Category Archives: Services

Gen-AI is Bad for Consulting Firms … But Even Worse For You When the Consulting Firms Blindly Use It!

A recent post on LinkedIn noted how there’s a wave of AI products flooding the consultancy and advisory space and how they are, frankly mediocre, overpriced wrappers on public models with minimum innovation, if any.

This is sad, but true, and it’s not the worst of it. The worst of it is that some of the Big X firms are training tens of thousands of consultants and f6ckw@ds on these tools to generate hundred page pitch decks and three hundred page strategy and implementation guides of standard generic, meaningless, drivel to deliver to you as “highly tailored guidance and expertise from their leading partners with 20 years experience delivering high-value projects” and charge you tens of thousands of dollars for the privilege.

This is especially egregious when you can use free/cheap (and I’m talking put it on your personal credit card cheap because you won’t notice the fee that is less than your monthly coffee charge from the coffee shop) to build the exact same pitches, strategy, and implementation guides from the thousands of freely available documents on the web in a few hours with a few generic prompts over a Sunday morning coffee. (And then, when the coffee kicks in, realize it’s all a load of cr@p and put in the bit bucket, but at least you will know what a load of cr@p looks like in pitch deck, strategy guide, and implementation plan form and will recognize it the next time an overpriced Big X tries to sell it to you for a ridiculous price tag and will have learned something from the exercise.)

Now that there are companies selling overpriced “custom” products to these consultancies, the situation is only getting worse, especially when the “customization” is just a wrapper with some pre-engineered prompts that aren’t well tested, only work at a point in time, don’t really give the consultancies what they need, and sometimes translate mediocre inputs to inputs that are even worse. Moreover, when you consider the price is sometimes a 100X multiple on the products they build on top of, it’s disgusting. Consultancies are paying more for less, and, in return, you are paying even more for even less!

Which makes no sense when the current publicly available LLM tech is being offered cheap (to try and hook you on it, even though, as we’ve repeatedly explained, the tech is not ready for prime time and will never deliver more than a fraction of what they are promising), and new implementations will get a lot cheaper. Just look at how DeepSeek undercuts the cost by a factor of 100 and gets 90% of ChatGPT (as long as you don’t mind exposing all of your secrets to the CCP). LLMs are nothing more than a fancy next-gen “deep learning” Neural Networks that construct responses vs. serving up canned responses (which is why hallucinations and lies are a core function, not an error that can be trained out) which gets us closer (but no cigar) to decent natural language processing (NLP) for the express purpose of the generation of desired outputs from inputs, but not there (and now, in addition to all the false positives and false negatives, we had to deal with, we now get to deal with hallucinations and lies as well). It’s not secret magic, it’s layers and layers of interconnected statistics and probabilities that no human can understand, in rather standard models that any Theoretical CS and Applied Math PhDs can build, and implementations that are better and cheaper are going to keep appearing as time goes on.

This means three things to any consultancy thinking about using these custom “AI” solutions

  • you still have to be even more tech savvy to use them to any degree of effectiveness
  • it’s not “the art of the prompt“, it’s the art of the training (even though they don’t really learn because they are NOT intelligent) because that determines the maximum level of effectiveness you will ever reach with them (and you need to provide them with sufficient correct data, which needs to be in the high gigabytes at a minimum, and, preferably, in the petabytes)
  • you don’t have to worry about when they are right (enough), which will happen between 90% and 95% of the time with proper training and proper prompting, or when they are obviously wrong, which will happen a very low percentage of the time (say 5% to 9%), but when they are oh so wrong but the response is constructed in a way that is oh so convincing that an above average person in intellect and experience wouldn’t know otherwise (that danger zone between obviously wrong and good enough that is likely only 1% to 2% of the time).

Now remember that your consultants aren’t that tech savvy, and you should know right off the bat incorporating and using these is going to be difficult and time consuming. (There’s a reason we are constantly advising you to be very careful about using Big X for tech selection and tech projects, and that’s because, even though they say it is, it’s NOT their forte. They weren’t built on tech, and they don’t have the best talent in tech — that talent goes to the big tech companies who can offer the 500K salaries to leading devs or the wild-west startups that leading devs think are cool.)

