10th Annual IBX Purchasing Executive Summit Keynote Focuses on Social Media’s Influence on the Purchasing World

When I was asked to both speak at as well as moderate the 10th Annual IBX Purchasing Executive Summit in Stockholm in early October, it represented what is quickly becoming a busy fall speaking schedule that will also take me to places such as the United Kingdom and British Columbia.

The focus of my Keynote will be my latest book “So Act Already – The Unsociable Business of Social Networks,” and how social media is influencing the world of procurement from both a technical as well as relationship building perspective.

In this regard, Washington Dispatch No. 7: Roundtable Discussion on Transparency and Technology, which was an excerpt from the white paper that came about as a result of the Transparency in Government Procurement roundtable discussion at the end of April in Washington, provided a highlight as to social media’s growing importance.

Featuring a guest panel that included the former CIO of the US Federal Government, Karen Evans, IACCM Founder and CEO Tim Cummins, 30 year public sector veteran and author of the seminal Towards Tesco paper Colin Cram, and Washington-based expert author Judy Bradt, social media was viewed as an ideal vehicle to address a number of challenges.

Specifically, the question surrounding the effective utilization of technology to “build the collaborative business relationships that leverages improving skill sets and maximizes service delivery.”

According to Bradt, the foundations for addressing the above challenges are already in place and especially strong in the United States, as demonstrated by the recent announcement by the DoD that they were “formally encouraging the use of social media” through what they refer to as a “balanced social media policy.”

The DoD decision is without a doubt, very interesting given past tendencies on the part of both public and private sector enterprises to either limit or restrict outright employee access to social media during business hours.  This change of heart according to Bradt, will further enhance what she referred to as an already “rich business culture” that “based on the power of existing associations to bring stakeholders together” will further strengthen the needed relationships and open the required channels of collaboration within the public sector procurement world.

Bradt’s views certainly have a great deal of merit as web-based “technologies” such as LinkedIn and Facebook, and services such as Twitter are platforms within which a growing number of buyers and vendors are beginning to interact.  What is telling is that some of these vendors are actually looking beyond the communicative advantages of the group development and blogging venues associated with social media, and are extending the functional capabilities of their core solutions through a direct social media interface.

In an ironic twist, free or low-cost social media collaboration platforms may very well become the transformational bridge between the costly ERP-centric type applications of the past, and the steadily emerging on-demand SaaS solutions as a result of their dramatically reduced costs and shortened implementation periods.

This of course falls perfectly in line with Karen Evans’ assessment that government can no longer “buy products,” but should instead focus on acquiring “services and relationships.”

While the IBX event is an invitation only conference, we are working at gaining the necessary permission to broadcast a number of the live keynote addresses (beyond mine of course), through the PI Window on Business, which is a featured show on the Blog Talk Radio Network.

Stay tuned for further updates leading up to the conference.

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Outsourcing Revisited: Is It A Viable Strategy?

According to recent studies, two-thirds of all outsourcing programs fail to achieve the expected results. In fact some studies even suggest that this estimate is low putting the number as high as 90 percent.

And this is not a new phenomenon.  Industry reports and articles between 1995 and 2007 tend to suggest that little progress has been made with a strategy that appears to be long on promise but short on results.

This leads to a number of questions the most important of which is simply this . . . is outsourcing a viable strategy?  And if it is, why the dismal track record and, how can an organization ultimately make it work?

The above are the opening comments from a show we aired last year with Phil Fersht who at the time according to AMR’s Mickey North Rizza, was the firm’s “Outsourcing Guru.”

Fersht, who has since left AMR – a firm he joined in January 2008 – to pursue his Horses for Sources vision, provided some interesting insights into the reasons behind the above referenced trends.

That said there is still a great deal left unanswered in terms of the practical application and enduring benefits of an outsourcing strategy.

It is this practical, real-world view of outsourcing that makes today’s program most interesting, as I welcome IACCM’s Founder and CEO Tim Cummins and 30 year public sector veteran and author of the seminal “Towards Tesco” paper Colin Cram, to talk about outsourcing from the client perspective.

About Tim:

Tim Cummins, CEO IACCM

Tim Cummins is CEO of The International Association for Contract & Commercial Management (www.iaccm.com).

