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Fast Fashion – But at What Price?

Is the concept of ethical fast fashion an oxymoron? Do we as consumers have a good enough grasp of the ethical considerations?

Today’s typical fashionista has high expectations. She, or maybe he, wants to buy cheap and affordable trendy clothes in the latest styles straight off the catwalk.

Never mind that an item is unlikely to last more than ten washes. Fast fashion is getting faster and cheaper, but what is the real cost to society and the environment? We may have an uneasy feeling about the issues, but generally have a poor grasp of ethics.

How important is this industry?  

The direct value of the UK fashion industry to the economy is around £26 billion and growing fast. Average spending on fashion in Europe is about €700 (>£500) per person per year. Italy, Germany and the UK are Europe’s largest fashion markets in terms of consumption.

Fashion’s total economic contribution is much more if we include activities in indirect and related industries. We may be feeding the economy with our purchases, but we are also harming the environment. Shipping, transportation and logistics are energy demanding, time consuming, and pollution-spewing.

The formula for success in this industry was always to give the customers what they wanted: trendy garments at the right price, of acceptable quality, in the right place, and with a dash of speed. In the last five years there has been a concerted effort by some retailers to become more ethical buyers, employing better human resources policies and safety practices.

Ethics in Fast Fashion

Do procurement teams harbour concerns about sweat shops or care about child labour or manage waste disposal? Or is it more important to buy cheap to satisfy the consumer who just wants to pay £3 for a T-shirt?

Paul Brownhill, Group Chief Executive at Britannia Garment Packaging, says that although the majority of consumers want quick access to the latest trends at an affordable price, they are now also seeking assurances about the way these items are produced. He notes that consumers are increasingly concerned about the quality, safety and environmental impact of the clothes they buy. Is this really true?

The University of British Columbia recently researched this issue and came to the conclusion that, theoretically, young consumers place an importance on sustainability but have a blind spot when it comes to fashion.

“They may care deeply about eating organic foods, but fast fashion consumption is exempt from such moral decisions. This approach can in part be explained by the fact that youthful consumers may fail to fully grasp issues of sustainability, in particular the disastrous future environmental risks associated with unsustainable production.”

Other similar studies demonstrate little evidence that ethical issues have any effect on consumers’ fashion choices or that they are likely to sacrifice their own personal needs for the greater good.

Some Bright Spots

Leading retailers like H&M, Gap and Zara have all signed a pledge to improve factory conditions. H&M, whose tag line is ‘Fashion and quality at the best price in a sustainable way’, was recently named one of the world’s most ethical companies by the Ethisphere Institute.

One of its claims to fame is that it is the number one user of organic cotton in the world. H&M, with 3,900 stores in 61 markets, is also one of the first and largest fashion companies in the world to make its supplier factory list public.

Louis Vuitton Moet Hennessy, (LVMH) a corporation comprising over sixty luxury brands, has been auditing its carbon footprint since 2004. Tiffany & Co. produces a Corporate Responsibility Report, which touts their support of human rights, anti-corruption practices, and commitment to responsible mining. This is all very commendable if it is more than just words on the page.

Fast Fashion and the Ecosystem

For those that do care about the future of our children and damage to the environment, there are a couple of other options. Buyers can check questionable supply sources, read every label, and buy only locally produced items, but this may come at a cost.

What about sourcing second-hand or hardly used items? Re-purposing items creates a positive ethical and environmental impact and can be both cost-effective and trend-setting – it even has possibilities in the commercial environment.

Landfills are full of synthetic material. Cheap clothing goes out of fashion and people end up with a lot of unwanted items. UK consumers ditch more than a million tons of clothing every year.

In poorer countries the problem is less noticeable; items get handed down and re-circulated until they totally disintegrate. In developed countries, they may end up in the rubbish bin.

What can we do to help?

  • We could support ethically sourced products from brands that have committed to best practice
  • We could create more awareness among commercial buyers about poor labour practices and sustainability
  • We could buy fewer higher quality garments to reduce the environmental impact of fast fashion.

