All posts by Market Dojo

Are Procurement Professionals Stuck in the Stone Age? – Part IV

As B2B technology companies are beginning to realise the benefits of being easy to use, what changes do we think will happen? How do we envisage the B2B tech space evolving within the next 5-10 years?

B2B Software

Market Dojo put an article together examining what it would look like in 10 years time, and how it will have to adapt and change to remain ahead of the game.

With a focus on Market Dojo as an eSourcing company, we came up with a few conclusions, most of which can be applied not only to eSourcing, but to B2B technology companies as a whole.

The table below looks at different functions of technology and predictions on how they might change within the B2B landscape.

Function Change
Mobile Technology Whilst consumers are ever increasing their use of mobile tech, are businesses going to become more reliant on this in the workplace? The simple answer is yes. B2B companies need to be aware of becoming even more responsive, searchable and usable across the mobile technology of the future?
Google (power of the web/search) Will this develop enough and become intelligent enough to make other applications obsolete? Such as developing  more intelligent supplier search function and becoming the de-facto supplier database though their categorisation.
APIs The ability to integrate between solutions is already possible, but in the future it is set to become even more simple. We expect it becoming ever easier to integrate with any (software) component through standard connectors, so that best of breed becomes as attractive or even better than ERP solutions.
Amazon/Google/Apple B2B platform Established companies moving into other areas (E.g. developing eMarketplaces) and threatening the smaller providers with their ability to quickly develop technology. This is already happening.

Procserve, for example, have built links with Amazon for B2B purchasing. (See full article here.)

Eradicating the user interface Moving from slick user interface to ‘no user interface’, as per this Coupa article.

A rather controversial idea, but we can see some logic that instead of having to log into a tool every day, instead it fits around your life so you can interact with it outside the tool via Voice Activation such as Google Voice, Siri, Cortana, etc.

True commoditisation The final stage of the technology lifecycle is commoditisation. (See Market Dojo’s video on the four stages of technological growth taken from a TED lecture.)
Integrated market information How global news stories affect various aspects of your business and what technology can do to make companies more aware and faster.
Also how tech can keep companies updated with what’s being said about their brand. (Ref. Owler.)
More focus on AI & Automation/robotics The software could take actions when it ‘thinks’ it is needed. e.g. within eSourcing – delay an auction due to lack of liquidity, or suggest a better lot structure based on the bids received.
Public Sector Procurement A big shake-up in the public sector software market to disrupt the legacy tools with their complex workflows and procedures to be a slick tool that people enjoy using. E.g. Matrix SCM
IT involvement & Security barriers IT’s function is changing from an in-house design/build/implement function to a strategic business partner who guide business stakeholders in the selection of appropriate SaaS systems.
Marketing How will people find us in the future, compared to how they find us now?
How will the power of search change in the future?
At the minute, the focus is on Content Marketing, but what next?
More personalised, more interactive marketing?

As you can see, we expect the Market Dojo platform to become more intuitive and user-friendly over the next few years. Is this true of all business softwares? Will we (realistically) be able to prioritise usability and design over functionality and features?

The authors have pondered long and hard the question of when the B2C approach will catch on in the B2B World. We think it is progressively changing, but will, for the reasons listed in previous articles, take some time to change.

New suppliers with easy to use solutions are coming to the fore, Coupa and Egencia come to mind. But we postulate that it will be a slow change process, with perhaps another 5 years before the whole B2B solution market feels like today’s B2C environment – at which point the B2C landscape will possibly be different again!

To stay at the forefront of technology, can B2B companies look to B2C arena as a gauge of what’s to come?

What are your thoughts?

Market Dojo and Odesma have partnered to combine their intuitive eSourcing software and expertise in offering business advisory services to offer clients a winning procurement solution.

Are Procurement Professionals Stuck in the Stone Age? – Part III

If procurement technology is stuck in the stone age, what do we need to do to modernise? We take a look at some B2C examples for inspiration.

B2B & B2C

So far in this series, Market Dojo and Odesma have discussed whether procurement technology is stuck in the stone age, and why B2B software isn’t keeping up with its B2C counterparts. This article examines some B2C companies getting it right.

This article was originally published on Market Dojo.

Slowly but surely, not only do we see B2B companies adopting B2C ideologies, but some B2C companies are jumping in and filling the gap left by B2B providers. Granted, the complexity of B2B companies isn’t completely covered by the consumer oriented companies, so they are aiming more at the smaller companies. But all the same it still highlights a shift in the market.

By taking a couple of examples, we can see where these changes are happening and examples of B2C solutions doing it right.

