Making Cents

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Leadership opportunity for procurement: Defining savings

As procurement becomes more strategic and jack miles headshot   Jack Milesmanages a greater percentage of organizational spend, it’s becoming more common for it to report to the finance organization. This makes sense. But I’m often surprised by how little procurement  knows about finance and finance knows about procurement. It’s hard to work together well when the groups don’t understand each other.

 

Finance often doesn’t understand how measure, manage, or evaluate  procurement’s performance and effectiveness. They don’t know how to determine what value they’re adding, if any. If that’s the case, it’s likely that procurement lacks credibility within the organization, making it harder for them to partner with finance

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Aspirations to become trusted advisors tops procurement priorities, says new study

 

There’s something new on procurement’s radar. Yes, more budget would be nice, and so would an endless supply of talent, but those are not new to the list. According to the The CPO Agenda, Hackett Group’s annual study of key procurement issues, becoming a trusted advisor now tops the list of procurement’s

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The Coupa Top 5: Earning trust and diving deeper into data

 

Analytics and big data projects are starting to appear on the radar screens of forward thinking procurement organizations. Many companies have a rich store of data to pull from, and procurement is well positioned to undertake these types of projects. Studies show that even small projects can yield big financial gains. Caution -

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The death of email or the birth of choice?

 

I was talking to an analyst the other day about donna-wilczek-headshot-450   Donna Wilczeknew software features we’ve developed to let people perform transactions directly from their email without having to register for, or log in to a system. I’m a fan of this kind of functionality, because it really helps people live by the two-minute rule, letting them quickly complete tasks and move on. To me, these are the kinds of things that add real business value and drive adoption.

 

After reviewing this, the analyst made a comment to the effect that many product organizations in our industry are moving away from email, while we’re adding more email capabilities. The dialog that followed was around my view that what we’re really seeing is not the demise of email, but the birth of choice. A variety of options is what people need to be successful, because everybody works differently. I think email still matters, and businesses and product developers should not count it out. Here’s why.

 

A trend afoot?

For a few years now, people have been predicting the death of email, presumably to be replaced by some more collaborative means of communication. You know there’s a new trend afoot when people are saying things like, “My 16-year-old son doesn't use his email account.”

 

Yet email is still the most used applicationchoicesThere's no longer one sure-fire way to reach everyone. in any corporation, and email service providers are still reporting strong growth. There are over 100 billion email messages sent daily. That dominance may diminish, but it’s hard to imagine that email will soon die and be replaced with something else.

 

Email is now just one of a multitude of ways to communicate and transact. To remain competitive in this era of choice, businesses must recognize that they have to connect with customers in many different ways, because there is no longer any one sure-fire way to reach and interact with everyone. That means thinking beyond specific tools or platforms to the needs of different people, and let those dictate the approach.

 

For example, Facebook was supposed to be one of the things that was going to replace email, but today’s 16-year old may not even have an account. The hip kids have all moved on to Snapchat, which makes perfect sense in world where youthful mistakes can live forever on the internet and become ammunition for cyberbullying.

 

A 16-year-old kid is in high school and doesn't have a job. Does he or she really need email? Snapchat, Whatsapp or plain old texting will do just fine. But I'm not certain they’d work for me professionally. 

 

Best for business 

But why should that be? The original genius of email was its speed - it allowed you to communicate instantaneously, which was a big deal in the days when interoffice memos could take hours or days to reach their intended recipients. Today, there are myriad ways to communicate instantly, most of which can fit in your hand, or even on your wrist.

 

Email, however, suits many business needs. It updates live throughout the day, and because there’s a lot of relevant content going there, you’re in that system throughout the day. Email is a suitable vehicle for attachments, consolidating different conversations into distinct threads, and it has straightforward and intuitive group messaging capabilities (which smart phones have only just started to figure out). From an employers' perspective, it's great because it's easy to monitor and leaves a clear virtual paper trail.

 

It's all about freedom of choice and giving people the right tool – or, more likely, their choice of tools for the job. It’s challenging for businesses to develop products and services and messages for all these platforms and various end-user populations. And at the same time, there’s a new opportunity to think beyond the medium to what it is that the customer wants and needs.

