Category Archives: Services

Let the Bloodbath Continue!

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.)

In a recent LinkedIn post, THE PROPHET tells us there is a Consulting Bloodbath starting, especially in the Big 5 (and their strategy firms). All the doctor can say to this is Good Riddance! and It would be even better if they battled it out Gladiator style! (After all, it’s been 28 years since American Gladiators ended, time for a rebrand and a relaunch with a little bit of MXC, which ended 17 years ago.) But we’re getting ahead of ourselves here …

Basically, according to THE PROPHET, firms are worried about the economy and growth headwinds ahead (this is also why investors have yanked money from equities and lessor-rated debt in recent weeks), and this includes tech/dev teams within consulting firms. In some cases lucky consultants are put on the bench and told they have six or nine months to find their next gig, and in others (and maybe the doctor is reading a bit between the lines here) they received their pink slips faster than they could say please Jack Robinson.

The bit about tech/dev teams makes the doctor happy because,

  • these are not tech firms, and they are selling modern analytics/automation/AI solutions they often have no business selling (and no real capability to deliver at even an average level unless they recently acquired a firm that does — remember what they initially got big doing, that is what they do better than anyone else)
  • they are not structured for proper SaaS development and deployment and are NOT SaaS enterprises
  • most of the “talent” they are using are not “top” talent, and if if they are “top” of their class when they are hired, they still need mentorship and experience to become “top” talent, mentorship and experience they are NOT going to get a lot of at a Big X until they start climbing the ranks (as there are too many hires each year for one-on-one mentorships to be practical, it’s usually one mentor per team)
  • the Big X cost structures are too high for mass market penetration; only the F500 / G3000 can afford them, but they still shouldn’t be using them automatically because overpaying for anything that can be commoditized by a SaaS or servifes vendor doesn’t deliver the value they need in inflationary times where supply chains are breaking daily (and instead the Big X should be used for where they deliver the best value — see when should you use a Big X)

And before you chastise me from apparently taking pleasure in people getting fired, think it through! If you do you will realize

  • the true “top” talent is going to end up at appropriate SaaS/Tech companies (or SaaS+IP powered niche automated services consultancies where their true talent/drive really is) where they can get the mentorship they need to grow and reach their full potential (and possibly rejoin a Big X later, either by choice or through acquisition0 because
  • Big X being forced to pull out of (chasing) inappropriate custom SaaS/tech deals/engagements will open up the market back up for those companies that are well positioned, who can start growing and pick up this top talent, and, moreover, give Big X a chance to focus on where they offer the greatest value, can easily guarantee a return on a high dollar investment, satisfy the customer on the first project, and get repeat business for life (see when should you use Big X)
  • the “talent” that is not ready for the tech market will either go back to school or find their true calling (before going down a path where they will eventually get overwhelmed, be unhappy, or both; we can’t have the next generation burn-out in first world countries where a very significant portion of the aging population will not be of working age in the very near future)

Plus, shift happens! (How many of us have been restructured, rightsized, or outsized from a job by financiers and lawyers who think they can run a complex enterprise from a balance sheet or understand advanced technology and engineering when they can barely gas up the Jaguars and Mercedes they drive to work everyday?*) Furthermore, given that the average life expectancy at a job these days is 4 years, this talent might as well learn about, and get used to it, now when parts of the economy will be rebounding (and they have opportunity ahead of them), versus getting their @ss3s unceremoniously throw to the curb next time the market drops.

And if, for some reason, a Big X Consultancy (which did not start in tech but in accounting/tax, operations, strategy, etc.) is where they belong, then let them prove it in a battle royale! Forget about sitting on the bench waiting and hoping to get invited to a sales call where they can sell a project to work on, put them in the Arena! When a Fortune 500/Global 3000 needs a consultancy, force them to make their selection in the arena where the consultant leads will battle it out modern gladiator style! Not just a Dragon’s Den pitch, they have to battle it out to even get the opportunity to pitch — prove they’ll do whatever it takes to deliver value at the hourly rates their employer is charging!  (Yes, we’re kind of joking here, but if it is where they belong, they should have no problem proving their worth!)

Thoughts?

 

* If the apocalypse is nigh it is largely because some rich benefactors, not even involved in the day to day running of the company, and likely never involved with the company at all, looked at their spreadsheet models and forced the engineers who actually know how to build things out of the C-suite, allowed Gen-AI to tell them how to do technical jobs, and then elected populist pinheads as Prime Ministers and Presidents to tell them balance-sheet management is okay. And let’s not forget that, as per the OECD PISA data, statistically most of them shouldn’t even be able to do high school math competently!

