The Procurement Software Podcast

It's the final episode of our second series. So to finish up, we're going to be doing something a little bit different.

This week we're bringing you 10 new startups for the price of one!

I recently attended Procurement Summit in Hamburg. It's a fun, pleasingly non-corporate showcase for new companies in the digital procurement space. Where else would you find a Mario Kart competition at a procurement conference?

I saw loads of exciting new ideas there, and I'd like to share ten of the best new startups that caught my eye during the conference's pitch event.

Flowciety won the startup pitch event this year, and with good reason.

They're a Berlin-based startup, all about data exchange and process automation, across both internal departments and external third parties.

This automation enables you to have a fully auditable trail, avoiding PDFs and emails in favour of realtime tracking. It also enables you to manage supply chain and inventory across, for example, a subcontracted part of an external process.

Link to Flowciety website

This Swiss-based startup aims to make companies more competitive by using their internal data more effectively. This is a really smart calculation tool that takes things from the bottom up.

It's a data driven engine that estimates product prices based on CAD drawings, specifications and materials. It estimates the cost of raw materials and of cost changes per part, based on engineering changes during the new product development process, or on commodity price movements in our increasingly volatile world.

It also calculates labour costs and provides advanced analytics and material grouping.

Link to Shouldcosting website

Hivebuy is a source to contract solution, strongly focused on process optimisation for small to medium sized businesses.

The solution supports companies in budgeting, requesting and ordering services for their business. It also establishes better purchasing conditions for your business, through pooling of pricing on popular catalogues.

Obviously this is quite market-dependant, and the company has a strong focus on Germany at the moment, but I'm told that they are looking to expand this scope.

The software relies an intuitively designed approval process that link departments with a simple communication flow and approvals process.

Control features offer a transparent dashboard for budget management per department. Hivebuy also offers supplier catalogues both externally and internally, along with contract management and repository as part of their more top end plans.

It's a unique spin in a crowded niche, which I find very interesting.

Link to Hivebuy website

This startup from Zurich is a professional services platform focused on external workforce. According to their presentation, 30% of human capital is now external contractors, and this represents 42% of a company's spend on people, on average.

As opposed to other external workforce platforms that focus on audit and legal compliance, these guys are very much focused on smart contracting as a way to reduce costs.

TrueLedger offers many forms of control here: Time and materials contracts, cost ceilings, standard contracts, and risk sharing, across both blue collar and white collar. All of which flows through to automatic invoicing and ERP integration.

Link to TrueLedger website

5. Lhotse Analyitcs

Lhotse are very much focused on industrial manufacturing companies, from the midmarket to enterprise. Because these are often low margin industries, it's crucial to have better data that creates measurable value.

They claim that their software can produce 7.5% savings on average to their customers, using market intelligence and cost breakdowns to offer the best leverage possible.

Especially in industrial manufacturing companies, the supplier's sales person is often the better informed party during negotiations. This solution aims to change that by arming businesses with better data and 360 spend analytics.

Link to Lhotse Analytics website

6. Procuros

Procuros, based in Hamburg, automates B2B transactions. It acts as one-to-all middleware between ERP systems and the end user. This turns manual ERP processes into digital workflows with a user friendly interface.

Procuros enables automatic data exchange from ERP system, via a self-serve interface for buyer and stakeholder alike. This, according to them, makes requesting and onboarding suppliers as easy as sending someone a facebook friend request.

Link to Procuros website

7. Matchory

This German startup offers a supplier scouting tool which is simple and  effective. It brings unstructured, decentralised and diverse supplier information into a harmonised supplier search.

It does this three ways. With a web scraper that searches for supplier data, by accessing publicly accessible data and through an API that talks to other systems, extracts data, and enriches it.

This data is then cleansed using ML and AI. T

Matchory claim that it only takes five minutes to find the right supplier through their platform, so this is great for anyone who's new to their category or doesn't already have a large database of potential suppliers.

Link to Matchory website

8. PAXLY

Paxly is another German startup with a very niche focus on packaging spend. Their solution helps with sourcing, selection and evaluation of bids in the packaging category. It's hard to source packaging in a standard invoicing platform, so what PAXLY aims to do is create a simple channel that's custom-tuned to the needs of packaging procurement.

Link to PAXLY website

9. Tacto

Based in Munich, Tacto offer an end-to-end source-to-contract and analytics portal for direct manufacturing business, especially medium sized ones.

The focus here is on creating an intelligent procurement operating system that easily identifies opportunities and realises them within the platform - covering everything from sourcing, RFX, ajd operational purchasing ato analytics, as well as offering a supplier and vendor portal.

Their USP is being plug and play, with no high level consulting or ERP integration required to get the most out of the platform.

Link to Tacto website

10. Negotiation Intelligence

Another Swiss startup, this might be the one that I found most intriguing. A completely new concept, Negotiation Intelligence combines tech with human experience.

It tackles the challenge of negotiation training. I'm sure we've all been on this kind of training, forgot most of what we were told and pushed the handout into a drawer to never be looked at again. And fair enough - the static classroom environment doesn't always translate to the real world.

Negotiation Intelligence aims to solve that by using an AI-driven core engine that gives live training, with built-in negotiation roleplays that gamify the training experience. On top of that, there's an ongoing toolkit for subscribers to improve their negotiation skills. Negotiation Intelligence combines the power of speech recognition, advanced data analytics, and human-delivered coaching for a truly hybrid approach.

One of the things I found most interesting here was that you can then host internal league tables within an organisation so you can see who your strongest negotiators are. Not only fostering a competitive attitude, but allowing you to see where your human resources will be best spent.

Link to Negotiation Intelligence website

With that, we've reached the end of Series 2.

And I just want to take a moment to thank everyone for listening to this series of the podcast.

I'm really honoured and humbled that we've been able to double our average number of monthly listeners this season, and I can't thank you all enough for that.

I hope you're just as excited as I am about what we've got coming up in the future, on procurementsoftware.site as a whole, and on this podcast, which comes back for Series 3 in September this year.

Until then, we hope you have a great summer!

There's plenty more to come in the future, and I look forward to seeing there.

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Sign up for the Procurement Software Newsletter

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Find today's featured startups on LinkedIn and beyond!

Flowciety

Shouldcosting

Hivebuy

TureLedger

Lhotse Analytics

Procuros

Matchory

PAXLY

Tacto

Negotiation Intelligence

Download our Tech Map for Enterprise

Download our Tech Map for Mid-Market

Download our Tech Map for SMEs

Find your perfect procurement tech solution in our Software Finder app

Sign up for the Procurement Software Newsletter

Book an Intro Call and let’s talk all things Digital Procurement!

Connect with James on LinkedIn

This week we're looking at something we rarely talk about on the podcast - the public sector.

My guest this week is Grant Smith, COO of Elcom. He's here to lend his expertise, which is handy because the public sector is a topic I know relatively little about.

Grant hails from the UK, but his experience should be applicable to public procurement in any developed markets.

We kick off with a brief history of Elcom.

It started out in the US in the early 90s as a hardware reseller. They developed a piece of software with MIT in Boston to run the ordering and procurement process for the business. When the dotcom bubble burst in the late nineties, they sold the hardware business and began to focus on the software side of things instead. 

In 2001 they were offered the Scottish government's P2P service, which they're still running. It's run as a shared service by the Scottish government, for and on behalf of the entire Scottish public sector, processing nearly 8 billion pounds worth of public sector spend each year.

Elcom also does work across the UK in the health and education space, where the software covers sourcing, contract management, P2P, inventory, point of care, analytics, and more, along with supplier services such as bid management.

It's a full stack suite, just in a very specific niche. And with such a saturated market, it's important to carve out that niche if you want to survive.

 

The main difference is that the public sector is quite heavily regulated. There are thresholds in terms of the value of goods, works, or services that you're buying that need to be advertised and go through a formal process.

For example, in sourcing, there are procedures that must be followed quite rigigly. In the private sector, you go out, you get your quotes and you make a decision on who you're awarding to.

But on the public side, there are a lot more rules to follow: Minimum number of bidders, the ratio between price and technical, and the documentation you need to go through, should the procurement be challenged. There are many more hoops to jump through on the public side, especially post award.

We then move on to discussing some tangible examples of what we can learn from public procurement, and focus first on healthcare.

 

Grant's UK-centric experience means that he's used to working in health care as part of the public sector. This is of course not the case everywhere in the world, for example in the US. But he's seen interesting things in the UK's inventory and point of care space that are applicable worldwide.

In UK healthcare, there's a good initiative called 'scan for safety', whereby consumables are regularly barcode scanned to capture data and keep track of things during a procedure. The software captures information like stocktake data, items consumed during a procedure, who's in the room, and where a procedure takes place.

An innovation here is RFID (radio frequency identification) , which could really revolutionise the provision, costing and tracking of care in a clinical environment.

With barcodes, the problem is having to label everything manually: Staff need barcodes on their badges, each individual item has to be packaged with a label, and those labels need to be scanned by hand. It's labour intensive, and cost prohibitive.

RFID, though, removes this practical barrier. You don't need to apply barcodes to each and every item. Now the software can use either the RFID or the barcode, and this is already reducing costs.

 

Think of the day when manufactures put RFID packaging on their items, as they do now with barcodes. You'd have RFID tags on every item, and also in each location. Stocktaking, which is now a heavily manual process, would be made much more straightforward. A simple RFID reader could gather the data and pass that on to the software automatically.

