optimized, bug-free, secure code — vs. unoptimized, buggy (especially at the boundaries), and insecure code regularly generated by AI-based vibe coding tools (where, depending on what source you access, 53% to 78% of code generated has serious security issues).

In other words, it’s a great article, from a customer-centric viewpoint and written for customer executives. From a back-end, provider perspective, it’s missing one key step — the development step that takes vibe coding prototypes and produces real (AI-backed) enterprise applications.

Moreover, it centralizes the FDE activities when, in reality, they are ongoing throughout the entire cycle.

  1. they activate, and put the foundation in place
  2. they train the users on how to properly use the LLMs for accelerated research and are always on call for help
  3. they maintain the orchestration layer, and improve (and correct) it as necessary
  4. they work with the end users to vibe code prototypes
  5. they work with the development team to build the next generation (or iteration) of the enterprise apps in the SaS model

In other words, AI can enhance SaS, but it cannot replace the need for skilled humans on the provider side (for development, implementation, maintenance, and improvement) or the buyer side (for process definition, improvement, decision criteria, etc.).

At the end of the day, AI can only replace bit-pushers who do tactical data processing tasks which should have been automated by machines 30 years ago (when it was promised), but it can’t replace anyone who needs to make a (strategic) decision. This is true regardless of the model, and the right model, like Phil’s SaS flywheel, actually exemplify the need for the right, skilled, talent.

STOP PAYING PROCURETECH/FINTECH ADVISORIES A DOLLAR JUST TO LOSE THREE DOLLARS!

Last week, in our post where we asked if ProcureTech Generated Billions While Practitioners Lost Trillions, we noted three things:

  1. Approximately 1.8 Trillion Dollars (more than the annual GDP of 92% of the countries on Earth) will be wasted this year on Tech-Related Spending
  2. Approximately 600 Billion Dollars will be spent with the big consultancies and analyst firms who do Financial (Technology) and Procurement (Technology) consulting and advisory
  3. That’s three dollars lost for every dollar spent on big consultancy and advisory firms

So how do you stem the bleeding? Especially if you can’t STOP spending mooney on tech advisory because you can’t stop spending money on technology because you can’t survive in today’s digital world without it?

You STOP forking over (high) six and seven figures without a guaranteed return! In other words, unless they save you some coin, then your money they will not purloin!

More specifically, if they are promising outcomes, then (the majority of) their compensation should be 100% dependent on outcomes. If you don’t make bank, then their compensation will tank.

To be even more precise, don’t buy:

  1. any technology platforms where the majority of compensation is tied to successful sourcing events, transactions, etc.
  2. any GPO services unless it’s 100% outcome oriented
  3. any functional outsourcing unless the majority of compensation is tied to ROI

Now, the technology providers and consultancies will push back, steadfastly claiming that their technology and services are worth way more than they are charging, but here’s how you counter:

  1. you will pay a base annual fee for the platform that will cover 150% of their base hosting costs, so they won’t lose, and then a percentage of transactions, identified savings through sourcing events, contract value, etc. where the percentage is calculated such that if you save 100% of their promised savings, they will make 50% more than what you would pay on a fixed cost after negotiation — if they are so confident in their claims, this should be a no-brainer
  2. you will pay a fixed amount on each transaction, calculated based upon the expected savings before you sign the contract, and if they can deliver the savings, you will definitely be using them regularly — and, as with the Tech Provider, you will calculate this so that they win bigger than if you pay them a fixed cost IF they generate a return for you
  3. you will pay a fixed rate per hour that is enough to cover the assigned personnel cost (their salary plus 30% overhead), and any compensation beyond that will be dependent on the department delivering an ROI beyond a certain amount (which is the amount required to cover the basic fee you are paying them); and again, you’ll fix the compensation such that if they deliver 100% or more of what they promise, they will win big too

Now, you’re probably saying the doctor is daft by telling you to offer them 50% more than what you’d have to pay on a fixed cost basis if they deliver, but here’s the reality, without incentive, THEY WILL NOT DELIVER!

There is an 88% technology failure rate across the board, and 94% failure rate if it’s a (Gen-) AI project. The reality is, as we pointed out in our series on how, even if they have good intentions in the beginning, your (technology) vendor will screw you, the vast majority of systems fail to deliver, because, once the contract is signed and you have access to the system, they have zero incentive to do anything else for you.

Similarly, once they have you on a multi-year contract, why should the GPO or consultancy have any incentive to go beyond the minimum? If you want them to continually serve you and look for ways to generate a return for you, make it worth their while. And then you won’t be paying them one dollar just to lose three dollars in return!

This is where you start. Then, you question any consulting contract over 100K to 200K as a mid-market and 1 Million as a large global enterprise. At that point you have to define the value you expect and what gain-share agreement you are going to craft to ensure it.

Does ProcureTech Generate Billions While Practitioners Lose Trillions?