The campaigning organisation Labour Behind the Label provides information on what brands need to do to up their game and move closer to employing ethical sourcing practices.

Suppliers are anxiously trying to satisfy the market’s needs for speed and price, at what cost? Is ethical fast fashion” an oxymoron?

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.

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.

How Top Procurement Professionals Conduct Reverse Auctions

Using reverse auctions opens up a wealth of benefits for procurement professionals. But it’s important to fully understand when and how to use them. 

Reverse auctions have been around since the late 1990s, and have been regularly used as a tool by procurement professionals to obtain better pricing and lower supply costs. The use of reverse auctions can benefit companies of all sizes, but it really comes into its element when used by professionals within the procurement industry.

In an ordinary auction, buyers would compete with each other to obtain a product or service, yet in a reverse auction, the roles of the buyer and seller are reversed, and involve sellers competing to supply goods or services to a buyer. Over time, the price in the auction will start to decrease. Think of it like an eBay for the supply chain.

For procurement professionals who still haven’t started on the reverse auction or e-auction game, we’ve taken a look at how some of the finest procurement professionals use reverse auctions in their daily lives, and what benefits there are to using the service.

Time is of the Essence

When it comes to reverse auctions, as the supplier does most of the work, one of the greatest benefits is that the procurement professional can save time.

In the case of a traditional contract, businesses send out a request for a proposal which would have to be completed by the seller. The business would then sort through the proposals to make a qualified decision. The process of a reverse auction means that the whole process can be done online, cutting the requirements for manpower and time, with a decision being made much quicker.

Most reverse auctions won’t last longer than an hour either, meaning that the actual process can be wrapped up quicker, and both business and supplier can get on with what they do best.

Money can be Saved

Many companies these days are under economic pressure to become more streamlined and to reduce costs. In 2014, it was reported that the DLA, the U.S. Defense Logistics Agency, had found that by using reverse auctions they were able to save around $1.6 billion in a year – with $400 million coming from three auctions alone.

Whatever the size of your business, reverse auctions can be a great way of saving lots of money. Pitting suppliers directly against one another will mean that the lowest prices will be offered, and you be able to purchase services at a highly competitive price. Many companies will also tend to buy in bulk, meaning that even greater savings can be made to the bottom line.

The net will be opened up

Reverse auctions provide a great opportunity for smaller and lesser known businesses to get involved, and compete for something they may have otherwise never have had the opportunity to. Depending on the situation, the process can help to create new, long-lasting relationships between the business and the supplier.

In the past, companies may have felt limited to choosing suppliers local to their area. Nowadays, thanks to the growing reliance of technology, this is no longer a major issue. The net has been opened and allows businesses around the world to compete, which in turn allows both the buyer and supplier to network and build connections.

Reverse auctions are not for everyone

However, reverse auctions are not for everyone. It’s important that procurement professionals are able to determine when it’s right to use the service.

As it is a service that is mostly fixated on providing the lowest price, it can be hard to determine the level of quality or service that will come with that low price. In many cases, the lowest bidder may not necessarily be able to provide the highest of quality, and this can end up having a knock on effect on other aspects of the business.

To tackle this issue head on, Market Dojo believes you should use price as a stepping stone only, and not a set rule. Obviously, you want to be able to pay as little as possible, but if you factor in levels of quality and the reputation of the seller, then you are more likely to make a better buying decision.

Finally…

Ultimately, reverse auctions are a great tool for the procurement professional in today’s technology-focused climate. The buyer can spend less resources on purchasing decisions, whilst new suppliers can take part in sales that they wouldn’t otherwise.

To be effective at buying goods through the reverse auction medium, those in the procurement industry need to remain vigilant and try not to focus entirely on price. High quality goods and delivery times also need to be factored in order to make the process efficient and cost-effective. Otherwise, you may just end up paying out more.

About the Author: Adam Maidment is a Content Writer for Portfolio Procurement, specialists in the recruitment of experienced procurement professionals throughout the UK.

Dynamic Solutions to Dynamic Problems

‘Pop up Warehousing’ and ‘Dynamic Warehousing Networks’ are new terms hoping to provide dynamic solutions to solve an old problem – large fluctuations in stock.