Uber and Freight Brokering

MD - Uber

The transportation networking company Uber originally focussed on the B2C space by bringing together people looking to travel in the same direction, aggregating the demand and sharing out the cost of the journey to charge a lower price.

Targeting those traveling for personal reasons and commuters, they are paying special attention to the business sector with their latest development of business profiles.

More recently, focus has shifted to the freight industry where they hope to achieve similar by introducing mobile-based freight brokering technology. Not only will there be a reduction in number of ‘empty miles’ travelled, mobile-based freight brokering technology can help lower operating costs, improve fuel efficiency, boost asset utilisation and enhance resource productivity.

Benefits which Uber have been reaping since they formed in 2009.

Amazon Business

Amazon touch briefly on the B2B side with Amazon Business. With benefits like integration with purchasing systems and order approval workflows, they have adapted Amazon to create Amazon for business.

This could have extreme effects on the the current technology providers, should Amazon develop an eSourcing/eAuction aspect. It would not be that difficult for them to make the shift.

Another area in which Amazon has moved to a B2B focus is with their hosting options. This isn’t an adaptation of their B2C offering, but an entirely new market for them.

Software as a Service

MD - Airbnb

Airbnb, for example, provide a marketplace that allows one to search for and/or offer accommodation. Their sleek design, mobile-optimisation, carefully thought-out filters, and simple sign-in methods are something to be rivalled. Having relied heavily on investment, they have been able to afford the development costs and created a really neat SaaS product.

MD - ProcurifyProcurify is another such example of improved, B2C-esque usability. They aim to provide P2P technology without the presumed “boring” grey-scale colour scheme and clunky design that we have seen (and expected?) for so long. They have responsive design and mobile applications available. With their bright colours and simplistic design, they are very appealing.

Social Networks

But will this new technology, mainly adopted by new companies, only appeal to the millennials of today? Will previous generations appreciate this or seek their old faithful, familiar, providers.

Jive is also an interesting example. Marketed as “The Next Leap for Social Intranet Software“, their user interface is very similar to that of Facebook. Or, at least, Facebook 3 years ago.

MD - Jive

The concept is brilliant – provide companies with an internal social platform to share company news and collaborate. However the user interface still leaves something to be desired. Granted it’s one of the best on the market, and I am in no way criticising them specifically, but overall, there is still a lack of ease-of-use in B2B social platforms in comparison with B2C.

Is this because we expect it, because more complexity is required, or because the design needs to remain colourless and simple?

LinkedIn have recently redesigned their ‘groups’ making them more user-friendly and appealing, so increased usability is something which they pay attention to. But the creativity of design is definitely lacking in the B2B world. Why does business have to be so boring?!

The procurement community is lucky to benefit from the industry specific, social platform Procurious, which, with its bright colours and easy interface has a very B2C feel – which differs greatly from LinkedIn.

MD - LinkedIn and Procurious

In the picture on the left, you can see crowded text and pictures with no clear direction of what to look at next with a few small tabs at the top to interact with.

On the right the information on the profile page is broken down into tabs and the contact information on the left-hand side makes it easy to see details of an individual.

It seems that Procurious, being a more recent development, has taken learnings from other solutions (in its space) to create a more user friendly social media platform. Whilst LinkedIn (above left) is busy and cluttered, Procurious provides a more simplistic, clearer view. If you haven’t done so already, definitely recommend getting involved there and signing up to the tool.

Global Trading

MD - Alibaba

Alibaba provides an online platform for global wholesale trade. They launched in 1999 and attempt to make sourcing of goods and suppliers more simple for businesses, working with millions of suppliers across the globe.

Within the tool, they have a categorised search option for buyers with the ability to ‘get quotations’ from the approved supplier list within Alibaba (AliSource Suppliers).

So how will B2B software and technology evolve in the next decade? Make sure you read the final part of this series to see what we think.

Market Dojo and Odesma have partnered to combine their intuitive eSourcing software and expertise in offering business advisory services to offer clients a winning procurement solution.

Are Procurement Professionals Stuck in the Stone Age? – Part II

Is procurement losing ground by having antiquated, “stone-age” technology solutions? Why are B2B solutions struggling to keep up?

Stone Age Computers B2B

This article was originally published on Market Dojo.

In the second article in this series (you can read the first part here), Anya McKenna, of Market Dojo, and Ed Cross, of Odesma, ponder why B2B software remains stuck in the past, while B2C software is moving forwards in leaps and bounds, providing users with the experience they want.