You only have so much clean and complete data you can use for training. You can’t just throw in the 1000s of decks you’ve built as you can’t share work you’ve explicitly created and sold to past clients, and the AI won’t anonymize the decks and suggestions (even though you think it will). It won’t know that “Ford” is the name of your client and might think that “Ford Data” is another term for shallow data and copy sections from that custom strategy straight into your pitch deck for General Motors (and chances are your overworked junior consultant won’t catch it when skimming that 200 page deck with only 2 hours to go before the meeting). And we know what happens then … (and it ends with the consultancy not keeping either client).

It will take a lot of analysis to identify those 1% to 2% of cases where it is very, very wrong but so convincingly right that you will miss some. What happens when you do and give your client advice that explodes in their faces? (We’ll let you answer that one.)

And for you as a consumer, if your consultancy is using this Bogus AI tech, it means that:

  • the situation that results from solution delivered might be even worse than the situation you started with (as should be evidenced not just by the tech project failure rate that is approaching 92% but the fact that 42% of projects are being abandoned during implementation!)

A solution designed by Gen-AI is not a solution. A real solution is a solution designed by human intelligence that uses real, augmented intelligence, to research and validate that solution. Remember that if you are going to hire a consultant!

One of these things is not like the other — it’s the right choice!

This originally published March 6 (2024).  It is being reposted due to the criticality of the subject matter (and the fact that One Trillion was wasted on services last year).

Note the Sourcing Innovation Editorial Disclaimers and note this is a very opinionated rant!  Your mileage will vary!  (And not about any firm in particular.)

Three bids for that spend analytics project from the three leading Big X firms come in at 1 Million. One bid for that spend analytics project from a specialized niche consultancy you pulled out of the hat for bid diversity comes in at 250 Thousand. Which one is right?

Those of you who only partially paid attention to the education Sesame Street was trying to impart upon you when you were growing up will simply remember the “one of these things is not like the other” song and think that any of the bids from the Big X firm is right and the niche consultancy is wrong because it’s different, and therefore must be thrown out because it’s too low when, in fact, it’s just as likely that the three bids from the Big X firms that are wrong and the bid from the niche consultancy that was right.

Those of us who paid attention knew that Sesame Street was trying to show us how to detect underlying similarities so we could properly cluster objects for further analysis. What we should have learned is that the Big X bids were all the same, built on the same assumption, and can be compared equally. And that the outlier bid needed further investigation — a further investigation that can only be undertaken against an appropriately sized set of sample set of bids from other specialized niche consultancies to compare against. And without that sample set of bids, you can’t properly evaluate the lower bid, which, the doctor can tell you, is just as likely to be closer to correct than what could be wildly overpriced Big X bids.  (Newer firms often have newer tech and methods — and if these are the right methods and tech for your problem … )

As per our recent post, if you want to get analytics and AI right, most of these guys don’t have the breadth and depth of expertise they claim to have (as most don’t have the educational background to know just how broad, deep, and advanced AI and analytics can get, especially when you dig deep into the math and computer science and all of the variable models and strengths and weaknesses, and instead are trained on what is essentially marketing content from AI and analytics providers). In the group that sells you, there will be a leader who is a true expert (and worth his or her weight in platinum), a few handpicked lieutenants who are above average and run the projects, and a rafter of juniors straight out of private college with more training in how to dress, talk, and follow orders than training in actual analytics … and no guarantee they even have any real university level mathematics beyond basic analysis in operational research (and thus a knowledge of what analytics is and isn’t and can and can’t do).  And unless you know what you need, and why, you can’t judge the response.  (Furthermore, you can’t expect them to figure out your problem and goals with only partial information!)

While there was a time big analytics projects were (multi) million dollar projects, that was twenty years ago when Spend Analysis 1.0 was still hitting the market; when there were limited tools for data integration, mapping, cleansing, and enrichment; and when there weren’t a lot of statistics on average savings opportunities across internal and external spend categories. Now we have mature Spend Analysis 3.0 technologies (some taking steps towards spend analysis 4.0 technologies); advanced technologies for automatic data integration, mapping, cleansing, and even enrichment; deep databases on projects and results by vertical and industry size; extensive libraries for out-of-the-box analytics across categories and potential opportunities; and a whole toolkit for spend analysis that didn’t exist two decades ago. This new toolkit, built by best of breed vendors used, and sometimes [co-]owned by these best of breed niche consultancies (that don’t try to do everything, and definitely don’t pretend they can), allows modern spend analysis projects to be done ten times as efficiently and effectively, in the hands of a master — a master that isn’t necessarily on your project if you hire a Big X or Mid-Sized Consultancy without doing your homework, vetting the proposal, and vetting the people. [See when should you be using Big X.]

