Category Archives: Software Buying Guide

Stop Sanctifying Savings, Recognizing ROIs without Research, or Seeking Solutions Solely in Software

If you’ve been reading the doctor for any length of time, you’re probably a bit confused about the third part of this title — as the doctor is one of the biggest proponents of sustainable software solutions that cover the extended Source-to-Pay process and enable next generation Sourcing and Procurement. However, just because he believes you should have an appropriate software solution for every stage of the source-to-pay process, that does not mean he believes all of the solutions are in software alone. Some are in systems, which are composed of talent, technology, and transformation(al processes).

Sometimes the solution to a challenge isn’t (just) a better system, it’s a better process. Take invoice overpayments, common in large organizations due to over-billings, duplicate billings, and even fraudulent billings. The current “solution” is to use a recovery firm who will take 1/3 of what they “recover” for you as their fee, but they won’t recover everything (since anything off contract is hopeless, as is any fraud that slipped through — the perpetuators are long gone, and even if the authorities find them, by the time you get a judgement in court, they’ve spent, laundered, or transferred the money to somewhere you can’t touch it). This is not much of a solution, because if only 50% of the overspend is addressable, and you lose 1/3 of that in fees, you’re only recovering 1/3 of your overspend. Ouch!

The solution here is better process enabled by technology. When an invoice comes in, the system auto-processes it and auto-matches it a purchase order and a goods receipt. If there is no PO, and it’s not a pre-defined monthly billing, it’s marked as no-pay until manually verified by the buyer that a) the invoice is for goods that were ordered and b) all of the units / services are the agreed upon prices or rates. And even then it’s held for payment until the goods are marked as received or the services delivered. If there is a PO, it must match all of the yet unmatched units (if multiple shipments, and thus invoices, are made against the PO) and each unit must be billed at the approved (contracted rate). If not, it’s flipped back to the supplier for correction. If the supplier won’t correct, possibly because the order was expedited at managerial insistence and the supplier agreed only if a premium could be charged, then it needs managerial approval before a payment can be issued, and if that is not given, it needs to enter a dispute process. In other words, no invoice is paid until matched, verified correct, and, when necessary, granted managerial approval — and the entire invoice management function is governed by a well thought out, defined, and detailed process (with flow-charts that govern process flows) that ensures every invoice is processed correctly in every situation (based upon whether or not the goods and/or services are under contract, PO, cyclic billing agreement, ordered from a catalog, requisitioned at a defined rate scale, bought in an e-auction, etc. In other words, the process comes first, and the technology enables it.

This means that while the software should enable as much of the process as possible, you shouldn’t look to the software, or even the vendor, to define the process for you. The vendor should have best practices, and should provide you with sufficient configuration options to make it work for the process you need, but you need to understand what you need before you select a solution. Some solutions on the market will be really rigid, and others will expect you to configure it to your needs. In other words, software can provide you with what you need to complete the solution, but software alone is not a complete solution — you need the right process and the right people using it. So don’t look to a software provider as the solution, look to a provider to provide software that will provide the software part of the solution.

And, more importantly, don’t accept the promised ROI without doing your own research. Most providers will promise you an ROI of 5X to 15X in an effort to convince you that NOT buying their solution wold be the stupidest thing ever as every day you’re not using their solution you’re flushing money down the toilet. And if the ROI of a solution is that high, you should definitely have a solution — but the solution that gives you that ROI might not be the one that promises it. Remember, ROI is realized return / total solution cost, and depending on how good you were doing before buying the solution, the current market conditions, your industry, and the ancillary costs of the solution (implementation, integration, training, etc.), the ROI for your organization could be drastically different than their average ROI for their average customer. For example, while the vendor’s average customer might see an ROI of 5, you might only see an ROI of 2.5, and at a multiple of less than 3, it’s likely not the solution for your organization. (Unless it’s the only solution and you need a software solution, but it’s rare that there’s only one software solution that would work.)

If you’re given an ROI, ask for the calculation the vendor uses and how you would calculate it for your own organization and do it yourself. Add padding into the price, and when you have an expected range of savings and/or cost avoidance, err on the side of caution (the lower end). That’s the number you use when considering the value, not the vendor’s number. Every situation is different, and you need to understand how different your situation is from their average customer.

