1st Generation of Enterprise Software – Customer Bears all the Risk

It wasn’t that long ago in the Enterprise Software industry that vendors charged customers large up-front software fees, which effectively meant customers bore all implementation and financial risk for the project. Once the customer bought the software they then tried to address those sunk costs by hiring teams of consultants (from the vendor or a top-tier systems integrator consulting company) that charged them even more, on an hourly basis, for implementation projects that were rarely delivered on time and within budget. As if that wasn’t bad enough, the software companies then came back and hit them up again, with 18-20% annual support and maintenance fees on the original purchased product. Read More »

I love Ariba. They created the eProcurement space in 1997 with their ORMS product. They went public in 1999 with 30 licensed customers and pulled in over $45M in revenue that year. It was the beautiful definition of enterprise software.

Fast forward a decade and the company recently announced that “Ariba has redefined enterprise software”. Awesome! I read on…”Enterprise software is dead. At least enterprise software as it is traditionally known. In today’s business world, it’s all about being connected, efficient and informed”. Hmmm…I’ve heard that last sentence stated in so many ways and in so many spaces before.

But there was much more meat to this press release. They named the product release 10S2. Come on guys!!! That’s an enterprise name. What does it even stand for? If you didn’t want to be enterprise-y, you could have come up with something cool like Froyo or Snow Leopard. You can brag to your friends that you’ve got Gingerbread on your phone…not brag that you’ve got 10S2. They may want you quarantined. Actually, come to think of it, why even name the release at all? If it’s a true cloud solution, every single customer should be running the same, latest code. It’s just a point in time like the Salesforce Winter Release or the Coupa September ‘10 Release…just a month or season will do just fine.

Naming is one thing, but what about the features? This one stood out. “With Ariba 10S2, companies can requisition items across spend categories, improving both collaboration and spend coverage”. Wait. Am I reading this right? I love you Ariba and I really believe that you’ve had this for a long time…like back in 9C3PO release. Requisitioning across items, suppliers, commodities, services, etc. was in Coupa’s first release years ago. You mean that we could have exploited this gap? Maybe it’s just a typo.

Another new feature jumped out at me. It’s in a category of what Ariba calls “Self-Configuration Tools”. They go on to explain that “Through new catalog updating and validation tools and configurable approval rules embedded in Ariba 10S2, companies can make changes to their systems as business needs dictate.” Wow! You’ve bought the software and now you can configure some stuff yourself! Joe Manager gets a promotion…no need to call up IT or Ariba to increase Joe’s approval limit. Hot dog diggity! From day #1 at Coupa, we insisted that business users would be able to make any and all changes, additions and deletions through a simple user interface. From catalog content to punchouts to approval workflow to users to suppliers…EVERYTHING can be updated in real-time by the business. Not just a few item, like with Ariba’s so-called Self-Configuration Tools. EVERYTHING.

I like this one too: “Enhanced Integration Options – With Ariba 10S2, companies can improve business process automation and accelerate adoption and results through enhanced integration options designed to quickly and easily connect ERP and other third-party systems used to drive commerce”. Not fully understanding this, I searched for Ariba’s API documentation. True cloud companies like Coupa understand the importance of open APIs and publish them online for the ecosystem…check out Coupa’s, Salesforce’s, Taleo’s, Zuora’s, Workday’s and so many more.

With this, has enterprise software really died? Is Ariba really on the cutting edge of what’s new and exciting in enterprise software? You be the judge. Maybe the true redefinition of Ariba will come in it’s next major release. And the naming for that release will undoubtedly remind me of one of the all-time great movies…

Nigel: What we do is, if we need that extra push over the cliff, you know what we do?
Marty: Put it up to eleven.
Nigel: Eleven. Exactly. One louder.
Marty: Why don’t you just make ten louder and make ten be the top number and make that a little louder?
Nigel: [pause] These go to eleven.

Source: Watch This is Spinal Tap

I love Ariba. I really do.

Unless you are techie immersed in the latest application languages, platforms and the like, chances are you haven’t really thought much about “the cloud” beyond asking yourself “what the heck is cloud computing and why should I care?”. As business professionals, we are all responsible for helping our organizations achieve success and profitability. And this is exactly why each of us should care about the cloud and its power to drive process efficiencies, eliminate wasteful spending, and deliver savings.

To help you make sense of “making cents” in the cloud, Coupa CEO Rob Bernshteyn dives into 8 core business problems that cloud-based spend management will resolve once and for all.

Excerpt:

The Out-of-Control-Spending Problem

Raise your hand if you’re happy with how your organization spends money? Anyone? (“Bueller?”)