Tim spent many years as a commercial manager and executive, working in the banking, automotive, aerospace and technology industries. His work has taken him to more than 40 countries and he has lived inthe UK, France and the United States. Tim’s career included a period on the Chairman’s staff at IBM Corporation, in a group studying the business impacts of globalization and options for corporate restructuring; he then led the reeingineering of IBM’s worldwide contracts and contracting organization. Tim was the founder of IACCM and has led its development since incorporation in 1999. In this role, he acts as an ambassador for change in the way that trading relationships are structured and managed, and provides advice to member companies and public sector agencies on how to improve contract and relationship outcomes.

While Tim has been a guest on shows such as the PI Window on Business on Blog Talk Radio, IACCM has received extensive industry coverage including appearances by Vice-Chair Tim McCarthy as a guest panelist on the two-part segment (Is The Traditional Association Model Dead? Part 1) – Air Date, April 9th, 2009 & (Is The Traditional Association Model Dead? Part 2) – Air Date, May 21st, 2009.

To learn more about IACCM Click this Icon

About Colin:

Colin Cram in Action

Colin Cram has a successful procurement, outsourcing, conference programme and training consultancy business, Marc1 Ltd. An Office of Government Commerce accredited consultant, he is a regular speaker at national and international seminars and training events, lectures on university degree courses, is a regular contributor to professional journals and is an associate of Manchester Business School. He has been a member of EU working groups on Procurement, Innovation and Sustainability. He provides consultancy services to public and private sectors, including how to secure business from the public sector.

Colin Cram, a Fellow of the Chartered Institute of Purchasing and Supply, held senior procurement positions in the public sector for over 30 years, including central government, higher education, scientific research and local government. He was responsible throughout for initiating and implementing innovative strategies for procurement, shared services, outsourcings and organisational re-engineering. He developed and successfully implemented strategies to tackle monopoly supply situations. In creating several leading edge procurement organisations and collaborations, he was responsible for third party spends of up to £7bn a year. Savings from his initiatives exceed £1bn pa.

Colin’s most recent public sector position was as Director and founder of the North West Centre of Excellence. This led the drive for efficiencies through collaboration, joint procurement organisations and better practice across 47 local authorities. Its scope included procurement, construction, shared services, health and social care and the national lead for local passenger transport.

Remember to use the following link to access both the live and on-demand broadcast “Outsourcing Revisited: Is It A Viable Strategy?” which airs at 12:30 PM EST on Monday, August 2nd on the PI Window on Business on the Blog Talk Radio Network.

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Conrad Black’s “sunset” lament: “I am big. It’s the pictures that got small!”

As I looked at the picture of Conrad Black arriving in a limo at a rented ocean side mansion in Palm Beach, Florida following his release from prison, I was immediately reminded of a line from the 1950 classic movie Sunset Blvd. when the iconic Norma Desmond reflecting on her career in silent pictures dismissed talkies with the line “We didn’t need dialogue. We had faces!”

photo from CBC News (Hans Deryk/Reuters)

If you look closely at Black’s profile one cannot help but notice the slight smile and underlying smug arrogance of a man who undoubtedly views himself as a brave knight unjustly banished from his fiefdom by a cruel and largely uninformed legal system.

After all the only thing that Conrad did wrong was quite simply . . . be Conrad.

Think about it for a moment. The actions that landed him in court, and ultimately in jail while different were nonetheless executed with the same condescending aplomb that in 1978 enabled him to “acquire” from the widows of Ravelston Directors Bud McDougald and Eric Phillips controlling interest in the company.

Despite the outrage that he had somehow taken advantage of these ladies in mourning, Black’s reward was Ravelston.

Let’s move ahead to 1981, where after one of his companies (Norcen Energy) failed to disclose that it’s board planned to seek majority control of Ohio-based Hanna Mining Co., the SEC charged Black with “filing misleading public statements.” The charges were subsequently withdrawn by “consent decree” after Black and Norcen “agreed not to break securities laws in the future.” Naughty, naughty Conrad.

In 1984, Black deemed that the pension plan surplus of Dominion Stores Ltd. was the rightful property of the company, and then proceeded – without consulting plan members mind you – to withdraw over $56 million. Must have had big plans for the weekend?

The supreme Court of Ontario ruled against the company expressing the opinion that while the most recent language in the plan suggested that the company may in fact own the money, the “original intention was to keep the surplus in the plan to increase members’ benefits.”

The decision was then appealed all the way up to the Supreme Court of Canada which eventually upheld the lower court’s decision.

As much as possession is nine-tenths of the law, perhaps to Conrad ownership is also a state of mind with the mere morality of the masses being nothing more than an inconvenient reality.

