Category Archives: Technology

Seven Easy Mistakes Source-to-Pay Tech Vendors Can Avoid

A few weeks ago we wrote about Five Easy Mistakes Source-to-Pay Tech Buyers Can Avoid in their effort to procure a fit-for-purpose technology solution to help them with their current challenges because the wrong solution can often be worse than having no solution at all.

However, and this is one thing the doctor knows very well, it’s not just buyers that make mistakes. Vendors do too. Lots of them. Lots more than they’ll care to admit, and these mistakes cost them time, money, sleep, and, sometimes, satisfied customers — which is ultimately the most important thing as satisfied customers will renew software subscriptions indefinitely (while unsatisfied customers will try to end the subscription as soon as possible).

Especially newer vendors, and especially those that haven’t built and/or run a company in our space before. And while some mistakes will be unavoidable (innovation doesn’t happen the first time, some things can only be learned the hard way, etc.), most aren’t. (In fact, the vast majority aren’t.) Usually all that is needed is research and insight, which can often be obtained by overworked founders without enough time by engaging the right advisor*.

So, to help these vendors understand overlooked areas where they are likely making mistakes, and where they should at least get an independent review, so that they can bring you better solutions, we’re bringing to them (and you, so you ask the right questions when considering their solution) the most common mistakes the doctor has seen over and over (and over) in his long career as an (independent) industry analyst, blogger, technical solution reviewer, consultant, researcher, CTO, etc.

Lack of market understanding and the real needs of their potential market

The first time the doctor talks to a new company, either for an introduction, review, or due diligence, one of the first things he hears (or will ask if he doesn’t), is why the founders started this company. And the answer he gets the most by far, so much so that he’s lost count of how many times he’s heard it and struggles to point to significant companies where he didn’t, is because XYZ didn’t do this function we needed to be efficient so we figured there was an opportunity. This would be a perfectly logical response if:

  • XYZ was a company/product that was designed to serve the function the founders were trying to address
  • there weren’t already two dozen products out there that addressed the function already and, at the baseline, did the same thing; literally, the same thing

This becomes especially prevalent during every M&A frenzy where a PE firm decides they need a company that does X, like (accounts) payable(s) during the last frenzy (exacerbated by COVID when PE firms realized/decided that business needed to be conducted entirely online, and decided they all need a virtual collaboration and online payment solution in their network). And the doctor doesn’t want to tell you how many times he heard payments company X was started because bill.com or quickbooks didn’t do basic accounts payable functionality or how few (read: almost none) didn’t do any real research which, in just a few hours, would have uncovered two dozen plus companies with payables capability the founders were sure didn’t exist, and the real opportunity was only in differentiation, specific country/regulatory support, or price-point (as there weren’t a lot of solutions at an affordable price point for smaller mid-size businesses until a few years ago). And even worse, many of these founders thought analysts and potential buyers should be super impressed that they essentially re-invented the software process wheel for a particular function for the twenty-forth time.

So, dear vendor, before you go to market, do your research (or contract someone who can do it properly for you)! And if you don’t understand your real value, contract an analyst that can identify it for you. The market is fickle, unforgiving, and easily swayed by a better presentation (even when from a competitor with lesser technology). Given that the knowledge and resources are out there, there’s no reason NOT to get it right.

Lack of competitive landscape knowledge and the real needs going unserved overall or at an affordable price-point for their target market

Building on our last point, it’s not just knowing what’s out there and what it does, but where your competition is strong and weak, what markets they are going after, what markets you should be going after based on your relative strengths and weaknesses, and what price point that market can easily afford and buy within a reasonable length sales cycle.

the doctor realizes this can be very time consuming, but this is where an implementation consultant or the right analyst can be extremely valuable, as they can quickly provide you with this information based on publicly available knowledge on currently released products based on demos and product reviews they have done, (feedback from) implementations they have been associated with, and (feedback from) integrations that they (or consultants they work with) needed to do, and buyers. A good analyst can do this without sharing any roadmap or non-public details on not-yet released capabilities, and should do that as roadmap and un-released capabilities might never be released, and is not something you should be basing your direction on.

