Debbie Wilson

A news piece on a Safeway Inc. Purchasing manager pleading guilty to receiving bribes in exchange for “steering contracts for processed tomato products to SK Foods rather than industry competitors” caught my eye today.  According to the article, Michael Chavez of Fremont, California faces up to 20 years in prison and a $250,000 fine.  While Chavez may not get the maximum penalty, it is wonderful to see that receiving kickbacks is a) getting big attention, and b) resulting in some very serious consequences.

Kickbacks have long been the bain of the procurement profession.  I remember in the ‘80s talking to a sheet metal shop owner in New England area who said that he avoided working with old-timers in procurement because so many demanded something on the side.  I’ve seen other evidence of problems throughout my career.  

Perhaps it goes without saying that strategic sourcing solutions can help with this problem – I doubt that Mr. Chavez had the sort of nice, auditable history of competitive bidding and award rationale – like a strategic souring application offers – to document his indiscretion.

I never dreamed that I would devote my professional life to a career in procurement.  Heck I hardly new what procurement was when I took a job as a junior buyer in 1984 after following a very beguiling man to Boston and finding that my newly minted, prized business degree from Miami University (prized in the Midwest, that was . . .) meant little in the East.  In fact many people assumed I went to school in Florida – well no offense to my fellow Floridians but . . well . . .

Anyhow, it’s been an incredible and rewarding journey to be in procurement and given the advent of a new decade it ‘tis the perfect time to reflect and predict, no?  

 In 1990 – I was a few months into a job at Wellfleet Communications – an Internet start-up that won Fortune Magazine’s #1 growing company three years in a row.  It was an exhilarating place to be, and especially to be in procurement, because our buying power was rapidly increasing and most suppliers were keen to do business with us.  Our challenges were coping with growth; securing enough DRAM to meet demand; and deciding whether to outsource domestically or offshore. That decade, we considered an investment in EDI but opted instead to let our BPO partners provide it; we were an early implementer of bar-coded VMI. And as for procurement software – we used ASK MANMAN at first but later put in SAP. 

One hot new software product we bought, in the mid ‘90s, was Aspect Development’s part management system.  It was so helpful that I thought I had died and gone to heaven.  I bought some Aspect Development stock instead and made a killing.  (This was post-purchase – so nothing funny going on here!)  Another interesting thing that happened that decade was when we chose SAP, I was asked by our systems integrator to spend some time detailing what our processes were and where we thought software could help. Absolutely nothing came of this work – much to my frustration – but in hindsight – it got me thinking how procurement might benefit from all this innovation. 

Fast forward to 2000 – my business, Deborah Wilson Consulting (yeah I know – zero creativity here, sorry!) had taken off and I was enjoying consulting to a number of large businesses.  One of the most interesting gigs was helping the City of New York specify a custom e-procurement system.  This work made me respectfully realize just how much really goes into these applications.  This was also about the time that I launched my website – www.purchasingauatomation.com, to share some of the insights I was learning and to market my services.  I also began writing about the software vendors that were gaining traction in the market – names like Commerce One, i2, Ariba, FreeMarkets.  I was so impressed with FreeMarket’s business model that I remembered making a mental note to apply for a job there if I ever got tired of running my own business.  

But in 2000 – my primary impression of the market was that most products were greatly overhyped.  Great and as exciting as they were, the available applications were a far cry from the complete solutions that many were marketed to be.  I thought however that the market would develop fairly rapidly- and that by 2010 I should be prepared to do something different.  Well surprise, there’s still plenty going on and plenty more to happen before this story is finished.  

So what will 2020 bring?  My guess is that many of the names we consider to be the “gold standard,” just as in 2000, will be long gone – as a result of many years of acquisitions, partnerships and business realignments to come.  But on the other hand, I think by 2010 we will finally see that anticipated day- the day that good procurement software is a widely available, widely accepted and well understood as a critical asset for procurement, just as Google is today for search.  And maybe, finally, but I’m not counting on it, I’ll need to think about turning my attention to something else besides procurement.     

Your turn – I’d love to hear your reminisces!   

And of course, happy New Year!

Understanding Gartner’s Finanical Ratings of IT Vendors (subscription required) details how Gartner baselines vendor’s financial performance .  Nope its not procurement, but yep its an updated version of the model developed on Cool Tools for Purchasing.  (Alright, I admit it, I’m tickled to see this model more broadly adopted!)   The basics of the rating include cash flow from operations,  revenue growth, profit margin, and the current ratio.     The research note describes the rating methodologyand details the rating calculations.   Although Gartner (and Cool Tools) use it for rating IT vendors, the model works for businesses of all types.

This pair of notes (subscription required)

Develop KPIs for Procurement Processes

Top Procurement Processes

describes the top procurement processes – spending analysis, purchasing, strategic sourcing, and supply base management – and offers recommendations on how to assess their effectiveness.