Whether predictable or unexpected, most businesses have had to deal with stock maxing out their facilities from time to time. Moreover, as managing average or normal stock levels has become more sophisticated and accurate, the effect of the pinch points becomes more acute.

Of course, any predicted overflow can be accommodated. However, just because it is predictable (for example, seasonal storage gluts), doesn’t mean its impact, or the challenge of solving it, is reduced. Furthermore, not all stock excess is predictable – far from it! Taking advantage of bulk purchase opportunities or running promotions make good business sense, but often create storage headaches.

Historical Solutions

Historically, the solutions that companies resort to cost money and may adversely affect operations. They may rent additional warehousing to accommodate extra stock, or find themselves involved in costly shuffling of inventory across locations, both existing and new.

Outsourcing – getting a third party provider to pick up the slack – is the obvious course to follow, but has traditionally suffered from a lack of transparency and the sense that a better solution might have been missed. After all, an emergency is not always the moment to run a tender process!

Dynamic Solutions

However, the growth in dynamic solutions such as Pop-up Warehousing (the colloquial term for on-demand storage space) is now set to change the game.

This ability to quickly identify available warehouse space and pricing on the internet, represents a step-change in how to deal with over-spill. It means that solutions can be found locally or in strategically relevant hubs – dependent on the user’s need – and that rates are benchmarked by the market.

On top of the transparent pricing and availability that these dynamic solutions provide, they also facilitate a direct dialogue with providers across the country. This means that users can identify, secure, and make use of available warehouse space immediately.

This level of choice can mean the economic benefits of bulk buying or customer promotions are not diluted further down the P&L, and the added flexibility can also allow companies to be more daring in their development – testing new products, markets or distribution strategies with less inherent cost (and risk) and modelling the impact of more permanent solutions to their business without making significant investments or sweeping changes.

Speed and Flexibility

The ability to quickly react and adapt can be particularly beneficial to fast growing or new e-commerce businesses. These business are often unclear about what mid- or long-term capacity they need, and the resources required to support fixed logistics costs.

Dynamic warehousing allows them to upscale logistics in line with their growth rate, without overwhelming resource and cost implications, nor the distraction and risk of running a fast-growing logistics function.

With end to end logistics costs averaging 12 per cent of sales value, not doing it as efficiently as possible can make a material difference to competitiveness. For a third party logistics provider, that 12 per cent is their 100 per cent, and they have the vertical and horizontal experience of logistics to build skills and capabilities from shared experience. Outsourcing logistics can, therefore, make a lot of sense for younger companies – as long as the most appropriate providers can be found easily.

Whilst outsourcing is not a new concept, the catalyst for the recent upsurge in interest has been the development of interactive online platforms by companies such as Flexe Inc in the US and, more recently Zupplychain in the UK.

These websites provide a degree of aggregation and transparency that means all businesses, whether large or small, mature or a start-up, can benefit from a level of flexibility. This means users can be more responsive and make better decisions for the present and future health of their company.

Zupplychain employs algorithmic matching of customer’s search requirements to warehouse availability to show warehouse pricing, along with an automated and structured process to progress enquiries and a cloud based system to manage customer stock in provider’s warehouses.

5 Keys to Unlocking Successful Integrated Business Planning

Many companies still struggle with executing a strategic integrated business planning (IBP) process that effectively integrates demand planning, supply planning, and financial planning.

Successful Integrated Business Planning

Most simply put, the process should drive decisions on how to best meet demand (customer/consumer sales for existing and new products) within supply constraints in order to optimise financial return. Yet answers to the questions of each planning component of IBP (See Figure 1) can be dramatically different, and lead to very different results if addressed in silos versus an integrated fashion.

Put more bluntly, companies that successfully execute IBP achieve greater operational and financial benefits than those that do not. A key requirement for that success is collaboration, including a disciplined, repeatable process that drives integrated decision making, and a balanced scorecard for performance measurement.