This aligns with these initiatives, allowing for a better, more granular data capture with much less manual work.

RFID could also be a huge boon to general manufacturing, as a very viable solution for things like store room spare parts. It could also solve the common problem of items going missing because they're not being booked out of storerooms correctly.

We're already seeing this in retail – some supermarkets (and Amazon's new convenience stores) now allow you to pick up items, put them in your basket, then walk out the door while the store automatically charges your credit card. And this is almost certainly going to be important technology for procurement, going forwards.

 

We talk about the big focus on ESG, and making sure it's embedded into the procurement process, and also how local governments are often keen on awarding business to small and medium sized enterprises.

Are these objectives conflicting, when we look at the increased amount of bureaucracy around ESG, considering smaller businesses might not have the resources to handle such in-depth compliance? How can Elcom help with this?

One of the biggest complaints from small businesses, especially in the UK, is that public procurement is too bureaucratic. When a tender is released, many SMEs are put off by what's required, and ESG is definitely a factor there.

In the sourcing and contract management space in particular, we're seeing a move towards including ESG factors. It's common now for an awarding authority to ask for a commitment plan on environmental impact, a commitment on not paying less than minimum wage, or for a statement on gender pay gaps. They may also ask how your business practices can positively impact society – things like taking on young adults and training them for the benefit of society at large.

While all this is admirable, it definitely creates barriers for small businesses, and could create the risk of giving an advantage to big business.

 

Data analytics and granular visibility

Elcom aims to mitigate this risk through the benefits of visibility.

Looking at the data and analytics angle, Elcom takes spend data, cleans, categorises and augments it, and can then give deeper insights into spend.

From a single line of this data, they can start to deconstruct who that supplier is, where they're located and the nature of that supplier – whether they're an SME or not.

Regardless of whether this data is being skewed by large businesses, having the information can help to nail down the type of spend, and what impact that has in terms of ESG. This should, in turn, influence what the public sector is buying, if that's the way society wants to go.

Giving this visibility into spend should not disenfranchise smaller businesses.

As long as the vendor can be identified as a corporate entity, that can lead to additional data in terms of wider social or environmental criteria.

Elcom brings in data from other sources to give a clearer picture of an organisation. This solves the classic problem of the duplicate supplier, or supplier being identified in different ways. For example, by bringing in data from Companies House, the charity commission, the care equality commission and other sources, Elcom can 'roll up' duplicate suppliers into a single parent / child entity.

Take the large UK supermarket chain Tesco as an example, they have a single headquarters in Welwyn Garden City which would be referred to as the parent entity, then each individual supermarket throughout the country would be identified as a child entity.

This is particularly useful when gauging local impact, as it helps to gauge what's happening at a local level, store by store. Money can be spent locally by these child entities, and isn't necessarily always paid back to headquarters in a simple way.

Elcom has an integrated eSourcing function within it as a source-to-pay solution, rather than procure-to-pay – what drove Grant to offer this, rather than partner with a best of breed for eSourcing, considering this is such a saturated market?

And why choose this over a less work-intensive P2P system?

Firstly, the Elcom software is modular. So a lot of Elcom's clients do already have a sourcing solution in place that can be integrated instead. But there are still authorities out there, especially in the public sector, who don't. So there's still a demand for Elcom to offer that kind of software.

It may require a lot of upkeep to manage, but for now the numbers still add up and Elcom can generate revenue on this front.

Also, there's a difference between a quick sourcing request and a more strategic sourcing exercise. And the public sector's sourcing needs are fundamentally different to those of the private sector.

 

We wrap up the podcast by asking Grant where you can follow his work at Elcom, or get in touch.

Connect with Grant on LinkedIn

Vist Elcom's website

Visit ProcurementSoftware.site

Download our Tech Map for Enterprise

Download our Tech Map for Mid-Market

Download our Tech Map for SMEs

Find your perfect procurement tech solution in our Software Finder app

Sign up for the Procurement Software Newsletter

Book an Intro Call and let’s talk all things Digital Procurement!

Connect with James on LinkedIn

This week we're diving back into the topic of spend analytics and spend analysis, with a focus on smaller and medium sized businesses. We'll look at the challenges they face, and how smaller businesses can afford a spend analytics solution that works for their unique needs.

We're joined this week by Thomas Siersbæk Heller-Njor, from CostBits – a procurement professional who's entered the procurement tech space, with a unique spend analysis solution for the mid market.

First up, I ask Thomas to introduce himself and his background.

Thomas started working in IT, then moved to working in procurement for the shipping line Maersk, where one of his projects was in spend management.

He found himself living in Cape Town, doing an assessment for the 42 sub-Saharan countries, and realised he had no tool for the job at hand: Gathering PO data, contract data, spend data, etc. So he built a very crude version of his software then, and realised it was a tool that others could benefit from.

He's excited to get to work in this space, and passionate about wanting to make data more accessible, available, and actionable.

I pick up on the word 'actionable' as a key differentiator between CostBits and its competition. What does this mean, and  makes CostBits stand out?

There's a range of different factors here. From a user perspective, the main benefit of CostBits (as well as a simple UI), is that most people stop with analytics. Maybe people working in strategy look into analytics once in a while, but his experience is that a good contract doesn't always equal real savings.

So how can he create a spend management platform that gives more? Data. All the data that CostBits get every minute, or even every second, can be mined.

Let's say you agree on a price of a hundred, then you get billed for a hundred and twenty, CostBits can use data to see that and ask “is this a good idea?”. It generates actions and guidance for normal people who can't see through millions of lines of complex data. It notices things: “There's a contract for this category and you're not using it – is that okay?”.

CostBits aims to bridge strategy and day-to-day operations with understandable suggested actions.

This kind of contract / price discrepancy happens more often than we'd like to admit. One of my frustrations with pulling spend analytics from ERP is that procurement gets access to all the different reports around orders placed, but that's not spend – spend is what you actually pay on invoices.

That's why CostBits is built entirely on invoices, and if they can get purchase orders, contracts, and catalogue information, that gets added on top. When working with smaller mid-market customers, invoices are where the real useful information lies.

Smaller companies don't have a wealth of resources for data management. They may have maybe one person who does business intelligence, and they don't necessarily know the data. So CostBits simplifies this, by focusing on actions to create real impact.

Data and resourcing are critical here, and that I'd like to come back to that point. But before that, let's get back to basics. How much revenue or spend would a company need to have before they'd see the benefits of what CostBits?

The more spend you have, the more you can get out of it from a pure money perspective. Anything more than 5-10 million euros in spend is going to be more than enough. But he still wants to address folks in the mid-market, so one of the key indicators on whether they'll be able to get anything out of the software is whether or not they have distributed procurement: Not strategic, tactical procurement, but more purchasing and operational.

Actions-focused spend analysis

As an example, let's say you have a plant and a HQ. You're buying, but you don't understand the contracts – they're probably in binders behind somebody's desk. If you're in this position where you have more than one location, or even people within the same location buying from vendors, you're going to have a structural issue with follow-up.

CostBits can give that structure, so yes – money is an issue, but there are benefits beyond that in terms of structure.

This leads me to ask Thomas to walk us through what he thinks the key differences and problems are, between large and small businesses. Is it misalignment in terms of objectives, is it capability? What are the biggest issues here?

If you're a large multinational company, the issue is that you have a ton of different systems. Maybe growth through acquisition has left things really messy. But you have the budget, training and staff to make sense of it all.

However, in the mid-market you have simpler data, and fewer systems. Structure is simpler, cleaning is simpler, here the brick wall is in terms of capabilities – these companies don't have a procurement department. Your procurement team might even take on that role as a full time job. Small companies simply can't afford the training needed here.

Selling CostBits to medium-sized companies

Thomas thinks that procurement departments aren't given the benefit of the doubt, and often aren't invested in enough.

It's the old adage, many companies understand what they sell, but very few truly understand what they buy. And if that's the case - if smaller companies don't have a dedicated procurement department - will they 'get' what he's selling to them.

In this case, what would Thomas's sales strategy be? Would he sell directly to a CFO or managing director?

Yes – this is pretty spot on. He would always engage finance in this instance. They have the budget, so he has to get them on board. In larger medium-sized companies, there may be people more dedicated to procurement so in these cases he can get a phone number and have a conversation.

For smaller companies with no real procurement on their org chart, he goes straight to finance. Because these are the people who know that the cost of goods is super important. They know this, but they just don't know what to do about it. These guys know they need to do something, especially with the chaotic times we're now living in. But they're staring at the data with no real direction. And that's where CostBits comes in.

How would Thomas get around the capabilities gap here? If finance has the data, but they're struggling to implement changes based on that, what does he do there? Does he offer consulting?

Implementing spend analytics to close the capabilities gap

CostBits always helps with implementation, but doesn't sell actual consultancy. His perspective is that he'd rather be the hub in the ecosystem. If you need a consultant to help you with the change, he could do that.

But Thomas would rather focus on bringing more companies and clients in, helping them with procurement, and  bridging internal and external gaps.

He hooks up with external parties – and doesn't make a dime on it. One of his first clients bought the software, then three weeks later bought catalogue software from someone Thomas knew in the market.

