Business & Technology Nexus

Dave Stephens on technology and business trends

Archive for April 2006

Liquidation Sales

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Over the years central Procurement departments have been responsible for a lot of stuff. If memory serves, up to 45% of firms in some surveys have Procurement lead disposal sales. So I have a basic question for my readers: why? Is Procurement really a natural for *selling* as well as buying?

There was a time when Sourcing solutions weren't even considered complete unless they supported a forward- as well as a reverse auction. But of course it was ludicrous for most sales – because sellers naturally go to where their market is. And whatever you're disposing of, chances are "the market" is NOT in your sourcing tool!

DoveBid or eBay seem like two of the most logical choices for disposal sales. And of course there are a ton of eBay liquidation specialists to choose from.

Please share your stories on this topic. A friend of mine who ran Procurement at a mid-sized high-tech company once told me their disposal sales were more like garage sales – a few signs would go up around the neighborhood & the receiving dock would be open for the day with people coming by to make offers on lots of "stuff" (office furniture, excess inventory, etc). Can you beat that?

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Written by Dave Stephens

04/30/06 8:59 PM at 8:59 pm

Posted in Opinion

Shameless plug for Doug Hudgeon

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Doug is a Procurement consultant in AUS. I'm enjoying his latest posts. I thought he did a wonderful job exploring & giving a real world (and fun) example of Procurement's long tail here. And I've thoroughly enjoyed his exploration of vendor relations, especially his latest post on contract management & fairness. Good work Doug! 

Written by Dave Stephens

04/30/06 8:50 PM at 8:50 pm

Posted in Opinion

Ariba Quarterly Report

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Jason Busch over at spendmatters has the objective analysis. Here is where you’ll find the rant… Btw, the 2nd comment on jason’s blog by ‘Dan’ is pretty insightful too.

I was stumped by Ariba’s quarterly numbers. They are certainly out of excuses for not growing the top line. I’ve definitely heard enough of how great the transition to SaaS is going while revenues limp along. Oracle, SAP, and many of the little guys in Procurement are growing license (let alone total revenue) at an impressive clip in Procurement – and yet the self-proclaimed leader is shrinking.

But I shouldn’t have been surprised. The problem is straightforward imho. Ariba saturated the Fortune500 with hugely expensive software back in the .com boom. These big firms were stuck with massive annual support bills, and over the years they’ve switched off Ariba and onto something else – and justified the migration on the reduction in support payments alone.

Ariba isn’t accumulating any at-risk contracts like that anymore, but it’s just taking a long time for the overhang to work itself off.

Now this Ariba view is sans-FreeMarkets, which was struggling with it’s own “renewals” problem. I remember thinking they sold to Ariba at just the right time – before their revenues began sagging as buying organizations opted for more self-service.

So I am awaiting some stronger numbers from Ariba – they certainly have a great vision and some really useful technology for customers. Maybe next quarter.

Written by Dave Stephens

04/27/06 8:34 PM at 8:34 pm

Posted in Opinion

Procurement System: Build or Buy?

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With all the latest technology advances, you might be wondering whether a packaged Procurement solution is any better than a homegrown, tailored system.

It’s a very good question. And to be honest, I’ve been wondering the same thing.

The first step in determining the answer is to look at your business requirements. Some aspects of Procurement seem simple on the surface, yet can prove surprisingly complicated.

For the sake of specificity, why don’t we narrow down our discussion to a particular area within the Procurement domain – after all, there are systems for tactical buyers, Sourcing tools for strategic commodity experts, portals for suppliers, self-service buying tools for users, and lots of additional toolsets for dedicated problems, from linear price performance to category sourcing optimization.

So, let’s take a supplier portal. What if you have a basic Purchasing system but are wondering if you should build out a capability for suppliers to log in to interact with their data 24×7 and deflect calls, inquiries, etc from your tactical buyers.

