See this link on Spend Matters for the story on Gartner’s 2008 Magic Quadrant for Sourcing Software http://www.spendmatters.com/index.cfm/2008/7/15/A-Free-Look-at-a-Gartners-Sourcing-Magic-Quadrant. My comment was a bit too lengthy for a comment on Jason’s post. So here it is, below:

First a disclosure: I lead the product development for TradingPartners. TradingPartners provides eAuction services. Very similar to what FreeMarkets pioneered all those years ago with their “Full Source” offering. We don’t sell software licenses, let alone software suites, so wouldn’t fall into Gartner’s analysis but we are considered competitors with a number of the companies mentioned in the Gartner Sourcing Magic Quadrant report. You can make up your own mind to what degree the comments below are self-serving or not.

I’m not keen on the name of the report. Despite all disclaimers the report is titled “Magic Quadrant” which implies that there is one “magic quadrant” that buyers should look at, i.e. the top right. And when I look at the vendors in the graphic the relative ranking seems fairly arbitrary. Certainly it’s not clear from the report why Quadrem should be better able to execute than BravoSolution.

The best part was the overall 10,000ft view of what is happening in the market. In particular:

1. The distinction between strategic sourcing and tactical sourcing. “Organizations should expect to eventually deploy two separate sourcing solutions or two configurations of a single solution: one for tactical sourcing (for example, querying a contract fuel vendor for this week’s price per liter) and one for strategic sourcing (such as simultaneously negotiating rental car contracts across multiple vendors for service for the next three years and in 10 countries”.
2. The summary of the consolidation in the sourcing software space (gone are Freemarkets, B2eMarkets, Frictionless, Mindflow, Procuri, Verticalnet).
3. The recognition that wrap-around sevices are of paramount importance in strategic sourcing initiatives. “[E]ffectively leveraging different auction/event types for the best results requires a knowledge that can be gained only be using strategic sourcing applications. Furthermore, enabling suppliers to register online and providing customer service to troubleshoot their issues requires a significant effort that a procurement group will not be able to support without advanced planning and incremental staffing”.
4. The recognition that strategic sourcing tools don’t require ERP integration. “They function nicely as standalone tools, because the trigger to commence a strategic sourcing event is the initiation of a project, and prospective vendors do not need to be in the vendor master unless they win the bid. The output of an event tends to be a contract. The unstructured nature of strategic sourcing lends itself to solutions that are architected as project management and document repository tools”. Here Gartner calls strategic sourcing unstructured. I would prefer to call it BRP (in contrast to ERP).
5. The recognition that, in reality, buyers are still sticking to Excel rather than fully automating the sourcing process. “Requirements should be specified in the sourcing tool at the line-item level to fully evaluate and document the resulting bids using the application; however, in practice, many companies simply attach the specifications and record the resulting proposals at the header level, and analyze the results offline.”

Some parts of the report I would take with a pinch of salt:

1. Including forward auctions in the debate. They are a red herring. Sure from a technology point of view they are similar to reverse auctions but in practical business terms they are of little relevance to most buyers.
2. Cautioning that some suppliers are buggy. Without any meaty supporting arguments I’d assume all software is equally equal in this regard
3. Come to think of it, a lot of the “strengths/weaknesses” seem cursory. E.g. Ariba is praised because it “offers varying scales of its sourcing product so customers can consume functionality as gradually as desired”. And Ariba is criticised because its “customers tend to use sourcing to solicit bids from local vendors”. 

The Gaping Void cartoons are often really spot on, and here’s one of my favourites.

It neatly sums up something I’ve struggled with in my life developing software products over the past 10+ years. Programmers will prefer to continue building software (development) rather than slowing down and seeing how people use that software in the real world (support). So you often see a tendency to continue adding new features one on top of the other. Something that used to be good once gradually becomes more complex and brittle over time.

Where I am now I try to develop products along the lines in the Hugh cartoon. Deliver software in small chunks. Speed up and slow down delivery so that you have time to see how people use your latest code before you race off down the next avenue. Focus on the pieces that people are interested in. Spend time stripping stuff out as much as piling new stuff on. Depending on what the user base really uses. Something that is only really practical in the On Demand/SaaS/ASP/whatever world rather than the behind-the-firewall expensive-customised-software world.

Not a million miles away from the approach Mitch Free talks about in this interview with Jason Busch today (and what prompted this post).