The fact is that the charges and ultimate conviction of Conrad Black has more to do with shifting societal mores in which his overabundant avarice and feeling of entitlement offend those of us who he considers to be mere mortals. In essence it is we who have changed and not Black, and as a result the manner in which the law was applied to punish him was more in line with our outrage than was it with true legal principles.

The court proceedings reminded me of the Bill Cosby snowball in July story. The one where he had returned to the family freezer in July to retrieve a snowball that he had stored there in January for the sole purpose of exacting revenge on a friend when he least expected it – re a snowball to the head in the middle of summer – only to discover that his mother had thrown it out. What is a kid to do? In Cosby’s case, he went up to his friend and spit on him.

In Conrad’s case, the people tried to hurl at him the equivalent of a legal loogie, which was as it turns out an inappropriate application of the law.

So now Conrad is free. No doubt feeling somewhat vindicated, and being the picture of consistency throughout the entire ordeal, he can now state in Norma Desmond-type fashion that “he is still big . . . it is the rest of us who have gotten smaller.”

With the American legal system lying face down in the proverbial pool, it would be hard to argue with him. Of course, it has always been hard to argue anything with Black.

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Europe seeks access to lucrative Canadian contracts (but what does it really mean to Canadian business?)

Meetings in Brussels between the EU and Canada this month ran longer than expected as negotiators considered allowing European bids for public works contracts in Canada worth an estimated $100 billion a year . . . European industry wants access to Canada’s regional and local public works contracts, from provincial energy infrastructure to municipal water works and hospital equipment.

from Public contract prospects spur EU-Canada trade talk by Juliane von Reppert-Bismarck, thestar.com (July 26th, 2010)

As was the case with the Buy American exemption negotiations this past fall, local public works contracts at the provincial and municipal level are once again being dangled as an inducement to further Canadian Trade policy. This time of course, it is the European Union that is on the other side of the negotiating table.

The stakes according to reports, is that the two sides estimate that “a deal would within seven years generate additional annual income of about 11 billion euros ($14.2 billion) for the EU and 8 billion euros for Canada.”

From the Canadian perspective an agreement with the EU would help to offset a dependence on what was referred to as a “shrinking demand” for Canadian products in the United States, while opening up new avenues of revenue in the EU in key industry sectors such as auto parts, insurance, beef, grain and pork.

There are of course the pre-requisite obstacles to overcome such as the EU’s concern that with Canada being part of the North American Free Trade Agreement, a corridor for “cheap non-Canadian foods and goods” could flood the European market and put local producers out of business.

Canadian opposition centers on concerns that “opening up public procurement contracts such as for municipal water works to private providers, or extending EU drug patents, would erode key social services.”

All this being said, what does it mean to Canadian-based suppliers who either have contracts or are pursuing public works contracts at the provincial and municipal levels?

Even more interesting, and as we discovered during the Buy American experience, having access versus generating tangible revenue is clearly not one in the same. Specifically provincial and municipal decision-makers indicated that their first inclination is to always deal with a local versus foreign supplier.

This of course sounds good for Canadian business however, with municipalities such as Ottawa lamenting the steady decline in RFP response from the indigenous supply base, have Canadian suppliers already abandoned the public sector arena in favor of the potentially more lucrative private sector markets?

After all, let’s consider the recent announcement by the federal government’s procurement ombudsman Shahid Minto, that the Fed’s policies back in 2005 had “unwittingly” helped to create monopolies. Or the recent report that it can take up to 20 months at a cost of $86,124 (in Canada the time and money is equal to US estimates if not more), for a supplier to win their first government contract. These two factors alone may very well indicate that the only corridor in a Canadian/EU trade agreement is the direct, unchallenged path between EU suppliers and our government contracts.

We will be following this story as it develops over the next few months leading into the next scheduled meeting between Canadian and EU officials in October. Focusing on getting the definitive answers to some of the questions that we raised earlier, as well as examining the contractual differences that exist when a government does business with a foreign versus domestic supplier, this could very well turn out to be 2010 version of the Buy American story.

NOTE: This post originally appeared in the Contracting Intelligence Blog.

Seven Part Series on successful government contracting wraps up on a high note

Back in January when we aired the first episode of Judy Bradt’s acclaimed 7-Part Seven Steps To Success: Jump Start Government Contract Series, we had a clear objective  for both suppliers and buyers.