 

I would suggest that we all start with this question in mind: What is success for the end user? If you start with a clear definition of success, you can work backwards from there and choose from a whole palette of platforms and mediums for what it is you want to help people do. Email might well be among them. Email, web, app, SMS, wearables . . . consider them all and choose as many as you think you need to increase your rate of adoption and customer success. In this era of choice, options are the only thing that's not optional.

 

Donna Wilczek is vice president, product management at Coupa.

Procurement people are getting smarter, but technology and talent challenges persist

 

 

A few weeks ago, we featured an article by Susan Avery, Procurement Changes in the Past 10 Years in the Coupa Top 5. Avery, a longtime writer on the topics of purchasing and procurement, pulled together some interesting statistics on how procurement has changed over the past 10, and in some cases, 20 years.

 

These statistics came out of a research study she conducted last year for another, more in-depth article profiling the modern procurement professional. In some cases, she was able to draw additionally on a 1993 study by an earlier writer at mypurchasingcenter.com to give an even longer view. We thought it would be interesting to put her findings in a chart to show more clearly what’s changed – and what hasn’t - between then and now.

procurement now then

What's changed the most over the past decade or so is how much more educated people in procurement are, the increasing amount of financial responsibility they have, and the wider diversity of experience they're bringing to the role.

 

Perhaps most notable is the shift toward a greater alignment with finance. Not only are more people coming to procurement with a finance background, there's been a big jump in the percentage who report in to the CFO. Not surprising considering that 27% of procurement people in 2013 reported managing a budget in excess of $100 million.

 

Avery also observes that procurement professionals are working in a wider variety of industries today, based on her experience writing the Purchasing Magazine procurement salary survey for many years. Whereas ten years ago the majority worked in miscellaneous manufacturing, metalworking and process industries, today procurement professionals today work  in a wider variety of industries including healthcare, education, pharmaceuticals, and financial services she says. 

 

And, whereas before they bought a lot of commodities, today they source a wider range of goods and services, including IT, professional services and corporate travel.

 

The increased level of education and qualification, and the diversification of background and activities squares up with what Andrew Bartolini, managing partner and chief researchser at Ardent Partners called out in the most recent CPO Rising report as a new convergence around procurement as the go-to department for executing a wider variety of initiatives, including things that have not been traditionally part of the procurement role.

 

What's remained constant over the last decade or more are a familiar set of challenges: The shortage of talent, the need for technology and automation. Also the same: despite these challenges, roughly 80% say they would choose the profession again.

 

Read the full article by Susan Avery here.

 

4 reasons you need to reconsider e-sourcing software

 

If your supply chain looks the same in 10 years as it does now, andy chiangAndy Chiangyou’re going to be in trouble, says globally recognized sourcing expert Andrew Bartolini. Why? Markets are moving fast, and products are becoming commoditized faster than ever before. Strategic sourcing can be a critical competitive differentiator. 

 

And, the only way to be strategic is with e-sourcing software. Bartolini goes so far as to say that if you are doing sourcing without e-sourcing software, you cannot call it strategic sourcing.

 

I’ll put my stake in the ground right next to his.  E-sourcing software makes all the processes associated with sourcing efficient and scalable, so you can source even more categories, and still have time to be strategic. Yet, even a lot of large companies I’ve worked with still do paper based sourcing. No matter how good your team or process is, it’s simply no match for what can be done with modern e-sourcing tools. Without them, you’ll stay mired in antiquated processes and fall behind your competition.

 

Let’s define e-sourcing: Sourcing using email, Excel, Word and shared documents cannot be considered e-sourcing. Yes, those are electronic tools, but they’re not particularly well suited to sourcing.

 

E-sourcing software is purpose built for the specific workflow of sourcing. It lets you easily aggregate information, protect company knowledge as people come and go, and create repeatable processes.

 

The most sophisticated e-sourcing software integrates into the procurement strategic sourcingSoftware suited to the distinct workflow of sourcing can free up teams for more strategic activities.system to go beyond process automation and provide intelligence that helps you identify new opportunities and get more mileage out of the contracts you’ve negotiated.