When you're a smaller company, you can get the software from Costbits, and they will see the gaps and point you to solutions, but Thomas doesn't want to solve those problems for anyone, through consulting.

I add that selling consulting isn't half as scalable as selling software!

The focus is on building something that makes a difference to the entire ecosystem, rather than going deep on consulting for a small handful of companies.

My next question is about the lower end of the market. If Thomas is selling CostBits to companies who don't have large dedicated procurement teams, they're going to be predominantly involved in operational, tactical activities – especially given the geopolitical challenges at the moment. So, it's one thing being able to access results from tools quickly in terms of analysis, but what does he do in terms of delivering on the platform's insights?

Bridging the gap between analytics and the day-to-day

First, the tool's landing page tells you per category, or per lever, what you can do - be that reducing supplier base, renegotiation, contract compliance...the usual stuff.

The landing page will tell you which categories and levers have the biggest potential upside for cost reduction.

People don't have the time to plough through data and make their own analysis. It's hard enough to spot problems, let alone the levers that will affect the most change. CostBits give them a list of actions with a click of a button.

Another thing Thomas aims to do here is bridge analytics and the day-to-day.

He's working on adding more feeds for day-to-day transactions. For example, when an invoice comes in that should've been paid a different way, or didn't follow the contract, that will come up for the actual employee responsible. So then you can say to that employee, specifically, “what happened here? Is this okay?”.

Analytics is great, but the key focus here is connecting operations to analytics, for real value, not just a pretty picture.

Is this similar to how guided buying works, where users are walked through their options in simple terms? Yes, this is exactly it, taking the thinking from guided buying, and applying that on a feed level.

The dream, which may take a few years yet, is that a normal procurement purchasing operations employee can come in at the start of their day and say “this is my feed of stuff to do for the day”.

Changing behaviours and supporting positive change

He wants to build a tool that changes behaviour and supports that in a positive way.

He doesn't want to see the negative way, where an invoice comes in and we have to say: “You didn't use the contract, that's very bad”.

Instead, Thomas wants to create a scenario where we spot the purchase order and say: “You made a purchase order from supplier number one in this category, when we have a contract for supplier number two – are you sure this is the best move?”.

It's too late, if what you're looking at is an invoice. So that's his thinking – he wants to guide people.

How often would users need to take a CSV dump of the data to make sure it's accurate? If it's coming from finance, then presumably it needs to be uploaded into CostBits intelligently to be of any use?

Thomas says that if he wants to get lots of people on board with his software, he needs to keep implementation fast. So CostBits feeds directly from the customer's ERP or finances. Then they have the data models, and understand how that looks per system. So this makes implementation really fast – CostBits onboarded its first client in two days, as opposed to six months.

I ask about licensing models. Does CostBits use a per-user licence model, or a per-organisation licence model?

Thomas says that while they're still learning here,  right now it's a per-user licence model. Maybe this will change over time, but this way made sense to begin with.

However, what CostBits is not doing, ever, is a per-consumption licence. The whole point of CostBits is to get lots of people looking at all the data, and consumption-based licences limit usage. You need people to go in and use the software a lot, that's the whole point.

Connect with Thomas on LinkedIn

Visit CostBits’s website

Download our Tech Map for Enterprise

Download our Tech Map for Mid-Market

Download our Tech Map for SMEs

Find your perfect procurement tech solution in our Software Finder app

Sign up for the Procurement Software Newsletter

Book an Intro Call and let’s talk all things Digital Procurement!

Connect with James on LinkedIn

This week we’ve got another informal chat from The Procuretech Pub livestreams. I’m talking to Dr. Wolfgang Schnellbächer from BCG, the author of a new book fresh off the presses - Profit from the Source: Transforming Your Business by Putting Suppliers at the Core. 

I ask Wolfgang for a quick bit of background, before we move on to talking about his book.

He explains that he is currently leading procurement for BCG across Europe, the Middle East, Africa, and South America. He focuses on procurement transformations across different industries, including automotive.

In particular, Wolfgang says that he enjoys expanding the mandate for procurement for wider value generation, using technology.

I ask Wolfgang about common mistakes in how organisations manage their procurement teams internally.

He says that, interestingly enough, many of the biggest companies make the biggest mistakes - 50, 60, perhaps even 70 percent of a company’s overall budget is managed through suppliers by procurement. Oftentimes it goes even higher. If you look at how much time CEOs spend thinking about suppliers or procurement, you’d be surprised: 1% of their day, which is around seven minutes. There is not enough focus on procurement, when there’s such big potential in terms of overall spend numbers. 

I ask Wolfgang why procurement doesn’t get the same level of attention as sales.

He thinks that this goes overlooked because most CEOs come from a sales background. It’s a legacy issue that has to change.

Look at Apple - Tim Cook, Apple’s CEO was a CPO before that. He’s always thinking in terms of profit from the source, and it’s paid off for them.

I go on to ask Wolfgang if this means we need to get CEOs on board, so that organisations can view procurement differently. Or is it more simple, that procurement just needs a bigger training budget?

Wolfgang thinks it’ll need a structural mandate to empower procurement. As an example, he asks us to imagine an engineering company: It may have relatively few engineers in-house, but imagine every engineer in that company’s supply chain, all the way down the tiers… It’s a huge number of people that could be coming up with great ideas for that company. It’s frustrating that procurement always gets so little time and money spent on it, so late in the process. 

He also agrees with my second point on training - we need to train people better. It all comes down to experience and expertise. If you have people working in steel procurement, they should have worked in a steel plant. Industry experience really matters. 

CPOs often move their procurement professionals around, presumably thinking that it’ll broaden their experience and expose them to more categories. But I put it to Wolfgang that he’s almost saying the opposite - procurement experience only has so much value, and it’s category-specific experience that really counts. 

He says that procurement people should have technical expertise in what they’re buying. They need to be able to trigger ideas from suppliers. This way you can align ideas coming from the inside and outside of the company. 

He thinks that many procurement professionals do this already - they do think deeply into their categories and they can innovate. But this potential is never tapped, they’re not heard in the organisation because they come into the process too late, and are often only expected to give a cost focus. 

We need to give a mandate for these people to speak up more. Again, he mentions Apple as an example.

He also raises the pandemic - it was procurement in the end that solved those issues. 

I say this is all very well and good in theory. But go on to share some of my own experiences as an under-appreciated category manager: A lot of administrative busy work that companies dump onto procurement professionals, despite it not really being their job. Don’t we need to fix that, before we can get to the good stuff Wolfgang’s talking about ?

He says it’s a big challenge, but also a massive opportunity. We need to do things in parallel.  We now have AI that can help us in all the key value dimensions - savings, innovation, risk, sustainability…

If we’re asking for a bigger mandate, it’s great to compliment that with powerful tools. But neither tools nor mandate can get the job done without the other. It’s going to have to be a synchronised process.

I ask Wolfgang about the phrase ‘going bionic’ from his book - the idea of integrating together human ingenuity with technological innovation. This seems to encapsulate what he’s trying to say here. Could he talk us through what a successful change management process looks like, in terms of ‘going bionic’?

Wolfgang brings up the case of a German automotive company. He started to work with them a few years ago, and back then the indirect procurement function was not the place to be.

We laugh about this - it rarely is!

But people there were feeling utterly powerless, like every day there was a wasted day. It was the last point from which anyone could make meaningful decisions. But in the end, the two things we just mentioned happened in parallel. One, a strong roadmap laid out in terms of mandate requests, for example being involved early on in IT sourcing. And two, great enablement through capabilities, for example new tools and technologies. They used those powerful tools as a showcase - look at what we can do now. And this supported the mandate.

I ask specifically about that mandate - how did they convince the CEO to deliver that?

He says you need to come from value. Sell procurement as the secret to CEO happiness, or the secret weapon to leapfrog competition. If CEOs manage procurement correctly, they can have whatever they need for their overall company strategy, be that savings, quality, speed, reduced risk… It is possible. 

Everyone’s complaining about supplier shortages - that’s unsurprising, if the CEO only spends seven minutes a day thinking about suppliers! 

I say that I often see it like a leaking bucket, or a tyre with a puncture - sales or revenue is the water pouring in, but lack of effective supplier management is a hole that this value flows straight back out of.

Wolfgang says this is a great analogy, before we go to a quick break.

I say that it’s easy to convince CEOs with BCG stood behind him, but what tips would he have for chief procurement officers looking to do the same?

He says that procurement is often too far from procurement’s thoughts. Yes, CEO’s don’t think about procurement, but it works the other way round. He also thinks it’s important to make things tangible - share samples, share use cases, let the CEO see your hard work. 

If we’re going to create this mix of technology and human potential, what are some of the common myths out there? For example, there’s this feeling that robots and technology can replace human roles. What does Wolfgang think a procurement team of the future looks like?

He says the future can be bright if we make it that way. Yes, some jobs and job profiles will be reduced by technology. But there are many new tasks coming up that deserve our focus, as procurement. If we can get these wide mandates to trigger creativity, then there is certainly still a huge job for procurement to do, that can not easily be replaced by a bot.

Technology doesn’t just reduce redundant tasks, but it helps make better choices in strategic tasks. Technology can steer us, not by becoming our boss, but by becoming a smart adviser.

I agree - we need technology to take away these mundane tasks, because things like ESG and risk are increasing procurement’s workload. 