Judy Bradt

As a supplier you would gain the necessary insights to shorten the time-line between the response to government tenders, and the realization of tangible revenue.  As a government buyer, you would find the answers to why bid responses have been declining and with it the value in both pricing and quality of service.

Considering that on average it takes a supplier 20 months at a cost of $86,124 US to win their first government contract – information Judy indicated that isn’t made readily available by government small business offices – trimming both time and cost is an essential goal for suppliers and governments alike.

This is especially important for governments who have seen both their active supply bases and corresponding bid response levels decline dramatically over the past several years.

This is what made this last segment in the series on marketing so interesting.

While there are many contributing factors to success or failure in the world of government contracting, all of which were addressed in a succinct and usefully practical manner in the previous six parts, in what was perhaps a saving the best for last broadcast, Judy delved into the misconceptions surrounding how to effectively market to a government prospect.

Surprisingly, the majority of suppliers continue to make the mistake of investing so much into marketing materials while overlooking the most critical aspects of the sales and marketing process . . . the building of relationships.

Even though Judy goes into great detail on when and how to effectively utilize the many marketing tools that are available in terms of making meaningful inroads into the public sector arena, these only become effective when the supplier is looking to share true intelligence versus broadcasting their particular features, functions and benefits.

Only when a supplier has a firm understanding that non-branded information sharing is the first and most important step in establishing a true rapport, are they then able to use the aforementioned panoply of tools including Direct Mail, e-mail marketing, traditional and Internet radio, social media (re LinkedIn, Facebook and Twitter) to establish a meaningful connection with the government buyer.

In fact and as Judy alluded to in earlier discussions, this is the best and most certain way for a vendor to establish themselves both legitimately and transparently as a “preferred” supplier.

Once again, I would strongly encourage you to listen to the on-demand broadcast “Seven Steps To Success in Government Contracting: Marketing,” as well as all of the previous episodes through the Seven Steps to Success show page here on the Procurement Insights Blog.

About Judy:

As the Principal of Summit Insight in Washington DC, Judy’s been covered by national media including SBTV, ABC Radio, the Financial Post, Fortune Small Business, and Entrepreneur Magazine. From 1988 to 2003, Judy was the top specialist in US government contracting at the Canadian Embassy in Washington DC.

Leveraging her more than 20 years of experience advising more than 6000 clients on success in government contracts that collectively have accounted for revenues in excess of $300 million US, Judy will take us through her critically acclaimed “Seven Steps to Success” presentation. As a supplier you will gain the necessary insights to shorten the time-line between the response to government tenders, and the realization of tangible revenue. As a government procurement professional, you will find the answers to why bid responses have been declining and with it the value in both pricing and quality of service.

Watch for Judy’s new book “Government Contracts Made Easier” in the fall of 2010.

Series Sponsor:

One final note, I would like to thank our series sponsor Elcom, whose support of this exciting series is greatly appreciated.

"Building Bridges"

Elcom has developed a range of on-demand eProcurement and eMarketplace Systems for both Private and Public Sector clients around the world. The company’s flagship eProcurement application has been powering the award-winning eProcurement Scotl@nd Service since 2001 and is also an integral part of the Visa eMarketplace that links eProcurement and ePayment in a single, easy to use, service.

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Procurement ombudsman says Federal buying policy unwittingly helping to create monopolies

“A supplier taking all the work ultimately leads to a monopoly.  As the number of bidders shrink, service declines, and prices and profit margins creep upward, said procurement expert Jon Hansen, who runs a consultancy called Procurement Insights.”

from Federal buying policy raises alarm (Government unwittingly helping to create monopolies, procurement ombudsman says) by Kathryn May, Ottawa Citizen July 16th, 2010

Like the Carly Simon song “Coming Around Again,” it is interesting that just a few short years ago when I had made the above referenced statement it was generally looked down upon by government officials as being a lot of talk with little real meaning or substance.

After all, who could forget the Executive Director, Chief Information Officer, Treasury Board of Canada, Secretariat Bob Mornan telling me that everything I was saying, including my questions surrounding the award of a major contract to a vendor in which their promised savings could never be achieved, may very well be true but what was important is that the government followed bid procedures.

Ahh those were the days of the good old boys club when the Canadian Government’s oligarchical fraternity of ex-IBMers and the like would close ranks and politely snub their noses at both common sense and the rest of the world.