 

New cloud companies are making e-sourcing software more cost-effective and easy to implement than ever, bringing automation within reach of more organizations, so it’s time to think about doing things differently than the way you’ve always done it. Today’s e-sourcing software lets you:

 

1. Cast a wider net

Because e-sourcing software makes processes more efficient and scalable, you and your team can start to get more strategic. Rather than spend time on the mechanics of sourcing (e.g. collecting bids into a spreadsheet for evaluation, notifying suppliers of deadlines), sourcing professionals can use their time focusing on strategy. You can widen your net, including more vendors and sourcing more categories than with manual processes.

 

The other way you can widen your net is by letting your end-users run very simple “3 bids and a buy” sourcing events without any training or assistance from the sourcing team.  Today’s software is so easy to use you don’t have to be a pro to run an event. Both the strategic sourcing team and business users can be more efficient in finding cost savings for the organization.  If your organization is on the cutting edge, you might even train some of your business users to run reverse auctions and be prepared to see some eye opening savings.

 

2. Improve supplier relationships

You can invite more suppliers, and e-sourcing software makes it easy for them to participate by only requiring one thing of them – an Internet connection.  The best platforms won’t charge supplier fees or require registering on a network. 

 

An e-sourcing platform brings consistency to the process, making it easier for suppliers to participate. It also provides for a much more transparent process. Everyone has equal access to information, eliminating suspicions of bias. All this leads to higher supplier participation and lays the groundwork for better relationships, both of which bring more value to the buyer.

 

3. Harness the power of the collective

Being strategic means scanning the horizon for sourcing opportunities. With integrated e-sourcing software that’s connected to all your company’s buying activities, you now have intelligence about past, planned and in flight purchases so that sourcing managers can be alerted about where to look for more sourcing opportunities.

 

For example, some department outside of headquarters all of a sudden orders 100 computers. It's under the threshold for procurement to look at, but it's a big enough spend that it might make sense to run a sourcing event to get better pricing. With an e-sourcing tool that's integrated, you could be alerted any time there’s an order over a certain value and stop the requisition before it gets to the supplier so that the sourcing team can come in and say, "Hey, can we spend a little time with you and source this to get you better pricing?"

 

Or, let’s say your system is integrated with expense management, and you start to notice a lot of people expensing the same new keyboard. Now you have an opportunity to source it and put it in the catalog at contracted pricing instead of having everyone buying it at their favorite store.

 

4. Integrate for scalability

The other advantage of an integrated e-sourcing system is on the back end, where you can easily flip the winning bid from a sourcing event directly to a requisition, contract, or catalog item. You don't have to retype everything to load into the catalog, or create a separate requisition or contract. You just push a button and all that information carries over.

 

For example, you could negotiate pricing for your entire office supplies catalog in your e-sourcing software, and then with a push of a button bring the new pricing right back into the catalog for your end-users to purchase from.

 

Even if you think you don’t procure a lot, or even if you’re already getting some savings, you could be getting so much more with e-sourcing software. And your people, instead of doing the work of calling and emailing and cutting and pasting and compiling can instead be doing more strategic activities.

 

E-sourcing software can help you transform sourcing from a back-office function to a source of competitive advantage. You can’t really be strategic without it.

 

Andy Chiang is the product manager for Coupa Sourcing and our resident expert on reverse auctions. He also enjoys sourcing honey from his home apiary.  Prior to Coupa Andy worked in strategic sourcing and supply chain at Gap Inc.

 

 

 

TCO Guy Buys a Tesla

Last spring, I bought a Tesla. You’re probably thinking two things. First, amit duvediAmit Duvedi“Cool!” And second, “Expensive.”

 

Right on the first count, but wrong on the second. I’m not saying a Tesla is cheap, but you have to look beyond the price tag to understand its cost, and value, relative to competing cars.

 

This is what I do in my professional life: I help companies understand the business value and total cost of ownership (TCO) for enterprise software.

 

Hidden costs can make a product with a lower price tag more expensive in the long run. A higher-priced product may deliver a better result, yielding greater value and costing less over time, therefore justifying a higher initial price point. My job is to study at all of these factors and make detailed estimates so that customers can make a decision based on a multi-year TCO and value delivered.

