Outcomes is a Dirty Word! Part I

And you shouldn’t have to hear it!

The word of the day is outcomes, and, no matter where it’s used, it’s a dirty word.

You all know that where DEI is concerned, especially in North America, it’s a dirty word. As @Jason Busch will explain in detail at every opportunity, DEI has replaced “equal opportunity”, but unlike properly applied equal opportunity, which took us two steps forward, DEI, or at least its “outcome”-focussed interpretation, has taken us two step backs.

These days, everything has to be measured, and the belief is that if you don’t meet the goals for whatever racial/religious/women/minority metric your organization has defined to be an appropriate racial/religious/women/minority mix for your organization, then you aren’t diverse, equitable, and inclusive and, therefore, you should go out and immediately hire the racial/religious/women/minority employees you need to meet the metric. Merit be damned. No longer is it the most qualified resource, where someone of a minority is hired when two or more applicants are otherwise equal, it’s the most qualified resource of the identified minority, who might not be at all qualified for the job! It’s the token black employee taken to a whole new level! Not only does it reward incompetence, but it insults minorities who study and work hard to be just as competent, if not more competent, than their white male counterparts.

But I digress — we already know outcomes is the dirty word of DEI. But what you don’t know is outcomes is a dirty word across the business, wherever it is used – and Procurement is no exception! Why? It’s only become the popular battle cry since the Age of (BS) AI, whereas its prior use was been limited to situations where the consultancy, vendor, or analyst firm could hide the darkness and venom that the word contained.

More specifically, until recently, outside of DEI, outcome was primarily the verbiage of GPOs, who were doing their best to convince you to turn over a significant percentage of your procurement to them, or recovery audit firms, who were doing their best to convince you their services were the only way to recover your money that your suppliers were assuredly screwing you out of.

But they reality is that they’ve been both misleading you since the get-go. Sure a GPO can get you better prices than you can get on the long tail with their volumes, but that’s only true for the long tail. Moreover, the reality is that the costs aren’t that much less, if any less, than what you could negotiate on your own if you did a winner-takes-all long-tail RFQ to a MRO, office supplies, electronics supplier who could meet the volume across your long-tail needs, especially since that GPO is charging the supplier an administrative fee of up to 3%, and they’d happily give you the same price to NOT have to pay that fee! Add to that the GPO is charging you for their services, and you’re not saving much. Plus, when you work your way up to the head of the tail, you are definitely in 3-bids-and-a-buy RFQ or auction territory, and the application of a well designed tail spend sourcing solution will save you just as much as a GPO, IF NOT MORE!

Moving to recovery audit firms, their outcome-based pitches sound great, as you only pay their 33% if they recover the money on your behalf and fatten your bank account, but here’s the thing. If you had a properly designed retail-focussed e-procurement solution that integrated supplier and product management, did m-way matches, and prevented payments where you didn’t have good receipts that matched the invoice that matched the PO where the prices matched the contract, rejected duplicate invoices, tracked rejected units and associated credits, applied those credit notes against future orders (with the matching product), etc., you could prevent all of those overpayments in the first place — despite the fact that all the recovery audit firms tell you that overpayments (and their services) are unavoidable.

But there are more, and more modern, examples. The worst is AI-first services-as-software vendors convincing you that you should pay based on “outcomes” instead of on a traditional SaaS pricing model. Their rationale? The majority of SaaS tools that you are paying for aren’t offering you immediate, measurable, savings and, therefore, are too expensive. But if you paid for software based on “outcomes”, you’d have measurable value and you could claim the fee was worth it. And the argument sounds convincing, even if it’s complete and total bullshit. The purpose of most software is to increase efficiency, not save money. That’s the value.

And when the real reason they are pushing outcome-based pricing is that they can’t afford to sell based on a SaaS model because the compute costs of their BS AI-first are too high to cover on traditional SaaS pricing — even though there is a traditional A-RPA SaaS application that does everything their app does for a fraction of the cloud and compute cost, as long as you don’t need a fancy-smancy natural language interface or a slick UX. In other words, if they were honest about the true value of their application, they could never charge enough to cover their costs and would be out of business yesterday.

A second, more modern, example is the big consultancies taking a queue from their GPO, Recovery Audit, and now AI-first services-as-software peers and trying to justify their highly inflated pricing (which has skyrocketed over the last decade as they became the go-to firms for all big tech strategy). Especially since it’s the only way they can overcharge for projects where they are primarily deploying a multitude of AI agents (which we know produce utter garbage, just look at the Deloitte fiascos in Australia and Canada) and juniors that they hope will catch and clean up all of the hallucinations in the deliverables. (Because if they charged based on what the tech and juniors were worth, in a climate where no one wants to pay inflated rates for consultants for projects with potentially guaranteed return, they wouldn’t be able to maintain their high rates.)