Integrated Business Planning_Slide 2

Figure 1: Components of Integrated Business Planning

Based on our experience, we at The Hackett Group believe unlocking IBP can deliver the following competitive advantages and benefits:

  • Visibility into the financial implications of decisions and actions related to demand and supply.
  • Significant cost improvements driven by a more efficient and effective supply chain.
  • Improved top-line revenue growth.
  • Inventory deployment improvements, e.g. “the right product in the right place at the right time” based on customer demand, which reduce excess deployment costs.
  • Increased customer satisfaction as a result of more accurate demand planning and inventory availability which reduce out of stocks and back order issues.

However, with all the evidence that implementing IBP leads to important benefits in an increasingly competitive environment, why do many companies continue to miss out on the potential rewards of IBP?

We believe there are five keys questions that companies can use to open the doors to an effective and efficient IBP process. The first two questions deal with the market place and competitive environment in which the business operates, while the final three questions help assess internal improvement opportunities based on best practices for process, people, and data, systems and technology capabilities tied to IBP.

  1. What are the big-picture IBP trends in the marketplace?

Here are three examples of what leading companies are doing:

  • Streamlined annual planning and budgeting processes.
  • Balanced scorecards, with cascading metrics.
  • Unified data models and better integration of technology platforms to support advanced planning and analytic capabilities.
  1. How do our supply chain cost and metrics compare to other companies?

Benchmarking can serve as a useful tool for measuring performance against the competition. Armed with valuable key performance metrics for cost, process and resources, supply chain leaders are equipped to make critical decisions and address areas of opportunity.

As an example, the metric “Demand/supply planning costs per $1000 revenue” is an excellent indicator of overall efficiency (see Figure 2):

Demand & Supply Costs

Figure 2: Demand/supply planning costs per $1000 revenue across industries. Source: APQC 

  1. Are optimal planning processes in place throughout the organisation?

Establishing a best-in-class IBP process is the foundation for maximising the efficiency and effectiveness of any organisation. Example best practices include:

  • IBP goals and objectives are clear and well understood.
  • The IBP process evaluates gap resolution and business optimisation options.
  • Materials and reports supporting IBP are exception based. 
  1. Do we have the right people at all levels of the organisation, to own the plan, make decisions, and ultimately be held accountable for the plan’s execution?

Equally as important as the right processes, is having the right organisational talent and accountability mechanisms in place. Example best practices include:

  • Adequately staffed resources with required knowledge and skills.
  • Clear ownership and accountability.
  • Discipline to adhere to decisions made as part of the IBP process.
  1. Finally, are we equipped with the appropriate technology (tools and systems) necessary to fully support integrated business?

To enhance supply chain technology capabilities that both support and optimise the integrated business planning process, best-in-class organisations successfully employ supply chain systems and tools to maximise their IBP process.

Importantly, the firm must have the tools and systems needed to bring together and reconcile demand, supply, and financial plans in order to identify gaps and imbalances.

Read the full Hackett Group Supply Chain Insight Report here to learn more trends, best practices, and metrics which help supply chain successfully transition to Integrated Business Planning

Hanna Hamburger, a Director in the Strategy & Operations practice at The Hackett Group, has over 25 years of industry and consulting experience. She has worked extensively with consumer products and retail companies as well as life sciences companies in the areas of sales, marketing and supply chain process, technology and tools, and organisation performance improvement. A longer version of this article is available on The Hackett Group’s website.

Raise Your Glasses to the Cloud

Does being stuck in our ways, and doing things “the way they’ve always been done”, mean procurement misses out on the benefits of the Cloud?

You can download the latest GEP white paper on the impact of cyber security, and the benefits of a cloud-based procurement technology solution here.

You can buy flip-flops that have a bottle opener built in to the sole.  Notwithstanding the sartorial choice of sporting said footwear, the synthesis of the two household objects into one ‘solution’ was clearly something born of necessity, or desperation, or more likely both.

The crown cap on a beer bottle, the correct name for which is actually a misnomer – the ‘crown cork’ – is 124 years old and still going strong. The ubiquity of the particular type of stopper means that almost everyone can access a tool designed with the express purpose of removing one, but finding oneself on the beach without one can lead to some unusual inventions, or some risky and occasionally painful improvisations.