In contrast, a dedicated niche consultancy should have all these tools, and only have masters on the project who do these projects day in and day out. Compared to the bigger consultancies who don’t specialize in these projects, which will have a team of juniors using the manual playbook from the early 2000s, and one lieutenant to guide them. That’s often why sometimes their project bids are five times as much — and why you should be inviting multiple niche best-of-breed consultancies to bid on your project as well as multiple Big X consultancies (including those that are truly focusing on analytics and AI, and you can identify some of these by their recent acquisitions in the area) and be focusing in just as much on the six figure bids for the one that provides the best value, not just the seven figure Big X bids.  (And, FYI, if you invite enough Big X, you might find some come in at six figures and not seven because they have acquired the newer tech, took the time to understand your request, and figured out how they could get you the same value for less cost, leaving you funds for the follow on project where you should consider the Big X!)

(This is also the case for implementations. The Big X always have a rafter on the bench to assign to any project you give them, but there’s no guarantee any of them have ever implemented the system you chose before, or if they did, no guarantee they’ve ever connected it to the systems you need to connect to. You need specialists if you want a new system implemented as cost effectively as possible, especially if its a narrow focused specialist application and not a big enterprise application the Big X always implements. At the end of the day, even if you’re paying those specialists 500 or more an hour because getting a system up in 2 months at 40K is considerably better than a small team of juniors taking 4 months at 200 an hour and a total cost of 80K.  But again, mileage will vary — if the solution you select is a Big X partner, then the Big X will be best.  If it’s a solution they never heard of, you will need to evaluate multiple bids from multiple parties. )

Remember, where any group of vendors on the same page are concerned, All of us is as dumb as One of us!

Don’t fall for the Collectivism MindF6ck! that if multiple parties agree on something, that’s the right answer!  the doctor does NOT want to do say it again, but since a month still is not going by where he’s hearing about niche consultancies being thrown out for “being too cheap” or “obviously not understanding the problem” (which means the enterprise throwing them out is too uninformed and not recognizing that the Big X bids could just as likely the outliers because they aren’t inviting enough expert consultancies to the table), apparently he has to keep writing (and screaming) this truth. (the doctor isn’t saying that you can’t get a million dollars of value from some of these consultancies, just that you won’t by giving them a project they are not suited for;  again, see when should you use big X to identify when that million dollar project will generate a five million ROI — it’s people doing these projects at the end of the day, and where are those people?)

Remember, most of these firms got big in management, or accounting and tax, or marketing and sales consulting, not technology consulting. The only reason these big consultancies started offering these services is because of the amount of money flowing into technology, money which they want, but while the best of the best of the best in more traditional accounting, management, and marketing fields flocked to them, the best of the best in technology flocked to startups and c00l big tech firms  Now, some of these firms double downed, went and recruited those people, built small teams, learned, bought tech companies to expand the team, and now have great offerings in a number of areas.  But we have tens of thousands of tech companies for a reason, not everyone can build every type of technology, and not everyone can be an expert in every type of technology.  So while they will have expertise in some areas, they just can’t have expertise in all areas.  No one can.  Find the best provider for you.  Sometimes it will be Big X.  Sometimes Mid-Market.  Sometimes Niche.  It all depends on your problem at hand.)

And yes, sometimes the niche vendor will be wrong and woefully undersize the project or your needs.  But as per the above, if you don’t do give them a chance, and deep dive into their bid, how will you know?

 

Did you ever try eating a mitten? the doctor bets some of those clients did! (He feels you’re not all there if you think glorified reporting projects should still cost One Million Dollars by default and might actually try to eat your mittens! [Joking, but you get the point.]  Deep analytics projects that require the most advanced tech, especially AI tech, will cost a lot, but standard spend analysis, sales analysis, etc. where we have been iterating and improving on the technology for two decades should not.)