Bob of course has long since retired, and with him the memories of the golden days of the Canadian Way Forward initiative.  His legacy, and those who shared his arrogant sentiments, is that today the very tenets of Canadian government procurement in the first half of the decade have manifested itself in the recent announcement by the procurement ombudsman Shahid Minto, that the Fed’s policies back in 2005 had “unwittingly” helped to create monopolies.  Unwittingly?

Minto went on to say that the “market dominance by few firms may be an “unintended consequence” of the government’s 2005 decision to make standing offers mandatory for the routine goods and services bought by government.”

In the process continued the ombudsman “The government has inadvertently created the conditions (for monopoly),” and that “It’s not what the government intended to do and that’s why we think a review would be beneficial to see what the impacts are, including the unintended effects.”  Unintended consequence?  Inadvertently created the conditions and, unintended effects?

Perhaps Mr. Minto should visit the Ottawa Citizen archives for a story dated September 2, 2006 titled “Treasury Board reviews how PS fills top jobs: Treasury Board is reviewing a controversial program that has parachuted about a dozen high flyers from private technology and consulting firms into key executive jobs within the public service.”

According to the story, the “Treasury Board (was) reviewing a controversial program that (had) parachuted about a dozen high flyers from private technology and consulting firms into key executive jobs within the public service.”  Again IBMers (and the like) such as Mornan, Ken Cochrane and Dan Belanger, immediately come to mind.

Speaking from first hand experience, this tightly knit group as well as the others which infiltrated the government’s decision-making hierarchy was anything but unwitting, unintended or inadvertent in their manner and vision.  Surrounding themselves with sycophants or alternatively politically adept, practically neutered players such as Jamie Pitfield, where the government is today is by no means an accident.

The only real question is what took Minto so long to realize and then acknowledge the mess caused by these individuals.  Even more important, why the kid gloves in terms of the platitudes of incompetence?  I cannot help but feel that this is reminiscent of the Gerald Ford pardon of Richard Nixon.

In the most simplest of terms, Mornan, Cochcrane et al were nothing more than arrogant members of an exclusive club whose sole interest was being right versus actually getting it right.  Mr. Minto this, and this alone, is at the root of all your problems today.

Seven Steps To Success in Government Contracting: Marketing

“People Buy from whom they know, like and trust.”

During the previous six segments of this seven part series with expert author Judy Bradt in which we have talked about success in government contracting, this immutable truth has been consistently presented as a key tenet for effectively penetrating the government marketplace and positioning oneself for the greatest likelihood for winning business.

This includes winning what Judy has often times referred to as a legitimate and transparent preference with the buyer.

In this the seventh and final segment in Judy’s critically acclaimed Seven Steps To Success: Jump Start Government Contracts Series, we will examine what it truly means to market against this backdrop of interpersonal relationship building versus brochure distribution that list product features, functions and benefits.

Just a reminder that this entire series has been recorded and is conveniently available on an on-demand basis through the Seven Steps To Success Show Page on the Procurement Insights Blog (right hand index).

Remember to use the following link to access both the live and on-demand broadcast “Seven Steps To Success in Government Contracting: Marketing” which airs today at 3:00 PM EST on the PI Window on Business Show across the Blog Talk Radio Network

Series Sponsor:

"Building Bridges"

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Data Security: The Maginot Line of Contracting

“For those of us in contracting, we spend hours crafting clauses and negotiating terms which are mostly of limited honesty or meaning. Is this because we really don’t care, or because we are blissfully unaware of the truth? Companies simply cannot promise complete security of data or information management. It is an area of relative security and safety – and one in which we must become far more expert and knowledgeable.”

The above is an excerpt from a July 6th, 2010 post in Tim Cummins Commitment Matters Blog titled “Security – A Major Contracting Challenge.”

Besides the fact that Cummins is the Founder and CEO of the International Association for Contract and Commercial Management or “IACCM,” I often refer to his perspectives on contracting as he tends to look at the underlying mechanics if you will of a process that in many instances works against itself through the inclusion of onerous clauses that inequitably transfers risk to one party (usually the supplier).

This is why the issue of incorporating clauses into contracts regarding guarantees relative to “data protection, information security and disaster recovery,” may very well be as effective as the famed Maginot Line was in protecting France from invasion by a foreign enemy. We all of course know that the term Maginot Line has come to represent a belief in what is ultimately false security.