The Public Sector is Giving Procurement Integrity A Bad Name … Can the Private Sector Fix It?

A recent article over on Global Government Forum on Procurement Integrity: A Big Problem That’s Worse Than Most Organizations Think, pointed out that errors, fraud and abuse in procurement cost governments and organizations millions of dollars every year, and even though recent headlines in the US (TriMark, Booz Allen Hamilton), UK (NHS, Royal Mail), and Canada (ArriveCan) are starting to shine the light on the extent of (public sector) procurement fraud, the problem is still bigger than you think. Much bigger.

Current estimates are that organizations, across the public and private sectors, lose 5% per year due to procurement errors, abuse, and fraud. Given that Global GDP is about 85 Trillion dollars, at 5%, that’s 4 TRILLION dollars estimated to be lost annually to errors, abuse, and fraud. And that’s probably a low-ball estimate due to the fact that we just calculated that Over One TRILLION dollars will be wasted on IT software and services due, primarily, to lack of knowledge and/or outright stupidity (and not malicious intent, but if it’s easy for consultancies and third parties to considerably over bill for legitimate goods and services that you need, imagine how much they are fleecing you for goods and services that you don’t need and may not even receive).

It’s highly likely that the true cost of errors, abuse, and fraud (internal, collusion, and external) is closer to 10% of total GDP, or close to EIGHT TRILLION. That’s at least twice the GDP of every country on the planet except China and the United States. That’s a BIG PROBLEM, which is definitely not being helped by the 100M to Multi Billion Procurement Frauds being reported almost monthly across major western economies — and multi-million dollar fines don’t repair the damage. (They don’t even come close.)

This is damage which Procurement needs to repair — because Procurement is the only department that has any hope of putting proper procedures, processes, and platforms in place to minimize the errors; training the organizational employees on proper procedures and monitoring the implementations to prevent abuse; and putting in place proper detection systems to detect, and prevent, potential fraud and quickly identify and track it when it happens.

Unless all the bucks go through, and stop at, a modern Procurement department run by a CPO who puts in place proper people, processes, and platforms, loss is going to continue to run rampant. Which means that while the public sector is failing us daily, the Private sector has to step up and restore the integrity of Procurement. It can start by utilizing some of the the techniques in the linked article, and continue by continually learning and implementing the best technology and processes it finds to not only uncover significant savings in inflationary times, but return integrity and trust into big business, and give governments who have lost their way a model to follow.

And for more details on Bad Buying to avoid, and how to achieve Procurement with Purpose, the doctor suggests you start by following the great public procurement defender, Peter Smith.

Commenting on The Prophet‘s 2024 Procurement / Supply Chain HR Advice

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.)

Don’t be Afraid of Going “In-House” If you Have Tech Expertise

In this recent LinkedIn article, The Prophet notes that, in the past, he’s always recommended a stint in consulting given the presentation and analytical skills it builds where consulting can also imply “outsourcing” or “managed services”. But for 2024 he think[s] the time is right to consider going “in-house” if you’re debating a career change in procurement or supply chain and you have technology skills.

the doctor fully agrees, with a mild caveat. Specifically, “in-house” must also be capable of being interpreted to include new-age niche service providers that, as The Prophet himself pointed out in his 9th Prediction that “SaaS Management Solutions Start to Eat Services Procurement Tech“, we’re going to see new categories of blended consulting/service providers that offer not only consulting but power engagements with in house (SaaS) tech that blends tech, data, and automation in new ways to provide enhanced service packages to clients based on service fees, data fees, platform fees, and consulting fees, depending on the engagement. These plays will need the above above average talent to bring it all together, and could prove to be the most fruitful jobs this talent can get both in terms of compensation (especially if they get a small piece of the company) and job satisfaction (solving problems in less time with more value than any Big X did before).

The Prophet also notes that many consulting orgs are still on hiring freezes or cutbacks and a bunch I know aren’t raising salaries this year and that if you are an expert “grinder” versus someone with deep commercial/sales or product knowledge, you might be better valued in a company in 2024. the doctor agrees.