Not knowing your true capitalization needs pre-profitability

While we should applaud companies that can bootstrap, and provide a standing ovation to companies that can raise angel / VC capital early to accelerate development, we should ONLY do so if they make an effort to understand their true cost of development, how long it’s really going to take to make that first sale, how long after that until they will make enough sales to support the minimum headcount they will need to sell and support those customers, and how much cash it’s going to take to get them there and raise it, or at least pre-negotiate follow on raises/loans to get there after the first investment.

Too many good companies fail because

  • they don’t take the time to estimate the true cost
  • they do, but don’t stick to their guns and when the investors say “final offer” at 70% of the estimated amount, they say “we’ll make it work”

And they try. They make a valiant effort. And as money dwindles, they put in 80 hour work weeks, developing more, faster. They amp-up cold-calling, content generation, reach outs, etc. They make their most heroic efforts. But all for naught. You can rush development, but you can’t rush a sales cycle. People need to realize they need a solution, do their research, qualify you, get a budget, go out to RFP, follow an archaic corporate process, and, then, hopefully, they can buy your product. If you’re lucky, you’re entering the process after they get the budget, but then you are fighting against a favoured “incumbent” that they plan to buy from (once they eliminate you), but usually it’s before, which means, on average, you are waiting six months for them to get a budget in the next cycle. If you’re a few months away from closing the doors, that doesn’t help you.

So if you can’t get what you need, don’t start. We all know entrepreneurship sounds great. We all know it’s a great experience to have on your resume. But it’s stupid to start something you know has no chance of succeeding. After all, there’s always another opportunity out there where you stand a chance of success. (And that’s it, even if you have enough in a typical case scenario, pandemics can happen, disasters can happen, markets can shift, or a better solution can be released halfway through your development by someone else that had the idea before you and is currently developing it in stealth mode with double your funding and a marketing budget out of the gate.) So, dear vendor, wait until have you a true chance. Otherwise, you’re wasting your contribution and letting down your early adopters when you close your doors (and that hurts us all when they lose faith in smaller companies and go back to ERP).

Overvaluing the tech (and AI)

A good tool is worth good money, and a great tool is worth great money. And if the great tool significantly increases efficiency, identifies meaningful cost avoidance, and delivers a 5X ROI, such a tool can be worth hundreds of thousands (or even millions of dollars if it is used by hundreds, or thousands, of users globally). But good and great is relative to what it does, how many people in the business it’s used by, the value it is delivering, and, ultimately, the budget the business class you are targeting can afford to pay based on the first three factors.

Tech for the sake of tech, while cool, has no value beyond being cool. Even if you have a lot of actual “AI” baked in (and let’s face it, if you do, the “AI” is only solving a very focussed, niche, problem), it’s still valueless unless it delivers value. It doesn’t matter how long you took to build it, how much it cost you (which can be a very poor measure because if you didn’t have a good team, overpaid that team, didn’t have the product or goal well designed when you started, p!ss3d hundreds of thousands away on Class A office space and big parties, it might have cost you tens of millions to build something a smarter, more focussed, cost conscious team could have built for two million), or how unique it is — in business, it needs value.

And before you try to sell it, you need to understand that value from a customer’s viewpoint, otherwise you’re going to have quite a challenge and customers who would otherwise jump on something fairly priced will not buy it even when it could be the best solution for them. (It’s not what the competition is selling it for, it’s what it should be sold for … one of the reasons too many Procurement departments don’t have modern tech is that they can’t get the budget for software priced using traditional enterprise software pricing that only the F500s/G3000s can afford.)

Undervaluing the tech (and AI)

Again, a good tool is worth good money and a great tool is worth great money when it delivers the right efficiency gains, cost avoidance, and value to a business that is losing a lot of money due to inefficiency and lack of insight.

Thus, you also have to be careful NOT to undervalue the tool or slash the price in an effort to get customers in the door quickly or sell to smaller organizations than you should be selling to, especially if the tech was expensive to build and no other organization could build it for less than 80% (or more) of what your organization invested into it and the cost of maintenance/continued development (due to advanced tech or unique capabilities or lots of integrations) is high. The reality is that once you set a price, that doesn’t become the floor, it becomes the ceiling, and if the price is not sustainable, you will go out of business and that will hurt not only you, but any early adopter that buys into you (and, again, that will hurt us all when they lose faith in smaller companies and go back to ERP).