I think this is the point that Tim, as well as others have been trying to make. Specifically, by passing what has become a proverbial hot potato in the contracting world to suppliers through the inclusion of clauses does not in any way, shape or form acknowledge nor address the reality of the situation surrounding cyber risk. Even if a supplier were for whatever motivation, willing to promise an unassailable level of security and accept contractual terms in which they were to bear the lions share of responsibility for a security breach, any buyer would be foolhardy to walk away from such a contract in a peaceful state of oblivion.

Furthermore, and by not truly understanding the breadth of the risk with transacting business in an increasingly virtual world, neither the buyer nor for that matter the supplier will ever be able to effectively address the issue and in the process create a fair or balanced risk agreement.

As a means of providing you with some additional perspective on the real issues of information security, I will refer you to a May 7th, 2010 interview I did with Richard Stiennon, whose new book Surviving Cyber War examines in depth the major cyberattacks that have recently taken place around the world, and why the virtual world may very well be a defining global battleground.

Stiennon, who is the founder of IT-Harvest, an independent IT security analyst firm, and the author of the security blog ThreatChaos.com, and is also the holder of Gartner’s Thought Leadership award as well as being named “one of the 50 most powerful people in Networking” by Network World Magazine, shared some startling insights on what has already, and continues to happen on a daily basis while we, in a blissful state of Maginot comfort, toil away with our daily activities. (Note: use the following link to access the on-demand May 7th interview “Surviving Cyber War.”)

In the end, the need to address issues of data protection, information security and yes even disaster recovery when the unthinkable happens, are to be certain key elements of a well structure contract. The emphasis of course is on “well structured contract.”

Expertise in contracting therefore must extend beyond the mere unilateral imposition of terms and conditions on one stakeholder, that do little more than assign blame versus providing any tangible protection in which the risks are both acknowledged, understood and shared.

In short, its time to tell the Emperor (figuratively speaking) that he isn’t wearing any clothes . . . then begin to do something meaningful about it!

NOTE: The above post was originally published in the new Contracting Intelligence Blog.

Clarity in Contracting . . . More Than a Question of Automation (A Contract IQ Post)

“That said and in line with the above referenced October 30th, 2008 Procurement Insights post, Evans stressed the importance for government buyers to “put out has much information as possible to remove any barriers or perceived barriers for suppliers.”

While Evans stressed the importance of reaching out and engaging as many suppliers as possible, especially with large IT acquisitions, as it is virtually impossible for a buyer to “know what all the technologies are in terms of what is out there (in the market), the need for greater clarity in terms of articulating what service the government wants to provide and how it is different from what is currently in place or is known is crucial.

This according to the former US Federal Government CIO, provides vendors with the ability to clearly state and demonstrate how their solution is going to get the job done.

The clarity to which Evans referred also extends to providing a meticulous outline as to how vendor solutions and capabilities are going to be evaluated by the government, as it can reduce the potential for challenges or protests of contract awards down the road.”

The above excerpt is from a May 2010 post from the Procurement Insights Blog in which the former CIO for the U.S. Federal Government Karen Evans, stressed the importance of clarity in a successful RFP acquisition process.

Now one might think that this isn’t exactly breaking news or that we are sharing what had until this point in time been an unknown secret of successful contracting.  In reality, this is such an obvious observation that it would seem to be somewhat redundant to even mention it at all.

However, if it is such an obvious statement, then why are organizations in both the private and public sectors struggling with declining RFP response and eroding supply bases?

In the December 4th, 2009 post from the same Procurement Insights Blog titled “The Paucity of suppliers bidding on City of Ottawa contracts is a symptom of a much larger problem” city officials were lamenting the fact that on average they only receive a handful of responses to their bid requests despite a significant investment in SAP as well as posting RFPs through the ubiquitous government-wide MERX site.

So in the spirit of the old Johnny Rivers hit, where have all the suppliers gone and, why did they leave?  Of even greater importance, how do you bring them back?

In a recent roundtable discussion in which I was joined by industry experts to talk about transparency in the public sector procurement process, there were many reasons presented for the decline in supplier bid response.

From one-sided belt with suspenders contract terms and conditions that unduly place the lions share of risk on the shoulders of the supplier, to policies that can turn a simple acquisition into a Magna Carta event, the tendering process can in and of itself present a daunting obstacle to transacting business.

In other words buying organizations, for the most part unintentionally, make it difficult if not outright impossible for a supplier to do business with them.  What is ironic however is that the very thing that is supposedly designed to attract suppliers, is usually at the heart of the exodus problem.  I am talking about technology.  And this is a problem that is not confined to the supplier side of the equation, but also extends to include the buyers themselves.