Moreover, the doctor believes that this will be the year that Big X Consultancies will, in tech, finally be hit with the triple whammy of:

  1. a market unable to afford their (sometimes ridiculously) high rates
    especially relative to the average service they provide (as the market has to accept what we’ve known since The Limits to Growth was published in 1972)
  2. an exacerbated brain drain
    as the companies who let talent slip in favour of DEI quotas recruit good talent back in house (which is easy when talent who went to consultancies sees their salaries freeze & their careers stall)
  3. a dose of reality as the smarter companies see what some of us analysts* have seen for years that when it comes to modern tech or industry leading service offerings, at consultancies that have under-invested in tech, you have one group leader who is stellar (and worth whatever the firm charges), two or three handpicked recruits that are above average (and worth double or triple their market value because you can’t get that talent easy), and then thirty to forty average bench warmers fresh out of school who aren’t capable of doing anything original due to lack of real world experience and can only follow the playbook written years ago by the group leader and only updated sparingly as the handpicked recruits have time.

Why?  Because the best consultancies, mid-market and Big X alike, will do something about it  (and already are — either acquiring companies to get pools of talent, focusing more on training the talent they have, or forcing team leaders to do more mentorship of the junior staff to raise them up), and bring the same value to tech that they bring to other areas.  (See when should you use Big X?)

If you don’t believe the doctor when he says that the big consultancies are much shorter on the above average tech talent they claim to provide you, then ask yourself this:

How are Big X and Mid-Sized consultancies supposed to hire talent during tech booms when some tech companies will pay 250K+ for an intermediate developer (which is twice the average average salary in some well educated markets, and at least 2/3 more than the average salary#) and 500K+ for a superstar?

When the VC and PE money flows, startups, which are cool and an opportunity to get rich if you ride the next unicorn, are more attractive than starting at the bottom rung of a consultancy. Thus, in these times, especially when the consultancies need bodies for all the implementation projects (because when the economy is pumped up by tech, a lot of companies buy tech), they hire what they can get — which is not the above average talent (of which there isn’t even enough for all the tech companies when you look at the paltry number of STEM graduates each year, the number of those who are actually qualified [which is less and less every year, not only do you have the double whammy of severe grade inflation and below par DEI-agenda admissions that The Prophet pointed out, but also overworked Professors who are forced to grade on a curve] and then calculate the number above average). Some of the “talent” graduating is so bad that you’re lucky if they understand the concept of a boundary condition when coding or calibrating when installing a piece of hardware [but fortunately they don’t end up, or stay in, tech very long — it’s easy to weed these individuals better suited for other careers out fast]. (Remember, the doctor used to be a Professor, keeps in contact with Professors, and the situation gets worse and worse each year. It’s all about maximizing dollars — from out-of-province/state students who’ll pay more, international students who’ll pay way more, and then hitting those quotes for massive DEI-based subsidies. It’s not about admitting, training, and turning out the best and the brightest. Only the rich and the rainbow.)

Now, the doctor should again point out that he’s not totally bashing the Big X and Mid-Sized consultancies — in traditional (management/operational/finance/strategy) consulting domains, many of them are great — and way better than an average company  In fact, he has a whole article on when should you use Big X?. But in tech, you’re often lucky if they’re average.  (Some are way above average, having recently acquired specialist vendors and consultancies in tech, analytics, and/or AI that instantly gave them a pool of world leading experts, while others have more or less ignored modern areas of tech until the AI hype reached full steam and are playing catch up.)  And when it comes to advanced tech, if you’re trying to find a true leader to take on your project, and you don’t know what you’re looking for, your odds are about equal to snake eyes when you roll the bones. (Your cost will be too high and your odds of generating a real return too low unless you first do your homework. You can’t throw an incomplete project request over the wall and hope for a good return from anyone!  This means identifying your needs in detail, reviewing the proposals in detail, and vetting the talent that is proposed.)

* even if many analysts can’t speak the truth because their firm’s success hinges on the success of the vendors who pay for their research, which in turn hinges on the success of the consulting partners they use for implementations …
# even though these same vendors will then wonder why they go bankrupt or have to do massive layoffs in two years

Roughly Half a Trillion Dollars Will Be Wasted on SaaS Spend This Year and up to One Trillion Dollars on IT Services. How Much Will You Waste?

Before we continue, yes, that is TRILLION, numerically represented as 1,000,000,000,000, repeated twice in the title and yes we mean US (as in United States of America) dollars!

