Jason Busch’s Analyzing comparative claims piece on Coupa‘s Ariba-bashing marketing campaign has caused quite a stir. And not without due reason. Jason has correctly pointed out a number of shady points in the Coupa campaign as well as clearly juxtapositioning the two competitors.
But there are a few areas where the correct analysis unfortunately gets in the way of pragmatically successful purchasing; namely how we define maveric spend and which path one needs to take when tackling this dilemma.
One of Coupa’s big differentiators is the iRequest and iBuy features. In brief it enables end users to browse online-stores to requisition items. The items are then submitted for approval and the actual purchase is carried out by a purchasing professional.
Commenting on this functionality Jason Busch writes:
“…however, in larger organizations, iRequest and iBuy defeat the purpose of rationalizing spend with specific suppliers to hit volume-discount thresholds. Going to non-contracted supplier sites through iRequest and iBuy may not constitute a maverick purchase in the purest sense, but it’s certainly close to one, given the lack of a contract, price sheet, and potential discount/rebate schedule.”
And whilst he is correct in his analysis, I’ve experienced first hand on numerous occasions how exactly this type of functionality and behavior has paved the way for successful e-procurement implementation as well as development.
When I started out with e-procurement back in the dark ages before the dot-com era our free-text requisitioning was the one killer app that successfully won over a reluctant user base.
- First, it made it possible for end-users to still use their preferred suppliers
- Second, the purchasing department could when possible steer the purchase towards contracts
- Third, the purchasing department could analyze buying behavior and end-user preference to optimize the supplier network
- Fourth, skillfully navigating the above criterion, the purchasing function was able to minimize maveric spend while transferring spend towards contract suppliers
To this day – the very company that I started my procurement path within is still applying these fundaments in successfully rolling out e-procurement to a global organization (~100 countries). It eases the change management process as well as enables e-procurement roll-out to locations that are off the map in many cases.
There is a big difference between uncontrolled maveric spend and allowing end-users to show their preferences while still retaining control. And lest not forget that in the latter case, there will be a pre-approved purchase order sent out to whatever supplier, a PO that can be matched against an invoice, minimizing administration.
Call it what you will – iBuy, iRequest, free-text requisitioning – to successfully roll-out procurement you need a procurement solution that goes well beyond traditional catalog e-procurement. Jason also points this out and gives a heads up to Vinimaya which I can only applaud; from what I’ve seen, they have some great stuff up their sleeves.
March 2, 2010 at 7:07 pm
You make excellent points as unfortunately, Jason (whom I like and respect but as demonstrated with previous opinions including his assessment that spend intelligence was a misleading phrase*), has proven once again to be out of touch with emerging trends in the industry. Including in this instance the viability of agent-based, Metaprise models.
These models allow operational flexibility on the front lines without sacrificing the adherence to centrally established objectives. In short, adaptability to real-world market conditions as outlined in many of the 700 plus articles and white papers I have written, and maintaining and achieving centralized or collective objectives are not an either or proposition.
In the following excerpt from a recent article, supply base erosion through the broad application of forcing procurement practice into an artificially narrowed funnel of supplier access has had dire consequences in both the private and public sectors:
“Public sector organizations are being faced with a serious problem relative to supply base erosion. Specifically, fewer, quality suppliers are responding to bids resulting in a phenomenon known as creeping margins. Creeping margins occur when the RFP response pool decreases dramatically to the point where 80 percent of the business is being done by 20 percent of the suppliers. Over the years I have made reference to creeping margins by way of tangible examples such as the Canadian Department of Defense consistently paying a premium of a 157% above market price for Indirect MRO parts to support their IT infrastructure. Of course the results of an eroding supply base is not limited to the public sector, as US retailer Best Buy through a misaligned vendor rationalization strategy paid a premium of 23% above the going market rate for their MRO parts.” (Note: here is the link to the entire article as well as others; http://procureinsights.wordpress.com/?s=Vendor+Rationalization)
Through my government funded research (re the Scientific Research & Experimental Development Program or “SR&EDs”) the data was noteworthy regarding the effective use of agent-based models within a Metaprise platform (the basis for which the iBuy, iRequest and similar-type dashboard applications have been developed).
