This rant has been brewing for a while, so, like the waiting list for Red Sox seasons tickets, it’s “wicked long.” As you know, we at Spend Matters are very vocal supporters of new techniques and tools in the marketplace, but we have been very vocal critics too. We haven’t been afraid to call out the biggest procurement technology vendors or the biggest procurement management consultancies. In other words, we analyze the “procurement industry” (i.e., the ecosystem of all providers who serve procurement and inbound supply chain practitioners) and draw some conclusions and make recommendations based on the facts and our experience. Quite often, such big providers don’t like what we have to say, even if they secretly agree with the conclusions or recommendations. Yet I can’t help but feel a bit alone sometimes. Like the lyrics in the Allman Brothers song, “there’s nobody left to run with anymore.” It seems like the market is filled with toothless abominable snowmen from Rudolph the Red-Nosed Reindeer – lots of noise but not a lot of teeth. Nobody is saying what often needs to get said. Where are the curmudgeonly industry analysts of old?
Don’t worry, I won’t be pining for the old days, but have done a little self-reflection (uh-oh), and in the face of so much digital noise, I thought it’d be good to put down some thoughts on the roles of various information providers and how best to use them. A free market is based on perfect information – and the information out there is far from perfect. So, the more that we examine the nature of these sources and our own biases, the better the choices that we can make in utilizing them.
What is an “industry analyst” anyway?
The short answer is this: a role that any self-respecting person in category management or strategic sourcing should play. We’ll talk about what industry we mean in a moment.
By definition, at Spend Matters we are playing the role of a “procurement industry analyst.” The term “industry analyst” is something that has been associated with IT industry providers and therefore the purview of Gartner, Forrester, IDC, et al. When I joined AMR Research (now Gartner) back in 1999, I never liked the term, especially since it was so IT-biased, and I spent most of my time with both procurement/SCM staff and IT staff, trying to help them really frame their problem, consider different strategies, challenge their assumptions, evaluate various provider approaches/types, and only then discuss the providers, which tended to be technology-focused given that market convergence around the broad spectrum of procurement services hadn’t begun (and still is in its infancy). This process is the advisory aspect of my job that I like the best, especially when I can broaden the thinking of a senior supply executive, not just given them some tactical market intelligence on procurement solutions.
In a sense, good industry analysts are like good category managers. They have to understand their stakeholders, understand their problems (and the metrics they need to hit), and then translate the market intelligence that they have about those supply markets in order to help the stakeholders make good decisions on how to engage those markets to accomplish their objectives. I usually describe myself as a category manager on-demand, a high-IP fractional FTE who knows a set of focused markets where the budget owner is procurement itself – 100-percent spend influence (sort of). Of course, this budget for external procurement resources is only about 10-20 basis points on total spend, but with a >10X ROI that should have been received from procurement resources, it’s an important budget and therefore an important set of markets. So, shouldn’t procurement apply deep best practices to its own spend for technology, talent, etc. as it industrializes its supply services to the business? Of course.
But here’s the rub. A mega-category manager like me, similar to any other category manager, needs to have deep intelligence better than the stakeholder who can buy a stock market intelligence report or simply consume the marketing material from the suppliers themselves and an ecosystem of supposed experts that they employ in the field. Yet, borrowing from the 4 Ps concept in marketing, even if the “product” of this intelligence/insight is indeed better, the placement, pricing, and promotion of such information is also important So, my purpose in writing this is, in the spirit of caveat emptor, to help informed buyers know what to truly be wary of – and what biases they might need to re-think.
To make this example real, let’s use the example of practitioners running SAP’s on-premise applications – trying to make sense of SAP’s cloud strategy and series of acquisitions (Ariba, Fieldglass, etc.). If those practitioners are trying to find information to help them chart their best strategy and path forward based on their requirements and best interests, here’s what’s available to them.
Major business press
Forbes did a three-part series on SAP in the cloud, and the 2014 installments are here and here. I could certainly deconstruct these and the irony of the points, but there’s another issue. They were written by SAP Cloud CMO Tim Minahan. OK, fine, it’s a guest post. We allow guest posts all the time, as long as the content is good (we approve them beforehand). But, wait, upon further inspection, these guest posts are part of Forbes’ BrandVoice, which Forbes describes as “an integrated and by-invitation content-sharing platform that enables marketers to join the conversation with their own narrative and expertise” and “an innovative approach to integrating marketers’ content with Forbes’ editorial and users’ content — allowing marketers to demonstrate their thought leadership on the Forbes platform.” Tsk tsk. For the record, you will never see paid advertorials on any of our Azul Partners websites unless third-party contributions are explicitly tagged and marked as "sponsored content" -- a blogging norm that Forbes is not adhering to.