The question is why big B2B software solution providers have not changed and emulated B2C? We would postulate the following reasons:

  1. Customer demand or acceptance.
  2. Drive for consulting revenues by providers.
  3. Decision makers equate complicated to valuable.
  4. Industry  Research organisations are in the pocket of those who pay and report as such.
  5. Existing suppliers balance sheets stifle innovation or change due to the impact on profit of asset write downs.
  6. Big business inherently do not trust small innovative start ups / CIOs don’t get fired for selecting the old guard.
  7. B2C companies are not interested in selling to the B2B customer base.

In order to fully understand this, we need to look at each of these points in more detail:

  1. Customer demand or acceptance.

Interestingly there does not appear to be a huge clamour amongst B2B customers to secure simpler, easier systems.

Take SAP or Oracle for example. They continue to dominate their sector (SAP acquired Ariba for $4.3 billion), and continue to thrive, making little effort to simplify and re-invent with ease of use at the heart of their solutions.

Whereas, in the B2C arena, there is no choice for the providers. Millions of users’ voices are being heard, and all leading solutions, from Amazon to AirBnB, are simple and easy to use. Perhaps the imperative to change amongst B2B players is just not being voiced by action.

  1. Drive for consulting revenues by providers.

The prevailing model for providers is to maximise revenue (after all they answer to shareholders), and they have predominantly built models that support this goal. They do this by securing licence annuity, and augment this with implementation, training, consultancy and delivery services.

Take a leading and long established eSourcing provider for example. They provide a complicated and unintuitive, but effective, solution for e-Sourcing, which they support with a very large consultancy practice (600 professional staff delivering revenues of greater than €70 million).

Though figures are not available we might hypothesise that at least 50 per cent of the revenues are consulting and support related. Clearly it is not in any legacy B2B providers interests to simplify the user interface, due to the resulting loss of support revenues.

  1. Decision makers equate complicated to valuable.

Is it human nature in business to expect business solutions to be inherently complicated?

Look at Jive, a sort of Facebook for business. Whereas Facebook is really easy to navigate and personally manage intuitively, Jive is not.

Given Facebook came first, and Jive built a similar tool, albeit for a closed company environment, is it that those that selected it, measured its value in terms of its complexity?

  1. Industry Research organisations are in the pocket of those who pay and report as such.

A rather contentious point perhaps, but when looking at Gartner’s report on the e-Sourcing market a few years ago, they had only just added a 7th criteria to their analysis: Ease of Use.

Gartner had historically focused on functional components – i.e. spend analysis, contract management, etc. (making up 4 of 7 criteria) – alongside technology platform and business services.

Additionally the analysis of providers generally only lent itself to the bigger or more established players. The 2013 report included fewer than 30 suppliers, with the leaders in their opinion being the likes of IBM, BravoSolution, Ariba, GEP, and SAP.

Very few emerging and new players are included. This may be due to time constraints, but clearly is at the detriment of newer, and easier to use, solutions.

  1. Existing suppliers’ balance sheets stifle innovation, or change due to the impact on profit of asset write downs.

It is a fact of business that the balance sheet plays a large part in driving companies’ behaviour, especially if they have many millions of $/£ intangible asset value.

SAP had Intangible Assets of €25.6 billion on revenues of €17.6 billion in 2014. A write down in an asset, results in an equal write down in profits. Institutional shareholders typically take fright (and flight) at write-downs. Therefore re-inventing the hegemony of existing solutions, requires a potentially significant investment and potentially a write down in previous investments – this is not something the neither executive nor board will countenance.

Is it therefore a surprise that existing solutions lack innovation in the user interface, which may well require re-programming in a newer language?

  1. Big businesses inherently do not trust small, innovative start ups; CIOs don’t get fired for selecting the old guard.

When was the last time the CIO of a large corporate suggested taking a risk? Corporate behaviour is typically risk averse. It is much safer to select a proven provider such as IBM or SAP, than take an opportunity to shake the tree.

This therefore precludes newer, start-up technologies that will deliver often much more cost effective, easier to use solutions. Coupa are making real inroads here, but few others are.

  1. B2C companies are not interested in selling to the B2B customer base.

The question is why don’t Amazon, or Tesco for that matter, move into the B2B space? They provide a huge range of products that businesses use. Yet they generally haven’t, other than grudgingly, thought to move into the B2B market – it is not part of their strategy.

However, we understand this is changing at Amazon! They believe their market is the consumer, not business, possibly because they are much simpler to deal with, pay immediately and do not add massive administrative, process and management burdens (i.e. contracts, risk questionnaires, etc.), which corporates do add as a matter of process.