A couple of weeks ago, THE REVELATOR, in his AI Whispering asked Why does the ProcureTech solution side of the table make billions, while the practitioner side loses trillions (and more)? And it’s a fair question. Because even though the practitioners don’t lose trillions on ProcureTech and ProcureTech consulting (as that’s only in the Billions), they DO lose Trillions on Tech and Tech Consulting that the ProcureTech Consulting and ProcureTech providers SHOULD be helping them save money on.

To be precise, at least 1.8 Trillion is going to be lost by Practitioners this year on Technology and Technology Consulting. Earlier this year, in our post on SaaS Spending, we predicted that at least 1.5 Trillion would be wasted based on total industry spend and an average waste of AT LEAST 30% (due to overspend, unused applications and project failure), but we are now revising that up to 1.8 Trillion based upon a minimum projected spend of 5.4 Trillion based on recent Gartner estimates.

To put this in perspective, only 15 countries have a GDP in excess of 1.8 Trillion! In other words, the total technology spend wasted is greater than the individual GDP of 92% of the countries on earth.

But it gets worse.

If you add up the global revenue of the 23 Big Consultancies, which you will be using for ProcureTech, FinTech, and related consulting, it comes to 551 Billion.

Accenture 65
Bain 7
BCG (Boston Consulting Group) 13
Capgemini 25
Cognizant 20
Deloitte 67
E&Y 51
Fujitsu 26
Genpact 5
HCL Technologies 14
Infosys 25
Kearney 2
KPMG 38
McKinsey 19
Mercer 2
NTT Data 30
Oliver Wyman 3
Publicis Sapient 18
PWC 55
Recruit 23
BAH (Booz Allen Hamilton) 1
Tata 31
Wipro 11

And if you add up the global revenues of the 9 big analyst firms, which you will be using for ProcureTech and Fintech advisory, it comes to 51.5 Billion.

Clarivate 0.5
Forrester 0.5
Gartner 6.5
Hackett 0.5
IDC 4.0
IQVIA 15.0
Kantar 3.5
Moodys 7.0
S&P 14.0

That’s a total of 602.5 Billion you’re spending for ProcureTech and FinTech consulting and advisory in return for a loss of roughly 1.8 Trillion!

In other words, for every dollar you spend, you lose three. That’s the reverse of the ROI you should be expecting. You should NOT be investing in Technology or Technology Consulting unless you will get a 3 to 1 return. But what you ARE doing is investing in Technology Consulting and Advisory for a 3 to 1 LOSS! That is the EXACT OPPOSITE of what you should be doing.

So what should you do? STOP!

Or, if you can’t stop, change the game. More to come …

What is a Strategic Supplier Relationship?

Simple question. Sophisticated answer.

This was posed by THE REVELATOR in a recent LinkedIn article referencing his recent post on Procurement Insights’ Influence on Walmart’s Supplier Management Transformation.

First of all, the supplier has to be strategic.

For it to be strategic, it should be a supplier that is strategically selected, strategically engaged, strategically developed, and strategically managed. The goal of all of this should be to identify, build, and maintain a stellar supplier, as per a series we did here on how do you identify a truly stellar supplier.

But it’s more than that. Because strategic is more than just identifying long-term aims and interests and the means of achieving them, it’s execution. And when two parties are involved, its execution on both sides.

This means that it’s also critical that you are a strategic customer for the supplier. And while it’s hard to completely define what that is, as every supplier could have their own definition, at a minimum, just like a supplier should be stellar for you, you should be a customer of choice for the supplier, a topic we’ve also covered in the past.

But that’s not enough, because you can classify a supplier who supplies high-volume components as strategic with stellar service based on a set of KPIs, and the supplier can classify you as strategic based upon spend threshold and the fact that you always pay your invoices on time, and there can be nothing strategic about the relationship.

Unless there is active collaboration, a mutual commitment to mutual development, a shared goal along strategic objectives, and trust, there is nothing strategic about it and the relationship will fall apart the minute a major disruption or event occurs such as a supply shortage two or more tiers down in the supply chain that forces a supplier to choose which customers get their orders and which don’t (because it cannot fulfill all its contracts due to a force majeure event), or a sudden bankruptcy from your customer that forces you to cancel a big order (which will result in them not bidding/accepting further business from you).

For a relationship to truly be strategic, there has to be regular communication and collaboration on the shared goal of supporting the upstream supply chain of your current and potential customers utilizing the same values (sustainability, quality, performance, etc.) and a commitment to work together to solve problems when the going gets unexpectedly (and almost catastrophically) tough. When there is a shortage of a critical material, you will get your supply first, or if that’s not possible, the supplier will work with you to design an alternative (that uses a different raw material) or find alternate sources. When your biggest customer goes belly-up bankrupt, you will work with them to find additional, substitute, business you can give them to maintain the relationship and the business until you find a replacement customer.

Strategic means dependable, and that the dependability is both ways.