According to a November 2009 article by Leon Smith titled “Chances and Challenges for Buyers” despite the huge investments made in procurement technologies during the past decade, “usage of these systems remains markedly poor.”

Based on his research, Smith found that only “14% of the companies surveyed expressed confidence that 60% of spend was being channeled through eProcurement,” which is the typical benchmark for applications of this nature.  What is even more telling is that “more than 60% of those who responded to the survey placed eProcurement usage at less than 20%.”  Less than 20%!

This is one of the reasons why I have always viewed the McDonald’s-type “billions and billions served” tag line that has been adopted by some vendors who trumpet that they process more than x number of dollars in spend, as being the quintessential red herring.

In fact, and coupled with the disclosure 0f these negligible adoption rates, it may not be all that unreasonable to surmise that commensurate with the introduction (and forced compliance) of an automated system, there is an accelerated rate of decline in terms of supplier participation.

So if technology is more a part of the problem than it is the solution, then what is the answer?

Evans, who oversaw more than $70 billion U.S. in IT acquisitions by the Federal Government during her tenure as CIO, expressed the firm belief that “products” (re technology), does “not replace skill sets.”

A sentiment that is obviously shared by the CPOs who responded to the Smith survey when they indicated that “raised expectations on procurement to deliver sustainable bottom-line savings,” emphasizes the fact that there is an “acute” need to “nurture top talent.”

Some 65% of these respondents rated “capability development and talent management as a key objective area for the coming year,” which includes “the right blend of category, supplier and market expertise with the usual contracts and pricing knowledge.”

Could it be that the industry’s enamored view of procurement automation has caused both vendors and their customers to overlook an immutable truth . . . people buy from people whom they know, like and trust?

Is it a possibility that in the misguided attempt at maximizing throughput through the introduction of automated eProcurement systems organizations have somehow ignored the importance of practical expertise and industry knowledge?

At the end of the day, and this is where I believe that both Evans’ and Smith’s CPOs references to skill set requirements should also include software vendor personnel – especially those whose origins are in the ERP world – people transact business through relationships of understanding versus automated bid notifications.  Specifically, organizations that have become enamored with what the technology is purportedly capable of doing re the famous features/functions/benefits list, ultimately lose sight of what really counts which is the ability to share expertise and experience.

It is these latter two “people-centric” skill sets that cannot be replicated or scaled as a turnkey system.  Perhaps this is the key contributing factor to the low adoption rates about which Smith wrote?

If this is in deed the case, which I am inclined to think it is, then a change in the way that vendors and their clients view technology is in order.

Included in this renewed state of perceptive reasoning is the need for vendors to alter their approach in terms of their sales and marketing efforts, placing a greater emphasis on leveraging important indigenous skill sets versus what I call automation abdication.  In short, execution and ultimately the scalability of any procurement strategy is driven by a particular vendor’s unique understanding of the real-world operational challenges faced by their prospective clients outside of their technology’s functional capabilities.

This means that the viability of a software solution should not be predominantly based on an analysis of technical functionality, but instead on the vendor’s industry expertise associated with properly assessing risks, structuring contracts and managing supplier relationships.

I am certainly not alone in this thinking, as Evans also talked about vendors having to “change their business models”  and begin focusing on the critical areas of “quality of service and reliability of data.”

Unfortunately, you very rarely if ever read about the operational skill sets of the people behind a software company, and how they can address areas such as effective policy development and calculating shared risk.

Front and center on Ariba’s main landing page for example is the tag line “Better Commerce for Everyone – Introducing the Ariba Commerce Cloud,” as well as other technologically oriented links.  If, as Smith’s article claims, only 14% of all companies process 60% of their spend through their eProcurement system, how important is technology or computing in the clouds?

After all virtualized or “cloud computing” architecture Evans reasoned, is really just “optimizing the use of infrastructure” and is therefore a commodity versus being an actual service.  Therefore vendor expertise must shift from their technology to the very processes and operational realities of the procurement world they are seeking to serve.

Given that eProcurement technology has done little to reverse the decline in supplier bid participation, instead of asking for technological specifications, end-user clients are going to start examining and comparing the purchasing skill sets of individual software vendors.  This will include areas like category, supplier and market expertise, as well as contracts and pricing knowledge.

To sum it all up, don’t tell me what your technology can do for me, tell me what you can do in terms of providing the expertise to create contracts that are balanced and effective at delivering a best result outcome for all stakeholders.  This alone, is the all important first step to improving supplier engagement and participation.