There are more examples, but by now you should see the common theme. Which is simply this: “outcomes” is always a way to charge you more for less (and sometimes next to nothing) (just like DEI is an excuse to replace people with actual capability with people with next to no capability).

But the worst part, the blatant financial rip-off that always accompanies a (pure) “outcome-based” sales pitch isn’t the worst of it!

(That Vendor Rep) He Ain’t Pretty …

A verbal commentary on the current state of SaaS …

I wore two hats, I was pounding the sand
And on the weekend in a rock & roll band
One Monday aft in the office board room
In walked a rep who looked like Max Headroom

He stared at me and it was scaring me off
He said he worked for the vendor on top
I heard a voice inside me say
He ain’t pretty he just looks that way

We made a date for demo round two
I wore my jeans and he wore a suit
There was this misconception all over town
That he sold software savings by the pound

He said “Buy my app, there won’t be no fuss”
I said “Why? you haven’t shown me cost-plus”
Watching him leave I heard his grunt-in-tow say
“He ain’t pretty he just looks that way”

So, I called his office, the admin was there
Said “He’s busy, he can’t come to the phone”
I held my breath, decided to wait
A guy like me needs to set some things straight

I got stuck with the sales rep from hell
Didn’t take much time for my hormones to tell
Letting him in has been a grave mistake
He ain’t pretty he just looks that way

His ego wrote cheques incredibly fast
But the software he sold wouldn’t save us the cash
I laughed out loud to my total dismay
He ain’t pretty he just looks that way
He ain’t pretty he just looks that way

He ain’t pretty
He ain’t pretty
He ain’t pretty
He ain’t pretty he just looks that way

You Really Don’t Need to Read Another State of Procurement Report for Five Years!

Just read this 34 part series and you can ignore the 10+ surveys / studies / reports that will be collectively released by every major ProcureTech consultancy and analyst firm this year (which will likely include, but not be limited to: Capgemini, Deloitte, Everest Group, EY, Hackett, McKinsey, PwC, and many, many more)! We say this with certainty because we reviewed all of the reports they put out for the last 5 years and the vast majority of the content was the same year-after-year and firm-after-firm. You can practically count on any survey/study that tackles barriers, risks, and concerns to overlap with the following at least 80%, and that these will be the most significant barriers, risks, and concerns. In fact, in five years, only one concern will have changed, and that’s the tech-du-jour, because that’s all that was really different between 2025, 2020, 2015, etc.

You’re welcome!

You Don’t Need To Read Another State of Procurement Study for the Next 5 Years!

Top Barriers to Success

Breaking Down The Major Procurement Risks with High or Moderate Impact

Primary Concerns for Procurement Leaders

BONUS

Don’t Focus on Spend …

In a recent LinkedIn post by Celia SGAR, she made a very important point on a key requirement for good Procurement advice.

Focus on Impact, Not Spend!

Now, her advice, governance, assessment, and relationship breakdown was focussed on Supplier and Vendor Management, because otherwise you’re wasting your time reviewing the same suppliers over and over again, but the reality is that it’s good advice that should be applied across the Source-to-Pay and Category Management lifecycle and the only way you’re going to get good results in today’s turbulent trade tussles.

Right now, the typical focus when analytics is first implemented is to find the top suppliers and top categories. Then, you’re supposed to measure those suppliers and source any of these categories not currently under contract or coming up for contract in six months. Then you’re supposed to track those over the next year, match all of the invoices, and report on the savings. Which will end up being less than you expect because the reality is that most organizations know 8 to 9 of their top categories and 8 to 9 of their top suppliers without any analysis, those are the suppliers they are managing, and those are the categories that are being “sourced”, “spot bought”, or a combination of both based on what the organization feels is best.

But this typically isn’t where the biggest opportunities are! The biggest opportunities are in the suppliers providing critical components who aren’t being managed, the categories from the next tier that are not managed because the organization doesn’t realize they’ve went from tail to mid-tier, and the categories where extensive market research has not been done to not only understand market price but should cost.

Contract Management needs to focus on reviewing contracts that don’t have standard terms and conditions, don’t have risk management clauses for emerging and newly identified risks, and don’t have regular measuring, monitoring, and reporting clauses from both sides.

In other words, teams start off on the wrong focus, and continue on the wrong focus all the way through sourcing, contracting, and supplier management because they focus on spend, not impact.

