Business & Technology Nexus

Dave Stephens on technology and business trends

Archive for August 2006

What’s A Buyer To Learn From Streetprices.com?

with 3 comments

Many of my friends and colleagues are regulars at PriceWatch.com and Streetprices.com. I’ve always like Streetprices, but it may just be because I found it and used it first, who knows.

Websites like these are sometimes even more telling than electronic component commodity indexes. Because in this fast moving Procurement category, being ill-informed about pricing trends can spell disaster. And although consumer prices tend to lag producer price changes, even a small drop in demand can trigger discounting in the retail and wholesale channel and indicate a future downward pressure on component prices.

I have a lot of fun tracking pricing in particular subsegments of consumer electronics such as digital cameras and digital video recorders. It all started when my wife and I had our first child. Like the rest of you with kids, that trigger got us into the market & buying stuff – it didn’t matter that devices would be tons cheaper – we needed the equipment asap. Then, like everyone else, we watched as our new gear was mercilessly devalued by the market as the pace of technology marched on.

Computers were one of the first super-rapid continuously commoditizing markets. But now the entire array of consumer electronics seems to succumb to a continual surge in downward pricing pressure. It’s a sympton of a hyper-efficient market – efficient because its product segments offer insatiable appeal to customers. It’s a nearly irresitible market to pursue – because suppliers and startups know a better, faster, and cheaper play will allow them to mint money.. but only for a short time.

For us consumers, and for that matter us professional buyers, this begs an important question: how do you decide when the right time to buy or to refresh is? When is the time to lock in a corporate contract & what is the right pricing and volume guarantees? It’s a difficult, complex question with so many variables most people just give up and go with their gut.

I just bought a MacBook for $999. ($100 amazon rebate on $1099 apple store price). I know Apple is on the verge of refreshing the CPU’s, among other things. I postponed the purchase for months, but finally broke down. And a new OS is on the way so I’ll need to pay for that upgrade by next March. (because I do want that new Time Machine feature)

If someone can figure out an algorithm to help companies determine the sweet spot for buying in the electronic component and consumer electronic marketplace, and patent it, that would sure be a nice business. To me, this sounds like Doug Hudgeon’s sweet spot – he’s the equation guy – so I’ll issue a challenge to him to outline the factors that one should evaluate to try and make the decision on whether to “buy now” or “hold out” quantitative. Michael Lamoreaux might have some innovative ideas too – after all, if memory serves he’s the phD guy.

In addition, it seems to me a closed service like PurchasingData.com should consider opening up & collaborating with a multitude of sources (preferably viral) for pricing – with an aim to build a transparent open B2B version of streetprices.com. If any of you are interested in exploring this idea further, email me.

In the meantime, I’m still on the sidelines for a LCD or gas plasma refresh for my Rear Projection widescreen. Prices are just dropping too fast to jump into the market. Does anyone have any advice on when to replace my 65″ Mitsubishi widescreen? I’m guessing if you knew when the last big additional factory was coming online that could precede a temporary plateau in the downward movement of prices.

-Dave

Written by Dave Stephens

08/31/06 7:43 PM at 7:43 pm

Posted in Opinion

Budgetary Control and Encumbrance Accounting

leave a comment »

I had several great conversations with partners and prospects today.. A standout was a call with a higher education institution that has downloaded a copy of Coupa eProcurement to play around with & pilot. It was one of those nice open source moments where you know that making the product truly accessible had a hand in gaining the customer conversation. Good stuff.

I’ve always liked higher ed. It’s a tough nut to crack since the people that work in higher ed are so darned independent. Yet it’s great to see management soldier on in pursuit of the increased efficiency procurement provides. And let me “give a nod” to SciQuest as they’ve done some good work with major universities and their implementations seem pretty well regarded. Oracle is no slouch in the higher ed market either, selling a bunch of my old eProcurement stuff into that market.

Both firms (SciQuest and Oracle) were involved at the University of Pennsylvania for instance. UPenn went on record with a $64MM savings number for the first 5 years of operations on the combined platform. If memory serves Procuri may have been in there for reverse auctions.. But I digress..

What I’ve always loved and hated at the same time w/in public sector and private non-profits is the appraoch to budget-based buying. In concept, it’s fantastic and should be applied to many other industries – a cost center decides (or is told) how much they are authorized to spend over a given time period. It may be broken down by procurement category. Then, POs and Invoices are tracked against that spend – and it’s a hard cap.. Try and spend past your budget and you’re blocked.

This all sounds simple enough but take my word for it the requirements tended to go way overboard, including modeling spending, live feeds and interaction with GL, and overzealous ledger entries for step-by-step activities in the procure to pay flow. As a result, solutions, admittedly including Oracle’s, were terrible. Peanut brittle, so to speak. Encumbrance and budgetaey accounting bugs in Oracle’s solution typically could only be fixed by a few extremely knowledge people (you guys know who you are) and usually involved data corruption scripts and chanting Hopi prayers (okay, you get the point).

So I was encouraged, delighted, overjoyed (dancing in the streets) to see there may be a middle ground, even for some public sector organizations and non-profits where a common sense approach to budget-based procurement can win out.