 

Naturally, I did this exercise for myself before buying my Tesla. I’m not a wealthy enough guy to just say, “I want it” and go out and buy it. I had to convince my inner TCO guy.

 

Calculating TCO is hard for most of us. Two natural human tendencies get in the way: Short-term focus on up front costs, and the assumption that the value of all options will be equal. To overcome these tendencies, you need a disciplined process that is much the same for anything you buy. Here are five steps for calculating TCO like a pro.

 

1. Compare apples to apples

The goal of TCO analysis is all about drilling down to get as close as wetco guy tesla   Amit and Tesla. can to an apples to apples comparison, but you still have to be comparing products in a similar class.

 

The Tesla isn’t going to be for everyone; you have to be able to pay the up front costs and wait for the savings to fully phase in. If you’re in the market for a Camry or Kia there’s no way this comparison is going to work.

 

For the TCO calculation for my Tesla, I looked at the total cost of ownership over a five-year period as compared to other new luxury cars such as BMW, Lexus and Mercedes.

 

If you’re comparing software, you have to be comparing software in the same class as well. For that, you have to define your top success criteria and success metrics. After that, you need to compare only those technology solutions that help you achieve your goals in your desired timeframe.

 

2. Look for hidden costs

Hidden costs don’t appear on the price tag, but are incurred during the transaction or over the life of the item you’re buying. For cars, hidden costs include repairs and maintenance, taxes, licensing fees, interest on financing, insurance and fuel. In the case of the Tesla and other alternative fuel vehicles, you get tax rebates, so I guess you could call that a hidden benefit.

 

When you add these other costs projected out over time to the sticker price of the car, you get the estimated total cost of ownership for a given time period. Even two cars with the same sticker price will usually have a different total cost of ownership.

 

It’s the same with enterprise software, although it can be harder to find the hidden costs. People tend to assume that since they’ve given each vendor the same RFP or list of needs, every option will address those needs the same way. But, hidden fees for implementation, training, upgrades, customizations, ongoing support and additional seat licenses are common and usually have a material impact on TCO. You have to especially watch out for hidden costs that might kick in after the first one or two years.

 

One more aspect of hidden cost is the opportunity cost of different options. If you’re looking at two comparable technology solutions, and Option A delivers the intended value faster than the Option B, then the latter should be associated with a higher opportunity cost/penalty in your TCO analysis. Time to value matters and it should be a part of every comparative analysis.

 

3. Is the future cloudy?

Because of the cloud and the rise of the Internet of Things (IoT), products are no longer static. There’s now the possibility that even mundane products like thermostats and appliances will actually get better.

 

That’s true of the Tesla; it’s a cloud car and part of the IoT. It’s always hooked up to the wireless network at home, and every few months there's a software upgrade that happens overnight. In the morning, voila, a new feature is there.

 

For example, the Tesla has regenerative braking, without the traditional “creep” feature. If I take my foot off the brake, it doesn’t move forward like most cars do. But, if you come to a stop climbing a steep hill, the car used to behave like a manual transmission car, rolling backward when you took your foot off the brake.

Based on feedback from the user community, they did a software upgrade and the Tesla now has a feature where the car holds in place for ten seconds, long enough for the driver to move his or her foot over to the accelerator. The car got better, without drivers having to buy the next model.

 

The cloud has now become an important consideration for buying enterprise software, for the same reasons. Time horizons for innovations and upgrades are much faster, and they’re delivered automatically to all the owners of the product. The product roadmap is more compressed, and there’s an opportunity to deliver more value on a continual basis.

 

4. Account for the intangibles

It’s not possible to put a number on everything, for the car or the software, but intangible benefits should still be accounted for.

 

For example, I get to use the diamond lane in my Tesla, which saves about half an hour a day for my particular commute. I could calculate a dollar value for that based on my wages, but really what it does is give me back some more time to spend on my family or my health. It’s hard to put a dollar value on that, but it’s definitely a benefit.

 

I also like the idea of no emissions coming from the vehicle itself, but I think the jury’s still out on the environmental aspect—the batteries cause some pollution that may cancel out reduced emissions, so I left that out of the calculation.

