Friday Rant: Spend Management Snake Oil

At Purchasing's Smart Sourcing Summit yesterday, D&B's Jim Lawton introduced the concept of supply risk snake oil (before I comment on this further, I will reiterate the disclosure that D&B, along with other competitive providers, are both consulting clients and/or Spend Matters sponsors). What is snake oil, you ask? According to Jim's talk, "Snake oil is a traditional Chinese medicine used to treat joint pain. However, the most common usage of the phrase is as a derogatory term for compounds offered as medicines, implying that they are fake, fraudulent, quackish, or ineffective." His implication: there's a lot of snake oil in the supply risk market, a comment that I could not agree more with (let alone for the broader Spend Management software and services market).

During his talk, Jim suggested that snake oil purveyors in the supply risk market fall into a number of categories, including "existing vendors with incomplete or partial solutions (spun as the real-deal), market information packaged and resold as real-time intelligence (which it's not), dashboards from larger enterprise software providers (which leave it up to you to fill in the blanks or pay an army of consultants to populate)" and, my personal favorite, "the one hit wonder -- any service provider deliverable that takes the form of a Microsoft Office document, spreadsheet or presentation". Not only is Jim dead-on in this analysis -- he's putting a stake in the ground that someone should have posited a long time ago. Namely, that a good many of the self-proclaimed supply risk emperors out there really have no clothes.

Now, to be fair, D&B's solutions have their detractors. I've heard a number of people criticize their risk ratings accuracy on smaller and middle market suppliers. My favorite story here is how CVM Solutions, a D&B competitor, likes to tell customers that according to D&B's data, it's going bankrupt. Which is anything but accurate when it comes to their free cash flow and balance sheet (maybe moral bankruptcy, perhaps, but they're certainly not going out of business). I've also heard numerous companies complain about false positives with D&B data. But when organizations customize D&B deployments and incorporate their own operational data, the actual results I've observed tend to be in a different class entirely than anyone else claiming to offer real-time, predictive supply risk solutions focused on delivering as much early warning as possible around supplier financial disruptions and operational failures.

Granted, snake oil exists in many areas in the Spend Management market. The fact that SAP and Oracle can still say with a straight face that you'll be able to deploy their eProcurement capabilities without additional providers (e.g., Vinimaya, Hubwoo, etc.) in the mix and achieve significant levels of indirect/catalog spend under management is an absolute farce. Both would have been run out of town -- or shot with a six-shooter -- in the old American West for selling such spend snake oil nonsense. Moreover, the supposed category expertise that many consultancies -- including some of the biggest names -- bring to certain spend areas are anything but. Rather, they trot out their SME partners who will rarely, if ever, show up again during the course of an engagement. And don't for a minute get me started on the rest of the spend tools lot. I don't want to get my blood pressure up at this hour in the day.

Regardless of what area of Spend Management technology or services you're looking at, it's always worth putting an exceptionally critical eye to what's being sold to you. Watch out for "shills" as well -- vendor reference clients who've gotten millions in custom development for nothing (and/or have had their pet features prioritized). They're equally a part of the snake oil business.

During the buying cycle, the only way you can be sure that you're not being snake oiled is to embark on an extensive market analysis of everything that is out there. It's also critical to methodically check multiple references (ideally those not provided by the purveyor) and to make sure your BS-detectors are in proper operating condition at all times during the sales process. Don't just depend on so-called experts to help make a final decision (they too, can be part of the act). Depend on your own extensive research and gut. Only then can you be 100% sure that your purchased spend salve will have its desired effect.

Jason Busch

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