However, the most important thing to understand is that you need to stop sanctifying savings and believing that the savings numbers provided by a vendor are a result of their solution. Or that you will achieve anything similar. Remember, “savings”, which is usually just “unnecessary cost avoidance”, is a function of how much the organization is spending across its addressable categories, how much overspend is across those categories, and how much was able to be captured — and this is dependent on organizational size (annual revenue), industry, and spend profile. If your organizational spend is considerably smaller, your addressable spend is less than industry average (long term locked-in contracts, etc.), or your overspend in high volume / dollar categories is less than industry average (either because you had good negotiators, or you cut the contracts at the most opportune time), then your expected “savings” will be considerably less than their average customer savings they are presenting to you. In other words, like ROI, the advertised number may not be what you get. Specifically, your savings might not be anywhere close to their advertised number.

But that’s not the most important reason you need to stop sanctifying savings — the most important reason you need to stop sanctifying savings is that there is absolutely no correlation between the savings numbers and their software. Let’s repeat that. There is absolutely no correlation between the savings numbers and their software. Why? The same reason you should not seek solutions solely in software.

The reality is that, depending on the situation at hand, sometimes most of the “savings” or “cost avoidance” results from a better process alone and has nothing to do with the software solution whatsoever. Also, sometimes the solution that is needed is simply a workflow that enforces a process, a RFX solution that collects comparable information, an e-procurement solution that supports contracted rate catalogs and rate cards, etc. These standard solutions are offered by dozens of vendors and if the majority of the “savings” or “cost avoidance” comes from a baseline solution, it literally doesn’t matter what vendor’s solution you use! Literally. So if the vendor with the significant savings number is asking 1M annually in license fees and a smaller vendor offers a solution with all the necessary baseline functionality for 120K annually, you could get the same savings for 1/8th of the cost (which would significantly impact the ROI).

In other words, when you are given a savings number, you have to do your research and figure out

  • what percentage of those savings results solely from the fact that the implemented solution enforces a proper process
  • what percentage of those savings results solely from the baseline functionality that is available in at least 3 to 5 other solutions (at a lower annual license cost)
  • … and what percentage of those savings result from advanced features found only in that solution

For example, if only 5% of the savings results from advanced functionality and your estimated annual savings from addressable spend for the first 3 years is only 10M per year, are you really willing to spend 8X as much in license fees for an incremental savings of 500K? The answer here should be a resounding NO as that incremental savings is less than the incremental solution cost! But if you’re a multibillion dollar corporate, that could save 50M a year for three years, with a 10% incremental savings from the advanced functionality, then you would be saving an extra 5M per year at an incremental cost of 800K (which is a 6X ROI) AND have advanced functionality that could be applied to all categories that might squeeze out an extra percent here and there.

In other words, what solution you should buy depends on which solution you expect will give YOU the greatest ROI based upon YOUR calculation, not the vendor’s customer averages (or outrageous quotes from multinationals who spend 10X what you do). Furthermore, don’t misread the title — you do need software to enable your Sourcing, Procurement, and Supply Chain, but the software is not the total solution — which requires the right process driven by the right people. So don’t expect the vendor to solve all your problems, just the software portion (which you should only buy after identifying what you need, and the vendor you should choose should be that which has the greatest expected ROI for your organization, as calculated by you).

Source-to-Pay+ Is Extensive (P13) … But I Can’t Touch The Sacred Cows!

In our last installment (Part 12) of this series here on Sourcing Innovation (SI), we provided you a list of forty-plus (40+) vendors that could potentially meet your spend analysis needs and help you identify the cost savings, reduction, and avoidance opportunities you have in your organization as well as the best modules to achieve those cost savings, reduction, and avoidance opportunities. The right spend analysis tool properly applied will generate returns that are many orders of magnitude greater than the cost of the tool and will surprise you.

However, some of those best opportunities will be in the “sacred cows” of Marketing, Legal, and SaaS subscriptions. And you probably think you can’t do anything because you don’t have the data, Marketing and Legal won’t let you touch their spend (or give you the detail you need to even analyze it, often because they didn’t collect it), and you have no idea on what SaaS is actually being used and how much you overspend.

the doctor knows this, and knows that you might need custom solutions to manage, and analyze, this spend, so, before we move on and tackle the next module in the Source-to-Pay queue, we’re going to take a brief sidebar and provide you with short lists of vendors that specialize in each area that will collect the data you need — and sometimes even provide you with deep, customized, integrated analytics that provide you with the insights that matter (including the insights that matter on your matter spend) — to enable deep spend analysis, benchmark creation, and opportunity identification.