Even if you think you know all about managing supplier/vendor relationships in your organisations, have a look at this site  that has been referenced a few times places like Confused of Calcutta, Media influencer and weThink.

Strange how the same kinds of words can mean all kinds of things to different people. Before I saw these links, Vendor Relationship Management didn’t sound like anything earth shatteringly new - after all SRM is  just another SAP module.

But The VRM project I’m linking to here is a different entity entirely. It’s spearheaded by Doc Searls of Cluetrain (*) fame. From the weThink link I’ve mentioned above:

While more of mind-shift than actual code, Doc Searls believes in the next few years, consumers will disclose their intentions to marketers through something akin to a personal rfp.

In this view, VRM is the opposite of CRM from an individual consumer’s standpoint. The concept is intriguing, but it looks like the project/movement is made up purely of marketers and internet mavens. And looks like the people involved in the project are trying to reinvent from scratch something that corporations have been struggling with for years. There don’t seem to be any people with real experience of being professional vendor managers. If anything the opposite is the case. Two of the comments that came back:

“Doc’s VRM sounds way hard. I don’t want to manage my relationship with Target or write a RFP for a blender. I don’t have an acquisition dept.”

And

Terms like “VRM” or “personal rfps” evoke some of the biggest jokes of cubicle-laden America

Ouch. My view: This VRM project would benefit greatly from some involvement from real procurement practitioners to join in the debate and hopefully help Doc’s vision become a reality. Without evoking any cubicle-oriented jokes. I can’t see the vision becoming reality anytime soon without that kind of involvement.

(*) Cluetrain  is a classic, very entertaining and absorbing book about the positive power of the internet. Well worth a read for those interested in what the internet could do – even if it was written nearly a decade ago. I would counterbalance it with The Social Life Of Information  which for me is a more serious/considered/balanced view of everyone becoming connected to everyone else.

Here are the procurement blogs I have on my current reading list

• http://www.spendmatters.com Where I go for industry analysis. And some entertaining banter.
• http://blog.sourcinginnovation.com Where I go for in depth dissection of offerings in the market place.

These are without a doubt the top 2 blogs in the space. Top 2 in terms of quality and quantity. Read these blogs first; anything of burning significance will end up on one of these two sooner or later.

Blogs allied to a particular vendor/service provider.

• http://www.esourcingforum.com Iasta’s blog and definitely a good one. David Bush walks a fine line between making the blog a true forum for all things supply chain, and running a corporate mouthpiece
• http://www.purchasingcourses.com/purchasingcertificationblog.html Next Level Purchasing’s blog covers training – always a good read
• http://www.mfgx.com/blogs/mfgx MFG.com’s blog. Mainly manufacturing. (Incidentally they changed their servers recently so any old RSS subscriptions you have via http://www.mfgx.com/blog/index.cfm will now be broken)
• http://www.2sustain.com/ Aravo’s blog (Supplier Enablement company with a green streak)
• http://purchasingtransformation.ibxeurope.com/ IBX’s blog
• http://www.strategicsourceror.com/ SourceOne’s blog. These are the guys who provide WhyAbe.
• http://www.supplyexcellence.com Ariba’s blog with apparently pretty high traffic. Note to Tim: Please can you make it more obvious that this is the Ariba blog. To the casual observer it isn’t obvious that this is the Ariba blog. Purely in terms of Ariba logo usage on the screen the casual observer might think that SpendMatters is more closely allied to Ariba than Supply Excellence.
• http://www.esourcingplace.com And mine of course. Much as I would like to consider myself un-biased I do work for TradingPartners so that is bound to affect my views.

General supply chain commentary

• http://tcummins.wordpress.com/  Tim Cummins (IACCM) takes a broad view from both a buyer’s and supplier’s perspective
• http://www.theferrarigroup.com/blog1/
• http://www.supplychainer.com/
• http://www.supplychainnetwork.com/ 
• http://www.buyeranalytics.com/purchasingblogs/ 

Other specialist blogs (dare I call them niche?)