Ever shake your head at some of the waste and inefficiencies? What about your CFO? Nope. She’s chagrined, to put it mildly. Frustrated with poor visibility. In fact, she likely has no idea where actual expenditures are for the quarter to date (she may have lots of “projections” though). Generally, she’s finding out about cost overruns after the fact – often weeks after quarter end.

How about your purchasing or procurement organization? Not a chance! They’re constantly trying to police employees to make sure purchases are only made for approved products, through approved vendors, through approved processes, and against negotiated contracts. No matter how hard they try, they cannot eliminate maverick, off-contract spending. They’ve tried carrots and sticks of all kinds, but employees still circumvent procurement processes all too frequently. And that’s just part of their challenge — their existing processes are complex, laborious, and inefficient. Pricing negotiated with approved vendors is often obsolete before the ink is dry. The list goes on and on.

What about the poor chaps in Accounting? They get to see all the dirt on the other side. Expense reports for items that should never have been purchased by the employee in the first place. They see expenses that are months old that should have been credited against previous quarters’ budgets (too bad the books are closed!). Travel and entertainment expenses that constantly bump up against company spending limits with receipts of dubious nature. And inexplicable “approvals” from managers who clearly don’t take the time to review expense reports with the diligence they deserve.

And what about your employees? Do they think the organization practices smarter spending? Not likely! The one time they order through the company’s approved vendors, they were frustrated by limited choices, high prices, paperwork, and long procurement cycles. More often, they bypass the “ask permission” process; put purchases on their own credit card, and “beg forgiveness” with expense reports later. Their management just about always approves the expense anyway, so why wouldn’t they?

How’d it come to this? Simple. Available technology does not suit the needs of the people who need to use it for the company to effectively control its spending. Even though procurement and expense reimbursement processes have the same impact on the company’s bottom line, most organizations employ completely distinct technologies and personnel to control spending. Existing technology was not designed for broad adoption throughout the enterprise. And when software is not easy to use, people won’t use it. That doesn’t mean they don’t spend company money — it just means they do it in ways that are hard to track, and control.

Luckily, new cloud applications enable companies to tackle the problem…

Discover the 8 ways companies can leverage the cloud to rein in unnecessary spending. Read the full article at http://www.sandhill.com/opinion/editorial.php?id=311.

Yesterday, in Part I, I challenged the procurement profession to seize the day and act upon the opportunities presented by the recent recession to claim their “seat at the table” and prove to top management the unique, strategic value that procurement can bring to the organization.

Today I want to help you make that happen!

The following checklist is intended to help Procurement professionals take a brief respite from their day-to-day routines to take a critical look at how their procurement functions are truly adding value to their respective organizations. Go ahead and take 30 minutes to consider these questions. There aren’t necessarily any right answers – these questions are meant to trigger the critical self-analysis that will help you discover what you could be doing better or differently. Remember: the recession has afforded you a seat at the table. Now it’s time to demonstrate you deserve to stay there, and that this is your time to really shine.

STRATEGY AND TACTICS

• Is your procurement organization too tactical?
• Are your business objectives based solely on execution and cost-cutting metrics?
• Are you measuring price variance against what you achieved last year? Or are pursuing truer measurements – like comparing your price variance against that of the market?

ALIGNMENT

• Are you partnering with your lines of business? Marketing requirements for supplier interaction and sourcing may be quite different from what IT says they need. Are you managing these internal relationships correctly?
• How are these partnerships driving risk reduction and increasing innovation?
• How do your executives perceive your cost reduction initiatives?
• Will your CFO counterpart stand behind your savings numbers and initiatives?
• Are you partnering with Finance to manage cost reductions and manage risk?

TALENT MANAGEMENT

• Do you have the right talent working for you? Do you have employees that can wear different hats and think on their feet?
• Does each employee understand the concepts of TCO (total cost of ownership) and risk premiums?
• Do your employees appreciate that putting your suppliers into a negative NPV situation could drive them out of business and put you at risk?
• Does each employee know your top suppliers? How about Tier 2 and Tier 3 suppliers?
• How adept is your staff at building relationships?
• Are you following an industry leading process to help you manage the group? Six Sigma, Agile, etc?
• How are you keeping your employees current on process improvements, new technologies, and best practices for supplier relationship management?
• Are you developing new procurement leaders?
• Who is your mentee?
• What type of procurement groups (ex. Procurement Leaders Forum) are you encouraging your staff to join and participate in to learn best practices?