 

If I were building a business case for enterprise software though, I would consider including the financial impact intangibles such as reduced processing times, which could free up people to be more strategic, or the ability for users to configure software themselves, which cuts down on the need for IT support. I’d also look at usability and user adoption and estimate the positive impact on end users.

 

5. Do the math

The Tesla is pretty cool, but a TCO guy can’t allow himself to be distracted by coolness. After you do all the research, you need to actually do the math.

Obviously that’s a more complicated equation for the software than the car. The Tesla community has created a number of TCO calculators specifically for the Tesla, so I was able to cheat a little bit. Repair and maintenance costs are already in there, so I really just needed to plug in my personal mileage estimates and electrical rates.

 

After all was said and done, the five year TCO for the Tesla came out comparable to buying luxury sedan whose sticker price was significantly lower, with greater savings if I hold the car even longer. That sealed the deal with my inner TCO guy, and I’ve never looked back since.

 

Amit Duvedi is Vice President, Business Strategy Value Management for Coupa. 

 

 

 

The 7 Rules of Electronic Invoicing

 

 

Uh-oh. Looks like you received an invoice from a supplier via email, didn’t you? And now you’re wondering what to do with it. Do you print it out and archive it?

 

We recommend you be very, very careful. Electronic invoices are subject to complex and changing regulations, so you always have to keep the seven rules of e- invoicing in mind. Rule number one: You will be audited. Do you know what the rest are? Watch this Fight Club- inspired video from our dev team to find out.  

 

Can't view video from this window? Try clicking here.

 

The Coupa Top 5: Separating the leaders from the followers

 

What separates the leaders from the followers? IBM's new procurement study calls out some specifics in words and pictures that have been part of the conversation on social channels in the past few weeks. What else separates leaders from the followers? They share their knowledge with others, this week in particular helping demystify the cloud and calling out supply chain challenges to watch out for. And, they think differently, as evidenced by PYMNTS interview with Karla Friede, CEO of B2B payments startup and Coupa partner NVoice Pay.

 

Coupa 1New study separates the world’s procurement leaders from the followers - Pymnts.com

As Kanye West said, “There’s leaders, and there’s followers,” and . . .  well, in the interest of propriety we’ll spare you the next line. But the opening line is just as true for procurement professionals as it is for entertainment supervillains, if you believe the results of IBM’s second in a series of procurement studies. IBM’s Institute for Business Value surveyed more than 1,000 CPOs around the world and found the qualities shared by top-performers - and the underachievers. Check it out to see where you, or your CPO ranks.

 

Coupa 2The anatomy of a procurement role model - IBM

If picture books are your thing, you’ll love IBM’s infographic treatment of its 2014 CPO study. Does your CPO have the killer eyes to scope the big picture, or the sharp ears to listen and adapt? What about the iron stomach for the risks and pitfalls of the modern procurement landscape?

 

 

Coupa 3How to choose the right cloud services - Inc

Today’s market is saturated with different types of cloud services. Cloud software has been around for more than two decades, yet we still use only one word - “cloud” - as an umbrella term (sorry, bad pun) for all SaaS models. In reality, cloud comes in many varieties. Understanding your options is half the battle.  Tony DiBenedetto walks you through private, public and hybrid clouds, and how to decide which one is right for you.

 

Coupa 4Six challenges that could break the supply chain - Supply Chain

We don’t have to tell you that the supply chain landscape has changed radically over the past twenty years. Advances in communications alone have revolutionized the sector. But what lies ahead? Sam Jermy picks out six challenges that will make or break supply chain models down the road.

 

Coupa 5Making business payments smart - Pymnts.com

Paying suppliers on time is good for relationships, and early is even better when dynamic discounting is available. But how can your company apply its usual strategic rigor to a process seemingly as straightforward as paying the bills? NVoicepay CEO Karla Friede has an idea, and it starts with forgetting what you think you know about electronic payments. Death to the status quo!