But first, we have to repeat our disclaimer that, as per the lists of e-Procurement vendors provided in Part 7 and the list of Spend Analysis vendors provided in Part 12, this list is most definitely in no way complete (as no analyst is aware of every company, and neither Marketing nor Legal are the particular domains of expertise of SI), is only valid as of the date of posting (as companies get acquired and go out of business, often without notice), and does not include the broader range of offerings that are available for SaaS Management (including provisioning and cloud management), Marketing (including agency management pure-plays, although DecideWare, for example, does this), or Legal (including contract authoring, management, and clause analysis — although we will cover some of these players when we get to Contract Lifecycle Management [CLM]).

Again, and we can’t say this enough, not all vendors are equal and we’d venture to say that this most definitely applies to the lists below. The companies below are of all sizes (very small to very large), offer different functionality (focussing in on different aspects of Marketing, Legal, and/or SaaS Spend Management), different levels of customization and integration, different types of companion services, focus on different company sizes and/or company types, and integrate with different Source-to-Pay and Enterprise ecosystems.

Do your research, and reach out to an expert for help if you need it in compiling a starting short list of relevant, comparable, vendors for your organization and its specific needs. For a few of these vendors, you may find a write up in the Sourcing Innovation archives, Spend Matters Pro, or Gartner cool vendor write-ups, but for many of these vendors, you’ll have to look beyond your typical sources of information as they are highly specialized and don’t fall into the typical Source-to-Pay bucket. But if you have enough Marketing, Legal, or SaaS spend, they can be highly valuable.

Note that, due to the newness of SaaS spend management, the different marketing and legal needs of every organization, and the high degree of differentiation between many of the solutions below, we are not (yet) defining baseline functionality and instead advising you to do a detailed analysis of your spend, processes, and needs and judge potential solutions based on that. If you need help with that, seek out a pro who can do the (gap) analysis and RFI creation for you.

Finally, a second reminder that inclusion on this list DOES NOT imply Sourcing Innovation is recommending the vendor.

SaaS (Software-as-a-Service) Subscription Cost Management

Company LinkedIn
Employees		 HQ (State)
Country
Beamy 60 France
BetterCloud 305 New York, USA
Cledera 63 Colorado, USA
Flexera 1026 Illinois, USA
G2 Track 792 Illinois, USA
Hudled 8 Australia
NPI Financial 410 Georgia, USA
Productiv 139 California, USA
SaaSRooms 9 United Kingdom
SaaSTrax ?? North Carolina, USA
Sastrify 166 Germany
Setyl 14 United Kingdom
Spendflo 70 California, USA
Substly Sweden
Torii 114 New York, USA
Trelica 12 United Kingdom
TRG Screen 179 New York, USA
Tropic 240 New York, USA
Vendr 404 Massachusetts, USA
Viio 18 Columbia
Zluri 111 California, USA
Zylo 144 Indiana, USA

Legal Spend Management

Company LinkedIn
Employees		 HQ (State)
Country
Apperio 48 United Kingdom
Brightflag 150 New York, USA
(LexisNexis) CounselLink 28 Ohio, USA
Fulcrum GT 158 Illinois, USA
Mitratech TeamConnect 1119 Texas, USA
Onit 339 Texas, USA
Ontra 421 California, USA
Persuit 100 New York, USA
Thomson Reuters Legal Tracker ?? Ontario
Tonkean LegalWorks 76 California
Wolters Kluwer (TyMetrix 360) ??? Netherlands

Marketing (Procurement) Spend Management

Company LinkedIn
Employees		 HQ (State)
Country
DecideWare 27 Australia
HH Global ?? United Kingdom
Mtivity 15 United Kingdom
Promost 68 Poland
RightSpend 23 New York, USA
SourceIt Market 6 Australia

Onwards to Part 14.

Good Strategies for Microsoft AND Big Software Co. Enterprise Renewals

A guest post earlier this month over on Spend Matters on “5 Mistakes to Avoid When Renewing a Microsoft Enterprise Agreement in 2015” had some good tips not just for Microsoft Enterprise Agreement renewals but Big Software Co. Renewals in general.

The major pieces of advice generalize as follows:

Waiting until the last minute for renewal negotiations.