How you get there technologically is largely irrelevant.

NOTE: The above post was provided courtesy of the new Contracting Intelligence Blog.

30

The Cure for Enterprise Software Fatigue

Whenever I am contacted by a vendor for a “pre” press release briefing, I always go into the discussion with one part interest, one part cynicism and one part optimism.

The interest of course is part of my natural curiosity about almost anything – which is why I guess I enjoy hosting a talk radio show.

The cynicism aspect of the briefing quotient is tied to the fact that very few companies actually have something worthwhile to say when they do a release.  I am immediately reminded of a press release I received earlier this year from a vendor (whose activities are usually very interesting), regarding a round of financing.

When I shared this information with Brad Feld, who is one of the top high tech VC’s in the country and the author of the leading VC blog Feld Thoughts, his “so what” response to this supposedly exciting news was the exclamation point to my own initial take on a release that should have never been sent.

The optimism element of my approach to press releases is that at the end of the day the company actually has something to say and, that through my own unique lens – perhaps the effect of playing one too many football games without a helmet – I can add value to you my readership.

For this reason I always look forward to the “chats” I have with either Rob Bernshteyn or Jason Hekl from Coupa.

While I am bound by a double secret handshake kind of confidentiality relative to tomorrow’s press release, in which I cannot disclose any  of the specific details of the release itself, I can say that when the information is disclosed it will be one of those “hey . . . these things just snap right off” kind of Larson Far Side moments.  For those of you who are unfamiliar with The Far Side, the specific frame to which I am referring is where one circus bear turns to the other to share the epiphany that their muzzles simply come off with a flick of a clasp.  Completely unaware, the human trainer is happily cracking the whip with the bears that are performing in the main ring.

Ironically, and like Coupa’s competitors, who happily toil under the guise of a similar invincibility especially as it relates to larger organizations, market acceptance of the company’s dashboard-styled solutions is definitely not confined to the small to mid-market end-user.

Despite what a Jason Bush may opine, specifically in his February 25th post on Spend Matters in which he stated; “In reality, I’d argue that Coupa has indeed taken things a bit further than Ariba when it comes to flexibility in requisitioning; however, in larger organizations, iRequest and iBuy defeat the purpose of rationalizing spend with specific suppliers to hit volume-discount thresholds. Going to non-contracted supplier sites through iRequest and iBuy may not constitute a maverick purchase in the purest sense, but it’s certainly close to one, given the lack of a contract, price sheet, and potential discount/rebate schedule,” recent big wins with organizations such as retail giant Michael’s proves that a broadly applied “rationalizing of spend” approach has more to do with vendor limitations versus practical application.

Even though Busch may call it rhetoric, the fact remains that true SaaS-based dashboard solutions that provide real-time, real-world intelligence at the point of purchase is the long overdue response to the tired ERP-centric platforms offered through “Ariba, SAP or Oracle” . . .  Vinimaya or jCatalog solutions notwithstanding.

Cataloging of course is a throwback to the days prior to automation when as a buyer I would have to physically access a library of endless “books” and then manually search through voluminous indexes in an effort to locate a part (usually an Indirect Material MRO product), and then call the supplier to ascertain if they still had the needed item in stock.  Over time, these catalogs became a morass of post-it notes or folded page corners with hastily scribbled notes serving as the SEO of the human interface.

When vendors first began creating electronic catalogs, it was certainly a major breakthrough however, it set these early companies on a relative course to oblivion in that it locked them into a model that had a limited shelf life.

Similar to the few remaining buggy whip manufacturers in the waning days of the horse and carriage, those companies locked into the artificially confining realms of catalog content management today are, without a doubt, the best in their field.  Unfortunately, it is a rapidly shrinking field in which the FUD factor that manacled the majority of large end-user clients to the SAPs and Oracles no longer carries any real weight.

The fact that recent comments by the likes of a John Wookey who acknowledged that “Customers that already have gone with SaaS in addition to an on-premise suite may not swap out for on-demand orchestration,” is an overt signal of this pending paradigm shift.

Why Busch and company would continue to cleave to this sinking ERP orchestration ship that reportedly “saves” end-users from the effects of SaaS Sprawl is anyone’s guess.

Change nonetheless is coming if not already upon us.  This takes us back full circle to the opening comments from today’s post, and why tomorrow’s news release from Coupa is worth noting.