CHANGE MANAGEMENT

• Are you investing enough in change management?
• Are your business peers telling you that they are tired of your emails, webinars, office hours, and personal meetings? If they haven’t, then you’re not communicating enough!
• Do employees know which tools are available to them? Are they trained to use those tools effectively?
• Do you understand the concepts of Vested Outsourcing/Relationship building? Think along the lines of working with your vendors, not on a Statement of Work, but rather a Statement of Outcome. Your supplier are working with you on a set of stated objectives and those objectives should be met for success!

Dont’ delay! Your time is now! Procurement has the visibility into company spending. You are at the center. You have insight into R&D, Manufacturing, Customers, Internal Business partners. You hold the keys to introduce new initiatives that impact not just the bottom line; but the top line as well, through collaborative innovation.

I urge you to take a half dozen of these questions and dig deeper on answering them and using the insights you discover to drive change, innovation, and improvement within your organization Good Luck!

I loved growing up in New Jersey.  The big yards that everyone had, the 4 different seasons, the passionate sports fans.  All great.  Except when I’d walk into our house after a fun day outside and get my first whiff of that awful smell.  It was unmistakeable.  ”Oh, no.  Dad is cooking LIVER!”  It was an annual thing that my Dad forced upon myself and my older brother.  Liver for dinner and no getting around it.  I’d break out a full bottle of Heinz, but it would hardly cover the taste.  It was, and still is, the most revolting thing I ever ate.

It got me thinking about enterprise applications (e.g., procurement and expense management) and how they are viewed in organizations.

Now, there are a couple kinds of applications. The first type of application is reserved for a few, well-trained power users; we’ll call this kind the “5 User App”.  This application is designed for a limited number of users in your company whose jobs are probably tied to the application.  Think: The receivables clerk in the finance system, a planner in a supply chain app, a pricing specialist in an optimization app, etc.   The other kind of application is the “Employee App”.  That’s the application that everyone might use periodically:  the purchase request system, the expense report system, the system that lets you check your paystub and setup your direct deposit, the employee performance review system, etc.

Now back to liver.   Liver is something that most everyone hates.  It isn’t pretty, it’s an awful experience and you fear it.  If liver was an business app, it better be the “5 User App”.    Those limited number of users might not like it,  but it’s their job to be specialists. They need to know how everything works.  They’ll spend 30-100% of their day in it.   Just keep it contained to only those 5 users.

Now if you serve liver to your entire company in the “Employee App”, you better have some great job security.  I couldn’t overrule my Dad, but employees will sniff out the liver and revolt against using it.  Your employee application needs to be so simple, so easy and so effective that people “just do it”.  No amount of change management, no amount of championing by senior leaders, no amount of CEO force will overcome the pervasive stench of a liver application.  It might take awhile for the troops to mobilize, but they are.

Don’t believe me?  Check out these tweets of disgruntled employees:

The moral of this story is easy: Consider more intuitive and–let’s be honest–less outdated business applications within your organization. You’ll see compliance shoot up. And you’ll see happier faces around the dinner table…er, workplace.

Note to Dad: I don’t think I’ll ever really get over my liver memories, but thanks for teaching me a valuable lesson.

Today’s post is the first in a three-part series by author, PI Window on Business host, and ProcurementInsights.com blogger, Jon Hansen. We will post parts two and three next week.

Over the past year I have written extensively about many of the emerging trends that are shaping or perhaps reshaping the world of procurement and the global supply chain practice.

From assessing the future of Outsourcing as a viable strategy (something that to this point in time has eluded many organizations), to the emergence of Software-as-a-Service “SaaS” and the corresponding technological breakthroughs associated with the utilization of agent-based application development models, to the mainstream recognition that Spend Intelligence is not merely the marketing hyperbole that some industry pundits had once proclaimed it to be.

While each of these as well as other trends are without a doubt significant, the potential  impact or reach is not nearly as broad as the effect that social media and social networking has, and will continue to have, on the profession and the business world as a whole.

Over the next few paragraphs I will touch on three specific areas of social media and social networking that will have the greatest impact on the industry.  What is worth noting is that purchasing professionals appear to be lagging behind their counterparts from other areas of the business world in terms of collaborative intelligence and personal branding.  This is a trend that needs to change if the role of purchasing is to evolve beyond the realms of a functional adjunct to a strategic influencer.

Trend #1: Conversational Marketing and the Emergence of the Vendor Blog

In previous articles I emphasized the importance of those involved in the purchasing (and the logistics and supply chain industry as a whole) to become active participants in the emerging world of social media and social networking – and no, they are both not one in the same.