Wolfgang thinks so, but eliminating tasks is scary - it makes people think of job losses, being replaced. So you have to excite first, with all the things that those employees could achieve if they weren’t wasting so much time. You have to excite with the tools, the technology needed to use that new time even more effectively.

I bring up legacy suites, and how a lot of them don’t do the things we’ll need, going forwards. Looking to risk management and crisis avoidance today, how can companies reduce risk?

Wolfgang says there are three things we need to be doing.

Bringing increased transparency - risk is wide. It starts with financial insecurity but goes on to disaster risks, pandemic risks, war risks. Just before the war in Ukraine, producers of trucks moved their production out of the country, and why? Because Russian border activity was so costly that it couldn’t possibly have been a bluff. Broad enough insight into procurement can really help you see global events on the horizon.

You need to have a defined tool box on risks. Buyers need to know their tools for risk management, just as well as they do already for savings.

We need to get closer to suppliers. If you have a rare thing you need to distribute, who do you give it to first? The people you know. We’re so used to treating people at arms length, in procurement. But we need to understand that this time is over. We need a deeper understanding of our suppliers, so we need closer personal relationships.

I ask Wolfgang what he thinks about onshoring, or de-globalisation. Is this a knee-jerk reaction, or is it still possible to manage complex global supply chains?

Wolfgang says that, although he does see de-globalisation already, he doesn’t want to give up on global supply chains. Finding the smartest supplier, producer, or manufacturer is a global process. You need to cast a wide net. So while some de-globalisation is necessary for resilience, we shouldn’t give it up. If we don’t do this, our companies will lose out and we will lose a lot of efficiencies.

I ask if Wolfgang thinks the tech currently exists to manage what he was just talking about.

He says no. The standard software can’t do it. But tailored solutions at individual companies could. We need specific answers to specific solutions. He gives the example of avoiding human rights abuses. We understand the metrics that feed into this (Wolfgang goes on to give examples), we can collect the data, and we can probably make something that works but there is no perfect AI solution for this that you can buy. It’s software that you have to build, using specific expertise, using your own data, for your own specific needs.

I agree that every company is different and that there’s no out-of-the-box solution for everyone. But I do question whether mid market companies can afford the kind of in-depth, DIY approach to software that Wolfgang is proposing.

We move on to talking about talent - what will this new supply chain environment we’re living in do to talent development and retention? What can we do to keep talent?

Wolfgang mentions the turnaround pyramid, and demographic shift in western countries - saying that there is something of an objective talent shortage. But yes, CEOs and CPOs need to go into hard discussions and conversations with talent. We need to advocate for procurement, and CPOs need to educate - not just the CEO but the entire company. Foster people making careers in your business, make them see that this is a great platform for them. And the last piece, of course, is technology. Investing in technology will attract the best new talent because they’ll want to work with that new technology. He talks about a company whose CPO started making content to promote new technologies within the company - articles, videos, podcasts, all to show people that they were using this latest tech and excite talent.  It’s not about finding the right people, it’s about attracting them.

The book was published on 21st June, by Harvard Business Review. In fact, it’s the first procurement book they’ve ever published. It will be in all good book shops, and also available on Amazon.

Stay in Touch

Connect with Wolfgang on LinkedIn

More details about Profit from the Source

Download our Tech Map for Enterprise

Download our Tech Map for Mid-Market

Download our Tech Map for SMEs

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Connect with James on LinkedIn

On this podcast, I’m proud that we take the time to talk to some of the more early stage companies operating in this space. And you don’t get much more early stage than just launched! 

Our guest today is Patrick Jonsson from Digi Procure, whose recently launched company offers a low code / no code guided category strategy creation tool.

I welcome Patrick to the podcast and ask him to open up with a quick intro on his background.

Patrick explains how he doesn’t come from anything of a tech background. From his home in Sweden, he’s embarked on an international career - everywhere from South America to Denmark. The bulk career of this was in procurement for complex organisational setups: Lots of stakeholder management and getting different cultures to agree. Then about three years ago, he went into consulting, but then decided it was time to move into the digital procurement space. 

He found low code/no code solutions really interesting, and so following a low budget, bootstrap approach he launched a minimum viable product with his first solution, which only cost around 2000 dollars. There were some issues with his first customers, but in solving those he fell on what seemed to be needed: A solution for guided category strategy creation. 

Simplicity is Patrick’s keyword here. Digi Procure is a very simple tool that helps you get started with making category strategies. And with a low code platform, he aims to add further functionality and complexity over time.

I say to Patrick that any SaaS solution will face the conundrum of functional complexity versus user experience. There’s not really a right or wrong answer here, and it can often come down to organisational maturity and complexity. I ask Patrick who he sees as the target users for Digi Procure. Is he aiming for large enterprises, or smaller businesses?

Patrick thinks the answer is medium-sized and up. In his experience, many organisations struggle with making category strategies. You might get a consultant in and end up with a strategy that’s maybe 30-60 pages long, and these just end up on the shelf. Follow up on implementation might not ever get done. Then later you get a new CEO who wants to make some category strategies and you start the whole cycle again.

So Patrick is aiming for what he calls  ‘maturity level 2’ companies. By this he means companies who are starting to dabble in strategic sourcing. You need that maturity and you need a certain size - maybe two or three category managers, before it makes sense to use Digi Procure.

I say that makes a lot of sense - we’re clearly not looking at greenfield here, as companies that young won’t have anything in place yet. But then the really big companies will probably want to go for that incredibly detailed kind of 60-page plan Patrick mentioned earlier. It’s really the medium-sized businesses that are just starting to dabble in category strategy who have the most to gain here.

Patrick agrees. He goes on to say that you can go more complex, using Digi Procure, and he speaks to some experience with customers who have asked for deeper functionality. But that’s the great thing about low code / no code. It’s adaptable to an individual customer’s needs and particularities in a way that traditional SaaS solutions might struggle with.

There’s also a much lower entry barrier when it comes to price - it doesn’t cost much to experiment with the kind of solution that Patrick is offering, compared to more established platforms with their own internal app stores. 

He aims to reach a point where he can use a huge repository of category strategy knowledge, and leverage that to help clients as quickly and responsively as possible.

I bring up another benefit here - category strategy isn’t something that requires an integration with existing ERP systems. It’s an activity that largely allows you to use a standalone piece of technology without having to integrate it into your existing stack.

Patrick says that’s just it - there were a couple of reasons why he chose this area to work in. For one, he is passionate about category strategy, but this ease of integration was definitely a factor too. 

The third reason he chose to do this is that he thinks it’s a good place to start, if you want your company to mature. Many organisations struggle to move from operational work to strategic and tactical work. So why not start with simply doing a category strategy, and using a digital format that gets everybody speaking the same language. This lays strong foundations for a company’s journey towards maturity.

I play devil’s advocate and pitch a scenario to Patrick. Let’s say I’m a head of procurement at a medium sized business with a team of five or six category managers. The biggest push back I’m going to give you is that strategy management takes too much time, it’s an administrative box-ticking exercise, it’s hard to pull together because everyone’s data is different… Convince me that I’m wrong.

Patrick laughs like someone who’s definitely heard all this before. He sees where this comes from, but this is what he’s trying to attack. As costly as it can be, he thinks that you need strategy or you don’t know where you’re going. Sometimes you need to step back, and yes - that could be a massive workload. But do you need to invest in some hugely elaborate foundation in regard to spend review, or do you simply need to start asking some basic questions like “where do we want to go?”.

He recommends that you should start somewhere, and that’s where a simple tool like Digi Procure can help. 

He says that this is where he’s heard great feedback from clients. After even a basic coaching session in strategy they come back to him and say “wow that was really good”.

I ask Patrick how this might work for a high ticket commodity within a mid-market business where the spend is high. Let’s say it’s a critical service or expensive material. How long does it take to put a category strategy through the system, bearing in mind the challenges that mid-sized businesses typically face with bad data.

Patrick says that if you want to go quite simple, his system could do one category in less than an hour. He explains that one of the selling points of his solution is customisation of complexity. You can set the level of detail you want, and that varies the depth of questions that you’ll be prompted with. Then based on your answers, here are some primary and secondary strategies that you might consider. From there you can set goals, barriers, and approvals. So it can be very simple, but it can also get very complicated.

I say that this ability to zoom in and out sounds great, as I used to get frustrated by one-size-fits-all documents back when I used to work in corporate - depending on the category, some things would be totally irrelevant. I like how common sense it is to remove or add levels of detail, so that things remain relevant. 

I ask Patrick where he’s seeing the most interest, from an industry perspective.

He says that it’s early days, and he doesn’t have a lot of customers just yet, but his first customer was in wholesale. Lots of items, buying into warehouses and distributing from there. He now has two other customers - one of them being a global organisation for fast-moving consumer goods, and the other is a machinery production company. 

There are some industries he’s not touched yet, such as medicine. But he thinks he’s seeing confirmation that there’s a complexity and maturity sweet-spot where his tool is of most value. 

I ask where Patrick sees the ROI with his tool? Is it simply better access to data? Or is it more around driving hard savings and delivering procurement targets?

He says that there’s research out there on category optimization projects and the kind of typical ROI they give. He thinks on average this is around 8.7% per project, but many companies don’t do these projects because they can’t identify where the bang for buck is. 