Affordable RFPs – The Real Reason(s) They Are So Rare, Part 2

Three articles ago, we noted that The Key to Procurement Software Selection Success: Affordable RFPs! was critical to getting the right technology to help manage your complex supply chain. This was because a proper RFP required a LOT of understanding to get it right, which we covered in detail in that article and summarized in Part 1. Then, two articles ago, we noted that we know all too well that most of you are asking Affordable RFPs — What Are Those? because you’ve never seen one. So in Part 1, after reviewing the requirements of a good RFP, and pointing out why you weren’t likely to get an affordable RFP from the majority of consultancies, we told you that they were still the answer because

  1. they could be affordable if Niche Consultancies stopped thinking like consultants
    and started thinking like enhanced product-and-data-based SaaS Management Providers,
  2. they only require knowledge management and expert augmentation to get it right, and
  3. if a consultancy understood this and was willing to make the necessary investment, they could quickly become a market leader.

Today we’ll explain what that means. We’ll start with the 10 types of understanding we outlined in our first article on The Key to Procurement Software Selection Success: Affordable RFPs!.

  • Procurement Maturity: the consultancy needs a maturity matrix, along with key capabilities at each level, key questions that need to be asked, and follow on questions (and contextual knowledge) to elicit the right details
  • Process Maturity: the consultancy needs a process progression flow to pinpoint where an organization is in each process, both from a human viewpoint and a technology enablement viewpoint
  • (Critical) Use Cases: not just from a standard “procurement” (“sourcing”, “supply chain”, etc.) point of view, but from an industry point of view; the consultancy needs a large library of standard (critical) use cases to build on
  • Current Technical Maturity: not just from an organizational point of view, but based on the progression of technology in a typical enterprise organization (which, of course, requires a knowledge of the history of tech to the present day along with progression flows along architecture, standards, models, etc. )
  • Missing Capabilities: based on the process and tech maturity, but also based on industry peers and leading solutions; requires all of the above AND all of the below
  • Key Solution Types to Address the Gap(s): knowledge of the standard modular / best of breed offerings in the space and related spaces, as well as knowledge of the standard must have, should have, and nice to have capabilities of each solution type, as well as the progression of technical maturity in each area; a rather extensive knowledge base will be required
  • Key Existing Solutions to Maintain: knowledge of the core, should have, and nice to have requirements of foundational ERP/MRP solutions and companion solutions in inventory, logistics, etc. (to make sure the S2P+ solutions will be enough to go to market for or if other modules / systems [and RFPs] will be needed); a more extensive database
  • Globalization Requirements: knowledge of what the e-procurement requirements are in each country the organization does business in, what languages will be absolutely necessary, what currencies will need to be supported, what government regulations there are for the products/services being sourced/sold, what industry regulations/standards need to be supported etc; internal databases or appropriate database subscriptions will be required
  • Service Requirements: knowledge of what requirements are needed for implementation, data migration, integrations, and maintenance; and how to judge if a vendor / service provider is up to the task
  • Unique Organizational Requirements: knowledge of industries and what differentiates them from a process requirement and solution requirement standpoint; detailed, but yet curtailed, knowledge in an internal database that matrixes this by industry, process, and technology solution

In other words, it means a LOT of detailed models, knowledge bases, and standard progressions as well as a lot of detailed knowledge on:

  • metrics where most organizations lie on the maturity curve(s)
  • vendors, what modules they offer, and how they stack up
  • once all of the above is racked, stacked, and mapped, what the core questions are
  • etc.

And that, of course, requires the consultancy to step up and

  • make some up-front and ongoing investments to build these knowledge bases that will
  • allow their intermediate associates to do the baseline work and
  • enable their experts to come in and finish it up in a fraction of the time compared to if they had to do most of the work themselves (i.e. 1/5 to 1/4).

This will allow most of the work to be done by the intermediate resources at a lower day rate, who will be more efficient with a knowledge base to build on, and then the expert to come in and review the work, identify the areas of weakness, and take it the last mile.