While this may have worked in the past, the bigger providers have smartened up. They have learned that it’s not the month or quarter or the year, but profit that matters, and will wait a month to get more profit when they are sitting on a huge cash reserve. Also, they have learned that if you wait until the last minute, you probably haven’t identified any other options, and even if you did, would not have time to implement another option and it’s you they have over a barrel, not the other way around. In addition, as per the article, there are only so many sales people and, unless you are a really big customer, if the sales people are busy, they may not get to you before the licenses expire and the systems lock up.

An over focus on price and an under focus on terms and conditions.

Price is important, but, as per the article, so is matching the service offering to the organizational need. Not only do you not want to over subscribe, and end up with a large number of unused licenses, but you don’t want to subscribe for products that don’t meet organizational needs either. But this isn’t the most important thing — it’s the fine print. If organizational needs are in flux, the last thing the organization wants to be is locked into a multi-year agreement or a minimum license count, with a huge penalty if the organization tries to end the agreement early. Similarly, the organization wants to understand the full cost of a cloud service and, if additional bandwidth or CPU usage costs can be added on during periods of intensive usage, this needs to be understood as well.

Treating negotiations as a one-time event.

The buying organization may set-and-forget the three year renewal until thirty (30) months, or more, have passed, but the vendor will be analyzing the contract, and usage, every quarter and looking for ways to extend the offering as soon as possible. The organization needs to monitor its usage as well to be able to make an informed counter to a vendor who indicates that the company is nearing capacity in licenses, computing power, etc. when it is still 20% away from maxing anything out and only increasing in usage at 1% a month.

Not being audit ready.

Chances are your Big Enterprise Software Vendor has an audit clause in the contract for any licenses installed on premise. And chances are that if the organization has not had an audit in the last couple of years, that, unless the organization agrees to the default renewal (which will often be for more licenses than required at a higher rate), that the customer will be audited for usage. The organization should do it’s own software (license) audits on at least an annual basis and keep detailed records. Not only will it have the data to dispute any claims to the contrary made by the vendor, but it will be able to make sure it remains in compliance at all times.

Enterprise software is costly. But it doesn’t have to be a spend sinkhole.

Enterprise Software Companies DO NOT Need Public Relations!

Since we’re on the topic of what really grinds the doctor‘s gears, another thing that really grinds the doctor‘s gears is the incessant insistence by public relation companies that they need to be ingrained in all communication activities undertaken by an enterprise software company. To this I say, BullCrap!

Let’s start by defining what public relations is. As can easily be read on Wikipedia, public relations is the practice of managing the spread of information between an organization and the public. Let’s dwell on this. It’s the management of information flow between the organization and the public. Now let’s dwell on what enterprise software companies do. Enterprise software companies sell software made by their organization to their client organizations. Now let’s dwell on this. They move software from one organization to another organization. Not to the public. As a result, the accompanying information flow is between two organizations, not between the organization and the public. So where does public relations enter the mix?

Let’s dive into what modern Public relations organizations do, or at least try to sell perspective clients, to see if we can make any sense of this.

  • Audience Targeting

    While it’s important to sell to the right audience, enterprise software companies have a pretty good idea of who their audience is. It is companies with a potential need for their software that is their audience, and not only does marketing have a pretty good idea of what their audience is, it is their job to know what that audience is.

  • Messaging

    Messaging is of the utmost importance, especially with so many other vendors also hawking their wares, and in a world where many customers are looking for partners, or at least software providers who can offer a complete solution (software, services, and training), the messaging often has to be perfect. But this is why you have Marketing — this is their primary job.

  • Social Media Marketing

    Since many of the decision makers at a potential customer are on social media, this is an important channel in which to place your messaging. With so many social media networks (LinkedIn, Facebook, Twitter, etc.) and so many different individuals in the target organizations to target (employees, directors, C-Suite, etc.), this is a lot to manage, and secondary to the messaging and audience targeting responsibilities of Marketing. So it makes some sense to get some help here — but this help should come in the form of organizations that specialize in social media marketing for B2B organizations, not Public Relations firms that specialize in information flow to the public for B2C organizations.

  • Media Relations

    This is important for any organization that does business and needs to get its message out to the world, even if it is just the corporate sector. However, this relationship should be controlled by marketing, not some third party with a watered down message.

