No Deal: Why The Procurement World Has Gone Silent

Posted on February 17, 2016

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“Oh, gotcha. But are the deals not happening or are they just not being announced? With SaaS, you can switch so easily, so why would you bother announcing who you’ve implemented this year/month/week? I think ease of switching has made win news go the way of press releases. It would be like announcing where you decided to go to lunch as a client win for the restaurant.” – Kelly Barner

Okay so here I am at the keyboard in my home office, while outside my window a swirling, howling snow storm blankets the town. It is really the first big storm of the year – which is something when you consider that it is February, and that I live in the Great White North.

That said, the one thing about snowstorms – even with the Internet – is that it makes you feel as if you are cut off from the rest of the world. In fact, it makes you feel as if the world has somehow stopped.

In an almost quiet . . . too quiet atmosphere, I realize that there has not really been any significant news from the world of procurement the past few days – maybe even longer.

There are no press releases about big client wins, or competitive banter between opposing service providers. Just silence.

I thought maybe it’s me. Maybe I am missing something. So I reached out to my literary partner in crime Kelly Barner, to ask what’s up?

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So Kelly . . . what’s up?

That is when she tells me that she thinks that the cloud has forever changed the procurement industry. Specifically, and as referenced in the opening paragraph of this post, the deals might be happening, it is just that no one is announcing them.

Why bother, when announcing a new client win “would be like announcing where you decided to go to lunch as a client win for the restaurant.”

I have to admit I loved the analogy. The fact is Kelly’s right on the money. With today’s cloud-based technology, switching service providers is as easy as changing your socks. There is very little if anything, to lock you in to an unproductive long-term relationship with a vendor.

Gone are the days of over arching implementations spanning years and costing millions of dollars. Like on-demand television, there is always something to watch that will be to your liking at the push of a button. You just simply switch channels.

The procurement world has now become commoditized – or at least the cloud-based solutions have.

What does this mean going forward?

Well, for one thing, pricing models have to change dramatically. I am not going to pay a premium for gaining access to a supply base, nor am I going to get saddled with heavy licensing fees that provide access to advanced features or functionality. Especially if said functions are included as a standard offering with the majority of competitor solutions.

The companies that can best adjust their business model to this new cost reality, are the ones who will ultimately emerge as the dominant force in this brave new world.

To illustrate my point regarding the need for a service provider to adjust their business model, lets look at the personal computer industry.

 

Back in 1977 when the Apple II was introduced with a 1.023-MHz processor, 128KB of RAM, a built-in keyboard, power supply and 9-in. monochrome monitor, it sold for $1,295. In today dollars that is $4,994.

While you ponder that number, it is worth noting that you can now buy an infinitely more powerful computer such as an HP Pavilion 23-q109 All-in-One for just $899.00.

“Thus, IBM is doing in servers what it did years ago in desktops and laptops — getting out, rather than attempting to compete on margins.” – September 29th, 2014 ExtremeTech article

This commoditization is ultimately going to change the service provider landscape.

Those service providers who are best able to offer a streamlined pricing model in which functionality and ease of implementation is guaranteed, will be the ones to gain market share. Those who can’t will likely follow a similar path to that of IBM who, despite an early dominance in the PC world, got out and refocused their energies on new and different market opportunities.

The only question that remains is who in the current field of service providers has the diversity and size to pursue a different market from the one they are presently in?

For example – and this isn’t suggesting that the company is in trouble – what alternative market could a BravoSolutions pursue outside of the only market they have ever known? What alternative service offering would they be able to provide? How would they be able to service the procurement world if their present offering doesn’t make the cut?

It is going to be a very interesting year . . . even in the silence.

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Posted in: Commentary