My thoughts turned to other service industries that don’t typically operate on budgets – and what it would mean for them to consider adopting budget-based procurement as an approach. It’s attractive as it puts the budget holders squarely in charge of their ongoing expenses. Even large organizations like GE could benefit – as the solution they employ today is to simply “turn off” discretionary spend if the quarter’s revenue looks a little light.

So who knows, maybe budgetary control and encumbrance accounting don’t have to be all evil. It’s going to be a blast to explore this in more detail and see what a fresh sheet of paper can do for the problem.

Stay tuned…

Written by Dave Stephens

08/28/06 11:09 PM at 11:09 pm

Posted in Coupa, Open Source, Opinion

+1 month from Launch

with 10 comments

We’ve had 460 Downloads of Coupa eProcurement from 7/27 through 8/26. Good start- but lots of work to do. The closest apples to apples comparison I could find is to TenderSystem, even though that’s in the Sourcing space. They did around 200 a month for the 1st 3 months on Sourceforge. Sugar did around 400 month 1 but over 5,000 in month 2. Though we’re just starting month 2 there’s no way we’ll match Sugar’s month 2 volume. After all, this is Procurement…

Written by Dave Stephens

08/26/06 5:40 PM at 5:40 pm

Posted in Coupa, Opinion

Quick Coupa Update

with one comment

We’ll have a corporate blog up shortly – and updates like these will be posted there once we do..

Some things we hope to introduce very soon include an online demo system for our Enterprise Edition (followed by Open Source Edition). We’ll have a lot better demo data in there then the skinny’d down database embedded in the Sourceforge downloads.

Also, we are prepping for another drop of the Open Source Edition on sourceforge. Probably time for a light refresh. We’ve responded to suggestions we’ve received to date & also re-packaged the application as a rails engine plug-in. Part of the reason is partner-friendly – this should make it easier to embed our stuff in a broader platform. The other part is efficiency – it helps us manage our SVN repositories easier.

August 27th will be +1 month from our initial and pretty quiet Preview Release launch. Thanks to everyone who’s provided feedback.

Written by Dave Stephens

08/25/06 7:05 AM at 7:05 am

Posted in Coupa, Open Source, Opinion

Buying Services – A “How Not To” Guide

leave a comment »

As you all know I live in Half Moon Bay. It’s a weird place. First of all, who heard of a city without an elected Mayor? Instead, some yahoo years ago thought it would be a good idea to “share” the mayorship and designed it as a rotating seat – everyone in the city council gets a turn. Whee! So you’ve got this eunuch of a mayor for a year – and just when they figure out what the heck is going on – boom, they’re out. And who really pays attention to city council seats – it’s some strange high school throwback popularity contest.

Why the venom? Well, it all started long, long ago…

The city of Half Moon Bay decided they wanted a park. So they bought some land. If memory serves they spent a few million for some pretty good acreage in an awful spot – right off a highway with no clear access without screwing up traffic. Which doesn’t necessarily make the whole idea bad – just a challenge & possibly a pretty good land deal.

Then they sat on the land while signing up a design firm. Half Moon Bay sent out an RFP for design services back in late 2004. But like most cities, they obviously weren’t schooled in Procurement 101. Out of 13 bids they picked a group called MIG (Moore Iacofano Goltsman). According to the Half Moon Bay Review, these guys had an impressive track record of prior park work in the San Francisco Bay Area.

The original authorization was for $250,000 worth of design services. And for a park, that sure seems like enough (estimated land size, my best recollection, <20 acres). It’s supposed to include basic stuff such as- a basketball court, an amphitheatre, a baseball diamond, a “meadow”, etc. Well, through the magic of T&M, change orders, etc, the payout so far for the designers has been rumored to be $345,000.

The Half Moon Bay city council is now upset. But what they deserve is a good long look in the mirror. It’s their fault – structuring a contract that sets appropriate incentives and penalties, and most importantly, caps costs, is essential in effectively managing services spend. The slippery slope of “wandering requirements” can lead to these horrifically bad outcomes.

By the way, the story gets far worse. The budget estimate for construction of the park was around 6MM. The estimate provided by the high-priced designers, without any cost breakdown or apologies, stands between 12.1 and 14.5MM. So now the city of Half Moon Bay has spent through the nose to design a park that doesn’t fit their budget.

In the meantime, our “mayor” has another 4 months in office. What a mess!

Written by Dave Stephens

08/24/06 8:43 PM at 8:43 pm

Posted in Opinion

Ford “Bold Moves”

leave a comment »

If you guys haven’t noticed Ford Bold Moves by all means check it out. A professional vblog on Ford’s struggles to turn around the business. Refreshingly candid and hip in a “watch the disaster in action” weird kind of way.

Written by Dave Stephens

08/24/06 9:19 AM at 9:19 am

Posted in Opinion

Popular Post on Open Source vs. Micro ISVs

leave a comment »

Who knew a guy who threw together a Bingo Card Creator could expound such clear views on software development and open source! Read what Patrick McKenzie has to say. Also, check out the stats and analysis on open source communities by Sandeep Krishnamurthy. Good reality check on the OSS movement.

Written by Dave Stephens

08/23/06 8:01 PM at 8:01 pm

Posted in Open Source, Opinion