Overestimating the DiY nature of the tech

Easy for you is not easy for a buyer. Remember, you’re the expert in the Tech — you built it, as well as an expert in the inefficiencies in the tech that came before — that’s why you built it, and an expert in the workflows that work well — that’s how you built it. You have the deep knowledge of the tech, the deep knowledge of the best practices, and the deep knowledge to know when a problem is best addressed by the tool, and when it’s not, and how out-of-the-box the support is, and how much has to be customized.

On the other hand, your potential client might be spending most of their time in Gmail and Excel, have never used the previous tool, and have no knowledge of current best practices. The customer may need training on the best practices, the workflows, and the tech, as well as a large reference library to remind themselves on how to use the tool if certain aspects of the process are not done very often (like once a month at most).

If services are needed, customers are not going to respond well to software only, or believe a low-cost when they know they will need the services. Understand the balance, present it appropriately, and sell it appropriately.

Misunderstanding the average customer capability & TQ

Building on the above, in addition to not overestimating the DiY nature of the tech, you should not misunderstand the average customer capability and the Technical Quotient of your target market. As we noted above, not all Procurement departments are advanced in the tech they have access to, and not all Procurement Professionals are adept with / used to modern tech. One has to remember that, for the longest time, Procurement was literally the island of misfit toys, and their understanding of technology and technology-enabled best practices was literally non-existent (as they typically didn’t use technology beyond the fax machine).

Even today, they may not be familiar with much more than basic consumer software for searching, e-reading, e-commerce, email, and gaming. Customized, deep, enterprise software may not be in their experience or repertoire.

Alternatively, if you are selling to a risk management or data analytics departments at big companies, they may have hired data scientists with deep training in mathematics and computer science used to not only using difficult mathematical (like Matlab and Octave) and analytics platforms (Qlik and Tableau), but building their own using open source analytics and data science platforms (like SciKit and Dataiku).

Know your audience and what they are capable of.

Failing to put the relationship first

In consumer software, it’s a transaction. But in enterprise software, it’s a relationship that you need to build, support, and adapt with. If the customer wants a transaction, they’ll use mass-market user-subscription based software or shareware. They’re going to you because they need services and support from a software provider that are experts in the technology and the process, can help them achieve their goals, and will keep the SaaS platform relevant.

* (HINT! HINT! STARTUPS/BEST-OF-BREEDS, STOP ASSUMING YOU KNOW IT ALL AND CAN DO IT ALL IN HOUSE! YOU CAN’T! YOU DON’T HAVE THE BUDGET FOR A FULL TIME EXPERT IN EVERY AREA. BUT YOU CAN OFTEN GET AWAY WITH PART TIME/SHORT TERM CONSULTING / ADVISORY. SO JUST DO IT!)

AnyData: Your Mid-Market BoB Analytics Solution for Opportunity Identification, Compliance Tracking, and Associated Project Management

AnyData, which we first covered on Sourcing Innovation back in 2017 (in AnyData: Another Analytics Arriviste from Across the Atlantic), has matured significantly since 2017, especially with its addition of auto-rule generation using AI in 2020 (as chronicled in AnyData, making spend analytics accessible by anyone! [Or, ‘The mid-market analytics quandary’]) over on the Spend Matters Content Hub, Pro/Insider subscription required).

Starting out as a Visual Development Framework / Data Hub, AnyData progressed into a good analytics offering, augmented by a good contract management (governance) offering, augmented by a good supplier management (primarily supplier data hub) offering, and that’s about where it was until 2020 when it significantly improved its analytics offering from a usability perspective and began the journey to take the rest of the platform from good to great.

Over the last two years, it has continued to refine its analytics offering from a quick-start/ease-of-use perspective where it has you up and running and doing real analytics in a guided self-service model in as little 15 minutes, added key field extraction and [better] analytics to its contract management module, included ESG/Sustainability support in its Supplier Management module, and built a brand new Project (Activity) (Savings) Tracking module with default templates for analytics-based savings projects, contract ([re-]negotiation projects), and supplier data gathering/compliance projects. In addition, using their rapid development capability, they can build custom, smart, project forms for any project type an organization wants to track very quickly (typically a few hours, a day at most) for a low fee [in addition to the standard templates you get included in the base subscription].