And when it gets to supplier management, by not identifying which suppliers present the most risk due to supplier instability, part criticality, regional uncertainty, trade wars, sanctions, etc, the organization is overlooking, the organization is exposing themselves to risks with severe impact potential by not managing those suppliers first and foremost.

So, if you want to get Source to Pay right, focus on impact, not spend. Not only will you save more, but you’ll be more efficient, and more resilient, overall.

Safe Vendor Selection is Hard!

Every week another vendor is going bankrupt or calling it quits. Every week another vendor is getting acquired. Most of the startups, even the over-funded ones, are not going to make it. Even assuming you know what functionality you need, it’s very hard to select a vendor that is not only good for you but likely to be around for the length of the initial engagement, which is probably 3 to 5 years (mid-sized to large) because, any shorter, and you’re spending more time on vendor evaluation, selection, implementation, and integration than actually using the vendor’s product! (And even if you can get a year-to-year contract, you know you still want the solution to last for at least three years to get a return on the time you spent investigating, selecting, and implementing the solution … which might only hit majority adoption at the end of the first year!)

So how do you select a vendor that is not just “good” but “safe”?

Well, let’s go back to our process for vendor assessment and selection.

Stage 0: Find a reasonable candidate pool based on your needs based on quick high level assessments.

Stage 1: RFI Creation

This is where you focus on weeding out vendors that

  1. don’t have technology that might actually solve your problems (without getting into deep details and demos)
  2. don’t have the necessary (cyber) security and privacy protections (especially if you are processing payments or private data and have to comply with industry and governmental regulations)
  3. are just too risky from a viability perspective for you to deal with
  4. don’t give you a back-up plan if something goes wrong

If it’s a point-based best-of-breed solution designed to solve one problem that could be replaced with another solution through the API, you can probably take a bit of a risk. But if it’s a foundational sourcing execution or procure-to-pay platform that is going to power your sourcing events and category management or your procure-to-pay process, this is not a vendor you can afford to have shutdown or get acquired by a buyer who doesn’t want to support it (because they’re buying for the customer base or dev team).

So how do you figure this out? It’s not perfect, but as we pointed out before, you calculate the relative corporate debt. If it’s too high, the vendor is not financially viable, even if it is “well funded” because most investors, even PE, won’t wait more than 5 years for their return — which is hard to get in tight economies when they invested at a multiple that’s (way) too high — and typically any multiple above 5X to 7X IS if you want a return in 5 years. (That’s why you always need to ask who’s funding your ProcureTech Vendor. If it’s customers, you’re safe. If it’s PE, you have to investigate deeply. A few firms are willing to wait [more than 5 years] for their return if the long-term is very profitable. But a lot of firms are of the “strip-and-flip” mentality, and that’s not good for anyone. And those in between start losing patience around the 3-year mark if they don’t see the sales growth they want, even if their growth expectations are ridiculous!) Collect the key financials and run the equation.

As for security (and privacy), you ask for their SOC 1/2 and certifications and any other certifications that are mandatory or designated as essential by your risk management department. If they don’t have the minimum, you drop them (unless they are in process).

As for functionality, you ask them to describe (at a high level) how they support your key core requirements. The in-depth descriptions and demos come during the RFP process later. The key to selecting a “safe” vendor and not being pressured to select a possibly “unsafe” one because you didn’t do all the right checks until after you fully verified the tech (and you can’t start the process again) is to do the majority of key non-tech validations up front, not at the end.

Moreover, by doing this analysis up front, you ensure that you aren’t wasting time analyzing vendors you can’t risk from a business perspective! Capability assessments take time. If you wait until the end to look at viability, you’re wasting a lot of time whereas the RCD calculation, certification verification, and verifying key requirements of other stakeholders often takes a fraction of the time as the in-depth tech assessment.

As for the back-up plan, here’s all you need to ask up-front:
Can I export 100% of my data, in a standard format, anytime I want it?

Not 90%. Not 95%. Not 99%. 100%!

Not submit a request and ask them to export a database or wait for a weekly backup process to backup and shoot you a copy. Request on the fly, it zips up (possibly into a multi-part archive) on the fly, and you can download on the fly.

If you can always get all your data, then, even if you mess up on the risk or viability assessment or something unforeseen by both parties happens, you have the most critical thing — your data — and you can always go with the next best solution! (And then make sure the clause is in the contract because it’s the most important clause in the contract.)

Now, this isn’t a complete list of requirements, as it will depend upon the industry and geography you are in and what type of solution you are selecting, but it’s a good start!