In this article, we want to offer some perspective and advice on how to prioritize technology investment and craft RFPs which will help you to buy a solution which will solve your problem and deliver value.
Procurement and Finance transformations are here to stay and tools are a key enabler – the question is which tool first and why?
I’m sure we have all wondered why enterprise procurement and finance tools are never as good as tools for SMEs or consumers?
SpendMatters analyst Nick Heinzmann recently published an article titled 3 Reasons Why E-Sourcing Providers Have Failed Procurement. The three reasons which Nick highlights are as follows:
- Too Much Functionality
- Too Much Analyst Focus
- Too Much Emphasis on Satisfying RFPs.
I completely agree with the article above and want to complement it by offering the software provider’s perspective so buyers understand what goes on behind the scenes and can equip themselves better in making their decisions.
The problem is bigger than that
The three reasons Nick mentions are really interesting because I think that it goes broader than just eSourcing and covers Procurement, Source-to-Pay and Enterprise software overall.
We recently wrote about the topic with slightly more passion in: Is Corporate IT Strategy Driving the Creation of ‘Shitty’ Enterprise Software? And even though it was written from a different perspective we still drew the same conclusions. We considered the possibility of some form of solution by looking at the way sales & marketing software tools have refocused and adapted.
You get what you ask for (because we are trying to satisfy the RFP)
Software providers fulfill a demand but maybe the wrong thing is being demanded by big enterprise in the first place. Ask for something different and it could be a whole different world. Be more specific and the quality of the solution could well be far higher.
Too many come to market with these big, all-encompassing RFPs wanting to buy everything under the sun to transform procurement and finance. This is totally missing the point of what software is for, which is to help you solve a particular challenge – whether it is doing something faster, providing visibility, reducing risk, etc.
Ask yourself this question, are we really going to be using all five modules we just bought all at once?
Of course not, you probably need one and someone convinced you to buy the other four. Later on, as the organisation matures and you further understand your other challenges and define the to-be processes you will need additional functionality.
In many ways it is like your everyday life. You don’t try to do a million things at once as you would end up doing them badly (and be completely overwhelmed). It is far better to write down what needs to be down, prioritize each item and then tackle them in order. That way you are achieving in an organized fashion and you are able to see high quality results.
It’s a mistake to buy all your modules at once
The main reason it’s a mistake is that it’s hard to understand all your requirements upfront. There are so many tools out there focused on particular verticals, processes, or focused on buying a particular type of good or service. Many of which are very good in their particular area. That being said, they will be weaker in other areas so it is often better to tackle one challenge at a time, one problem, one solution.
We recently discussed this by taking a look at SAP – they bought Ariba, Fieldglass and Concur. These are three different buying systems for goods, contingent labour and travel. If Ariba could do all of that they would have never bought the other two companies. I am obviously over simplifying what these tools do. They do more than that and probably have a lot of overlap but that’s beyond the scope of this discussion. If you are interested feel free to read ‘Why a single supplier management system is a waste of money?’ which goes into some more detail.
The software market is not structured like your company
This may seem like a stupid statement but let me explain. Procurement is not an island, far from it, in order to be successful they need to partner with other functions. Therefore, the tools today overlap with multiple functions – as a minimum procurement and finance have to overlap – but many other functions are also impacted because they will either probably be users of the tool(s).
Why is this important?
It’s important because as a software provider we are looking for the right person in your big organization to sell our tool(s) to. Invariably if I want to sell more to procurement I will start to silo my tool into their needs so I can sell more of my modules and convince you that all the other things don’t matter. The same goes if I am looking to sell it to Finance.
Because of this phenomenon it’s important to not make it an objective to buy all your modules at once or from a single provider. You may end up doing that but to make it an objective has zero benefit for you.
Supplier Master Data and Information Management is useful to illustrate this point. Supplier master data ownership is not consistent (very unfortunate for us), it may be Procurement, sometimes IT but normally Finance.
Now if Procurement comes out with an RFP they will talk about supplier onboarding and supplier information management and tell you they are not interested in master data because that’s owned by Finance. This is a mistake because supplier onboarding is a key supplier master data process (we discuss this in the ‘5 key business processes for supplier master data management’). This will take them down the wrong path from a business perspective because it won’t solve the problem they have around their data. Also, later on Finance will then go and buy yet another tool to do that – frustratingly they will probably overlook the influence of Procurement and so it goes on.
There is zero added benefit from having the software from a single provider.
You will not get a better price, better integration or a better user experience. In fact, in many cases the opposite.
The user experience could, quite possibly, be worse because it will not be tailored to the user needs in each particular area.
Integration has become a commodity and everybody is doing it. If your provider isn’t open to connect with other solutions then that should signal alarms in our current day and age.
Dispelling some myths
We are an SAP, Oracle, etc. company.
To buy software from a single company should not be an objective. I think IT departments must get their bonus’ based on this because I can’t tell you how many times I have heard this. You should do it because it solves your problem. It seems a shame to close off the vast majority of the market because of a name.
Usually a name that is made up of thousands of other names and has simply been rebranded.
I want to rationalize my systems
Buying all your software from a single provider does not rationalize your systems, it rationalizes your suppliers. Again, some IT departments can get these two confused and miss out on opportunities as a result.
I want my users to go to a single place?
They already do that, it’s called an internet browser. A link to the same tool or a different tool makes zero difference.
They will have multiple logins?
No they won’t, there is single sign on, it’s very easy to do and everyone does this. If that’s your issue then the problem you need to solve is single sign on. Don’t buy the wrong tools for this reason.
They will give me a huge discount on the other modules if I buy them now?
A bargain is a waste of money unless you actually need it. Software is not a consumable which you buy cheap and store for use later.
To put that in context, if you buy the module you need, think it through, plan out the future and start using it now, that’s great, it tackles your problems and saves you money. That being said, if you buy other modules, that you’ll use later on as they could be useful, what happens as the company changes and with that the requirements?
Each problem has to be tackled accurately, it shouldn’t be based on an off the cuff discount.
A discount is also relative, how software companies chose a price point for their offerings can be an interesting debate. But that’s a conversation for another time.
So what should you do to avoid the pitfalls and prioritize technology investment?
- Focus on defining the problem you want to solve not the tool you need. This will avoid the trap of buying things you don’t need.
- Make sure you understand and can quantify what value solving this problem will bring to your organization.
- Create an RFP which explains the problem you are trying to solve and what benefits you want to achieve. Be precise.
- Make sure every feature you have listed in the functional part of your RFP contributes to solving the problem, if not get rid of it as it will mislead you into buying tools which have features which don’t help you.
- Don’t make it an objective to have software from a single company, do it because it makes sense for your business.
- Create a roadmap of how you will solve problems, and identify other functions that will be impacted and buy tools based on how it best matches your business process and overall organization structure, jointly with those functions.
- Refer to this blog post to avoid getting trapped into IT or software provider sales talk.
Take some risks!
The problem is that everyone is too scared to ask for something different or go in a different direction, but in order to create something special and unique that’s what it takes. Leaders in big enterprise need to take more risks with technology to get more innovation rather than rely on analysts and sales people.
Ultimately it’s the bottom line that matters and if you are able to think laterally and focus on one problem/opportunity at a time, you could well end up significantly outperforming your rivals.