• http://vmo-blog.com/ Without a doubt this is one of the best blogs out there right now. Definitely, definitely worth a read for people in the procurement space.
• http://www.licensinghandbook.com/blog/ Contract negotation
• http://www.agmetalminer.com/  Metals
• http://at-scm.com/    Irregular but interesting
• http://muchosalsa.com/blog/ A gentleman from HP who is planning on building his own business in the supply chain space

Ones that I enjoyed but seem to have tailed off in recent months. Watch them if they come back

• http://360vendormanagement.com/ Outsourcing blog
• http://www.massin.nl/eSourcing  Occasional comments on the European sourcing industry

The various magazines also have their own blogs/RSS feeds. I distinguish between a blog which by its nature is more immediate and informal and an RSS feed of magazine articles. The blogs in my list right now are:

• Procurement Leaders  http://blog.procurementleaders.com/procurement-blog/
• Supply Management  http://www.supplymanagement.com/EDIT/BLOG/default.asp
• Purchasing.com  Has a range of blogs http://www.purchasing.com/blogs.html 

From what I can tell S&DC Exec and CPO Agenda don’t (yet) offer blogs.
   

This is from Supply Management in May. A quote from John Paterson, VP & CPO at IBM:

Sellers are more aggressive in their terms and pricing as they desire to maintain capacity and revenue streams. Sharp buyers recognise this and will typically look to place more business up for bid, take actions to renegotiate contracts, and seek out new suppliers. As always buyers should recognise markets change over time and they should do nothing that will damage their buying position when it becomes a sellers’ market again.

In these sorts of conditions reverse auctions are a great tool because they are able to cut through long-held assumed market prices and uncover exactly where suppliers are willing to go. But note John’s sage advice about not abusing market power. Again, reverse auctions, done well, are a good foundation on which to build solid supplier relationships (this has certainly been the case for me).

Here are some items that popped into my google alerts recently for reverse auction:

• A lowest unique bid wins gambling site. Their press release appears to be deliberately confusing given that talks about reverse auctions, procurement auctions and e-sourcing before diving into their  gambling piece. They even go so far as to claim that “The legality of low unique auctions has been proven by the American, British and the Danish governments who are all using the low unique auction concept [for awarding procurement contracts].” (No they’re not, they’re using reverse auctions - they aren’t using gambling sites)
• Forwards Dutch Auctions for mobile gear

I know some of you will consider this is just me quibbling over semantics but this is pretty important. Surely buyers need to know their auction types to be able to run effective sourcing projects. Just like they need to know their DDP from their FOB. I get really riled when people use the same term to mean completely different auction types. How many buyers would know that this auction here is not a reverse auction at all but is a forwards dutch auction?

I’ve long contended that, behind all the hype about Source To Pay systems and SRM packages and Flex interfaces and eAuction software, Excel remains one of the top 3 software tools for buyers. (The other 2 being Outlook and Google).

So I enjoyed reading this article on CFO.com all about spreadsheet worst practices and how to avoid them. Here’s how the article starts:

There’s little doubt that electronic spreadsheets are the most widely-used financial software application. But they are also the most-abused.

The article clearly struck a chord with CFO’s readership, as they published a follow up with readers’ views.

The CFO article is directed mainly at those who use Excel for number crunching, analysis and what-if planning. So the practices in the article will be of most interest to buyers who use Excel for analysis. But there are also some nuggets that you can pull out of the articles, even if you only ever use Excel for issuing RFQ templates.

The practices CFO highlights:

1. Poor segregation of data. Some people use Excel just as a super calculator. So if you look into a cell you might find the formula “=300000*1.50+158000*1.46+250000*1.20*0.95”. While it might make sense to the person doing the calculation at the time that we are looking at the total forecast spend for three different parts (300000 units at $1.50, 158000 at $1.46 and 250000 at $1.20 less a 5% discount), a formula as bare as this is not going to help explain the data 3 months down the line
2. Poor documentation of assumptions. The last part in my example formula is 250000*1.20*0.95. You could read this as 250000 parts at $1.20 with a discount of 5%. But why the discount? Does the discount always apply? Or is it some volume discount based on ordering over 200000 items? 
3. Poor documentation of constraints. Don’t put one complex formula in a cell. Remember in your maths exams when you were always told to show your workings? Same applies in Excel. Better to use multiple, intermediate calculations to show how you are getting to the final result.
4. Difficulties in making changes. If we decided that we wanted to change the forecast volume for part B to 180000 then it’s not immediately straightforward to know where to update the spreadsheet
5. Now it’s here, Now it’s not. The ability to change one value in a spreadsheet and have all the relevant values re-calculated is very powerful. But it’s also easy to lose track of where you were before you started your what-if scenarios. CFO.com’s recommendation is to use different worksheets for different scenarios, with one master worksheet to summarise and compare the results of your different scenarios.
6. Presentation Ready. It’s not hard to set your spreadsheets up for printing – with headers, footers, page sizing, repeating columns and rows. But it’s often overlooked, to the annoyance of the people you are emailing your spreadsheet to.