Since introducing their enhanced analytics offering three years ago with AI-based rule-derivation and easy re-classification, they have enhanced each part of the process to guide an average Procurement Practitioner and fledgeling analyst through each step of the process in a best-practice way that teaches them the basics while allowing them to go wide and deep as soon as they are ready.

For most clients, the AnyData process is this:

  1. Upload the file
  2. Determine if you want to
    • load the data Fresh,
    • Merge the data in, or
    • merge new data in while Replacing existing data for a time-period
  3. Select a Taxonomy (Standard, Industry Best Practice, or Tailored)
  4. Configure the Automation Process as needed
    (fields to analyze, priority, confidence intervals, etc. … or use the defaults)
  5. Review the Business KPI Dashboard and, optionally, drill into the Categorization Data Quality Dashboard
    • Optionally: Define rules for any significant or relevant unclassified spend (note that 100% mapping is not necessary, and not achievable by ANY solution on the market; 90%+ of the spend in a category is enough)
    • Optionally: Override the auto-generated rules, especially if you have a few products or services you treat atypically (for the chosen taxonomy; e.g. printer cartridges in electronics vs. office suppliers)
    • Optionally: Review, drag and drop the taxonometric (sub)categories as desired
    • Optionally: Enhance data/classifications as needed
  6. Review the Significant Opportunity Dashboards
  7. Dive into the Dashboards of Interest,
    which you can modify as needed to update / add analysis in a visual manner as needed
  8. Kick-off one or more analytics/savings project on an opportunity of interest
  9. Repeat from any step in the process as needed

A few points of note:

  • Through the SaaS front-end, file size is limited by browser limits but since they support compressed file uploads (and real-time decompression), that can easily be a 20GB file (uncompressed); if the initial file is too big, they support SFTP
  • AnyData is fast, so under a million rows of data only takes minutes to fully process
  • AnyData has best-practice starting taxonomies for multiple industries and can provide you with one upon setup
  • They tie their industry best-practice taxonomies to the standard taxonomies (like UNSPSC) and can make use of multiple data points for classification and for the industries they know well, their default rule generation will correctly classify 80%+ out of the gate
  • Their visual focus and the ability to drag and drop categories makes taxonomy classification super easy (and fields makes rules classification easy as well)
  • Rules can be on any combination of fields and use multiple types of matching (exact, partial, regex, etc.)
  • The Data Quality dashboard gives you a quick overview of the quality of data you uploaded (and the confidence you can have in the auto-generated rules without reviewing any manually, until you identify a need to do so in a category deep-dive)
  • The opportunity dashboards identify the best opportunities uncovered in the automated out-of-the-box analysis
  • It’s a click to start a savings/analytics project
  • You can jump back to any step at any time and continue on (down a different path) …

It’s tailored for quick start, quick execution, and quick time-to-value for a mid-market staffed by Procurement Professionals who are short on time and short on analytics training as it trains those procurement professionals how to do proper analytics through (semi-)guided workflows as they go.

If you’re a Mid-Market looking for a Best-of-Breed (BoB) analytics solution, AnyData should definitely be on your short list, especially since it’s one of the few offerings that can be obtained at an incredibly affordable price point due to the high DiY nature of the tool (and the focus on self-selection and self-serve SaaS sales). There aren’t many tools where you can get enterprise subscriptions starting at less than 2K/month, and few equal AnyData.

Kodiak Hub: A Supplier Relationship Management for Sustainability

Kodiak Hub is a relatively new Swedish solution for Supplier Relationship Management. Founded in 2015, it primarily served the Nordics for its first few years but began its expansion into the DACH and UK Regions during COVID (and even serves the NA market, although they don’t plan to tackle the NA market until the coming year).

A visit to its site might lead you to believe it’s a category management platform, billing itself as the starting point in a journey towards smart strategic sourcing, but that’s not quite what it is, or at least not where it’s found its niche and its true capability shines.

It’s true capability shines in sustainability, responsibility, risk assessments, and performance evaluations of suppliers, and their products, where those suppliers are creating (custom) (build-to-order) (manufactured) products where regulations need to be adhered to, carbon/GHG needs to be reported, and the organization needs to ensure they are acquiring a sustainable product (or service) as well as a sustainable supplier.