Bottle Opener Flip Flops

Necessity – the Mother of Innovation

What is surprising is that it took seventy years for someone to come up with the bright idea of combining the crown cap with a screw thread on the bottle – negating the need for a tool altogether, and even today bottles of beer that one can open with a simple twist are far from the norm.

Interestingly, that most useful combination is still limited to mass-production, mass-market brands, and rarely or never to be found on small-scale, independent, or craft brewery products.

The same, of course, applies to wine. There is unquestionably a huge resistance to screw caps on premium products from the industry, the consumer and the media alike.  Until, that is, you actually talk to the real experts.  Not the self-appointed armchair connoisseurs – I’m not being denigrating, I’m definitely guilty-as-charged – but those who really know their stuff.

I’ve met wine producers, merchants and critics all of whom are desperate for the screw cap to be considered as acceptable at the “high end”, as at the mass-market end, because the product is only better as a result.

Consider the labour-of-love winemaker who has to play Russian Roulette with their prized vintage every time a piece of possibly-contaminated tree bark gets stuffed in the neck of a bottle.

But, on the whole, we consumers feel it cheapens the product, and the lack of ritual and satisfying “pop” detracts from our enjoyment of the contents. The real experts say it’s just snobbery – and, of course, they’re right. But today there remains a relatively low ceiling on what a restaurant can charge for a bottle with a screw cap. Good wines simply don’t come in screw-capped bottles.

What finally convinced me of the ridiculousness of that position was finding myself with wine but without means of access. Today I find myself tutting in a very English manner if I find I need to go get a corkscrew to open a bottle.

Migrating to the Cloud

I find myself in the same mindset when thinking about the Cloud.  For a while I felt somehow discomfited by the idea of putting all my files, and music and images and books and data in the cloud, preferring instead to create my own personal cloud of NAS drives and IP sockets so that I could access what I wanted, wherever I was, but I would still ‘have’ all my data.

How daft is that? If my NAS drive goes down (which it has) who has to run around in a panic trying to fix it? If I move house or country (which I have) who has to handle the business of relocating and reconfiguring equipment to deal with the change?

You see the point, I’m sure. I was on a hiding to nothing. Insisting on a model of how data storage should be, because that’s how it’s always been, supported by some spurious mythology of physical location, is no different to saying screw-caps cheapen the experience of drinking wine. Nonsense.

Cutting away all the snobbery and enjoying wine starts and ends with glass to mouth. What happens up to that point might be interesting, but it’s not in the least relevant.

Now I find myself tutting in overly-dramatic fashion if the service or software I need is NOT available in the Cloud. Install? Oh, really!

Cloud computing is a loaded subject. There are genuine concerns, and genuine things to be concerned about, when considering moving business critical systems into a new environment.

But, let’s make no bones about it, you need to be thinking about those things anyway. The threats and risks won’t go away if you choose not to pay them any attention.  But the opportunities sure will.

We’ve applied a great deal of brainpower to design and build a cloud procurement platform that delivers a massive bang-to-buck ratio, in a secure and highly performant environment, and our two-part paper, ‘Securing Procurement in the Cloud of Tomorrow‘, is designed to help business and IT people alike start a meaningful dialogue on the subject. The Cloud is here, it’s huge, and growing.

But even now I catch myself out. Trying to improve performance of my video editing capability at work I spoke to our splendid and ever-cheerful head of IT about getting some kind of box dedicated for the purpose.

“Have you thought about a cloud video-edit-suite solution?” he said.

Well, d’uh!

Enterprises should be moving their procurement processes to the Cloud, say GEP. For more on this, download the latest white paper research.

For more information on high-performing procurement software, visit the Smart by GEP website.

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?

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.

Cloud Computing – Don’t Get Stranded with Sharks

If you think that cloud computing is not for you, you may be left stranded…with sharks.

You can download the latest GEP white paper on the impact of cyber security, and the benefits of a cloud-based procurement technology solution here.