Last year I moved out of London and bought an electric scooter from these guys for driving the 3.5 miles between my new house and the train station.

The story so far:
1. When it first arrived it didn’t work: the batteries weren’t functional. It took a good two weeks to get it workable.
2. Finding an insurer was a mission. There’s apparently only one in the UK. They aren’t cheap.
3. Stuff just fell off the scooter. Nothing major (yet). But still I haven’t got working replacements.
4. One of the options I bought they never even delivered. Kept fobbing me off for best part of 9 months (and I didn’t have time to chase every day).
5. It was vandalised once (someone yanked an important cable out) - and the supplier  expected me to be able to fix it. Heck, I don’t even own a soldering iron, let alone feel confident digging around in the bowels of the scooter.
6. Kids have sniggered at the man on the scooter … Until they realise it’s electric whereupon their sniggers are replaced by wows.
7. Fellow commuters are impressed by the electric scooter. Then they overtake me on the way home.
8. It is fun to drive a nearly silent machine. But it would be nice if it would go faster.
9. It’s nice not to need to stop and fill up with petrol (though I have no idea whether the electricity I use to charge it is cleaner, greener and/or cheaper than petrol would be).

It’s clear that this bike is still bleeding edge. It’s still the domain of enthusiast hackers. Definitely not ready for consumer prime time.

Parallels for professional buyers:

Beware of getting too far ahead of yourselves on green initiatives. Unless you have the time, inclination and executive support get too far ahead of the pack and you could struggle (1,2,3,4,5).

There is a good marketing angle (6,7).

And, heck, it might even make you feel better (8,9).

To be honest: When I look at my buying decisions at work I haven’t gone out of my way to buy greener at work. The only thing I can recall doing recently is ticking the box marked “plant a tree for every server” on a hosting deal.

A few years back we did some work with Oxford University. They were interested in how procurement auctions fitted into the bigger auction picture. We were interested in finding out how in line with auction theory we were. I was looking through my old material from that study and I want to share a neat graph from that work that models how expected savings rise the more suppliers you include in an auction.

If you assume that all suppliers in a marketplace have a price evenly distributed between a low price and a high price then, on average, the savings you would get increase as shown in the graphic above. This helps emphasise that 4 bidders is a good number for a reverse English auction, as I have often said. But one thing to clarify: this is a model - you can do better than the model by ensuring that when you select potential suppliers that you are selecting suppliers who have a lower price rather than selecting suppliers at random from the marketplace.

Two things caught my eye this week on the ongoing love/hate relationship between IT and Procurement.

IT doesn’t like Procurement

An article in Computer Weekly, 10 June 2008 print edition under the title: Procurement teams fail to serve IT. It reports on a talk given by Andy Kyte from Gartner. Some quotes from the piece:

Andy Kyte said that some businesses spend as much as 90% of their IT budgets on third-party suppliers but fail to get good value for money. Kyte said that IT procurement teams often act as if the only stakeholder they work for is the finance departments, and this is the reason why many deals do not add value and even lead to projects failing.

And, directly quoting Andy: “There is an obsession with cutting costs in IT procurement, but IT is about ensuring a better quality service to users.”

You’d expect Andy Kyte to know his stuff when it comes to procurement. After all, he’s featured here at AribaLive 2005.

Procurement doesn’t like IT

Which brings me to the this posting on the Ariba blog about Software As A Service vs IT. Here’s one quote: “it seems clear that IT’s tight grip on all things digital is gone and end users are winning the war.”

Which war? Justin goes on to explain:

What business user can survive without access to SaaS applications like WebEx or Salesforce? After a long battle over letting those and other apps through the network gates, the end users have won. IT simply can’t hold their end users back, strangling their productivity as more and more critical applications move online.

So can we ditch the stereotypes?

The stereotypes are there in full effect: From IT’s perspective, procurement is only about cutting costs. From Procurement’s perspective, IT is a gatekeeper which prevents users from doing business effectively. Sure there is some truth to both of those stereotypes. Yet at the same time there are CIOs who are looking at ways to break down information barriers within and between enterprises just as there are CPOs who are looking to generate value beyond unit price savings. From what I’ve seen in my professional life so far - which has touched both IT and Procurement - the similarities between the functions are greater than the differences.