It’s primary platform is organized into three sections: Insights, Impact, and Intelligence along with a home dashboard that visually shows you the regions of all of your global suppliers and allows you to hover over those regions to see the number of suppliers, the regional economic rating, and the Country safe(SOURCE)TM Rating.

The safe(SOURCE)TM Rating is one of the truly unique capabilities of Kodiak Hub and one of the capabilities that positions it as a strong Sustainable Supplier Relationship Management platform. Using indices and public data sources, it is able to create a regional risk assessment profile that allows an organization to quickly spot geopolitical, environmental, and sustainability risks even before sending out an assessment to a supplier, and to create a generic risk profile when specific information is (not) yet available. When this is combined with local economic indicators (to spot risks of [significant] currency fluctuations, increased bankruptcy, etc.) as well as the ability to pull in credit scores (from credit agencies) (with appropriate data feed subscriptions), it provides an organization relatively deep insight into what expectations it should have for a supplier even before analyzing its policies, practices, and external assessments.

The supplier profiles or scorecards that Kodiak Hub can maintain are quite extensive, allowing an organization to maintain all the compliance, performance, risk, and sustainability data it needs on suppliers, products, and services to power its supplier management, sourcing, and procurement. It supports all standard company profile data, including supplier type and spend totals, detailed (customizable) assessment data, detailed on-site audit data (which will override the existing data as necessary), (third-party) risk/ESG/CSR data/rankings/metrics, externally computed KPIs, and related company, product, and service linkages. It can also store any and all documents of relevance or interest (insurance, certification, specifications, contracts, etc.).

Insight is the entry point to the platform’s supplier, product, and services summary screens that capture, and allow a user to query, all of the data associated with a supplier, product, or service.

Impact allows you to create and dive into (data-driven) supplier assessments, (onsite) supplier audits, KPI-based evaluations, and identified actions (in progress).

Assessments are unlimited and can be on the supplier in general, specific products or services, and even restricted to specific category management or sourcing projects. They can cover quality, health and safety, compliance & governance, human rights, environmental, business, product, information security, and other areas of relevance to the organization and use pre-built (template) questionnaires, customized variants, or custom questionnaires.

Right now, even though they can be assigned a “type”, actions are essentially requests to the suppliers with an integrated messaging trail for asynchronous communication that allows suppliers to ask questions, buyers to provide answers, and action states to be recorded (pending approval, in progress, completed, etc.). Future versions of the platform will contain specific types to ensure necessary information is captured, processes and workflows are followed, interim checks and approvals are in place, and so on.

Intelligence is its integrated analytics platform that allows a procurement professional to analyze suppliers across campaigns, projects, KPIs, assessments, categories, products, capabilities, etc. Relationship managers and buyers can create custom dashboards and reports, and customize the pre-built dashboards as needed.

The UX is very clean, modern, broken into logical segments, and very easy to use. It’s intuitive where to go to get the information you need and how to update new information when it comes in. This reviewer finds it so intuitive that he believes you can jump in and be productive with it without any training whatsoever.

So if you’re looking for a great supplier relationship management platform to manage your sustainability efforts and assess your supplier risks, we recommend you include Kodiak Hub in your shortlist.

Suite vs BoB. Which Do You Choose?

Neither!

But you need something. And there is no other option (yet). So are you doomed?

That depends. But first, let’s talk review the Primary Pros and Cons of each.

SUITE
BoB
PRO

  • one vendor relationship to manage
  • modular integration out of the box
  • consistent UX (or it’s not really a suite)
  • pre-implemented with major ERPs
  • the primary module offered by the vendor is truly Best in Class and considerably beyond the average suite capability
  • implementation is typically vendor supported, along with some integration services
  • low (subscription) cost out of the gate, pay as you need
  • today’s BoB comes with full, complete Open APIs to build your own ecosystem
CON

  • likely that only one or two modules are Best-of-Breed (BoB)
  • implementation and integration services are likely third party
  • high cost out of the gate
  • traditionally a closed ecosystem
  • multiple vendor relationships to manage
  • limited integrations out of the box to other modules you will need
  • inconsistent UX across the modules
  • limited to no ERP/MRP support in many modules

In other words, many of the weaknesses of the suites are the strengths of BoB and vice versa. But you want the strengths of both and the weaknesses of neither, even though that doesn’t exist today as no vendor does everything well, nor can they because they would need to be experts in everything. (So unless a vendor hired all the experts, and became a monopoly [and we generally agree monopolies are bad], no vendor could even come close.) Even if a vendor did hire all the experts of today, and build everything out to the best of those experts’ capabilities, they’d soon become an unaffordable mega-suite (and then still not be best in breed in anything because once they built what the experts they hired envisioned, there would be a new generation of experts they still wouldn’t have employed with new, innovative, possibly revolutionary, ideas).