Far too often however, when entering this new realm of one-to-one direct interaction, the majority of individuals as well as vendors merely attempt to transfer the old “look at me” broadcast model to this new medium.   This of course rarely if ever results in creating any form of a sustainable brand.

You only need to look at the traditional print media, and in particular the daily newspaper industry to gain a powerful point of reference.

Long time media industry veteran J. William Grimes predicted that all daily newspapers in the US would be gone within five years.  His prognostication, which was made at a San Francisco conference in July 2009, was based on some startling statistics.  Specifically, that the daily newspapers only received 15% of the more than $60 billion spent on advertising over the previous 12-month period, which represented a decline of 10% from a decade earlier.

Grimes also stated that only 5% of the population still read the dailies.  This combination of declining ad revenues and readership is reflected in the fact that venerable publications such as the New York Times are awash in the proverbial sea of red ink.

Seeing the writing on the wall, the New York Times entered their definition of “the social media world” through the launch of their on-line version of the printed daily.  The expectation of course was that this new electronic, web-based venue would recapture readership and subsequently the share of ad revenues, both of which they have been steadily losing over the past few years.

Much to their surprise and dismay, the electronic edition lost money as well.

The moral of the story, and one that would be best learned by anyone contemplating the necessary move into the realms of social media is simply this . . . the transfer of static, non-conversational information to an electronic format such as a blog or social networking group will not work.

As indicated in my new seminar “Leveraging Internet Radio and Podcasting to Establish a Sustainable Brand,” the rather pedestrian elements associated with the information repository framework of a web site will do little to gain and keep market attention.  Web site traffic, which has long been considered the measurement of a site or blog’s presence and influence, is largely irrelevant in this non-personal, unilateral engagement with the visitor.

This is why Alexa ratings mean very little in terms of true market reach.

Let me provide you with an example.

In June 2009, I launched the PI Window on Business Blog primarily as an adjunct support venue or medium for the PI Window on Business Show on Blog Talk Radio.

In that first month, there was a grand total of 217 visitors to the site.

In December 2009, the total number of site visitors grew to 6,144.  This past month (January 2010), we fell just short of the 10,000 monthly mark with 9,894 visitors.

Based on research, this trend in terms of percentage growth will likely continue throughout 2010.

Using traditional methods of measurement (e.g., Alexa) one might consider this to be a compelling indication of an emerging, sustainable brand.  While it certainly does demonstrate increasing awareness, it is the behind the scenes story that is most significant.

I am of course talking about the high level of cross-pollination that occurs with the PI Social Media Network’s other brands including the PI Window on Business show on Blog Talk Radio and the Procurement Insights Blog.

This cross-pollination also extends to a growing number of external venues including social networks, on-line resource sites and internet-based media outlets.

Collectively, these interconnecting venues facilitate a dynamic, real-time interaction through a conversational technology platform that engages and responds to the individual first.

Think of it along the lines of David Cushman’s analogy in which the means of communication have transitioned away from the broadcast-centric many eyes looking at a single stage, to a one-to-one interaction within communities of purpose.

Much like the proverbial honey bee returning to a hive, each individual serves as their own filtering, gathering and sharing facilitator which inevitably determines the viral potential of a particular message.

In short, instead of engaging or writing to the unknown masses, social media and social networks actually enable you to connect and ultimately build a rapport with the individual directly.  It is then the individual who spreads (re pollinates) the message to others within his or her network of contacts.  As a means of creating a point of common reference, think of it as a referral system on steroids.

For vendors who are now entering the realms of social media through the launch of a blog, the old adage that people buy from whom “they know, like, and trust” is one that they would be wise to remember in the context of building that level of personal rapport.  Or, as my good friend the Marketing Doctor Dr. John Tantillo so adeptly phrases it in the title of his new book, vendors would be well-advised to recognize and respond to the reality that “People Buy Brands Not Companies.”  (NOTE: In the case of purchasing and supply chain solution vendors, you can substitute “Technologies” in place of Companies.)

Therefore, and looking beyond the realms of technical interconnect-ability, your brand is like your signature or fingerprint.  It is personal and it is unique.  It is also at this level that you distinguish yourself in a highly competitive world.

In terms of a Vendor’s Blog, the audience is interested in your brand, which is also your unique and distinguishable personality.  It is this very “Personality,” according to Future Buzz’s Adam Singer, that is woefully lacking from the traditional mainstream’s highly polished and professional looking blogs.

In short, if I had myopically focused on driving traffic to the lone PI Window on Business Blog so that people could read about my company, and the services I offer or the products I sell there is no way, regardless of how professional or polished it is in appearance, that the blog would have experienced the same growth in readership activity.  This is the essential starting point.

