Monday, 29 February 2016

Are Procurement Professionals Stuck in the Stone Age? - Part I


Market Dojo and Odesma partner to combine their intuitive eSourcing software and expertise in offering business advisory services to offer clients a winning procurement solution. Together, Ed (one of Odesma’s co-founders) and Anya (of Market Dojo) ponder the neanderthalic 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 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.



So what’s gone wrong? For this let me replay an anecdote (Ed speaking here) from 1999, when I worked 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 behavior 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 have to be compelling, easy to use and free or very low cost. Though with Generation Y coming through in business I expect this is about to change.

The question is why big B2B software solution providers have not changed and emulated B2C? I 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.

Expanding these points out:


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 $4.3bn 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 customers 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.

2. Drive for consulting revenues by providers

The prevailing model for providers is to maximise (after all they answer to shareholders) revenue 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 practise (600 professional staff delivering revenues of greater than €70m) Though figures are not available we might hypothesise that at least 50% 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.

3. 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 FB is really easy to navigate and personally manage intuitively, Jive is not. Given FB came first, and Jive built a similar tool albeit for a closed company environment, is that those that select it measured its value in terms of its complexity?

4. 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. They had historically focused on functional components i.e. spend analysis, contract management etc. (4 of 7 criteria) alongside technology platform and business services. Additionally the analysis of providers only lent itself to generally the bigger or more established players. The 2013 report included less than 30 suppliers, with the leaders in their opinion being the likes of IBM, Bravo, Ariba, GEP, 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 utilise solutions.

5. 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 €25.6bn on revenues of €17.6bn 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?

6. Big business 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 adverse, 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 be deliver often much more cost effective, easier to use solutions. Coupa are making real inroads here, but few others are.

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

The question is 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.

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 – it is not part of their strategy.Though 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.



THE AUTHORS




Ed is co-founder of Odesma, a new breed of business advisory firm, one that is uniquely on demand providing virtual procurement through the Procurement PeopleCloudTM. He is a results orientated executive level business leader with 25 years global professional services, consulting and functional experience in procurement, supply chain and change management. Previously with Xchanging plc, Ed had Executive leadership responsibility for running the global procurement and HR outsourcing businesses. He has also held senior level consulting and functional roles with QPGroup, ShareMax Inc. and PricewaterhouseCoopers.

Ed can be contacted at edward.cross@odesma.co.uk or at:
Odesma Limited, Woodrow, Off Snape Hall Road, Whitmore
Staffordshire ST5 5HS
Tel: +44 (0)161 433 7833
www.odesma.co.uk


Having joined the team in early 2015, Anya manages marketing and market analysis at Market Dojo. Market Dojo is the only e-Sourcing software provider to offer an easy to use, professional solution with completely transparent pricing. From creating content and managing social platforms, to attending networking events and building client relationships, Anya is the first point of call for any questions you may have about Market Dojo. 

If you’re interested in hearing more, get in touch:
Anya McKenna
anya.mckenna@marketdojo.com
+44(0)117 318 2537
+44(0)792 337 6307
www.marketdojo.com



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2 comments:

  1. You really hit it out of the park with this one!

    Here is another point worth noting that further shows you nailed it re Generation Y and the importance of your reference to intuitive technology such as yes . . . Candy Crush;

    "Today, an ever increasing number of people - especially those who are part of the younger generation (35 and under), use mobile devices to both buy and sell online. Many of these have never even used a desktop or notebook personal computer." (Source: https://www.linkedin.com/pulse/how-personal-mobile-connectivity-driving-indias-retail-nilesh-gopali?trk=mp-reader-card)

    I am going to be sharing this post far and wide.

    ReplyDelete
    Replies
    1. Hi Jon

      Thanks for sharing and great to hear you enjoyed the article!

      Ed and I have another one coming out soon about the importance of attitude in Procurement.

      Hopefully you'll enjoy this (slightly less controversial) one just as much!

      Delete