This ensures an accessible, dynamic and reliable supply base through which the intelligence that is gathered represents true market conditions that lead to sustained best-value purchasing decisions.
It is the collaborative view and collective outcome and not the enforced compliance practices that ultimately determines sustainable results through increased access.
In short, the technology behind dash board accessibility to a broader supply base in which advanced and multi-parameter algorithms are automatically incorporated into each front-line decision in real-time, provides the buyer with the necessary autonomy while still ensuring that centrally established objectives are incorporated into each and every decision.
* Note: here is the link to the article re Jason’s comment about spend intelligence, which we all now know is not just a simple misleading phrase: http://procureinsights.wordpress.com/2009/08/11/spend-analysis-versus-spend-intelligence-more-than-a-semantical-difference/
March 2, 2010 at 7:27 pm
[...] Thorsen — procureinsights @ 5:26 pm I just read Torbjorn Thorsen’s post on his Purchasing Transformation Blog, and while gently making reference to the fact that Spend Matters’ Jason Busch was [...]
March 2, 2010 at 10:25 pm
Great Post. Particularly interested in your response to Jason’s comparison of Coupa’s iBuy and iRequest functionality to maverick spend. As you say, “And whilst he is correct in his analysis, I’ve experienced first hand on numerous occasions how exactly this type of functionality and behavior has paved the way for successful e-procurement implementation as well as development…”
Agreed!
Just read the Procurement Insights blog post (http://bit.ly/b8ZqAV) about supply base erosion due to the broad application of forcing procurement practice into an artificially narrowed funnel of supplier access, and I’ll repeat what I commented there…In the current global economic conditions, harnessing the power of the crowd is a trend that will not go away any time soon. Not only is it empowering and progressive. It just makes sense. Move with the times, or the times will move over you.
March 3, 2010 at 12:16 am
John H: “It is the collaborative view and collective outcome and not the enforced compliance practices that ultimately determines sustainable results through increased access.”
Jeannie C: “In the current global economic conditions, harnessing the power of the crowd is a trend that will not go away any time soon.”
Well put both of you. I suspect it’s only a matter of time before the term “crowd sourcing” will make it’s real enterance into the purchasing lingo. But probably without a great deal of distrust.
This might be old news (as Procurement Leaders blogged it as it happened – http://blog.procurementleaders.com/procurement-blog/2009/9/9/ibx-ceo-marks-out-a-brave-new-world.html ), but I still love the story about how IBX CEO Leif Bohlin realized that his son was sourcing globally for skateboards using online supplier directories, auction websites (to keep costs down), social media (to establish quality on products) and a virtual network of peers. Leif’s son also forced his father to bring the board back to Sweden coming back from a business trip. One could call that a case of shared logistics.
What did Jon call it: “sustained best-value purchasing decisions”, now that’s something to strive for that will be understood by everyone. It’s a far cry from contract compliance.
March 3, 2010 at 4:03 pm
[...] supply chain migration By Torbjörn Thorsen, IBX Group AB A few days ago in a post about maveric spend was expanded by a great comment from Jon Hansen of Procurement Insights that explored the concept [...]
March 19, 2010 at 6:08 pm
Well, what do you expect when “People Magazine” starts covering hard news? Thanks for calling a rose, a rose
Left a longer comment on the ProcurementInsights blog
March 26, 2010 at 12:19 am
[...] been surprised by his latest rant when I took time to respond to Torbjorn Thorsen’s post on his Purchasing Transformation Blog, in which he gently made reference to the fact that Spend Matters’ Jason Busch was “correct in [...]
March 28, 2010 at 4:37 am
These are not complex tools to deploy, but they are, nonetheless applications that require some organizational change management to take place. In most cases, this involves re-evaluating current business processes, practices and policies that may have been developed years earlier and determine if they are still viable in today’s climate.
http://gravitygarden.com/procure-to-pay/index.html