Freelance analysts for hire
If you look beyond the major news outlets, you’ll still find many media sites, and you’ll also find that many of the contributors are freelancers. And freelancers need to eat, and to do so, they’ll need to create a compelling message for their sponsors. For example, if you search for SAP Ariba on ZDNet, you’ll see some excellent authors like Dennis Howlett and Larry Dignan. I too have contributed articles to various publications such as Supply Chain Management Review, and even Purchasing and Supply Chain Management, so guest contributions are fine. But, in the ZDNet example, you’ll also see some other authors listed that are not traditional. For example, one is Dana Gardner, who is the Principal Analyst at Interarbor Solutions. If you go to the SAP / Ariba podcasts on his website, you’ll find that he’s not really an analyst, but a paid interviewer who wants to spread the good news about SAP/Ariba. He seems like a nice fellow and I don’t want to mess with his livelihood, but the bigger problem is when the line starts to blur between marketers, journalists, freelance content creators, and true analysts. These content creators are not just freelancers though, and some of them look downright credible and have recognized names.
White paper firms
The most notable here of course is Aberdeen, a firm that makes its money primarily from provider-sponsored surveys and subsequent sales leads from white paper downloads. I can nitpick the research from Aberdeen or ex-Aberdeen analysts to death, but I won’t. It’s good yeoman’s content on procurement priorities and how different types of technology help address various processes. And quite often, this white paper content can be very strong if the writer is strong. And it’s free to the practitioner, so it’s easy to acquire and to drop into a presentation when you need a handy chart. It’s all good, even though as ex-CPO Roy Anderson once quipped [paraphrased]: “If I added up the promised ROI from these reports on each different type of technology, I’d actually be saving over 100 percent and should send that money to my p-card.”
No matter how much you dress up the content, the authors are not analysts. They will have nary a critical word to say about the sponsors that pay their bills. Therefore they will be prominently featured by the vendors, attend their conferences (all expenses paid), lead their webcasts, and so on. It’s always a good news story! This same problem occurs in membership-based networking forums of all sorts that make money on the providers. You don’t want to say anything critical about the one sponsoring the cocktail hour at the tux-n-tail award dinner. Anyway, the bottom line is that there’s nothing wrong with a white paper for education and enrichment, but just be wary of the context within which it was written. From a Spend Matters standpoint, we do white papers too, and I personally write them. But, I will only do it if it’s an interesting topic that covers new ground and will be valuable to the industry. Do we really need to read again that the CPO’s agenda is to demonstrate value beyond cost savings or what procurement will look like in 2020? Maybe, but maybe not.
The IT industry analysts
Just as SAP and Oracle are the “Big 2” in ERP, Gartner and Forrester occupy the same role in the IT industry analyst area for procurement. They are generally objective and do try to analyze, interpret, predict, and recommend based on their coverage areas and capabilities. And they are competent people who add value, especially people like Duncan Jones or Mickey North Rizza (who left Gartner to join BravoSolution). That said, to a big provider, they are “analysts… with benefits.”
Since I was the first procurement analyst in the IT industry analyst community 15 years ago, I can empathize with these people who do endless practitioner calls while also making sales calls, traveling to conferences, meeting with providers, and even occasionally sneaking in a little published research. It’s fun, but it’s tough. Most of all, I empathize when they have to deal with service-level agreements put in place with such “strategic accounts” – and when the strategic account manager would beg me to tone down a piece that wasn’t favorable. And don’t even get me started on vendor rankings. Luckily, we never did the quadrant/wave thing at AMR. It’s a brilliant marketing asset, and we have no shortage of opinions on the topic, but if you want to hear someone else talk about it from a supply chain standpoint, and want to buy a book on it, check this site out.
I would personally love to see some statistical analysis on how providers are plotted. Why do so many end up as magic? Why do the points cluster so close to each other? Why so many right on or near the boundary line? What is the correlation of client/prospect status to positioning? I can’t answer these questions but would find the analysis interesting and would welcome any comments. In terms of the value they provide, I could certainly mention that we publish about 10 times the content at 10 percent of the price, but, for procurement folks where IT picks up the tab, you should definitely squeeze as much value out of those memberships as possible and tap the analysts where others are assuming the cost.
And the rest
There are other micro-segments here: management consultants; membership-based research/event/advisory groups; technology evaluation clearinghouses; industry associations; lone-wolf consultants; and LinkedIn groups. These sources can be hit or miss, and we know most of them (and exchange information with them frequently). But our general advice is that if you know anyone from these sectors, you should pick their brain and also keep them in mind if you need their deeper services downstream for package implementation and whatnot. And of course you should understand, for what it’s worth, who gets funded where and by whom. For example, even though firms like SIG and Procurement Leaders get a sizable amount of their revenue from providers, even companies like CEB and Hackett will take sponsorship money too. So, you simply can’t just throw out great providers based on the absolute “cleanliness” of their funding model. Judge the firewalls based on what you see from them and your common sense. This leads me to my final point.