If his tool allows customers to identify which of these projects are worth it, and it can deliver that 8.7% ROI, then it’s definitely worth it.

I agree that this is a pretty meaty chunk, especially as a hedge against some of the price increases that category managers might be facing in direct materials.

As a final question, I put Patrick on the spot by asking him to summarise his tool in one sentence.

He says: Category strategy optimization - get that 8.7%, why would you not do this?

We laugh and conclude that, yes, that sums it up in a nutshell!

I wrap up the podcast by saying that Patrick’s tool is really interesting, particularly to companies who fall into its sweet spot in terms of complexity.

If you’re battling with having a less mature procurement team, but have the desire to put some category strategy data in front of your board, I hope this has caught your interest.

Stay in touch!

Connect with Patrick Jonsson on LinkedIn

Visit DigiProcure's website

Download our Tech Map for Enterprise

Download our Tech Map for Mid-Market

Download our Tech Map for SMEs

Find your perfect procurement tech solution in our Software Finder app

Sign up for the Procurement Software Newsletter

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Connect with James on LinkedIn

This week, we're going to be talking again about that little devil that keeps cropping up - data. 

I'm speaking to Costas Xyloyiannis, CEO of HICX, a company that takes a slightly different approach to data. Today we’re talking about what he thinks is the safest way to get clean data in your organisation.

Before we dive into the specifics of what makes his approach to data so different, I start off by asking Costas to explain Hicx in a nutshell.

Costas explains that HICX is in the business of supplier experience management. Supplier experience, for Costas, equals data. The end state isn’t just that data - there are value drivers after that too - but data is the foundation of supplier experience management: Better data means better experience, and a better experience in turn yields better data. It’s a flywheel value effect for both sides.

I ask how this differs from other solutions that take the approach of automatically gathering data using scraping techniques or AI. 

Costas gives a few differences here. Number one, what is the customer trying to solve? A lot of his customers want the right data in their systems. What you tend to find is that when you pull data out, clean it, change it, what you find is that you can never put it back into those systems. The data will have changed. So this is a very high risk, unsustainable approach. But this is the way most people have done it traditionally.

HICX puts processes in place which control how data is entered into those systems. The supplier is the source of truth, so why not optimise the process of collecting data from suppliers? Only then does HICX apply automation to enrich that data.

I ask Costas to clarify that he is using some degree of automation, but the fundamental difference is that he’s relying on the supplier to provide the core master data.

He says this is correct. He then goes on to speak to customer demand. Customers need a very granular view of their suppliers. If you’re looking at, for example, a process around manufacturing that has to take place at your supplier’s facility, most other sources don’t explain the things customers want to know: What is the parent legal entity, for example? These factors change how data and business processes are managed.

I bring up vendor master data. We often think about this wrongly: “What data do we need in the system to pay the supplier?”. But in something like manufacturing, food or automotive where you’ve got health and safety requirements that are important to the qualification process, there has to be some way of distinguishing the supplier experience and on-boarding process. If you’re using a tool that automatically cleanses data, it’s not going to know how strategically critical a supplier will be to you.

Costas agrees. He also says that context of how you use data is important. It could be the address of a supplier, it could be a payment address… When you’re cleansing you don’t know these things. Costas thinks that this is where customers need help: Who is the parent entity? Is this supplier part of the same legal entity? What is this address? How does it all fit together? This is what customers need to understand to a high degree of accuracy.

He goes on to talk about the importance of being clear on your use case. If your use case is highly analytical, then using an outside source to cleanse your data makes sense, because your goal is to process a lot of data. If you actually want to change the data in your operational systems, this does not work. You need context to meaningfully make those changes. What does each data point mean to your organisation, and depending on context.

I mention HICX’s clients, who are largely enterprise-level organisations. If the suppliers are HICX’s source of truth, then what typically does Costas see from his customers when it comes to managing or changing things? If you have too many people involved in this process, do you get to a point where you’ve got incorrect entries? Is there a master data steward approach, or a centralised department in charge of what data gets entered into HICX? 

Costas says this is a great question. And that the key thing is that suppliers are very cross-functional. This is why supplier master data is harder than customer master data. Everyone touches suppliers in one way or another. Around data governance and ownership, you need to have a global centralised team - that’s just the efficient way to do it. How to see it is that the supplier owns the data. You’re just validating it. 

But people want a lot of other information, environmental information, or other industry-specific needs. And what we’re seeing is people complementing this with “curated” data sources. Like Ecovadis, for example, they curate data for ESG.

And this is cross-functional. This will then potentially go to a sustainability team or a health and safety team, or whatever applies for a specific industry’s needs.

So customers are bringing the two together, they’re interested in driving their own processes, they want to do things cross functionally, and they want to use these curated sources when it makes sense.

I ask if this makes HICX the single aggregator of all of that data in one single source of truth.

Costas says that it’s not just aggregation, but orchestration of the process across systems.

It’s also about how data is implemented into workflow, and how data-driven workflow can contribute to overall efficiency.

I ask if there’s a risk here that vendors might see HICX as just another platform that customers are asking them to use? Given how reliant HICX is on supplier data, how does Costas get vendors to input this master data?

He thinks it comes down to context - first of all the supplier will have to supply this data to the customer. If they don’t have to do this manually through Excel or similar, you’re making things easier for them. There’s one place to go to for all their communications. You’re helping them navigate these systems, and that kind of accessible ease of use is already of value to suppliers.

 

I agree - having a single source from which to self serve is going to be a huge benefit. But then, the additional conundrum to that is “what do you do with the long tail?”.

I ask about how this plays with a platform-centric approach. Looking back on what Dr. Elouise Epstein had to say, and her model where one platform (usually a legacy suite) acts as the center of the procurement ‘spider diagram’ - does Costas think HICX could fill that role as a single source of truth that best-of-breeds then plug into?

Costas says absolutely. He thinks Dr. Epstein would absolutely put HICX right there in the middle of that diagram. HICX connects the common thread between best-of-breeds, and differing company needs, which is the need to orchestrate processes. This relies on data in order to be efficiently automated.  Costas says that suites will not have the right information to do this. 

He says that people forget where these suites and ERPs came from - these are largely transactional systems, used for orders, invoices and payments. So these systems focus on optimising the transaction. But where we are now, we’ve moved beyond the transactional. You need the right hierarchy of data and information, and the suite doesn’t deal with, for example, a parent entity or a manufacturing entity, or any of the things we were just talking about. 

I agree - if you put garbage data into a system, you’re going to get garbage out. It’s that nightmare scenario where you pay to run spend analytics and the biggest slice of the pie chart is “uncategorised”. We’ve all been there at some point in our careers!

 

We take a quick ad break, and once we’re back, I ask Costas if it’s lack of resources that’s part of the problem, or a lack of prioritisation when it comes to data?

Costas says that yes, historically procurement has not seen data as a priority. Focus on measuring success through savings means that data isn’t addressed until the problem is out of hand. Data solutions are no longer a nice-to-have, and now we’re seeing it prioritised more. But for years, bad data has been the main barrier to digitalisation in procurement. The penny has dropped, and the solutions on the market now are making it more feasible to invest in data.

I ask if Costas still sees a reluctance to invest in data. CFOs tend not to think long term, especially if they’re having to report results by the year or even the quarter. If this short term thinking is so prevalent, and the ROI on data investment is so longterm, is the worm starting to turn?

Costas says that there are savings to be gained from proper data management, and especially when you make data gathering a part of your on-boarding process. When you put it in that context, there are huge savings to be made when it comes to efficiency gain. It’s about how progressively organisations are willing to think. In some of Costas’ use cases, he’s seen companies remove seventeen full time equivalents in data management. 

 

I agree that being able to move people onto more value added tasks definitely generates savings. And before closing out the podcast, I ask Costas about the difference between enterprise-scale data problems, and the data problems that could face a small to medium sized business.

Costas says that, when a company is small, chances are that their challenges will be small. But as volumes and systems grow, you need more information, more analytics, and new kinds of insights. When you’re small, you might have enough data to derive useful insights, but you still need orchestration, especially if you’re going to grow in future. 

Even small companies should start with discipline around data, so that problems don’t sneak up on as a sudden and huge issue down the line. If you don’t act, these things can snowball quickly.

I finish off the podcast, not just by asking where you can find Costas, but also with a cheeky plug for his own podcast, where I myself have been a guest. 

You can find all the relevant links below, so be sure to check it out!

 

Connect with Costas Xyloyiannis on LinkedIn

Visit HICX website

Download our Tech Map for Enterprise

Download our Tech Map for Mid-Market

Download our Tech Map for SMEs

Find your perfect procurement tech solution in our Software Finder app

Sign up for the Procurement Software Newsletter

Book an Intro Call and let’s talk all things Digital Procurement!

Connect with James on LinkedIn

This week on the Procuretech podcast, I’m joined by Source-to-Pay (S2P) and implementation specialist Joël Collin-Demers, all the way from Montreal.

Source-to-Pay today – Market trends, Roadmaps, and Best-of-Breed vs. Full Suite

Today we’ll be talking about the dynamics of the source-to-pay application market, how to craft a transformation roadmap in that space, and where we see this market going in the future. But before that, I ask Joël to introduce himself.

Once he’s given us some fascinating insights into his favourite vegetable (it’s eggplant, if you were curious), Joël goes on to speak about his twelve years of experience in the procurement space.