And a consultancy who saw that and made the investments could scale up their operation by allowing their top resources to be four times as productive and support four times as many customers (as well as supporting their customers through the implementation in the project, change management, data migration, and assurance roles. (We only said that they had to be vendor neutral, and not be an implementation provider for the vendor’s software. Everything else is process or organization centric, and as the experts, that’s the work they should be doing, and the most valuable work to be done.)

Again, Affordable RFPs are the answer and maybe someday we’ll see a herd of those mythical unicorns.

Affordable RFPs – The Real Reason(s) They Are So Rare, Part 1

Two articles ago, we noted that The Key to Procurement Software Selection Success: Affordable RFPs! was critical to getting the right technology to help manage your complex supply chain. This was because a proper RFP required a LOT of understanding to get it right, including, but not limited to:

  • Procurement Maturity
  • Process Maturity
  • (Critical) Use Cases
  • Current Technical Maturity
  • Missing Capabilities
  • Key Solution Types to Address the Gap(s)
  • Key Existing Solutions to Maintain
  • Globalization Requirements
  • Service Requirements
  • Unique Organizational Requirements (less than you think, but those that exist are situation critical)

And this required a breadth of understanding across

  • the market
  • process evolution
  • use case specification
  • … including what must be technology backed
  • … and what should be technology or data enhanced
  • common module/solution types that mind the gap
  • internal foundations
  • the unique requirements, regulations, and resignations of each country you do business in
  • the services your team, and current partners, can and can’t do — even service specializations you didn’t know exist
  • what other organizations do

And most of this you won’t have in house. So you need Affordable RFPs. But we know all too well that you are all asking Affordable RFPs — What Are Those? because, as far as you know, they don’t seem to exist. And we hear you, because they rarely exist at mid-sized and larger consultancies  (because only a select few from their talent pool can do it efficiently and relatively cost-effectively and those resources with deep experience are going to be dedicated to any F500/G3000 that can afford to pay the A rates to keep them as a dedicated advisor), and unless you are a larger mid-size buying a mini-suite, they don’t even exist at the Niche Consultancies where they should be common.

We also spent a fair amount of time explaining why they don’t exist, even though one would think that they should be readily available at the niche consultancies (as this could not only make those niche consultancies true leaders in Procurement but also help them grow). In this last case, it was because it was typically only their senior resources that could do these projects, and since these projects aren’t currently quick to complete, it doesn’t take long for a senior resource day rate to add up. And, as we noted before, while this won’t be that much when you are larger mid-sized organization looking for a mini-suite or suite, if you’re just looking for one or two modules to fill a gap, this could add up to quite a bit.

So if this is the case, why are we telling you that Affordable RFPs are the answer if they’re almost impossible to find?

Because:

  1. they are the answer,
  2. they would be affordable at Niche Consultancies if those niche consultancies stopped thinking like consultants and started thinking like enhanced product-and-data-based SaaS Management Providers, and
  3. they only require knowledge management and expert augmentation to get it right.

So what would a Niche Consultancy have to do to get it right?

We’ll outline that in our next part. But it starts with investment. (And how many partners at consultancies want to invest their money? They were brought up on the Wall Street Mantra — Other People’s Money.)

 

Affordable RFPs — What Are Those?

A couple of weeks ago we penned an article on The Key to Procurement Software Selection Success: Affordable RFPs!. This resonated with those of you wanting to improve your Procurement operations who were willing to admit that you could use the help, but it also left you with one big question: where to find these affordable RFPs?

And the doctor hears you on this. You can’t just go to any old consulting firm and get an affordable RFP. Most of you have encountered high price tags, whether you went to a Big X, mid-size consulting company, or even a niche specialist. And you’re probably wondering why. Well, first you need to understand the following.

1. The Big X.

There are a number of reasons you’ll RARELY get an affordable RFP from a Big X.