However, and this is another key point to remember, you need to offer useful information in the form of “branded insight.”  It is this branded insight, which is centered on experience and expertise about a subject for which one has a great deal of passion versus a company name, logo or product offering, that builds the pre-requisite “know, like and trust” relationship.

The real question that remains is simply this . . . what brand is a particular Vendor looking to build through their new blog?

Noah Eisner reflects on Coupa values, then and now

Let me set this up:

Back in late 2005, when Coupa was nothing more than a couple guys in a coffee shop, I sat down and penned (ok, typed) what I later referred to as our manifesto.  It was before a single design was done or a line of code had been written. It was an attempt to define why it was important to build the company that is now known as Coupa.  Like a writer tries to define his or her voice, we needed to define what Coupa e-procurement was all about.  I needed to convey how we would innovate in an area that was sorely under served. This was what I wrote down that day in 2005.  I’ve edited out a couple of things, but it remains mostly intact:

The Coupa Manifesto (Circa 2005)

Enterprise applications have always suffered from user adoption mostly because of usability of the app.  Despite SAP/Oracle’s, others focus on better UIs, the problem is actually getting worse…not better.  What’s happening is that the benchmark for highly usable applications is moving too fast for enterprise apps players.

History
*  Early 1990’s. No one was on the Internet, home computers were a rarity, so people used computers at work…and thus the business apps were the benchmark of usability.  These weren’t great, but they were simple and worked for the few people that had jobs that required being on a computer.

*  Mid-late 90’s. The web came along.  The sites were very basic at the start…but got more robust (sometimes too cluttered) towards the late 90’s.  At that time, people were getting used to these sites which were different from the apps they had at work.  That’s when a company like Oracle released their first Internet ready app (10.7NCA, 11.0), but it was just the same app deployed in a different architecture.  So there was no real user benefit.  At this point, the usability benchmark might be shared by enterprise apps and the Internet (despite their user interfaces being very different).

*  Early 2000’s. people were now comfortable with the web.  Site design improved so most sites were highly usable with relatively dynamic content.  Most people had home computers by now and were spending a good deal of time on the Internet.  The enterprise players start releasing their first real Internet-looking business applications, but they are slower, less intuitive, etc.  This is the 11i and mySAP release timeframe.  Despite the Internet-looking nature of these bizapps, user adoption suffers because of the shortcomings.  People only use the apps if they have to (generally to perform transactions).  Internet apps are clearly ahead in the usability benchmark, and this is really starting to matter.

*  2004-2005. The next generation of websites are released.  These sites (called 2.0 sites) are richer but simple, more dynamic, more open, more collaborative and build in social networking.  People, especially the next generation of business users (teens, early 20’s), are now using these sites as a form of communication with friends and others on sites like Flickr, Digg, Blinklist, Yahoo Answers and more.  A lot of these sites have interactivity with AJAX.  Meanwhile, enterprise apps have hardly changed since the early 2000’s.   The usability benchmark is now accelerated in favor of Internet sites.  The companies that make these apps are planning to have a platform ready for the next generation of apps in the 2008-9, but by that time, the Internet sites will be so far advanced that the enterprise apps will be on the equivalent of where Internet sites were in 2003.    Business people will revolt if this gap isn’t closed.  You’ll see even a larger shortfall in user adoption.

So, at Coupa, we are going to bring Web2.0 to enterprise applications.   We’re starting in Procurement because that is our domain; it’s a big market, has a high ROI, and mostly because Procurement activities will benefit from Web 2.0 techniques.  The enterprise apps of today (or those planned for 2008) have nothing collaborative or “sticky” in them.  People do everything to avoid spending time on them.

We will change this. We will make business apps that people actually like to use. Imagine all users being able to go onto their Web2.0 application to buy things where they can drag items into their shopping cart (interactivity), post reviews of good items, read others reviews to know what seems to work (community), set items as their favorites which are viewable to others so those become the “most popular” items by the community (like Digg), being guided by others on difficult buys, maybe tagging items for easier searching.  The business users utilize their network of other users throughout the application instead of trying to track down someone in Procurement.  The business people won’t have to revolt anymore, and a more realistic visibility into spend will be available for Procurement…finally.

That was it–Our original Manifesto. In my view, what we’ve done over the last 4+ years holds to our beliefs.  We’ve delivered simplistic applications that deliver value, instead of confusing applications that deliver headaches and cost.  And we’re continuing to rapidly innovate with great capabilities in 2009.  And that’s not where it ends. Stay tuned for a couple exciting announcements planned for 2010.