He started off his career working for IBM, working on implementing procurement modules. He then progressed to implementing for direct and indirect materials, and looking specifically at source-to-pay applications that sit on top of ERP.

For the last three years he’s been running his own independent consultancy, addressing exactly the kind of issues we’ll be talking about today.

"Sauce"-to-Pay

Joël mentions the classic ‘pasta sauce’ metaphor for consumer choice: There was a time when there were only two or three kinds of pasta sauce on the shelf, and no-one felt bad about their decisions. Nowadays, breadth of choice creates option paralysis - it’s almost impossible to know if what you’re buying is really the best deal out there.

I point out that twelve years ago (2010) would’ve been around the time that Ariba, Coupa, Jaggaer - all the big suites - were just starting to mature and come onto the market. I ask Joël to talk about what it was like at this time, when all-in-one suites were hugely in vogue.

He mentions SAP purchasing Ariba in 2012. For a while they didn’t do anything with it, but over time they integrated. Adoption in the market for these big suites really didn’t begin until a little later, maybe 2015 - at least from what Joël saw in the Canadian market.

Many providers in this time were trying to buy up smaller solutions so that they could offer full suites covering the full procurement process.

Developing bespoke applications in-house. Is it worth it?

I bring up contract management and SRM, along with newer concepts like KYS. Going back to Joël’s “pasta sauce” analogy. I put it to him that I actually make my own pasta sauce - which, jokes aside, leads me on to asking if there’s any sense to companies building their own SAP tool.

Cearly this isn’t viable for mid market businesses, but at the enterprise level, does it pay off to build things from scratch. What are the pros and cons here?

Joël says that sometimes you need to make your own pasta sauce - on the shelf solutions might not fit your exact needs. Despite this, he’s never quite seen anyone build out their own application, in his twelve years of experience. But what he does see, is large amounts of customisation, or enterprises building out their own little bits of functionality that a core suite may be lacking.

He compares it to a pyramid. ERP is at the base, this connects to other functions, then you add applications for specific use cases to build on top of that, then you may go and get specific applications for one specific vertical.

If you can’t find something cost-effective on the market, this is when it pays to build things yourself. I ask if this is still a viable strategy now. Looking at Ariba and Coupa, and their app stores full of best-of-breeds that can be easily integrated, does this diminish the case for building an in-house app?

Joël thinks so. He expects to see a funnelling down of use-cases where building your own app will be a viable strategy. Niche spaces are being increasingly served. But then again, there are always gaps to fill. Niche apps are still being developed, and not every niche has been colonised just yet.

ERP, Data, and Single Source of Truth

I ask Joël if we still need all-in-one suites to provide a single source of truth. Is he seeing a move away from the suite-based approach, towards people using something like TealBook as somewhere to store their supplier data, contracts, and so forth, then P2P can be a separate tool that fits into that..?

He says that he has started to see this, but it depends what kind of data you’re dealing with. The vendor master is important. Single source of truth needs to be thought of, as you craft a roadmap. But it also comes down to cost - what is the maturity of your organisation? How much spend do you have?

All of these applications cost. Joël thinks that plugging in a large number of best of breeds is a perfect solution - if you don’t have financial constraints. But most companies do!

If you’re making decisions from this position and having to make trade-offs, then data needs to be a priority. But you might choose to handle this in different ways depending on your specific needs. For example, if you only have a couple of thousand vendors, versus ten of thousands, you’re going to prioritise differently. You might choose to support an ERP vendor master data process with a smaller MDM suite.

But you’re always going to have a tug and pull between ‘purist’, IT-driven applications, versus function-specific applications like TealBook. It’s an ongoing conversation within the business, and ultimately, this all comes back to cost.

How would Joël advise somebody making these decisions today?

I ask Joël what he’s seeing today - if someone came to him and asked for advice on full suite versus best of breed, how would he advise them?

Joël says there are two aspects to consider here - how do you approach the market, and how do you ensure you know your own business?

He explains that his answer would differ based on the business’s spend profile. If you’re 100% indirect and you don’t do any production, then that’s a different story to a business with a heavy lean towards manufacture and parts.

It’s important to have a solid understanding of your ‘as is’. Make sure to go around the different functional teams and get a clear picture of your business. Potentially consider geographies, the different teams you may have, and be sure you’re addressing that in terms of spend. You want to address the big pieces, then craft your vision on an end-state.

He advises asking yourself: What are we going to do for spend analysis? For sourcing? for procure-to-pay? For SRM? What are the constraints here?

From there, you want to share that vision - go back to your stakeholders and get feedback on it. All of this is agnostic of technology. You’re really asking ‘what is important?’ and ‘what do we need?’.

I bring up contract management as an example. There are loads of CLM products out there, but none of them seem to offer DocuSign or AdobeSign functionality for sign-offs. If this is something you think you’ll need, this is where you need integrations.

Joël agrees that these are the things you’ll need to consider. How does this kind of functionality fit into your CLM strategy?. Are you using internal or external templates? You need answers to these questions, before you can fully craft a strategy.

I summarise then, that if you want advanced CLM functionality, you’re going to have to look to a best-of-breed. Ultimately this is the difference between a “jack of all trades” and something that’s trying to be a world-beating solution to a very specific problem.

Let’s talk about sourcing

I ask Joël, in terms of the state of the market today, are the sourcing modules that come integrated out of the box with the bigger suites more focused on strategic sourcing and complex tenders, or more focused around tail spend and bringing operational sourcing into a single source of truth?

Does it tend to skew one way, or does it depend on the solution?

Joël says it very much depends on the solution - which is why it’s essential to consider your specific needs. Is your business more on the complex side, or not? What he sees in the market today, is that everyone is picking their own verticals and categories and choosing to specialise within a niche. Knowing your profile is essential before you go out looking for solutions.

Joël comes back to his central point - that it’s crucial to have a technology-agnostic end state in mind.

What do you want? What do you need? This is going to impact the functionality that you’re looking for. Where do you need deep functionality, and where can we live with functionality that’s more basic and out-of-the-box?

Going to market, yes you can look at the Gartners of this world, but Joël feels their scope is quite small. He’d recommend going to places like Spend Matters, or indeed ProcurementSoftware.site and searching for the keywords in functionality that matter to you.

Get a sense of what the best-of-breeds are offering in your space, educate yourself on the jargon specific to your niche needs, know what’s out there, then you can compare that to the functionality offered by your full suite options.

You don’t need to see every application, but you’ll get quite a sense of what’s possible quickly and can then move from there.

I thank Joël for his very in-depth answer and agree that ultimately knowledge is power.

It pays to know what’s out there.

Joël has an additional point about applications talking to each other. That’s an important issue that we may not be alerted to as procurement professionals: What other integration methods are there for this tool with other tools? What’s the degree of integration available? And functionally, how does it integrate - for example, can you align language used across tools?

A system may be seemingly well integrated in terms of the technology, but if you and your stakeholders are having to use different words for the same things, it won’t feel very integrated at all.

Supplier Relationship Management (SRM)

I move us onto talking about SRM, and how this plays out for both best of breeds and full suites.

I ask Joël to what extent he would recommend a full suite, or would a company working in highly regulated industries -for example, automotive or food and beverages - need a best of breed to manage their SRM needs.

Joël thinks they’ll eventually come to the realisation that they need SRM. The consideration with SRM is that this is the base of everything else - having a strong supplier relationship model is critical. If you’re going to spend a lot of money on a vertical, this one has ramifications on everything else, so he’d strongly recommend that it’s worth the cost.

If you don’t give thought to these use-case issues at the beginning then you can find yourself tied up in complications down the line and creating a lot of extra manual work.

I agree that it’s a “necessary evil” to spend money on a best-of-breed, here.

Joël goes on to give some further examples of areas where best of breeds are the way to go here. He brings up Stephany at TealBook’s analogy that this should work like contacts in your phone. You pick up a new phone (meaning application), you go on your contacts and everything gets uploaded automatically - that’s the dream for suppliers.

However, this is never really the case. Each application handles suppliers differently - leading to manual work. So this is why having that data management piece in place can provide real value. Some applications will do this better than others. And flexibility in master data is hugely important, so it can change to fit your evolving application landscape.

Managing P2P outside of ERP

I ask Joël if he’s ever implemented for a client that manages P2P outside of their ERP system that then punches that back into whatever solution they’re using to pay invoices - bypassing something like SAP or Oracle completely, and having a stand-alone tool transfer data back to financial?

Joël says that he has, and that the correct spend profile to fit is when your spend is 100% indirect. If you don’t have any materials or inventory management then you can look at this kind of setup.

When you have any sort of inventory management, that’s when you need to look more closely, and when this kind of strategy doesn’t work so well.

It’s not to say this couldn’t work - indeed, this is what Joël finds really interesting. Each business is different.

As much as consultants seem to love saying “that depends”, sometimes it really does.

Joël brings up the Dunning-Kruger effect - whereby people feel like experts after doing only minimal reading on a topic, but then the more they learn, the less qualified they feel. To be a true expert in a field, it’s going to take a while.

We compare our own specialties - Joël in implementation, and myself in knowing the market at a holistic level. We wouldn’t be able to do each other’s jobs, and nor should we.