But will this change? We postulate it is slowly shifting, with B2C principles slowly coming into the B2B World. In our follow up we will discuss this shift in some detail.

Market Dojo and Odesma have partnered to combine their intuitive eSourcing software and expertise in offering business advisory services to offer clients a winning procurement solution.

Are Procurement Professionals Stuck in the Stone Age?

Ed Cross, co-founder at Odesma, and Anya McKenna (of Market Dojo) ponder the neanderthalic and stone age ways of B2B software…

Stone Age Procurement Technology

The peculiar thing about business technology is that generally it is not very easy to use. I might exclude here email, but the rest of it seems to need a training course and some sort of super user, or a training provider (or even worse a consulting firm) to come and show you how or work it for you. Whereas the most used technology that we interact with outside of work generally does not require any support.

The irony here is that business technology came first, and the use of technology first appeared in the office, long before we all had tech at home or on our person. Yet, it remains unintuitive, expensive, and, as a result, does not get utilised fully or at all by a lot of people at work.

Compare this to B2C technology, how hard is it to work? ebay for instance. Or Facebook. Or even Candy Crush. The simple answer is they are intuitive, straightforward and certainly do not need any training or consulting support to get the benefit of them. In fact even Generation X (us older types) can work them on any number of portable or fixed lumps of technology. And a lot of them are free to the user.

Where Did it all Go Wrong?

So what’s gone wrong? For this, we’ll let Ed share an anecdote from 1999. While working for PwC, I presented to a local CIPS event in Staffordshire on e-commerce. This topic was perceived as very much the new kid on the block, and a whole host of new tech start ups were receiving incredible valuations.

At this session I laid out the view of the future described by the firm, ignorant to the nay sayers. In fact there were quite a few in the audience, most notably those with a few more years under their belts than me. One or two challenged my hypothesis on the topic.

I later left PwC to set up a Private Equity backed branch of a US e-Sourcing firm Sharemax.  A year or two later the dot.com bubble had burst and I was back in Consultancy, and the nay sayers were proven right.

So, what was, or still is, the problem? From an historic perspective the leading market insight companies and so forth, focused heavily on functionality, as did many buyers of solutions. And ignored the user experience, the maturity or demographic of the population expected to use the technology.

Many people in senior or middle management positions did not grow up with computing technology, and when making selection decisions, focused on elements outside of ease of use, and considered technology against an historic understanding – one where tech is always hard to use.

They therefore condoned supplier behaviour where training and consulting support were deemed acceptable costs of enablement. And this thinking has not much changed, given the demographics of leadership.

Of course, the existing providers have not been driven to step up, because the customer has not demanded it of them. Whilst in the B2C arena the demographic is younger. The expectation is of instant gratification, solutions that are compelling, easy to use and free or very low cost. With Generation Y coming through in business we expect the current issues are about to change.

So why have B2B software providers not followed the B2C route, and provided better, more compelling solutions to pull procurement out of the stone age? You’ll have to wait for the next part of our series to find out.

Market Dojo and Odesma have partnered to combine their intuitive eSourcing software and expertise in offering business advisory services to offer clients a winning procurement solution.

All for One, Innovation for None

Another public procurement price analysis article has made national headlines recently, found here on BBC News.

police

Many thanks to Market Dojo for giving Procurious permission to republish this article.

The Home Office conducted a study into police procurement trends across 20 common items including batons, uniforms and helmets.

I haven’t read the Home Office study in detail, but these kind of reports can err on the side of rudimentary:

Humberside bought police helmets for more than £43 each while most other forces acquired them for under £30.

This can indicate a savings potential and is undoubtedly a good place to start your evaluation for cost reduction opportunities.

However when you simply compare two purchase prices, rarely, if ever, does the analysis also delve into key contractual differences such as payment terms, rebates, catalogue pricing discounts, minimum order quantities, annual purchase volumes, inclusion of delivery costs, what delivery service levels, product warranties etc.

Then you have the question on whether the specifications are the same.  Perhaps Humberside has identified a more costly product that leads to a 20% better safety record from head injuries.  Might that not justify the additional cost?

There is a long perceived view that rationalisation and aggregation leads to cost reduction.  For example, in the same article Policing minister Mike Penning was quoted:

“For too long the police have approached the market in a fragmented way, buying equipment in small amounts and to varying specifications.

“It makes no sense for forces to buy separately when money can be saved if they act together.”