 

Replacing Rigidity with Creativity: Why We're Delighted to Develop for Apple Watch

 

Apple Watch goes on sale April 24, with pre-orders starting in just onedonna-wilczek-headshot-450   Donna Wilczek month on April 10th. The watch will go a long way toward expanding the BYOD (Bring Your Own Device) trend of recent years into a new subcategory: BYOW (Bring Your Own Watch).  

 

As anticipated, the watch can do a lot of what the phone can do. You can make and take calls of course, listen to your music, do Apple Pay and check the weather. You can Instagram, Uber, and even check Salesforce.

 

With all this functionality, some analysts and pundits are wondering why you’d need the watch if you have the phone, and vice versa. That leads them to the obvious question of whether the watch will cut into iPhone sales. They’re missing the point: It’s all about choice.

 

That’s why I’m so excited about it personally and professionally. Personally, I can’t wait to buy one. Professionally, I’m excited about what we’re developing here at Coupa for Apple Watch wearers.

 

Why is choice so important? I’m reminded of an article in this month’s print issue of Wired, Bricks and Order by Jon Mooallem.

 

Jon, who  writes an advice column for Wired called Mr. Know-It-All, answered a reader question about whether the reader’s daughter should be forced to sort her Legos by color.

 

As the mom of two little ginger boys, I can tell you that upon first reading the question it sounded like a fantastic idea, given that what I call Lego Chaos Theory is currently being practiced at my house. As in, there are Legos all over the place and it’s a constant battle to get them put away. Having them all neatly corralled and sorted by color appealed to my sense of order and control. I felt a brief moment of zen.

 

But within a split second, I stopped my reverie and blurted out “that’s ridiculous.” I thought about my kids and how I try to support their creativity and ability to make choices every day. Yes, the Legos should be put away, but my dictating exactly how that should occur would stifle creativity and choice.

 

Jon’s article drew the same conclusion. “So why not let your kid decide? Let her dictate the system,” he writes. “Let there be a different system every time. That will generate excitement about cleaning up, instead of resentment.”

 

Yes! Now, we’re talking. I see this playing out in so many areas of modern parenting where old approaches of dictating rigid rules are giving way to new approaches that help kids make smart decisions. We’re raising generations of kids that have been given the option to make decisions for themselves. And it has to be that way, because they have an unprecedented number of choices to make throughout their lives.

 

I also see this playing out in business, where consumer technology such as Apple Watch is delivering so many new choices that it’s changing the expectations of what’s acceptable at work. This consumerization of IT, where business users choose what devices and services they use to get their work done is a dramatic shift. Think about it, would people in the 1980’s have brought their own typewriter to work? It’s a whole new world.

 

To remain competitive in this era of choice, businesses must enable their employees and suppliers to work in many different ways if they are going to be more successful than their competitors. That means thinking about the needs of their different users and letting those needs dictate the approach. It means recognizing that the world is 100% mobile and even a mobile phone app isn't enough to support everyone’s diverse needs.

 

It’s one of the reasons that Coupa’s development team will continue to run at supporting all users in creative ways. We will have our Actionable Notifications available for any Coupa user within weeks after Apple Watch ships. To start, you’ll be able to approve an expense report, invoice, or requisition in seconds right from your wrist.

 

We'll follow that up by allowing Coupa Expense users to automatically start and stop a mileage tracker from the Apple Watch, and then automatically create a mileage expense report line item. I can hear sales people the world over rejoicing that they'll no longer have to maintain a mileage log or enter the start and stop address in an expense report. And accountants everywhere will be happy that they have the documentation they need to support government mileage reimbursement reports. 

 

That’s the win-win we’re after: end users have the freedom to exercise choice and their employer reduces costs and increases the speed of business. 

 

Apple Watch is big news, but I see it as just the start for a whole new range of choices. Our children will be faced with more choices than we can even imagine, and it’s our job as parents to prepare them to make intelligent choices in that world.

 

Similarly, it’s our job as intelligent software creators to continually design software that supports people’s abilities to decide what works best for them.

If you give people choices, they’ll naturally choose the way that takes them the least amount of time. This is what brings back excitement to the task at hand, replacing rigidity with creativity. The Lego mom in me couldn’t be happier about creating that type of world.

 

Donna Wilczek is vice president, product management at Coupa.

 

 

 

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