Pressures of budget and timeline can lead us to overestimate what we’re able to digest. We feel like we (and our teams) can become experts overnight, but we should really plan for change to take a long time. Implement something once, take six months to let your users get used to it, then come back and - without re-implementing - optimise.

It takes time to bring any change to full fruition, and all too often companies will replace a suite, or move on to a new solution, before they’ve truly given their first purchase time to properly imbed. These solutions are expensive and you should take time to wring all the value out of them that you can.

Time to implementation

Speaking of time, some applications boast implementation in a day, whereas I’ve heard stories of some big suites taking years. I ask Joël about his experience when it comes to implementation and time, and if this differs between suites and best-of-breeds.

He says that when it comes to similar data requirements, you’re going to be looking at similar implementation times regardless of the application you choose. He comes back to his previous point on overestimating how quickly we adapt to change, and this is often the big factor when it comes to implementation time.

He’s typically seen upstream modules like sourcing and contract management take around two to four months, as a realistic timeframe. But then there’s a long process after that of optimising - making sure everyone’s using it, and managing that change across each of your locations.

P2P, he’s seen take even longer - often six to nine months, because it’s so complex in terms of vendor data. Integration is always the most complex step.

What are you integrating into?

Is there middleware?

Should there be?

This is always where you’re going to run into the most complex questions, and require the most expertise when it comes to end-to-end data flow.

Wrapping things up

I draw this week’s visit to the procurement pub to a close, thank Joël for his time today.

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This week we’re doing something a little bit different: A quick solo episode, bringing you ten key criteria to consider when sourcing a digital procurement solution.

This is something that seems surprisingly hard to come by in popular articles and white papers, so here are ten helpful factors to consider.

Let’s dive into the list…

10 Key Factors When Choosing A Procurement Solution

1. Cost

The main question here is which cost model does the solution use?

Most digital procurement tools operate a Saas (software as a service model). These will either charge you an annual or monthly fee for unlimited users, or on a per-user basis. Some solutions offer a hybrid approach somewhere between these two, or use a more modular structure.

Per-user pricing gets expensive very quickly if you need to keep adding users. You may sign up to something like this, thinking that it’s affordable, but then scale up to a point where the fees get out of hand. For established businesses this is obviously less of a concern.

2. Features

I’m particularly talking about best of breeds here, rather than legacy suites. Less is more is the key thing here - do you want it to do one thing very well, or would you like something more versatile that offers a modular structure you can expand over time?

If you’re laser focused on a specific problem, for example contract management, or supplier relationship management, you’ll want something that can do the job well. But these focused solutions obviously lack flexibility. A more versatile, modular solution can expand as your business does.

It’s important to consider this with your end goal in mind - what do you want to get out of the software, and what will your needs look like down the line?

3. Implementation

How much time and resources will it take to implement a solution? Some of the bigger suites can take months to implement, not to mention an army of consultants in some cases!

If you’re a mid market business with a limited amount of IT resources, then you need to be asking providers to give you estimates on the time and ease of implementation.

How easy is it to connect to your existing systems, for example ERP? How open is the interface?

Most modern best of breed solutions have APIs which should facilitate implementation, but be aware that ERP systems - especially older ones - may not have the kind of open ecosystem that modern tools have.

If your solution is trying to communicate with these older ERP systems, then be sure to ask about this up front.

Maybe ask for case studies to see how this integration works in real terms before you commit.

4. User Experience

How easy is it to use - For you, for your stakeholders, and for your procurement practitioners?

I’ve been in situations in my career where I’ve been given tools so complicated that even experienced procurement professionals don’t use them!

If a tool creates extra work for your procurement team, or your suppliers, it might fall by the wayside.

You want users to adopt new tech, and you want them to enjoy using it. If a tool becomes something users want to avoid, it’s not a fantastic tool in the first place.

User experience is an often-overlooked factor, but I think it’s crucially important.

Try to get a demo, or prior access before buying a piece of software - and try to check out how easy to use and accessible the key features for your business are.

5. Customer Support

This is especially important with startups, who may not have 24/7 customer support. If you’re in a different time zone, trying to get hold of a company who don’t have an external customer support team, you could be waiting a while to resolve your problem!

Try to get a picture of exactly what customer support is on offer.

Do they have their own employees? Will they give you a dedicated customer success team member as a point of contact? Or, what if it’s the worst case scenario of a ticket system run by an external company?

6. Security

This is another one that’s often overlooked.

I have to be honest here, I don’t have the most comprehensive understanding of modern cyber security certification. But speak to your IT people and familiarise yourself with what’s contained within ISO20071 - the international standard on how to manage information security.

Make sure that these criteria are part of your scoring process, because as time goes on, I think that protecting ourselves against cyber security risks is going to be increasingly important.

7. Maturity

There are no right or wrong answers here - you may want to work with a fairly young company so that you can grow with them and shape your relationship together, but of course this could lead to more technical issues and teething problems.

You may favour an older solution, but obviously the trade-off here is reliability in exchange for flexibility and customisation.

It really depends on what's best for your unique business philosophy, but it’s still something well worth taking a stance on as a strategic consideration, before you go out to tender.

8. Integration with external providers

This one is becoming increasingly important in a best of breed or hybrid ecosystem. Even the big suites don’t do everything a procurement pro needs, so you may well find yourself needing to integrate other software.

I think the partnership and alliance space, alongside best of breed, is something we’re going to see more and more of in the coming years.

Ask your provider(s) who their software speaks with easily, who they’re partnered with, and which options for integration and expansion are easily available. Having a clear roadmap in mind of how you can combine and partner solutions is key.

Startups and Growing Companies

Numbers nine and ten might not apply to everyone. These points are more relevant to those working with startups, or companies that are still growing.

9. Is the provider profitable?

…Or are they completely dependent on venture capital as their source of investment?

We’re heading into some strong economic headwinds right now, so we can take a guess that venture money may dry up a little in the months and years to come.

I’m still optimistic that the amount of opportunity in the digital procurement space means that we’ll see growth, regardless of these challenges. But any company that’s effectively on venture capital life support, might not be the best partner long term as we enter yet more uncertain times, globally and economically.

Look at the figures: How many employees do they have? When were they founded, and how quickly have they grown?

You want to understand if they’re prioritising growth over everything else, or if they’re growing organically due to their quality.

10. How valuable is your organisation to them?

By this I’m particularly referring to companies that use AI and machine learning. AI systems need data, and they need training. You provide value to AI providers - especially young ones who need to feed more data to their AI.

This means you have value, and you should absolutely keep that in your pocket as a negotiating tool.

But what do you think?

What have I missed out? Are some of these points more important than others?

Get in touch to let me know your thoughts, thanks for listening, and don’t forget to subscribe to the podcast!

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This week we're talking about supply chains. More specifically, where does the line lie between procurement and supply chain? Should we be concentrating on better understanding our multi-tiered complex chains, rather than just purchasing software to better track and trace shipments?

Understanding the value of pre-emptive end-to-end supply chain management

It's a bit of a loaded question, but I'm sure we're going to have a great debate today as we welcome an expert in the logistics and supply chain field, Tobias Larsson from Altana.ai.

I welcome Tobias to the podcast, and ask him for a little bit of background before we dive into the bulk of this week's show.

Tobias explains how he began his career in supply chain logistics with DHL. Starting as a management trainee, he'd take calls in customer service. This let him learn the nuts and bolts of the business before moving into working in freight, then in innovation at DHL.

In 2011, just after the earthquake in Japan, he helped DHL develop a supply chain risk solution called Resilience 360. Eventually, this was spun out of DHL into its own business. Then, about a year ago, he left that organisation to join Altana.ai.

He goes on to explain how Altana's mission is to create a living map of global supply chains. He sees it like the Google Maps of b2b commerce, giving customers multi-tiered visibility of supply chain networks by using a broad pool of datasets, all stitched together with AI. Of course, this kind of risk awareness is only becoming more valuable in our current geopolitical situation, be it due to COVID, or other disruptions to global supply chains.

I say that, in future, it's clear we'll need greater communication between corporate procurement at a strategic level, and local procurement at a more operational level. I ask Tobias, if he's starting to see a move away from procurement reporting into the CFO or a business unit, and instead reporting into supply chain, or the COO?

He says yes, definitely. And goes on to describe how procurement has been a very strict process in companies, historically, acting almost as a policing faction. But now, looking at trends in the “new supply chain normal”, we've got bottlenecks, capacity shortages, transport issues, and a war in Ukraine.

It's going to take time to get back to where we were before, with just-in-time supply chains, So now, pushing reliability upstream and expecting suppliers to deliver doesn't really work any more. Pointing your finger at suppliers is meaningless if they can't get access to the materials they need. It doesn't work to expect them to deliver on short deadlines.

Collaboration and sharing responsibility

Tobias says things are changing into a more collaborative environment where you need to work together with suppliers to manage risk. Procurement isn't a policing faction any more. Today's challenges call for a trusted, responsive network, so that we can all be more strategic and nimble.

I ask Tobias to expand on the notion of near-shoring. Does he think that software like Altana.ai can offer the same kind of benefits? Could you keep a complex global supply chain in place while using that kind of software to mitigate risk? Or does he think a mix of both approaches is best?