Gartner projects that IT spend will surpass 5 Trillion this year. When you consider that 30% of IT spend is usually for software, and that one third (or more) of software spend is wasted (for unused licenses, which is why we have a whole category of IT and SaaS specialists that analyze your out-of-control SaaS and software spend and typically find 30% to 40% overspend in a few days), that means that roughly half a trillion dollars will be wasted on software this year.

Even worse, Gartner projects that spending on IT Services will reach 1.5 Trillion. And the waste here could be two thirds! Now, we all know that you need IT services to implement, integrate, and maintain those IT systems you buy. But how much do you need? And how much should you pay? Consider that an intermediate software developer should be making 150K a year (or 75/hour), that says that an intermediate implementation specialist shouldn’t be making any more than that, and not billed at more than 3 times that (or 225/hour). But how much are you being billed for relatively inexperienced implementation consultant, with maybe a few years of overall experience and maybe six months on the system that you are installing? the doctor knows that rates of $300 to $500 are not uncommon for these resources that are oversold and overcharged for.

But this isn’t the worst of it. As per our upcoming article Fraud And Waste Are Not The Same Thing, many implementation “partners” will try to get all they can get and make sure that when you go in for a penny, you go in for a pound and they will push for:

  • frequent change orders during implementation, usually billed at excessively high day rates as they have to “divert resources” or “work overtime”
  • unnecessary customizations or real-time integrations that are an extensive amount of work (and cost) when out-of-the-box or daily flat-file synchs are more than sufficient
  • extensive “process evaluation” or “process transformation” processes that are well beyond what you need to eat up consulting hours
  • extensive “best practice” education when your practices are good enough for now and/or those best practices are already encoded in the system you just bought and paid a pretty penny for and just following the default process gives you the same education

That will often double to triple the cost. But that’s not the worst of it. As per comments the doctor has made on LinkedIn, he regularly hears stories of niche providers losing 200K deals because customers said their quote was too low because all the Big X companies quoted over 1,000K for what should be 100K worth of work in their view (and, right or wrong, if a niche firm comes in less with a detailed proposal, they should be evaluated — maybe the Big X, with a very general request, over estimated your requirements and the effort, or maybe the niche firm completely underestimated it — how will you know if you don’t evaluate all the responses?). Literally. This is because, as the doctor has noted in previous posts and comments on LinkedIn:

  • they don’t have always have the talent in advanced tech (and even The Prophet has noted their lack of talent in areas of advanced tech in multiple LinkedIn posts, though he has been much more diplomatic than the doctor in discussing their lack thereof; but he did note in a 2024 advice post that consultancies are going to have a hard time attracting talent this year) — for every area, an average firm will have a team leader who’s a superstar, two or three handpicked lieutenants who are above average, and then 20 to 40 benchwarmers who are junior and not always worth the rate they are charging);  now, as with every general observation, there are exceptions (with some Big X recently acquiring a number of best-in-class technology, analytics, and AI vendors that give them top-notch world class talent, and others actively recruiting top talent form the best tech firms, but every firm is different, and, most importantly, every need is different — it’s up to you to fully qualify your need, review the proposal carefully, and vet the proposed talent, otherwise, it’s your fault if you overpay, fail miserably, and don’t get value
  • some of these firms have an incredible overhead — they got big in good times and built posh offices to house the partners making more than top lawyers who have a lifestyle to maintain (or, in some cases, they just acquired expensive real estate in premiere locations)
  • they don’t always have the knowledge of, or experience in, modern tools — some of which are ten times more powerful than last generation tools; this, of course, means that, in these situations, Big X benchwarmers are using last generation tools which take ten times the manual labour to extract value from
  • etc.

Unless you want to pay 1K an hour, at some of these firms, you’re not guaranteed getting that one superstar resource trying to be the front end to two dozen projects that his three lieutenants are trying to manage, all of which are staffed by junior to intermediate individuals who can barely follow the three to five year old playbook.   (While if you chose a different Big X firm that just acquired a whole consultancy with dozens of top analysts, it’s a different story.)

There’s a reason that The Prophet predicted in his 9th prediction that SaaS Management Solutions [will] Start to Eat Services Procurement Tech and that many companies will go in house if they have tech expertise. Because he realizes that these consultancies will have a hard time not only hiring, but retaining, tech talent when they have hiring freezes, salary freezes, and reduced engagements as more and more companies can’t afford the ridiculous rates they’ve been charging recently. (Companies may not have had a choice during COVID where it was implement on-line collaboration and B2B tech or perish, but now they do.)