So what do you do? Well, the answer is, as we pointed out in our post that asked where’s the Procurement Management Platform, acquire a platform that is designed to support data-centric end-point integrations for specific processes and organizational needs as this will allow you to select the right module for each task, configure the right procurement workflows, integrate new, even previously unthought of, modules with the Open API, and even support intake and supply chain platform integration.

But, as we noted, there’s no platform. So, unfortunately, you have to assemble your own. But at least today you can. A decade ago there were no options to do this, so either you bought a suite, and lived with it, or you bought best of breed and did extensive work to glue them together in a grit, spit, & a whole lot of duct tape situation (that would take about 69 months).

But today, all of the new best of breed applications are being built from the ground up with complete Open APIs and the newer suites are also offering you APIs to easily get data in and out as well. (Not so much on the workflow configuration / function execution front, but that’s not necessary.) [But please note that an App Store or Marketplace is not an Open API, it’s a closed ecosystem limiting you in what third party add-ons you can select.]

So you can theoretically start with the right instance of a BoB or a Suite as your base and build out the right platform over time, depending on your needs today, and how fast you can digest a new module. If you already have one or more first generation modules, you have the understanding of what these modules do and how to use them and can likely digest new versions of those modules pretty quickly, so you could start with that many modules plus one. If you have no modern S2P modules, then, as we indicated many, many times in our very long Source-to-Pay series, you need to pick a module that represents your most immediate need, start with it, and start to grow your platform from it.

Per Year, How Much Should You Outlay for a Multi-National Enterprise Source to Pay? Good Question! Poor Answer. 500K+

Whereas we were willing and able to put a real, actual, number, or a very tight range, for mid-markets, the situation gets more tricky for a multi-national enterprise with 1 Billion + in Revenue.

Why? Aren’t they using the same advanced tech as a large mid-market, except using advanced capabilities across the board? And, because of this, shouldn’t it max out at 500K? Well, yes, but there are additional considerations you don’t have in the mid-market.

[01] If you are using a lot of decision optimization, semantic analysis, network modelling, etc., then you are using a lot of computing power — that’s driving up the vendors’ hosting costs well beyond the mid-market. Now, at some point, it maxes out at costs on a dedicated machine basis, but it’s still higher.

[02] As a true multi-national enterprise, you are going to need a vendor that has extensive multi-lingual and multi-currency support in the product AND at the help desk when suppliers and third parties have difficulties using the solution to bid, provide information, submit invoices, etc. And while it’s only a one-time cost for a a suite built for true internationalization to add another language pack and currency, an enterprise that offers support in those languages usually has to add more headcount to support that language, and that adds cost.

[03] You’re not only going to have a larger Procurement team using it, but you’re going to have a decentralized global team with a lot more differentiation in capability, with a lot less people capable of being full DIY. They’re going to need more support on a regular basis, and you’re going to need to contract for this up front.

[04] You’re going to need a lot more data. You’re going to be subject to a lot more regulations and you’re going to need to collect, and verify, a lot of data on your partners and suppliers. A LOT of data. You’re going to need a number of data subscriptions on business identifiers, (beneficial) owners, and credit scores for verification that they aren’t on any embargo lists, involved in any legal suits, and acceptable to your insurance provider. Then you need data on their human/workers’ rights practices, compliance, and third party assessments for those countries with laws enforcing compliance and putting you responsible for your supply chain actions. Then you need Carbon/GHG data for countries with reporting requirements or limits. Then you need other ESG/Risk data for your own internal risk assessments. And so on. These subscriptions add up.