Now it’s no secret that the doctor does not like PR, for a host of reasons (chronicled in his Blogger Relations series), but this has nothing to do with his like of PR. This has to do with his dislike of many PR firms telling enterprise software companies that they need to be embedded in all of their communication processes and work with those companies in a collaborative and consultant manner for months and months to define their targeting, messaging, (social) media, and relations strategy and do all of the work that should be done, or at least managed, by Marketing at a very high cost to you. Not only are you shelling out 10’s of thousands of dollars for them to walk you through an exercise where you do all the work (because, let’s face it, they don’t have a clue what you’re selling, what’s unique about it, or how to uniquely position it), but you’re losing two, three, and sometimes even four quarters of momentum while you go through this drawn out exercise to get a message that your marketing team, possibly with the help of some subject matter experts, could figure out in a matter of weeks! It’s the oldest consulting trick in the book after making up a fad you don’t need — take your money to listen to you elicit what you need. (If you need to talk through your strategy to elicit your messaging, the doctor is certain a quack psychologist will be cheaper.)

So Fire That PR Firm and put your money where you need it:

  • Subject Matter Expert Consulting

    to help you figure out what is distinct about your solution and missing in your solution space

  • Thought Leadership and Expert Writing Services

    to help you get your message crystallized and down on (white) (e-)paper and in appropriate training materials for your clients

  • Social Media Campaign Management

    to manage your messaging through social media and on-line channels

Just like you shouldn’t get taken in by companies selling infinite scrolling websites that you don’t need, you shouldn’t get taken in by companies selling your collaborative PR services that you don’t need either.

IBM is Predicting the “Software-Defined Supply Chain”

In a recent article over in the Supply Chain Quarterly, Paul Brody, the Vice President and Global Industry Leader of IBM, told us that we need to “Get Ready for the Software-Defined Supply Chain”, and SI agrees. But the big questions of when, how, and where the transformation will start are still up in the air.

According to the article, this is the most exciting time in manufacturing since Henry Ford put the Model T on a moving production line. A wave of new technologies is emerging, maturing, and converging in a way that will reshape product design and manufacturing, shifting from a world defined by hardware and logistics constraints to one that is largely defined by software. However, despite these exciting new opportunities, the supply chain leadership at some of the world’s top companies is more focused than ever on perfecting an increasingly obsolete business model.

This is because most big manufacturing companies are overlooking the three critical technologies [that] are transforming manufacturing: 3-D printing; a new generation of intelligent assembly robots; and the rise of open-source hardware. Individually, each of these trends is transformational; together their power is multiplied.

This is all true, but the transformation is still limited to design and prototype production. Why?

While it is true that, with 3-D printing, solid parts are convertible from software design to reality at the touch of a button which instructs the machine to gradually build up an object one layer at a time by depositing materials like plastics and metals in very thin layers one atop the other, this process is slow. Something that can be moulded in a few minutes will take at least a few hours, and maybe a day, with one of these printers.

And while it is true that a new generation of robot assembly stations may cost as little as $25,000 per robot and require minimal effort for installation, which often equates to a day, or less, of a technician’s time, these low cost robots are still limited in the scope of tasks they can perform and rely heavily on complex programming which can be very hard to debug.

And while it is also true that the shared-resource model of open-source software development has spread into the realm of hardware design and that, from mechanical systems to networking equipment, hundreds of product designs are now available to anyone, no reverse engineering required, not many companies are producing this hardware. They’d rather produce their own proprietary hardware and sell it at a(n extravagant) profit. So unless you can produce the hardware you need to produce the products you need, you’re stuck with cobbling together your own designs using low cost parts (like the raspberry pi with controller add-ons or the upcoming $99 Intel board).

The reality is that while all of this technology, as it matures, will get cheaper and become more available, will start to transform manufacturing, manufacturing based on open source platforms, low-cost robots, and 3-D printing is not going to become mainstream for quite a while. However, it is going to transform design — since a designer can custom print in less than a day, on his workshop desktop, a prototype for any part he can design and conduct initial testing and analysis without having to configure a custom mould or manufacturing process. He can then use low-cost programmable robots to test streamlined, automated, production processes, and then build a test line out of open source hardware. However, once everything works as expected, because manufacturing requires economies of scale, the small-scale programmable robots are going to be replaced with larger, customized, high-speed robots; the printers with traditional moulding, bending, and cutting; and the equipment with proprietary equipment under a 24/7/365 support contract with a 1 to 4 hour response time.

Design is being revolutionized by those ready to move into the 21st century, but it will be a while still before large-scale manufacturing is revolutionized.