He says that balance is the way forward, here. Reducing long supply lines is useful, and it's worthwhile for companies to do that. But what Altana.ai focuses on is trust. Whether your suppliers are near or far, if you're better able to detail your value chain, that's going to have value. It's about bringing them closer to your business in more ways than simple geography.

I ask about inventory – does the shift away from Just-in-time to Just-in-case is going to become permanent?

Tobias thinks there'll be a strong re-balancing. It's more and more necessary to be mindful of your supply chains, and he thinks that a return to extreme JIT is unlikely.

I mention Brexit, and how we may expect to see more nationalistic policies in terms of trade, which is going to have an impact too.

Tobias agrees – supply chain has never become a national interest before. But policy makers are realising that supply chains are a vital means to maintaining security in the world. We're going to see more legislation around not only locality, but ethics and sustainability too. He mentions the recent forced labour legislation in the US that prohibits some parts from China. Tomatoes, cotton, polysilicates, with each of these, you now have to prove that your suppliers are not part of forced labour activities.

I mention a new German supply chain law that puts responsibility on the end manufacturer to be responsible for their second and third tier suppliers too.

Tobias agrees – this comes into play in January 2023, and will absolutely demand deeper visibility.

I go back to his point about procurement being the policeman. Now it seems that policing is going to be more and more engaged with compliance. If there is an investigation, it'll fall to procurement to prove that the company is innocent and compliant.

I ask Tobias if we should still be focusing on software that tracks cargo? Will there still be a need for that? Or if we focus on understanding our supply chains, will the need for that disappear?

He raises a recent study by McKinsey that shows some alarming results. Something like only 20% of businesses know anything about their Tier 2 suppliers. 3% know anything about their Tier 3. If you look at your Tier 1 suppliers, you should expect to have seven to seventeen times more suppliers in your total supply base. So you're only looking at the tip of the iceberg if you focus only on Tier 1.

I'm not convinced that a lot of companies fully understand their Tier 1s either!

Tobias agrees. He reckons up to 50% of companies don't really understand enough about where materials are actually produced. Visibility is lacking, all round and this needs to change.

On that note, I ask Tobias about technology in relation to risk management and predictive procurement. What can you focus on there? Some events seem impossible to predict – no software was going to forecast a war between Russia and Ukraine, for example. So what are the areas where software offers the most use?

Tobias's mantra is that, while we can try to be proactive about things – for example eliminating dependencies – the key factor is always going to be your reactive capabilities. Some things are impossible to predict, so we need visibility and we need to be as responsive as we can. The more you understand, the faster you can adapt to changes.

It sounds like a no-brainer – so why aren't companies banging down Tobias's door to invest in this kind of thing?

He says this is a great question, and thinks it comes down to cost. Risk, historically, has felt secondary when it comes to investment priorities. Lack of talent is also a factor. This is a new area, and specialists are in short supply. It's also about the data – if companies have grown through acquisition, there are so many layers that don't speak to each other, it's very difficult to organise that data into anything useful.

But that's what he's doing with Altana – getting that data organised and making it so companies are ready to achieve this kind of visibility. Data isn't easy, but it is a required step if we're going to make more sophisticated systems that can cope with this new normal.

I thank Tobias for his interesting company, and round off the podcast by asking how you listeners can learn more about Altana.ai.

Stay in touch!

Connect with Tobias on LinkedIn

Visit Altana's website

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This week our guest is Jim Bureau, CEO of Jaggaer. He’s carving out a niche for an all-in-one solution, at a time when best of breeds are gaining market share. I’m known as a bit of a best of breed fanboy, so Jim is stepping into the dragon’s den, here!

I welcome Jim to the podcast, congratulate him for his bravery, and ask him about the challenges of offering a full suite solution in a tough market.

Jim says it’s important to acknowledge that, while companies may want to commit strongly to either best of breed or full suite solutions, the reality is that most companies end up using a mix of different tech approaches.

He goes on to talk about the importance of user experience. Whether a solution is best of breed or wider in scope, the thing that users pick up on is the experience. And that’s what Jaggaer focuses on.

I ask what Jim expects to see in the future for established suites like Jaggaer. Does he expect things to become more modular? Is that a direction he’s thinking of following with Jaggaer?

Jim says that the reason why full suites exist in the first place is that it’s expensive to tie things together. He thinks that simplicity is key here, and that this question brings up two important initiatives for Jaggaer at the moment.

One is creating an environment and ecosystem of partners that allows people to have suite systems while being able to plug niche, innovative vendors into that - quickly, easily and without requiring a lot of IT spend. Jaggaer allows customers to share third party modules and products that can easily be plugged in.

Secondly, Jim is also working on something called Jaggaer Compose. This allows the customer and partner community to build out business processes that are specific to a niche or industry, and can then be shared amongst one another. He believes this will completely change the game on how people interact with these systems today. 

It will officially be launched at the end of Q2.

I ask Jim if he sees a future where customers can take a more  “pick and mix” approach. For example, let’s imagine a consumer thinks that an external spend analytics product is stronger than what Jaggaer can offer. Is that something that they could, as part of their RFP, specifically request? 

Jim says that, for any CEO, no-one wants to forgo business! But he accepts that this is how most companies want to work.

Jim has spent a lot of time and effort on Jaggaer’s autonomous commerce platform. Autonomy is important, and true autonomy comes from embracing sources outside of your own system - taking information from sources like TealBook or EcoVadis, and working that into your machine learning. There are so many sources of information out there, and you’re never going to own everything.

I agree that you can’t be everything to everyone - Ikea makes great kitchens but you wouldn’t buy your white goods from them. Customers want to use specialists. I use contract management as an example, and Jim jumps on the opportunity to speak more about this…

Jim says that contracts are something people often use as an example of an adjacent market here, but he’s spent a lot of time and effort making Jaggaer’s contract features as usable as possible.  

He explains that he doesn’t want to force customers into adopting his contract module just because it’s there. By focusing on the user experience, and good application of data (from some acquisitions we’ll talk about in a moment..), he hopes that customers will gravitate to the best, easiest solution available - and if that’s Jaggaer, then great.  

I ask Jim what drives his strategy around staying on top of innovation? How would he decide whether to acquire a company or to enter a strategic partnership like he has with TealBook and EcoVadis? 

Jim explains that it comes down to comprehensiveness. Not just the comprehensiveness of the application, but the comprehensiveness of the user experience. If we follow a workflow, from start to finish through a b2b application, are we improving that workflow?

The challenge in the SaaS environment today is that everybody wants an application that works just for them,  but they also want quick time to value. Jim says this is what Jaggaer Compose is all about: Allowing people to tailor their application to either their industry, their process flows, or their environment, without breaking the system when it comes to multi-tenant SaaS upgrades.

Investing in startups

I ask Jim if he also invests in up and coming startups, and he says that this would occur by way of his partner ecosystem - either revenue sharing, or from a support perspective.

I then move on to the question of balance. How does Jim see the balance between features and cost, in terms of where the market is going? What sort of annual turnover would a company need to typically have for Jagger to be an attractive solution?

Jim says that while this can vary, based on the industry, a good rule of thumb would be to see 250-300 million turnover as an entry point. Jaggaer does serve some companies below that threshold, but they would be something like pharmaceutical startups, which are unique cases due to their high profits and ability to scale explosively if successful.

Jim shares an interesting statistic: Indirect materials only make up about 25 to 30% of corporate spend. Direct materials matters, and Jaggaer is the strongest player in the marketplace here. It's a very good space for Jaggaer, and something that Jim views as clearly differentiated, relative to the suite’s peers. 

Data management, pitfalls for large enterprises, and changing times

I ask Jim about data management. Aside from his acquisition of TealBook, what else is he doing to stay ahead of the curve here? 

He says that this is one of the toughest aspects when making things work correctly. But he’s created an ecosystem of partners who, by working with them closely, enable a methodology for how data gets pulled in. In many cases, particularly at the enterprise level, companies will often have a separate MDM initiative that Jaggaer will then plug in to. 

I ask Jim where he typically sees enterprises fail. Where do they get frustrated or fall down when it comes to digital procurement transformation?

He says that something he’s seeing currently, is people not adapting to change. Between COVID and the recent geopolitical instability, what we're seeing now is a very different environment. Where people oftentimes historically have gone wrong, is by presuming that these changes are procurement issues, when really they’re revenue issues, or issues that affect companies on a broader scale. We should let more departments have a seat at the table, rather than limit the span of discussion to procurement alone. Span is important, and has a material impact on the success of adoption.

There’s also the expectation of speed, due to people’s experiences in the b2c world. People are expecting Amazon-speed turnarounds on purchases - to be able to buy something and have it on their desk the next day. And if you can’t deliver on that expectation, you will struggle. That’s why Jaggaer is fully intending to deliver that.  

I ask Jim where he’s seeing the most traction at the moment, in terms of business growth, 

Jim says he’s mostly seeing growth in areas with complex needs, such as manufacturing and pharmaceuticals. He does also see some greenfield growth, but points out again that 75% of corporate spend is in direct materials. That market has historically been ERP run, but those ERPs don’t communicate with the outside world fantastically, so he’s seeing a lot of uptick in that space.

To finish off, I thank Jim for his time, and ask where you can go to learn more about Jaggaer. 

Stay in touch!

Connect with Jim on LinkedIn

Visit Jaggaer's website

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Download our Tech Map for Mid-Market

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Connect with James on LinkedIn