So even though the suite itself should still be within that 250K to 500K per year range, when you add up the additional support needs, additional data needs, and dedicated computing power needs, you’re going to double or triple that cost. That being said, before you sign on the dotted line, especially if the quote gets close to 7 figures (one million), you need to do your expected ROI calculation. If you’re not going to see at least a 5X ROI a year on a conservative estimate, with an expected ROI of 7X to 10X a year by years 2 and 3, you need to step back and decide if you need all the functionality, all of the support, and all of the data subscriptions you’re asking for / being quoted, and if so, if you’ve included the right vendors in your RFX for (a) technology solution(s). The reality is that you should NOT be paying a million plus annually for an extended S2P suite unless you’re getting the ROI.

Also, be sure to build that model in-house or engage a third party that is not a reseller or implementer of the suite you’re considering. First of all, their savings averages are not guaranteed to be applicable to your situation. Secondly, their manpower requirements, and reduction, averages might not be appropriate for your business either. Thirdly, because they often build their savings model as a rollup of savings models across the different modules / functions, many of these suite models often end-up double-counting resource time or savings numbers by way of their design.

(Please note our choice of wording here — “end up“. Usually the provider or consulting organization is not trying to deceive you, and they often don’t realize that their roll-up model is double counting. What we’ve seen happen is they take the best calculators they have access to (through consultant or analyst relationships) in each area they are selling in the suite — sourcing, SXM, CLM, etc. — and then roll them up. But they fail to understand that the attributions of a savings percentage in each model always favours the solution/module being sold, which may also assume some baseline functionality of another module. As a result, especially since the savings opportunity often changes based on what technologies are available and applied together, all the estimates will be “Best Case” for the selected modules, and when you add those up across five/six modules, you will sometimes get a total “Best Case” that is as much as double what is actually reasonable. For example, you can have a category where if you just applied spend analysis on the RFX you could identify 6% savings, if you just applied supplier risk profiling to the RFX and eliminated the high risk suppliers and then took the low bids you could identify 4% savings, and if you just applied strategic sourcing decision optimization you could get 10%, but if you applied all three you only achieved 9% (since optimization finds everything spend analysis finds, but the risk assessment resulted in the manual elimination of a high risk supplier that optimization didn’t catch, lowering the initially identified savings opportunity). Rolling up 3 separate models, it would produce a 20% savings opportunity when it was in fact 9%. Now, in other situations, the rollup could be worse than the actual of combining all three technologies, i.e. the RFX is projected to only identify 3% on it’s own and the negotiation module to save 3% on overheads, but the application of both to a targeted subset of suppliers which are deemed to be most willing to negotiate based on volume could allow for an 8% reduction. But overall, these rollups don’t average out and usually over-count.)

[Also, most vendors feel they have to do it this way since most buyers don’t buy all the modules and they don’t have enough average savings data across the application of all advanced modules to all categories to have reliable numbers. So you really need to do your own models based on your own situation and come up with realistic estimates.]

Depending on your current state of affairs, current market conditions, and technologies available that your organization is actually capable of utilizing, that could be an overall, estimated, cost reduction of 3% against all spend expected to be put through the platform in the first year, or it could be 5% (or more, or less). Even 3% is good if you’re spending 1 Billion a year, 500 Million is addressable, and you think you can address 20% of that, or 100 Million, the first year. That’s an estimated savings of 3 Million, and if your year 1 cost was 750K, that’s reasonable with an ROI of 4X, especially if you think increased efficiency will come in year 2 with familiarity, that you will address 200 Million in year 2, and increases the estimated savings percentage to 4%, which would be 8 Million savings in year 2, and an 8X multiple even if you needed to add more data subscriptions and support, bringing the total solution cost up to One Million.

Probably not the answer you wanted, since the mid-market looks to be getting off cheap, but they are also spending less as an organization, addressing less of that spend, dealing with fewer volume or consolidation opportunities, fewer resources to tackle the mid-size categories, and losing on the tail since they can’t effectively manage it beyond catalogs, budgets, and hoping the 3-bids and a buy are fair (and not rigged through collusion). They might pay less for their S2P solution suite, but their total savings potential is also (considerably) less and, thus, their typical ROI is limited compared to yours.

But, well chosen, at least you’ll get an open, modern, usable solution for One Million dollars per annum — not something you can say in all areas of enterprise software.