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Bad Buying, Believing the Supplier — and the Beauty of SolutionMap

09/07/2020 By

Spend Matters welcomes this guest post from our friend and former colleague Peter Smith.

I stepped back from running Spend Matters Europe at the end of 2018, partly because writing two articles about procurement every working day for eight years got a little exhausting. So of course since then, I’ve been mainly … writing!

The fruits of my labour will be evident in just a few weeks’ time, on Oct. 8, when Penguin Business publishes “Bad Buying — How organizations waste billions through failures, frauds and f*ck-ups.” (You can pre-order it via links here).

It is, I believe, the first book fundamentally about procurement to be published by a major global publishing house, and my motivation was a desire to communicate the importance of procurement to a wider business audience. I decided the best way to achieve that was to highlight fascinating stories about things going wrong! Everybody likes reading about other people messing up, let’s face it.

Given the focus of Spend Matters, I thought it would be good to tell you here about tech failures. But actually, I could not find many examples for the book relating to procurement software leading to major disasters. I was tempted to include one story about my conversation with a senior procurement executive who told me that her firm had bought a very swanky, all-singing, all-dancing sourcing product a year or two back.

What have you used it for, I asked. “Two auctions” she said. I waited for her to continue with the list of events and activities … but no, two auctions was it. So they had probably cost about $100,000 each at that point in time given the cost of the software!

But I didn’t include that tale, in part because I didn’t want to name the firm, so I wouldn’t want anyone in the procurement tech industry worrying about what they will find on Oct. 8. However, there are examples in the book of more general IT systems purchases that led to major problems — in a couple of cases, you might even argue they caused the ultimate downfall of the entire business. But firms often don’t want to talk about such issues, for obvious reasons, so it is quite surprising when major issues do emerge into the spotlight, the legal dispute between Accenture and Hertz over a major technology development programme being a recent example.

On a related note, one of the chapters in the book is called “Believing the Supplier,” which I identify as a source of many bad buying decisions. Some firms and individuals simply appear to be gullible, but in other cases, I’ve observed an interesting phenomenon, where buyers and sellers collude to make a purchase look cheaper than it really is in order to gain budgetary approval.

The classic here is in the defence sector. When the Admiral wants a new warship, it is in their  interest — and the interest of the shipbuilder — to tell the defence ministry beancounters that it will “only” cost £/$/€ 200 million or so, even if both they and the supplier know very well that it will never be built for that price, and will probably cost double. The same thing happens in the civil construction world, and there is a great case study concerning a new concert hall in Paris in my book. It probably happens in terms of major technology projects too.

Often though, the buyer believes the supplier simply because they have no other evidence to go on. The supplier tells you the product will do something and for certain spend categories it can be difficult to verify whether that is really true before you commit. But where you can carry out effective research, then clearly you should, in order to help overcome this “asymmetry of information” risk.

I have no financial interest in Spend Matters any longer, but to come back to my old colleagues, I am a big fan of their SolutionMap product, because it cuts through much of this “believing the supplier” issue. If you consult SolutionMap information, you benefit from some of the smartest people in the world in procurement tech terms having taken the product apart to assess what it really can and can’t do. You don’t need to “believe the supplier,” because you can verify the claims and assure yourself of the product’s capability.

So perhaps the increasing use of SolutionMap is one reason why I can’t find too many examples of procurement technology bad buying. But you never know, and I’m still looking … just in case there is a sequel to the book. So if you have any good stories of failure, fraud or f*ck-ups, in procurement tech or for that matter anywhere else in our world, do let me know!