Whether to build or buy depends on what you want your supply base to be doing. Many firms make it a point to offer prospective supplier registration – a simple mechanism for alerting the buying organization of a new supplier’s presence in the market. But whether to build or buy may depend on how you choose to work with the data afterwards. How do you propose a prospective supplier who registers be promoted to your true supplier master? Can it be manual because of its rarety? If so, the process & data collection can be stand-alone and the piece of work really is very simple. With new tools a simple registration flow would likely take less than 2 person weeks to build.

Okay, let’s assume prospective registration is a good fit – now how about dealing with existing suppliers – how do they log in, maintain their password, check their Purchase Orders, and perhaps submit Invoicing information?

Again, newer technology makes build-up of these functions a snap – salted MD5 login encryption is available as a plug-in to many technology infrastructures. It’s like having the best available login security “for free”. As for showing data, that’s a breeze to – as long as your requirements are not real-time from your source systems. But when it comes to initiating transactions, you have some work to do. You must figure out a number of exception cases if you can’t perform the transaction at the same time in you back-end system & your homegrown supplier portal. The more “digital divides” you have, the more likely hidden costs will creep into your homegrown solution (and turn it into a quick & dirty solution).

Does that make homegrown start to sound like a problem? Remember, you have other options. If you use Oracle Advanced Procurement, iSupplier Portal provides some good transactional functionality & is architected right on top of your central e-Business Suite database. Of course, if you don’t have a centralized system, it doesn’t fit at all.

Also, you could go SaaS and use the new-age VAN’s out there like Ariba or Perfect Commerce. If the price is right, passing your supplier portal problem to them may make some sense.

But for many of you, it’s quite possible a homegrown solution just broad enough in scope to hit your top requirements may be just what the doctor ordered.

I’ve received a few build vs. buy questions over the last month – and I find them enjoyable. So, feel free to send me your question & situation. I’ll be happy to provide my advice on where some of your tougher areas might be.

Good luck!

Written by Dave Stephens

04/27/06 6:15 AM at 6:15 am

Posted in Opinion

Oracle Advanced Procurement: Graduating Class

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Quite a few members of my former team are pushing hard to get R12 of Oracle Advanced Procurement out the door. I have no doubt they are doing a great job.

But quite a few others have gotten the start-up bug, mostly in the consumer space. And some have moved on to "cool" endeavors at other established firms. I've decided to label the group who has left: The Advanced Procurement "Graduating Class". Here's the honor roll:

Jeff Mellen, Joe Wong, Sam Hsiung, Srini Panguluri – YouOS startup

Jang Kim – Moblastic.com startup

Jacky Cheung – Mobitv.com startup

Sudhir Rao – Purisma startup 

Angus Huang – Aplix (established company in cool space)

Damon May – Fred Hutchinson Cancer Research Center (what an amazing job)

Now, some of my former hot shots are MIA. Drop me a line at drstephe at gmail dot com and let me know what you're up to. I'll update the honor roll accordingly ;)

It's a joy to see these former Advanced Procurement development rockstars spread their wings. The ones pursuing start-ups are each going after pure innovation & creativity and are pursuing large prospective markets. It's great stuff. For the readers who have time check out some of their websites & demo their stuff.

And here's a promise to the "Graduating Class": I won't be just a lazy bones blogger forever!

drs

Written by Dave Stephens

04/26/06 10:42 PM at 10:42 pm

Posted in Historical, IT, Opinion

For Jason: JDEdwards Operational Sourcing

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Jason asked I comment on the release of a tightly integrated Operational Sourcing package for JDEdwards. The short version is – yes, I think it was a good idea. And yes, I think it puts light pressure on Sourcing point solutions. But perhaps not too much pressure – you see, I think JDEdwards is probably going to expand the size of the market and get customers using Sourcing who otherwise wouldn’t have bothered.

Let me first give a nod to the folks from JDEdwards.

I liked the people I met from JDEdwards post the Peoplesoft acquisition. They were down to earth and tended to focus more on product capabilities and less on “technology for technology’s sake”. My kind of people. Good folks.

