My Christmas Wish
It sure an interesting time to work in procurement. There are active, passionate discussions on how public sector should buy, whether collaborative sourcing and GPOs really work, and whether reverse auctions are dead. My biggest problem with procurement transformation is the lack of ability to effectively, concretely, REALLY measure results – to compare and contrast different approaches. For example, today, I was asked by a client – “How much does it cost to run an event?” Great question, but being a natural contrarian, my first thought was, “How much does it cost when you DON’T run an event?”
Here’s another question – should public sector source strategically? The logical answer to this question at minimum means answering many others - how will it impact employment and disadvantaged businesses? Can systems/personnel support it? How do you measure success? I’m naturally inclined to think about cost for procurement as a percentage of total spend – but that can lead to conclusions like NO procurement is nirvana.
So my Christmas wish is a test tube where clients can try different approaches – like a blind test – with the same conditions – market conditions, event volume, etc —- and source tactically, run an auction, negotiate a year agreement, negotiate a 5 year agreement, and then see what happens. Until Santa delivers, I guess we’ll have to continue to rely on logic, reason and best practices to guide us.
POSCO, a $35 billion steel maker headquartered in Korea, announced this week that it is rolling out what appears to be a full source-to-pay procurement solution for its Vietnam operations. This is very interesting news to me because procurement application adoption has been rather slow in AsiaPac, outside of Australia. The announcement was odd because there was no vendor name in it. I did a little research and found this article from 2002 that explains some things. According to the article, POSCO had just spent $155 million and 30 months on phase one of a technology development program to support supply chain management, budgeting, standard cost management and e-procurement. Clearly, in 2002 we did not have the type of packaged applications we have today. But $155 million . . . wave 1 . . . . wow. Maybe POSCO should consider doing with Italian Mobiliare did with BravoSolution – which his to offer the technology for sale to the broader market through a subsidiary.
This isn’t exactly hot news – but a very interesting tidbit that was published in August and is still worth pondering. CVM Solutions announced that it had noticed a very Darwinian effect in the supply base of its Fortune 1000. According to the press release, the study found that only 309,790 or 6% of the 4.9 million unique suppliers in CVM’s database were used by more than one Fortune 1000 company. This number is down 15% from 366,356 in 2008. One of CVM’s conclusions from the study is that Fortune 1000 spending with small and diverse business has been under pressure. Another possible reason for this drop is that larger organizations are getting more effective at rationalizing their supply bases. Both insights may explain why we’ve heard lately that US government contracts have been stipulating larger percentage spending with small and disadvantaged businesses.
Selectica announced that it has changed out several of its board members. Those joining the board include Michael Brodsky, Michael Casey, and Michael Gullard. I guess I could make a really bad joke here and observe that having the first name Michael is a valued characteristic at Selectica! Seriously, two of the three newbys bring enterprise software application market experience, which is good news for Selectica customers.
I’m noticing a real pick up in business in the general-purpose contract management application space. We’re getting a lot more calls from clients who are anxious and ready to buy. This is a good sign that folks are getting less willing to settle for very simplistic “contract management software” as a feature or very lightweight add-on to another solution.
M ikrofax has done it again – they’ve announced another new Middle Eastern customer. This time it’s UAE’s Crescent Petroleum that has bought Mikrofax’s e-procurement solution.
Research in Progress
Cathy Tornbohm, Mickey North Rizza and I are finishing up an in-depth note on the recent announcement that Ariba is selling its sourcing services to Accenture. As part of the due diligence for this piece, I read through my thick folders of financial reports. The FreeMarkets acquisition seems like just yesterday, but also like forever ago. Even though the Accenture deal involves spinning out much of the services arm Ariba got then, it’s clear that the FreeMarkets acquisition has been beneficial for Ariba on multiple levels.
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