Where do the “bloggers” fit in? And about that objectivity thing…
First, blogging is an activity that anyone can do. Anyone can be a blogger and any website of any provider can have a blog. So, welcome to my conundrum. As the most highly-trafficked procurement and supply chain blog -- and media site, for that matter -- in the world, we struggle because we are in fact a mash-up of many of the above roles (industry analyst, business advisor, topical expert, breaking news reporter, etc.) and also play additional roles such as market intelligence provider, M&A advisor, futurist, ombudsman for providers and practitioners, commentator/satirist, colleague, and fellow human being. Supply markets are messy, and our “second-order market” is messy in spades. But category management demands that you look at supply based on the nature of the products/services themselves rather than just adopting the traditional perceptions about antiquated labels for existing supply markets. You should follow best practices in managing your own spend, supersize your market basket (e.g., from IT industry technology view of procurement providers to an integrated procurement/SCM “solutions” market view), and don’t do a winner-take-all approach. There are hundreds of data sources to consider. So, how find the signal in the noise?
This gets to the objectivity thing.
Ultimately, success is all about delivered value. We really work hard to earn not only brand recognition, but also brand respect. In a true digital economy meritocracy, this should be based on the work that we do, not on outdated labels and brand perceptions for a convenient cognitive bucket to classify us in, nor any single spend category (categories are multi-dimensional). Procurement practitioners have this problem too. They are viewed by too many stakeholders as members of the purchasing department looking to reduce prices, and not as supply management experts looking to help them tap supply market power against a balanced scorecard of supply to accomplish their objectives.
For us, the problem is not really with the providers who know that we want to understand them in order to do our job as market-intelligent category managers (and “cover” them if they have something unique and influential in the market to share with our readership). They also know that while we will never disclose weaknesses or strategic plans shared under NDA, we will critique their market-facing efforts in equal measure with the praise – regardless of whether we work with them commercially. They know that such critique comes from us wanting them to be better and not because we don’t like them or are trying to coerce them into working with us. That said, given this expectation, there is a certain amount of self-selection involved because only those firms who are confident enough of their value proposition and humble enough to be reviewed are the ones who work with us.
The bigger problem is with practitioners. They have been understandably conditioned by the market to be wary and watchful of such biases and motivations of various information sources. If most of Spend Matters’ revenue comes from providers (which it currently does based on our site advertising revenues… until our premium subscription revenues take the lead, or so we hope), then they ask how can we be objective, right?
I would only say that you should judge us on the merit of what we produce. We didn’t get successful by being paid shills for the vendors. If they can earn our trust and respect (and vice versa) based on traction in the field (even if it’s a single progressive early adopter), they will get the well-deserved kudos based on value – not their checkbook. We actually walk away from a lot of business that we refer to other providers – in essence firing our future customers. And we have selected out some existing customers too! For example, based on some of the critiques we have recently given SAP/Ariba, you’d think they we had an axe to grind with them. But SAP is in fact a paying client.
Conversely, we’ve covered literally hundreds of providers who aren’t. Is SAP a big client? No. Is SAP happy with us? No. Can SAP get us “on message” with their massive cloudwashing marketing blitzkriegs? No. Does SAP pay for us to attend Ariba and SAP events? No. Do we attend anyway? Sometimes (Sapphire is coming up and we think we’ll drop in). Does SAP respect us? I hope so. Based on the IP logs, they certainly read us, and we can clearly see the effect of our analyses on their subsequent positioning, so they seem to be at least taking the medicine even though it doesn’t always go down so easily.
Anyway, we recommend that practitioners do the same self-selection and if it seems to them that we are not objective, they should frankly stop reading us. Let me be more blunt: if we can’t convince you that our opinions are objective, then maybe you should just stop reading. To paraphrase Groucho Marx, you shouldn’t belong to a digital club that would have a paid shill as an owner. OK? Enough said. As an analogy, I really have to applaud Tim Cook’s recent statements about not wanting shareholders who don’t think that sustainability is important. Was it greenwashing? Skeptics might say so, but I think it’s just good self-selection of who you do and don’t want to do business with. I personally don’t want to associate with old-school purchasing staff who don’t want to learn and share new approaches, techniques, and tools – nor with providers who are stuck in their ways either.
Ending with a parable
When I first met Dave Nelson back in the early 2000s, he made a big impression on me when he said he was always looking for new senseis to learn from. That humility and quiet confidence is something that I’ve found lacking with a few other CPOs that I’ve met over the years, and it reminded me of an old cup-of-tea zen story. Dave, and new-school procurement professionals, are willing to “empty their cup” and learn from non-traditional sources. With that, I’ll end this missive and ask you to join us for tea as we empty our cups together and fill them with each others’ new ideas and perspectives about how to spend better, to work better, and live better.