  • their modus operandi is to get their people embedded on your projects and keep them there for as long as possible at 3X to 5X+ their hourly rate, they are service firms with a large number of people to keep employed (and they need to invest in employing those people, and, to be honest, trying to streamline RFP processes across every type of software imaginable is just unreasonable for any company to do, so why should we expect it)
  • they have agreements with a number of big suite vendors where they are a preferred implementation partner (and not only do they get a big referral check in addition to YOUR implementation fees which makes finance happy, if they don’t bring enough clients, they could lose that partnership and the deep insight it gives them into the partner, which is key to them being able to bring value to the implementation — see when should you use a Big X?
  • they’ll put a senior resource / junior partner as lead, but you’ll hardly ever see that person, instead, most of the work will be done by a team of inexperienced recent hires, usually recent graduates, who will, unfortunately, even with a good playbook, rack up the hours just trying to get the basics right as they get the experience needed to be more effective (mainly because this senior resource / junior partner will also be attached to many other projects so that they can close the deals, leaving the team without a lot of senior guidance)

2. The mid-size consultancies.

While it is sometimes possible to get an affordable RFP from a mid-size consultancy, the reality is that it’s a rare occurrence (and your odds are about the same as achieving success with an average technology project which, as per Gartner, is less than 1 in 5, largely because they are never scoped and planned right, starting with the RFP), and most of you never will. As with the Big X, there are a number of reasons you’ll RARELY get an affordable RFP from a mid-size consultancy.

  • like the Big X, they want to get projects that keep their people busy (usually at more reasonable 3X to 4X resource hourly rates) as they want to grow, and this leaves little time for trying to streamline RFP creation methodologies which is possible if they are sticking to a niche with only a few, and maybe a few dozen, different solution modules that would be relevant (and, in their quest to grow, they can totally miss the big picture that it is delivered value that wins repeat business)
  • while they are willing and able to be more impartial than the Big X (who need to keep their partners happy to get the insight and training they need to deliver unparalleled value), they have a few partners they prefer to direct any RFPs (and awards) to as they know the systems well (and can get the implementation work), those resources get it done fast, and it keeps them front and center with the vendors who need to direct implementation work to a third party
  • they can’t afford benchers, so their recent grads are not only the top of their class who have shown aptitude for their domain, but they are balanced by intermediate personnel on the projects who can guide them and there’s usually always at least one senior person, but only the senior people can do the RFPs well enough on their own, so the day rates are almost as high as a Big X as the RFPs tend to be mostly senior and intermediate personnel

3. The niche consultancies.

The niche consultancies are your best bet of getting an affordable RFP, but the reality is that it’s still, unfortunately, hit and miss and it’s likely that less than 1 in 3 of you will see a decent rate when all is said and done (where we measure RFP spend against total system spend over five years and try to maintain the right ratio).

This is despite the facts that:

  • unlike the Big X and mid-size consultancies, they have lower overheads and can keep their bill rates in the 2.5X to 3X range (enough to cover their resources’ hourly rate, overhead, and a fair profit margin)
  • even if they have partnerships with a vendor or three, they tend not to favoured by the vendors who will never direct work to them (and only allow them to implement deals they bring) due to their small size and inability to rapidly scale up (like a Big X or mid-size), which means their bias towards any vendor, if it exists, is quite limited
  • they don’t have junior people, because they can’t afford benchers and resources that don’t deliver with their cost model, and only hire (high-achieving) intermediate and senior personnel, and focus primarily on those who can do small projects entirely on their own or with limited support

When you look at this, you should be able to get a lot of value for a reasonable amount of money. And, make no mistake, you do get value for money.

However, when you look at the total system cost that you can afford as a (smaller) midsize company, and then you look at the cost of getting that good RFP, the problem is that the cost of the RFP is more than you can afford (and should be spending relative to the annual cost of the specialized system you are likely to buy). This means that you end up having to cut corners on the software (and get less from a preferred vendor or go with a more cost effective runner up) or forego more than a modicum of help from the consultancy (where you just get a few advisory days and hope your team to can capture enough of the brain-dump to put together something reasonable).

Even though this shouldn’t be the case.

So why are most niche consultancy RFPs not affordable (unless you are acquiring a mini-suite or significant advanced functionality that comes with a significant price tag and are a larger mid-size with the budget for it) when they could easily pick a focus area and make it so?   And for that matter, why aren’t the razor focused mid-sized consultancies more affordable when they could do the same?  After all, it’s only the Big X where the investment would be unjustified compared to the return, and, to be honest, you are going to them for enterprise systems that cost nine (9), if not ten (10), figures, so you should be expecting to pay high six figures for a good RFP in that situation!   (See when you should use a Big X!)

We’ll get to that in our next installment.