The Prognosticators Series: 2013 Predictions by Jon Hansen

Posted on January 16, 2013


Editor’s Note:  As is often the case when the hands of time tick relentlessly forward into another new year, we take this opportunity to look ahead to what the next 12 months might hold in store for us both personally as well as for the purchasing industry as a whole.

In this third installment of our 2013 Prognosticators Series, I will provide you with my proverbial two-cents in terms of what we should look for in the year ahead.

One of the things that I love about the procurement world – especially after more years in the field than I would care to admit, is the fact that it never gets boring.

As I contemplated what to write relative to our 2013 “Prognosticators Series” there was as usual no shortage of possible topics.

For example, and as discussed numerous times on the Buyers Meeting Point weekly radio broadcast, writing about how purchasing professionals will finally claim their rightful seat at the executive table is one story that is worthy of coverage.

Beyond our personal development (or our emergence from the self-imposed shadows of obscurity), there is the new relational outsourcing model that is being heralded as the next big thing in terms of complex contract management.

What is the relational outsourcing model?

In an excerpt from his soon to be published book “The Evolution of the New Paradigm in Outsourcing” Andy Akrouche writes:

“A viable alternative to the adversarial nature of contract-oriented governance, the relational outsourcing model represents a new framework for structuring and managing business relationships.  It is a model based on strategic fit, flexibility, continuous alignment and sustained mutual benefit.

Similar to the principles that define the Six Sigma business management strategy, these tenets of success are nothing new.   In fact the relational outsourcing model is structured around the enduring core values that are exemplified by integrity of intent and mutual or shared partner benefit.  The main departure from Six Sigma is the primary focus on outsourcing and shared services.

How is it different from what is usually done?

Williamson’s 1985 conceptualization of “relational” governance recounted how economic weapons such as hostages and credible commitments to keep opportunistic behavior at bay, have long been the order of the day.  In essence financial inducements such as penalization for missed SLAs were considered the only means through which a contractor could ensure vendor performance.

It is not until recent years that this sledge hammer contract management methodology has been gradually usurped by a socially oriented enforcement of obligations, promises, and expectations that according to Poppo and Zenger (2002) promote norms of flexibility, solidarity, and information exchange.

What is especially encouraging about the socially oriented relational approach is that it creates an environment of trust between key stakeholders.  This means that potential problems can be recognized, acknowledged and dealt with effectively as opposed to remaining either hidden or alternatively justified, which ultimately results in little if any meaningful action being taken to remedy the pressing problems of a given situation.”

In eschewing what IACCM’s Tim Cummins referred to as “the blame game,” the relational outsourcing model leads to greater cooperation within a contract’s framework by making it the focal point of the relationship.

All I can say is why did it take so long to get to this point in vendor relations?  While better late than never, the truth is that we should have long ago abandoned the “you don’t get what you deserve, you get what you negotiate” adversarial approach to contract management.  With Akrouche’s relational outsourcing model, we now have the means to source relationships as opposed to deals.

Once again, these are noteworthy developments that warrant our earnest attention in 2013.

However, it is sometimes in the subtleties of everyday life that the big news can be found.

Oracle Buys Coupa?

Oracle Buys Coupa?

Nowhere in my estimation was this subtlety demonstrated more than it was in 2009 when Coupa founder Dave Stephens made the full circle return to his “enterprise” roots becoming Senior Vice President at Oracle.  Stephens, who previously held a variety of positions at the company from 1996 to 2005, currently runs 3 organizations that are collectively referred to as Oracle Applications Labs.  When you consider what he does at Oracle today you will understand why I believe he might be a key figure in 2013.

Especially taking into account what he accomplished at Coupa during his 2006 to 2009 Oracle hiatus.  Specifically, Stephens did everything from financing Coupa to raising venture capital to leading what is now considered to be the top SaaS spend management system into triple digit growth.  In short he is easily one of the most proficient founding innovators of the on-demand company model in the business.

Capitalizing on everything that Stephens learned and perfected during his Coupa days Ellison made the smart decision to repatriate the prodigal executive back into the Oracle fold.  The brilliance of this move – and yes I know none of you would have ever thought that I would use the word brilliance in the same sentence as Ellison – is that this happened well before IBM’s acquisition of Emptoris or SAP’s purchase of on-demand makeover master Ariba.

Coupa a Possible Acquisition Target in 2013?

In short, Ellison has positioned Oracle to move into the on-demand market within the familiar framework of his assimilation model.  He has also left the door open to follow the acquisition path of the other two should Oracle Applications Labs waiver in its ability to deliver enough on-demand market share to satisfy the company’s voracious share value appetite.  After all, with Stephens there is a Coupa connection.

Once again this is a brilliant move by a man who, back in 2006, demonstrated his propensity to take the battle to his competitors such as when he countered Red Hat’s assault into Oracle’s tools business by unveiling discounted support for linux.

Even though Stephens applauded Ellison’s Linux move, he did manage to take a tongue in cheek shot at his current boss in a 2006 blog post.  In explaining the reluctance on the part of the Linux penguins to join Larry on stage during the announcement of the new program at Openworld, Stephens wrote that “penguins both on-stage and around the world, are suspicious of Larry.

Obviously in rejoining Oracle, Stephens did not adopt the penguins’ suspicious outlook.

However in 2013, if Oracle’s competitors are smart, they would be well advised to think like a penguin.

Posted in: Commentary