We recently built a supplier risk management enterprise solution for implementation as a software as a service (SaaS) business model. The solution was architected based on inputs from various practitioners and domain experts in the industry as well as personal experiences in managing global suppliers in both large and small enterprises. It received many accolades and good reviews. However, we noticed that many companies had tough time justifying the budget for implementation of a supplier risk solution. Frequently, there are other more urgent priorities competing for the same budget. Some organizations tend to view Supplier Scorecard or Supplier Risk Management solutions as “nice-to-have” rather than a critical part of the enterprise operation. I beg to differ. Investment in risk management is somewhat like buying an insurance policy except it is much more critical. An insurance policy is primarily used for reactive or defensive purposes, whereas supplier risk management can be used much more proactively. Consider the recent examples of failures in supplier risk management in widely different industries:
Toyota’s failure in managing the supplier of braking systems (CTS Corp) that led to massive auto recall
Apple’s failure in managing Chinese suppliers (Foxconn) that violated corporate social responsibility obligations
BP’s failure in adequately managing subcontractors (such as Halliburton) for the offshore drilling platform leading to world's worst oil spill
In each case proactive management of supplier risk should have highlighted the danger so that mitigating actions could have been taken before it was too late. No amount of insurance could have provided as much benefit as an appropriate level of investment in supplier risk management. Typically, the investment required for managing supplier risk would have been just a small fraction of the insurance premium. Thus, in an increasingly inter-dependent enterprise that is constantly looking for operational efficiencies by outsourcing non-core functions, investment in supplier risk management cannot be over-emphasized. Is this the hazard of the “flat” world?
Jason Busch in his Spend Matters blog recently wrote about enterprise search vendor Endeca possibly entering Spend Analysis market (http://www.spendmatters.com/index.cfm/2008/8/22/Endeca-Quietly-Launching-Into-the-Spend-Management-World
). In my opinion this is just another example of collision of Search and Business Intelligence markets. BI vendors were already applying BI toolkits to Spend Analysis and now Search vendors are also following them into Spend Analysis.
The worlds of Search and traditional Business Intelligence are merging. BI vendors are adding search features and search vendors are pushing the envelope for reporting & analytics. For example, ad hoc reporting can be better implemented by apply parametric search coupled with charting & graphing.
It will be interesting. Historically, Spend Analysis always included reporting & analytics components but advanced search and data mining capabilities can make spend analysis much more powerful and actionable. It will be worth watching not only Endeca but also other search vendors like Autonomy, Fast Search & Transfer (now owned by Microsoft), and even Google.
Search vendors can also leverage their technologies into Spend Processing which is essentially a prerequisite to Spend Analysis. In fact, quite often Spend Analysis vendors will bundle Spend Processing with Spend Analysis. To perform a meaningful ranking of search results, Search vendors have developed various algorithmic approaches such as K nearest neighbor for pattern recognition classifier, Bayesian for probabilistic learning classifier, different weights for different words for Vector Space classifier. Those intellectual properties and techniques can be effectively applied towards elements of Spend Processing such as spend classification, supplier de-duplication, spend clustering, etc. Thus, I would expect that search vendors will play an increasingly important role in Spend Analysis.
Everybody keeps asking “Where Does Google Go Next?”
Google is working on many fronts. There are very high profile initiatives such as “Open Social”
for interoperability between various Social Networks, and “Android”
for mobile phones. For me because of my interest in enterprise software, a more appropriate question will be “What is Google’s Enterprise Story?”
Google is primarily about online ad leverage. But, surprisingly, Google has had limited penetration in the Enterprise ad revenue. Currently, Google’s enterprise offering is primarily limited to Universal Search or Search Appliance and Google Apps (check this out at http://www.google.com/enterprise/
). In fact, Google’s enterprise strategy is not to embark on a major standalone development and instead develop enterprise solution leveraging Google’s core consumer products such as Google Search and Google Apps. Google’s Enterprise Group’s explicit charter is to extend Google’s consumer applications into enterprise space. Google has also leveraged its consumer offerings in the recently announced integration between SalesForce.com and Google Apps. In this case Google Apps can be seamlessly used with SalesForce. This integration is now being extended to Salesforce’s force.com and Cloud Computing initiatives.
Google’s narrow definition of enterprise solution currently only includes the following:
1. Site search for visitors to the enterprise website
2. Universal Search (using Google Appliance)
3. Google Apps
4. Google Geospatial Solutions based on Google’s consumer products such as Google Earth, Google Maps, and Google SketchUp Pro
However, there are significant opportunities for Google if Google expands its vision for the enterprise. For example, Google can boost online ad leverage by targeting traditional enterprise applications such as sourcing, procurement, and a variety of other e-commerce opportunities.
According to Gartner Google currently executes less than 1% of e-commerce traffic (Google Checkout). But, if Google can have the visibility to enterprise financial transactions such as buying and selling between enterprises (even if those transactions are not taking place using Google Checkout), they can sell a lot of targeted ads to enterprises that are selling to other enterprises. With the rapid adoption of Software as a Service (SaaS) approach by the enterprises, and Google’s entry into the enterprise application space is now a lot easier. Moreover, to accelerate the entry into the enterprise space Google may consider acquiring one of the enterprise SaaS companies such as Ketera (my previous employer), Reardon Commerce or other competitors. Since Google Search is used by individuals for learning purposes, there are companies in the HCMs arena where Google can potentially benefit (increased ad revenue?) by partnering or acquiring companies such as Saba (another previous employer), SumTotal, Success Factors, or other Learning Management vendors.