“If you think you’ve seen this movie before, you are right.” So said David Linthicum, author of ‘Cloud Computing and SOA Convergence in Your Enterprise‘.

He went on to say, “Cloud computing is based on the time-sharing model we leveraged years ago before we could afford our own computers. The idea is to share computing power among many companies and people, thereby reducing the cost of that computing power to those who leverage it. The value of time share and the core value of cloud computing are pretty much the same, only the resources these days are much better and more cost effective.”

In biological science there is a concept called convergent evolution, which essentially describes how different organisms have independently evolved the same solution to a particular problem.  The similarity in body plan between sharks and dolphins is a perfect example. Despite one arising from a fish and the other from a land mammal, the particular circumstances of life in the pelagic ocean have resulted in the gradual adaptation through survival of both groups into superficially similar morphologies.

New Era Solutions

The cloud computing model of this era is indeed offering a similar solution to a similar problem that the shared computer access model used to. Indeed I recall having to book computer time in my university days, and that on a machine with a fraction of the computing power of my wristwatch!

In that case it was simply a matter of limited availability of the machines themselves and sharing the cost between groups was the only model that made sense. Today the equation is a different one.  Raw computing power and data storage are dirt cheap…

As an aside, a quick sketch calculation confirms that data storage twenty five years ago cost around seventy thousand times the equivalent cost today. (To check my working: I installed a 100MB hard drive in a business system in 1990. It weighed 120Kg and cost about £1100 Sterling. Last week, I put a 1TB card in my camera for just under £140.)

…but it isn’t the cost of the machine resources any more that are the limiting factor. It’s the overhead. The cost of management and operation, the risk of failure and consequential loss, and the inertia lumped on the enterprise in times of radical and accelerating change.

Putting Software to Work

What is driving business systems into an effective shared computing model in the cloud is not the need for more resources at lower cost (although this is undoubtedly an unplanned upside). No, it is the need to decouple the business processes from the technology.

Yes, of course, the technology – and by that we mean software of course – is central to the business process. I mean, do we really need to say e-this and e-that anymore? But in the past our business processes were determined BY the software. Today cloud software can give us the flexibility to conduct business how we think best and the software can be put to work for us.

Perhaps that’s sounds a bit too rosy-tinted for some.  But the fact remains, the risk and cost of making the wrong decision in selecting a cloud software provider, is the merest fraction of what it was in the old, customised-behind-the-firewall days.

A recent conversation I had with a consultant suggested one client of theirs was looking to migrate their systems as-is to an SaaS platform over the next five to seven years. In that same time, a more decisive CIO could make the wrong decision about a cloud provider twice(!), and still be further advanced in ROI by the time that migration is over.

Overcoming Intertia

So, the imperative to move into the cloud is compelling but the skepticism around security can apply the brakes in many organisations.

Because cloud computing evolved from a different ancestor to the shared computer model – out of the chaotic, anarchic, everyman’s internet, run by nobody-knows-who, instead of out of the traditional, conservative club of private supercomputers run by accredited Systems Analysts –, and because of a slew of high-profile hacking cases, there remains a core of uncertainty in the procurement industry.

To that end we work closely with our customers to help them understand where the security risks today really lie, and the greatest of these is inertia.

As I think about the case of the company taking upwards of five years to take what they have today and put it online, I can’t get the image out of my head of a diver coming up from a leisurely reef excursion only to see the dive boat heading for the horizon.  Of course, if he can’t tell whether that fin belongs to a dolphin or a shark, you now know why.

It will take a company with very deep pockets and very great resilience in a rapidly changing world to be able to ride out the cost of being left that far behind.

There do remain reasonable questions around technical security that should be asked and answered in any selection process, and our two-part paper Securing Procurement in the Cloud of Tomorrow is designed to help that conversation.

Vivek Kundra, former federal CIO of the United States said, “Cloud computing is often far more secure than traditional computing, because [cloud providers] can attract and retain cyber-security personnel of a higher quality than many governmental agencies.”

The question is not whether, or even when. It’s how.

Enterprises should be moving their procurement processes to the Cloud, say GEP. For more on this, download the latest white paper research.