Critical Capabilities for Best of Breed E-Procurement Vendors

Critical Capabilities for ERP-Based E-Procurement Solutions

This pair of documents (subscription required) rates e-procurement vendors against 11 major capabilities including fixed asset acquisition, internal store support; basic purchasing functionality; invoice matching; catalog support; specialized casual user interface; supplier collaboration; public-sector functionality; extended configurability; heterogeneous integration; and multisite support.  Rated vendors include Verian Technologies, SciQuest, Puridium, Proactis, PurchasingNet, Periscope, Perfect Commerce; Ketera Technologies; ePlus; Elcom; Coupa; BirchStreet Systems; Basware; Ariba; Epicor; SAP; Unit 4 Agresso; Lawson; Oracle; COA; Quadrem; Hubwoo and COA.

I took advantage of a bit of quiet time this lovely Christmas Eve to update the heat map for my end-user client interactions this quarter.  Here are some interesting take-aways: 

• I spoke directly with eighty-five unique end user organizations, up from 82 in Q4 2008
• Hottest topics are Procure-to-pay (level from Q3); enterprise contract management applications (up slightly from Q3); and strategic sourcing solutions, both suites and stand-alone applications (up from Q3). 
• Coolest topics include services procurement (down from Q3); procurement MDM (level from Q3); and vendor vulnerability assessment (down slightly from Q3).  

Some thoughts on the results – it seems that procurement groups have moved out of “panic mode” and a focus on cost cutting strategies, vendor vulnerability, and utilizing e-procurement to slow down spend.  Now the view is towards spending analysis, strategic sourcing suites and supply base management – solutions that deliver longer-term, sustain able costs.  Big dollar, large project topics like procurement MDM remain on the back burner.  All in all – I feel optimistic that these statistics point toward a recovering economy, and an environment that isn’t “abandon procurement, refocus on CRM,” but more like “Let’s build on our investment.”  What a lovely Christmas present for the procurement profession!

I had the privilege of chatting this week with Mikkel Hippe Brun, Technical Director of PEPPOL (Pan European Public Procurement) and chief consultant at the Danish National IT and Telecom Agency.  Brun is playing a key role in the PEPPOL initiative – which has a goal to drive purchase transaction document exchange online for public sector organizations in the European Union.  The key proposition is to create a single standard for purchase-related documents, leveraging UBL (universal business language) and UN/CEFACT and OASIS standards.  The underlying belief is that collaboration can be support in large part by the exchange of business documents. 

From my perspective, the PEPPOL project is a monumental undertaking, facing many barriers/issues, including:

• the established and widespread use of multiple e-procurement data formats in the markets (such as cXML and OCI);
• the increasing use of portal technology to support purchase interactions,
• and the adoption of multienterprise software applications such as reverse auctions and strategic sourcing solutions. 

To sum it up — seems like the market today is more about “any data format” and translation as a service and multienterprise applications then about pushing collaboration into nice neat electronic boxes.  This does not bode well for Brun’s idea.

 However Brun really got me thinking.  Why couldn’t we replace “logging into a customer’s portal and inquiring whether an invoice has been accepted” or “logging into a customers’ portal and viewing a request for quote (tender)” TO sending a standard electronic message requesting invoice status or downloading an RFP?  One of the value propositions, according to Brun, would be breaking down the tower of babel that the North American portal and “have it your way” any data format is creating.  Its definitely food for thought . . .  .

In between baking pies, eating turkey, watching hockey (go Monarchs!), playing tennis, and spending time with my family . . . first pass ratings are underway for the updated Magic Quadrant for Strategic Sourcing suites.  Curits Fitch, Iasta, SAP, BravoSolution done . . . . . commencing Zycus . . . .

As we approach the holiday season, don’t forget to take some time to relax and enjoy family and friends.   This priceless video from Xerox says it all – remember poor little Billy!

http://www.youtube.com/watch?v=CXFEBbPIEOI

I hope Kirit Pandit, an industry professional that I really respect – accepts this blog posting as a semi-apology or at least a firm clarification of a comment I made to him recently.  My fairly caustic remark was about someone who wrote a book on procurement technology (I’m not naming names or the specific topic here sorry) and I stated that this particular work was much a more of a poorly conceived attempt to further this person’s career along than an authoritative or worthwhile contribution on the subject.  

Anyway, I’m working on a research note on top processes in procurement – and as I go through my final edit I have referred to Pandit’s book, “Spend Analysis, the Window Into Strategic Sourcing” for precise language on OLAP and spend cubes.   This isn’t the first time I’ve used Pandit’s book as a reference, and I recommend it as good material for anyone who wants a better understanding of spend analysis.  

So Kirit, my follow-up comment that the barb was not intended for you was sincere, and here is my public apology to prove it.  And to my readers – here’s a disclaimer – Pandit works for Emptoris, and my recommendation of the book should not be confused with an evaluation of Emptoris’ spend analysis product.  That bit of work will be published in the upcoming refresh of the magic quadrant for strategic sourcing suites.