Bigger procurement is not always better procurement

Interestingly Spend Matters UK recently re-circulated an older post of theirs outling how bigger procurement is not always better procurement.  Please do have a read as it provides excellent insight that we won’t duplicate here.

What we’ve seen is that many of our clients run reverse auctions on aggregated volumes, rather than spot-purchases.  They are very successful in doing so.  That said, even very low value auctions of a few thousand pounds have lead to 30%+ savings, so bigger isn’t always better in our view too.

Large spend values attract large suppliers with the notion being procurement teams can exercise their leverage and use economies of scale to secure better pricing.

Lower spend values attract smaller suppliers and generally there are a lot more of them in the marketplace, which can equate to increased competition and better savings.

Perhaps the price differences seen with the police, assuming they are not associated with contractual or specification issues, are less to do with failure to aggregate demand and more to do with ineffective negotiations for their own requirements? 

One step forward, two steps back

One adverse side-effect to bundling up contracts into an aggregated demand is that it diminishes competition.

Taking say £200m of spend that is today fragmented across many hundreds of suppliers and bundling it into a single contract prohibits SMEs from retaining business.  As a result some may perish whilst others downsize.  The large company that wins the contract swells significantly to cope with the demand whilst other large businesses (if there are any) stay as they are or also downsize from losing their portion of the fragmented spend.

Fast forward a year and the market only has one real candidate who can cater for the demand – the incumbent.  This becomes a very poor market to negotiate in.

And so the cycle continues whereby it is decided to fragment the contract into smaller packages to increase competition, except this time there isn’t as much liquidity.  So we’re back where we started except with worse market conditions.

Innovation triumphs over imitation

As we’ve just noted, consolidated contracts diminish competition.  With less competition, there is less imperative to differentiate.  There will be fewer SMEs in the market and they are typically regarded as the key source of innovation with their agility and drive to increase market share.  Local police authorities will have their hands tied and won’t be able to engage with the SMEs and so those remaining will have little incentive to innovate.

Furthermore, the other suggested strategy in the BBC article was to standardise the products. This again reduces innovation, as the product spec. would be based on what already exists, not would could be.  Once that spec. is agreed, the market is closed out to new ideas.  This contradicts with the relatively recentreforms to the EU Procurement Directives.

So what should we do?  

We should be focusing on driving the market forward and negotiating effectively within that market.  A fragmented market can be your best friend, not your enemy.  Procure on best value, not just best price.  Don’t focus on Purchase Price Variance but on lifetime costs.  Improve through innovation.

We could go on but there’s a risk we’re sounding like a Baz Luhrmann song!

Hopefully we make ourselves clear but more importantly, what do you think about this suggested police procurement strategy?

Market Dojo is a pioneering software-as-a-service (SaaS) company that offers professional, intelligent and easy-to-use online negotiation software and accessible eSourcing software. Find out more at www.marketdojo.com.

Does Cost Plus Encourage Lazy Procurement?

Money

Many thanks to Market Dojo for giving Procurious permission to republish this article.

Cost plus (definition, adjective): “relating to or denoting a method of pricing a service or product in which a fixed profit factor is added to the costs.”

You could argue that every item or service sold is cost plus.  In other words you need to make a profit to stay in business so everything purchased has to have a margin added so the final sale will be more than the sum of their parts.

The area of cost plus that I would address is where the client has agreed to buys products or services from a supplier and the final price for those bought off the contact is not known.

This unknown value will be created from a cost plus relationship to ensure a profit is maintained. However, if the client continues to pay, where is the incentive for the seller to ensure they are procuring the goods or services at the market price.

Surely the client should be ‘on the ball’ and focus on year on year cost reductions although many times complex and varied builds on a contract prevent this.

‘Should cost’ exercises would be a useful tool in a perfect world if we all had the time but isn’t that why you are together with a trusted supplier?  Surely the supplier would focus on procurement costs so their sales exercises would be more competitive?

You would think so, but what if the market is not so competitive. In fact, does the cost plus model mainly arise in non-competitive markets dominated by larger players?

If this is the case you could draw the conclusion that procurement is not being driven in the right direction due to a number of unbalanced forces (cost plus, lack of competition, lack of customer focus). This bad practice could easily spiral downwards.

Will increased globalism be enough to shake up these suppliers or will the customers drive better value? Either way it often seems that procurement in these type of industries can be an afterthought that is of little importance.

Viva la procurement revolution.

Market Dojo is a pioneering software-as-a-service (SaaS) company that offers professional, intelligent and easy-to-use online negotiation software and accessible eSourcing software. Find out more at www.marketdojo.com.