For more help on avoiding the sharks in procurement software, visit the Smart by GEP website.

Week In Tech: IoT Security Spending, Spiceworks & Drones

Does the future of IoT security lie in the Cloud? New research published suggested that security spending is set to take off.

If the latest research from Gartner is to be believed, security spending on the Internet of Things (IoT) is set to accelerate in 2016. The figure could well top $348m in 2016, meaning an increase of 23.7 per cent compared to $281.5m in 2015.

Research director Ruggero Contu, commented that the current IoT security market is small, but ripe for growth, as both businesses and consumers  migrate towards smart and networked devices.

“Gartner forecasts that 6.4 billion connected things will be in use worldwide in 2016, up 30 per cent from 2015, and will reach 11.4 billion by 2018. However, considerable variation exists among different industry sectors as a result of different levels of prioritisation and security awareness,” he said.

Looking further afield, Gartner predicts that spending could rise to as much as $547m in 2018. This assumes that IoT adoption continues to gather at this same increased pace. These figures assume a march towards connected cars, heavy trucks, commercial aircraft, farming and construction equipment.

With more and more transport and equipment becoming part of the connected world, Gartner say that cyber attacks stemming from IoT will amount to 25 per cent by 2020. A lot more clearly needs to be done because as it stands IoT security spending accounts for only 10 per cent of IT budgets.

What can IT do then to better prepare itself for the connected future? Contu says we must look towards the cloud for answers to our security concerns, commenting:

“IoT business scenarios will require a delivery mechanism that can grow and keep pace with requirements in monitoring, detection, access control and other security needs.”

He goes on to say: “The future of cloud-based security services is in part linked with the future of the IoT. In fact, the IoT’s fundamental strength in scale and presence will not be fully realised without cloud-based security services to deliver an acceptable level of operation for many organisations in a cost-effective manner. By 2020, Gartner predicts that over half of all IoT implementations will use some form of cloud-based security service.”

Spiceworks Deploy Mobile Help Desk

Spiceworks has debuted a new app that takes its cloud-based help desk solution mobile for the first time.

The app will allow IT professionals to deploy and manage its services on smartphones and tablets, and allow push notifications to help them stay on top of tickets while on the go.

“We’re focused on helping IT professionals become more efficient by enabling them to run their help desk entirely from their phones or tablets,” said Sanjay Castelino, VP of Marketing at Spiceworks. “With a tool that’s easy to deploy and use on the go, IT professionals can now support their growing business in a way that works best for them.”

The platform also doubles as a social network and allows members to share their own technical know-how with others in the community. What’s more, users can submit requests for quotations for IT purchases to vendors direct from the app itself.

The Spiceworks Help Desk mobile app is available for download today on iOS- and Android-based smartphones and tablets.

When Will Drones Lead to Loss of Life?

As drone flight increases in popularity, and with Amazon’s delivery plans seeing no signs of abating, aviation officials say it’s only a matter of time before the inevitable.

On 17 April, a British Airways plane was believed to have come close to a drone that had flown into its airspace. James Stamp, global head of aviation at KPMG commented on the recent near-miss at London’s Heathrow Airport:

“People who fly drones in controlled airspace are potentially putting lives in danger, and should be subject to the strongest possible sanctions available under the law. A number of practical steps should be taken, including requiring drones to be registered, tougher penalties for irresponsible behaviour, and technology based solutions that will prevent the drones entering restricted airspace in the first place.

“More research is also required into the potential impact of collisions because, while the impact of bird-strikes has been well researched, the impact of drone impacts is less well understood.”

On Valentine’s Day, a drone came within 20-150ft of an Airbus A320 flying at 12,500 feet near Biggin Hill in Kent. The incident was made all the more serious by the fact that drones are permitted by law to fly only under a height of 400 feet.

Incidents are only gathering in pace – to put things into perspective, there were nine near misses in 2014, but this increased to 40 last year.

Have you got an interest in IoT security, networks and drones? Want to connect with fellow procurement professionals in IT? Then head over to Procurious’ dedicated Group for IT Procurement.

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…

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.