But there are still many companies who will, when they encounter a (perceived) tech need, immediately pick up the phone and call their favorite Big X firm and bring them in to help them understand who to bring in for an engagement, instead of widening the net to niche providers who might be 3 to 5 times cheaper, and who will deliver results at least as good, if not better, or, if their proposals won’t cut it, will validate when that multi-million proposal is a great value and will deliver the expected ROI.

Now, again, the doctor would like to stress that, despite how much he insists they are usually not the right solution for specialist advanced tech implementations that aren’t the enterprise systems and suites they usually implement, that Big X are not all bad, and sometimes worth many times more than the high fees they charge. [See when should you use Big X?] Most of these companies started off as management/operational/finance/strategy consultants and grew big because they were one of the best, and in certain domains, each of these companies still are. As they grew, they added more areas and became experts in those.  But no company can, and should, be expected to be an expert in everything!

And while there will be exceptions to the rule (as every one of these companies has some tech geniuses), the reality is that when you need more bodies than there are talented bodies in an entire industry, you’re not going to get them and, because consultancies are not cool when you want to be a tech superstar (and join a startup that becomes a unicorn), the ratio of superstar to above average to average to below average talent in these organizations is much thinner than in multinational tech companies (like Alphabet, Apple, Meta, Microsoft, etc.)  (Because if they were the best of the best, there’s no way they’d lay off 10,000 employees at a time every time the market jitters.)

In short, manage that IT services spend carefully, or you’ll be double paying, triple paying, or worse and providing a big chunk of the roughly ONE TRILLION DOLLARS in IT services overspend that the doctor predicts will happen (again) this year. (Unless, of course, you agree with Doctor Evil who says, why make trillions when we could make … billions. Because that’s exactly what happens when you overpay for software and services. Don’t expect the Big X or Mid-Market to say anything as they get the majority that overspend, and that’s how they stay so profitable.  Plus, they usually need those revenues to deliver what you’re asking for, as ill-defined projects mean they need to make a lot of assumptions and often over engineer to decrease the chance you will be disappointed in the result!  In other words, if you overpay due to your lack of research and preparation, it’s on you. )

Data-Driven Workforce Planning — WTF?

Data is good. And you should make use of it all the time. And while data might help you identify gaps in your work force capability, it can’t help you plan your future workforce. Why? A couple of reasons. First of all, you don’t know what’s coming down the pipe in future Procurement and Supply Chain needs and issues. Secondly, existing skill sets may not be enough to address those future needs and issues (which could require evolved versions of current skill sets or even entirely new skill sets). So while the doctor would agree that the 14% of Procurement Leaders who believe they have adequate talent to meet future needs are idiots that never look at the data, he would also argue that looking at the data alone will not allow one to adequately define their workforce needs.

Planning implies you are building a workforce for the future. Data can only identify gaps in your workforce today. And while you need to fill those gaps to conquer today’s challenges, put out the fires, and get to the point where you can start seriously thinking about the future, analyzing historical data is not going to get you there. You need to look at how new technologies will change production, how new technology will change logistics (not just green vehicles, but better planning technologies, more efficient cross-docking techniques, etc.), how regulations will impact trade, and so on. There’s no data on that yet (other than patent documents, vendor spec sheets, draft legislation, and so on). So how can you analyze data you don’t have?

So, why do we need to talk about this? Well, Info-Tech Research group is flooding the PR and Business News Wires with an article on how data-driven workforce planning is key to future-proofing organizations. And while data-driven workforce planning is key to getting your workforce right today, as we just explained above, it can’t future proof your workforce because you don’t know what skills your future workforce will need.

Yes, there are serious talent shortages in IT and Procurement. Yes, it reinforces the reality that a proactive approach to workforce management is something that most organizations should have been doing a decade ago. Yes data-driven insights are often the fastest way to see where you don’t have enough people or enough people with the right skills to tackle the job. And yes tools that can help you are highly valuable. But don’t confuse solving today’s challenges with people you will hire tomorrow with solving the problem of future workforce planning.

Now, if you hire the right people with the right education and the right skill sets in analytics and the ability to learn on their own, they will be more prepared than those employed by your peers. This may put you in a better place, as they may even have the skills to identify the gaps when the world changes, but there are no guarantees. So find top talent with the education, drive, and ability to learn, continually train them, give them time to look ahead once in a while, and you’ll be better off than those who just hire the cheapest resource they can to put out the latest fire.