Debbie Wilson

This new research (subscription required) answers the most common e-procurement-related questions that end users are asking Gartner.  Sample questions include how to maximize the ROI for e-procurement, how to drive user adoption, what to expect if you are integrating a best-of-breed solution to an ERP(s) and whether, for public sector, funding the initiative through supplier transaction fees is a good idea.

I had an interesting client call yesterday that reminds me that the flexibility of a SaaS subscription can work both in favor of the SaaS vendor (hey, you don’t have to have a capital budget for us . . . just a bit of operating funds!) and against them.  (Hmmm [says the buying organization] we really must cut back drastically and hey, are we really getting enough value from that solution?  It’s happening . . . . . .

I find a strikingly curious conundrum happening in procurement automation.  There has been a well-known, long-term challenge with the usability of applications in e-procurement, e-sourcing, etc, and clients have begged for quicker screen refresh times, fewer clicks and more intuitive screen lay-outs.  But what I’ve observed recently is that when vendors try to respond to this – procurement complains.  Why?  Because they are afraid their stakeholders won’t like the new UI, problematic as the old one may be, it’s something they are used to.  So, the result is, buying organizations are often more likely to put off an upgrade that involves a UI change.  And the root cause for this?  I suspect that is the tendency of procurement to make usage of systems “voluntary” – and when users have to learn a new interface . . . well here is another reason why I strongly advocate that buying organizations require the use of procurement applications.

I am just wrapping up a tour of several European cities – including Paris, Geneva, Lausanne, Frankfort and Vienna.  It’s always a pleasure to visit clients here but this trip has been especially gratifying.  In past trips, it has generally taken a fair amount of time to work through terminology and concepts with clients so we can have a conversation with a common understanding. For example, I’ll never forget the amazing amount of effort it took eighteen months or so ago to level set with a large European energy company.  

This year, I find our end-user clients are increasingly speaking the same language.  Whether Austria or France, people know what e-sourcing is, and they realize that there is a lot more to e-procurement than electronic invoicing.  How refreshing – the world is really getting smaller. 

I’m particularly intrigued with the EU Peppol project – which has great aspirations to deliver a single data model for purchase order documents and for supplier “dossiers.”  The goal is to facilitate e-procurement across borders.  Good stuff and I am glad to have the opportunity to catch up on European procurement automation trends.

You can pretty much assume that when I haven’t blogged for a while – something is up.  That has certainly been the case over the last month, as I have been buried with calls from Ariba customers of older on-premise products version 8.2 and 4.4 and older – asking about their options now that Ariba has formally ended support for these products.   Published newly this week is my note on the subject – (subscription required).   The whole situation is a good reminder to buyers to carefully review vendor contracts before signing them.  Its also a good heads up to vendors that it is in your best interest to help customers plan as far in advance as possible for upgrades.

I’ve been reading the Wall Street Journal (WSJ) ever since my undergraduate days – in the ‘80s, when the newspaper was assigned as reading for my Economics 101 class.  Since then, it’s been a staple of my life and a way to keep in touch with the world while taking a break from the luminescent blue screens of the seemingly ever-present computers and TVs.  I was one of many that wondered what would happen when Rupert Murdoch, a colorful media mogul that counts the Fox News Channel and the tabloid paper Star in his holdings, acquired this venerable publication.  Since then I’ve witnessed the addition of a sports section and a weekly crossword to the WSJ, along with a continuation of fair and honest reporting.  Clearly, if you are a business person but need to cut back your reading to one paper, the WSJ hopes it will be the one.  All it needs now is Dear Abby and the comics.  

Nothing however prepared me for the shock I received in the mail yesterday when I opened a letter from the Wall Street Journal.  “Renewal Savings Notice,” it proclaimed, along with an offer to add a year to my subscription at the wonderful price of $8.49 per week.  That’s $441.48 per year – almost enough money to buy both of my younger sons a season pass at their favorite ski area – and nearly three times the amount I paid last December for a year subscription – $149.00.  (And yes I know this because I tired years ago of publications counting on me to forget that my subscription is not yet up for renewal, to get me to ante up for another year or two of money way ahead of time.  I track this stuff.)  

My first thought was wow, I guess they needed to raise the prices – after all it is common knowledge that the newspaper business is fighting a mighty battle to survive.  Even the local Boston Globe has undergone turmoil when its owner, the New York Times Company, recently demanded that unions agree to $20 million in cost savings or else it would shut down the paper.   But a 300% increase? 

This morning I thought I’d see what the WSJ is charging for a subscription, if you order new through the website.  Well here was the greatest surprise of all.  The great rate offered online is $2.69 per week –$139.99 per year-  for the exact same thing.  My husband says to me, well that’s just the introductory rate – they won’t give it to me.  Well he may be right, but heck I’ll pay my neighbor $50 to subscribe on my behalf and still save $252.  Maybe I’ll even take her out to lunch too.

