You can’t optimize for products that are a rounding error in a broader P&L

Application vendors are in the business to make money and build shareholder value. This is true in procurement and other areas. Specifically, in the cloud applications world, providers that can grow quickly (ARR/MRR), maintain high renewal rates and prove they can up-sell/cross-sell are those that are most rewarded by investors. This in turn fuels investment (in R&D) and further innovation — not to mention providing a currency (stock) and balance sheet (via primary and secondary offerings) to go acquire other innovative technologies.

And so the cycle continues.

My colleague’s proposal is to give away optimization, when it is, in fact a form of differentiation for providers in the sourcing space. To differentiate, you can also go the other way in terms of restricting broad-based features and making an application incredibly easy to use. Or you can differentiate on how you use a feature, such as optimization, as part of a broader set of capabilities (e.g., autonomous sourcing, risk optimized sourcing, etc.).

Regardless, product/feature differentiation, market access/reach and pricing, of course, all drive the invisible hand of technology sales.

While it would be nice to simply give away optimization to encourage its use since it is usually inherently better than other forms of negotiation for most situations — Michael and I agree here — doing so runs counter to building and sustaining innovation.

To borrow my favorite Margaret Thatcher phrase, “socialism is great until you run out of other people’s money.” So, too, is simply giving away capability, and not showing enough success with a solution or P&L to further fund investment in the same product line. Unless you’re subsidizing it!

Until optimization becomes as “expected” as RFI/RFX or reverse auction capability in sourcing, I, personally, would actively discourage providers from simply tossing it in. But what I would deploy is clever marketing, channel, business model and go-to-market approaches to capitalize on the asset, if I had it.

Unfortunately, optimization is a rounding error for suite vendors in their overall P&Ls. As such, it simply does not get the attention of anchoring products such as e-procurement, invoice-to-pay, AP automation, CLM, etc. And the marketing is generally rubbish for it.

And that, my friends, is the problem that Michael and I would both agree is worth solving for (pun intended!)