Achieving Practical Outcomes to Complex Purchases at the Heart of the Emptoris Acquisition of Click Commerce

Posted on May 21, 2009

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“I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.”

Oliver Wendell Holmes, Physician, Poet, Writer, Humorist and Professor at Harvard (1809-1894)

To begin, and as many of you already know, I have a great passion for all things procurement.  It is an area of business that to me is the equivalent of 10 cups of dark roast coffee and is reminiscent of my first ride on the python roller coaster at Busch Gardens.  And while my interests in business are varied, nothing seems to run parallel to the sheer joy I take in the simple complexity of the modern supply chain practice.

This is why the reviews of last week’s Emptoris acquisition of Click Commerce’s CSM Solutions has been at times frustrating as they generally fall back on the analyst speak that often resonates only within the limited confines of a select group of followers.  In the brave new world of Web 2.0 and beyond, where social networks and mediums such as Twitter exponentially increase the reach of one’s message, this antiquated practice seems out of step.  Especially given the fact that 85 percent of all supply chain/e-procurement initiatives continues to fail worldwide.  If anything, this result should emphasize the importance of the need for the assessment or explanation of industry events to appeal to a much broader audience, an audience whose influence on both adoption and outcomes can no longer be overlooked.  In short, while decisions are made in the boardroom, success is ultimately achieved on the front lines.

In this forum of real-world understanding and insight, questions regarding service partner cultivation and tangential marketing strategies while valid, fall largely on deaf ears as it has no practical value from an execution standpoint.   Never is this statement truer than it is in the areas of services procurement where subjective elements are intertwined with tangible metrics such as pricing.

As indicated in the past, a great deal of my research into the utilization of advanced algorithms within the framework of an agent-based model centered on the objective of achieving a “best result” purchasing outcome on a consistent basis.  Funded by the Government of Canada’s Scientific Research and Experimental Development (SR&ED) program, this task was considerably easier when the purchases involved either a Direct or Indirect Material acquisition.  While there were certainly real-world, real-time factors that changed daily if not hourly – for example our trending showed that with the majority MRO spare parts, the cost would steadily increase throughout the day hitting a peak on orders placed between 3:30 and 5:30 PM – the ultimate scorecard was still based on a somewhat static analytical model.

With the procurement of services, the model was considerably more complex through the introduction of subjective elements into the assessment or decision-making metrics.  Of course the obvious question is simply, what are subjective elements?  And in this regard, I am more than happy to share an excerpt from a case analysis I had written as a means of illustrating my point.

A large government agency was looking to contract with a service provider to handle the support of their vast IT infrastructure.  In an effort to establish a performance capability measurement that could be used to create a definable standard and therefore uniformly applied to all RFP respondents, it was suggested that a minimum certification requirement be introduced.  Specifically, if a bidder’s service technicians had obtained a certain level of industry certification, then that company would receive positive points toward the total bid.  If not, no points.  Without getting into the complexity of bid parameters and weighted values, this one factor had a high degree of influence on the bid outcome.  This raised concerns with several organizations bidding on the contract as the certification being sought was relatively new and therefore the majority of technicians who had more than 10 years experience did not have the stipulated designation.  In short, the company whose technicians had the designation had on average less than 3 years of practical experience, while the technicians who lacked the required designation had on average more than 10 years of practical, real-world experience.  This raised the obvious question . . . which technician would be able to provide the greatest level of service?

Without giving away the results of my research, these are the very real and very practical questions that Emptoris is seeking to answer through their acquisition of the Click Commerce Contract and Service Management solutions.

In line with my observations in last week’s commentary, what Emptoris has accomplished with the Click Commerce transaction is “successfully maintain the balance of its indigenous innovative insights (or DNA) with an increased breadth of service offering to expand its ability to better serve a growing, mainstream market.”  This indigenous innovative capacity, to which I am referring, is reflected in the ability to effectively identify quantify and incorporate the subjective elements of a services acquisition into the procurement process.  A capability that is clearly demonstrated by the insights provided through the three-part guest post series by Emptoris’ Lead Scientist, Dr. Olga Raskina.  Here are the links to both parts 1 and 2 of the series; (Part 1) Why Optimization Matters: Moving Beyond Price Driven Auctions, (Part 2) Optimizing Value in the Economic Downturn [and Recovery].

To sum up today’s post, being able to demonstrate the ability to respond to real-world front line questions and challenges is of far greater interest (and importance) than the contemplation of the overall impact on market share or competitive strategies often heralded in traditional reviews.  Or to put it as simply and as succinctly as possible, the majority of professionals are more interested in how are you going to fix their problems and in the process make their life easier.

Webcast Scheduled for June 10th, 2009

To find out more about the Emptoris Service Procurement solution or to register for a complimentary webcast on services procurement visit Emptoris Services Procurement.

The Emptoris webcast on services procurement will be broadcast on June 10th, at 7:00 a.m. Eastern Time/12:00 p.m. London Time/13:00 p.m. Paris/Berlin (CEST) with a rebroadcast at 2:00 p.m. Eastern Time/11:00 a.m. Pacific Time.

PI Window on Business Special (For Want of a Nail: The Pandemic Effect)

Be sure to mark Tuesday, May 26th on your calendars so that you will remember to tune in to the first of four PI Window on Business 90-minute Specials.  In this initial Special titled “For Want of a Nail: The Pandemic Effect,” I will be joined by Nick Kelley, a researcher from the University of Minnesota’s Center for Infectious Disease Research and Policy, and the lead author of the November 2008 white paper “Pandemic Influenza, Electricity, and the Coal Supply Chain (Addressing Crucial Preparedness Gaps in the United States), to discuss the true nature of the latest swine flu crisis in terms of its potential impact on supply chains.  It is a show you will not want to miss!

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