In any event, when Peoplesoft acquired JDEdwards, (this is what I heard from others btw, so no more news stories referencing me please!) they didn’t quite know what to do with the company. Should JDEdwards be their mid-market solution, or should they sell it to verticals like Home Building and Discrete Manufacturing? It was a tough call because while the majority of JDEdwards customers were smaller, a good chunk of revenue came from bigger companies. Peoplesoft waffled, JDEdwards revenues shrank, etc.

One of the questionable things Peoplesoft did (to show how great the “integration” of the 2 companies was going) was build links between systems. Never mind demand was tepid.

So Peoplesoft SRM, which certainly had a bucket of features JDEdwards didn’t, became a showcase “integration” to JDE. I’m not sure if a single customer ever bought & went live on the combined offering, but it was there. The problem was, Peoplesoft SRM was built for a totally different type of customer.

IMHO, Peoplesoft was a collection of highly functional, best-of-breed applications optimized for big companies who could afford to spend a bunch of money in IT to rig them up to legacy systems & build a composite system. They were high-end. Meanwhile, JDEdwards customers installed the system as quickly as possible, and had that single system do as much as possible – hopefully everything their business needed. They then promptly locked it away in some closet. The joke goes: A JDEdwards customer’s idea of maintaining their application was “dusting”. Perhaps every 3-4 years they’d consider upgrading if you weren’t a pain in the behind about it.

So even though building JDEdwards Operational Sourcing meant introducing redundant functionality by replicating some of the basic sourcing capabilities also present in Peoplesoft and Oracle products, it was absolutely in line with what customers wanted & where that market was. It was just good common sense.

Now this won’t hurt Sourcing point solutions tremendously. It becomes more like the McDonald’s line “do you want fries with that?” Sell JDE, salesman xyz says “do you want Operational Sourcing with that?” – great! So my guess is it expands the size of the sourcing market more than it takes away business from the smaller players.

As for the debate around best-of-breed Sourcing vs. Sourcing tied into your operational and transactional systems, I defer weighing in for now. I certainly sponsored/authored/architected Oracle’s highly integrated approach to their flagship Advanced Procurement product line. But I’ve had a little less Oracle cool-aid lately and am getting close to forming a more objective opinion.

Written by Dave Stephens

04/25/06 8:46 PM at 8:46 pm

Posted in Opinion

Lessons from Transparent Punch-out Project

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One of the projects I learned the most from at Oracle was Transparent Punch-out. Of course, for as long as I can remember we had this vision of keeping content under the supplier's control & on their website but being able to ensure a consistent user experience for self-service requisitioners. For many years this just sat on the shelf, until one day Vijay Pawar and a few crack engineers on his team did an advanced prototype that actually worked and performed. We were able to do a distributed & parallel XML query to multiple content sources, get the responses, aggregate them & display them all within a second or two. We immediately submitted a patent on the idea, and scheduled it for the 1st available release.

Next, we invited a bunch of distributor suppliers to Redwood Shores to get their feedback. We told them "look, no more catalog syndication". We send you a query, you respond with the results. It's all real-time, with search governors in place to ensure speed. How do you think they reacted? "Boo!", "Hiss!", "NEVER!"

We had failed to position the "why" – and suppliers, hungry to differentiate to their customer base, just weren't buying. Sure, there were a couple ready to compete on price alone with good back-end systems who were ready to play ball. But 1 company estimated it would cost them $900,000 to adapt their systems. Pah! I'll adapt their systems for that and then hang out in the French Riviera for a few months to recoup. The bottom line was, if suppliers view a technology change as moving them closer to a commodity they will passively & actively resist.

Transparent Punchout may yet prove compelling – in fact, it has been pushed forward a lot further in the UK than in the US. Time will tell. 

But lesson learned – technology that bring capabilities to buyers at the expense of sellers will go nowhere fast. 

Written by Dave Stephens

04/25/06 8:24 AM at 8:24 am

Posted in IT, Opinion, Technology