What’s going on here?  On reflection, I’m guessing that the WSJ was hoping that I would re-up subscription and just submit the bill to my employer.  Or maybe they figure this approach is the way to figure out who is just going to pay and move on.  Gosh, reminds me of business class versus coach airfare – where there is also often a 2x – 3x premium for folks willing to pay it.  I admit, I’m small and so coach is not a big deal for me.  If I were 6’ and 250 pounds I’d probably feel quite different. 

But what about the WSJ?  Will businesses fall for it and pay 3X the price?  I know one thing for sure . . . . I won’t be, and I’m not going to just pass the buck to my employer either.  And I hope my procurement colleagues will consider trends like this when looking for cost savings.  Figuring out what’s behind a curious pricing schema can be a very productive way to drive savings.

My colleague and friend Andrew White was kind enough this morning to send me a link to a very interesting article in today’s Financial Times:  When Procurement is a Matter of Life and Death.  I think it’s a good article from the standpoint of bringing up that procurement need not be a backwater for “little people.”  It’s a wonderful place to be for capable people that are fascinated with how to build a top-notch, innovative supply base while simultaneously keeping spend to a minimum.  I’m really glad that people are more and more broadly recognizing the important and strategic contribution procurement can make to the organization.  

 But the article also demonstrates the continued lack of understanding of what procurement does.  Lost tanks?  Procurement BUYS things – including tanks – but I’ve never seen the task of choosing where to keep things or setting up an inventory system that effectively tracks it location as in-scope for procurement.  Procurement’s job ends when the purchased items or services are received.  And a helicopter with a kitchenette?  Procurement doesn’t design the products it buys – at most procurement would work with suppliers to facilitate input into design, not decide what features to put in.  

 Someday I hope to read articles that blame procurement for things that really are their fault – such as picking unduly risky vendors, not addressing supplier performance issues, or paying too much for what they buy.  And until then, I guess I’ll be glad to settle for procurement increasingly getting the attention that it deserves.   

It’s hard to imagine Emptoris without Avner Schneur. When I think of Avner, I think of passion, intensity and drive.  I have no doubt that Emptoris has been a survivor of the long and winding road of B2B evolution largely as a result of Avner’s work.   

There have however been signs of trouble at this pioneering company over the past year.  Last year’s disclosure (that came as a result of the Ariba patent infringement lawsuit) that Emptoris’ revenues were much lower than the analyst community had been left to believe were quite unsettling. Even more surprising was the fact that Emptoris was no where near profitable (at least not in 2007), which given its size and age, it should have been.  It is not a good sign that Emptoris was not able to get another round of funding from its existing investors last December when it had to pony up $7 million in damages to pay Ariba.   It also appears, from my interaction with prospects, that this year Emptoris hasn’t been winning as many new deals as some of its competitors.  My guess, and this is my pure speculation here, is that Emptoris’ new owner, Marlin Equity Partners, wasn’t too pleased with the performance of the company this year and as a result . . .  the search for a new CEO ensues.  

What will Emptoris be like without Avner?  Will the next leader help it thrive, grow, and improve profitability?  Maybe.  Will the vendor continue as a leader in the strategic sourcing space for the next few years?  Probably.  Will Avner be back, in one form or another, someday?  It may take ten years, as it did for Steve Jobs to return after being pushed out by Apple’s board of directors – but my prediction for Emptoris is – definitely.   And in meantime, I hope Avner takes some time to contemplate what skills and attitudes he needs to hone to provide leadership for a larger company.  

Procurement spans a rich and diverse range of activities.  The variety of tools available to enable procurement activities and expanding and maturing at a heightened rate this year, due to the widespread need to cut costs.  This signature Gartner document type profiles 26 different procurement technologies, detailing for each the current maturity level, the benefit rating, the current traction, and the expected time to maturity.   A subscription or purchase is required for access. 

Profiled technology elements include:

I’ve really noticed this year how much licensing strategy affects a vendor’s prospects.  Here’s just a few of the more interesting tidbits:

·        Some vendors charge on the basis of named seats – but they enforce a minimum price.  So if you get a proposal for a very small implementation – your seat price can go through the roof.    I’m seeing some of this going on in the strategic sourcing application – and it is hurting the vendors that use this approach.

·        In procurement, many solution types involve both professional (power) users and casual (approver, read only, project team member) users.   Vendors that do not allow customers to fully support both types of users – by making it cost effective to enroll as many casual folks as possible – incentivize their customers to limit access tot the solution and thus sub-optimize their implementation.

·        Believe it or not – the e-marketplace model is alive and well in some markets – for example- services procurement.  A very popular “licensing” strategy in this market pushes the charge for usage onto the suppliers – which in turn allows the buyer to minimize its investment to adopt this solution type.  This ability to push the costs onto the supplier is turning out to be a major success factor in the market.   

·        And what about license charges based on total spend?  What if your spend goes down, do your fees go down?  

Just a few things on a lovely August day to ponder . . . .