In 2006, I attended my first Emptoris Empower conference as an industry analyst. The company, of course, has changed significantly since then, most notably via two acquisitions (IBM acquired the company in early 2012). Over the next nine years, I attended seven or eight of the conferences including the last few years when it was held within IBM’s much larger Smarter Commerce Summit. The larger IBM summit was a very well run, high-end event, but its sheer size made it easy for Emptoris customers to get lost. In 2015, IBM decided to go “back to the future” and relaunch a dedicated Empower event, held last week in San Diego.
This was a great call as it made it much easier for the IBM Emptoris team and its customers to coalesce and network around the things they are most passionate about – spend, sourcing, contracts, and suppliers. If the event structure took us back in time, the IBM Emptoris team wanted conference attendees to know that their company is fully focused on the future. From an interactive design session run for the analysts in attendance to the “future of procurement” presentations and panels that were featured throughout the conference agenda, IBM Emptoris made it very clear that in its eyes, the future is now.
IBM Empower 2015
In many ways, it is the procurement team that drives enterprise innovation. That was the key message during the keynote/welcome address that Michael O’Leary, IBM’s director of procurement solutions, gave to open the first full day of IBM Empower 2015. Procurement unlocks innovation, O’Leary explained, by creating deep relationships with suppliers and leveraging those interactions in addition to working closely with internal business units. This did not occur overnight though; O’Leary noted, in his opening remarks to the keynote session, that procurement has evolved over the past 16 years into a truly strategic function.
It is a strategic focus that the IBM Emptoris team, which O’Leary heads, intends to emphasize with their clients. O’Leary also brought up three key points that procurement teams need to focus on: improving enterprise success and not just procurement’s own performance, engaging with stakeholders to understand and anticipate the supply chain’s needs and values, and embracing progressive process change and innovation. The enterprises that do those three things are, according to O’Leary, well-positioned to move their procurement performance to the next level.
The CPO of the Future
The next section of the Wednesday keynote session was a CPO Roundtable, which included University of California UC Health CPO Patrice Knight and Mondadori Group, CPO Andrea Munari, and Dawn Tiura, CEO of SIG. O’Leary acted as moderator, asking the panelists on stage key questions about people, process, and technology—all key enablers in crafting a high-performing procurement team.
Out of the three key enablers, Munari told attendees that he believed that people were, by far, the most important. It is possible to create the best process and to choose the best technology, but without the best people there is no way to effectively reach business goals. Moreover, Munari said that CPOs should look for people who are “emotionally engaged” with the company and want to succeed along with the organization. While people are the most important factor to an enterprise’s success, though, Munari also told session attendees that good technology and good processes were important too.
Knight echoed this sentiment, adding that one of the most important steps to take is to have someone heading up the supply chain. For that matter, people are an enterprise’s greatest natural resource when it comes to procurement transformation. Knight specifically praised business analysts, saying that a good business analyst can understand technology but become a sort of translator in that they determine which business problem needs to be solved and how to use technology to make that happen.
Both Munari and Knight also praised the practice of engaging and collaborating with suppliers. Munari said he likes to tell his procurement staff that they are “new-idea diggers,” who are charged with finding new ideas and creating the necessary relationships with suppliers to make that new idea feasible in the organization. Knight told attendees that she thinks the best procurement organizations understand what the business needs and then bring forward the engagement with stakeholders and suppliers to create different business outcomes. Engagement with suppliers in this way can make huge changes in the supply chain, which is really how the entire panel sees the CPO of the future—altering relationships with internal and external stakeholders to move the enterprise forward.
IBM and Coupa: Relaunch “One Stream” Partnership
The next speaker at the morning main stage session was John Mesberg, IBM’s general manager for Smarter Commerce, who introduced the expanded partnership between IBM and Coupa. Mesberg explained that one of the main impetuses for the closer relationship between the two companies was to connect upstream sourcing with downstream procurement which he called “one stream” procurement. Without these processes connecting, Mesberg said, it is challenging at best to drive buying policy down to the very endpoint of a transaction and the momentum from sourcing activity can be lost.
The IBM/Coupa partnership aims to conquer that particular challenge by combining the strategic sourcing and supplier management functionality of IBM Emptoris with the P2P solutions offered by Coupa. Rob Bernshteyn, CEO of Coupa, told attendees that Coupa and IBM are best-positioned for marrying upstream and downstream capabilities because the partnership can deliver real-time supplier and contract compliance at the point of need, give users the ability to track actual versus implied spend all the way down to the transactional level, and can give users more nuanced control—including allowing procurement to get involved right away to manage exceptions.
While the partnership is not new (nor exclusive), the renewed interest in it from the two executives teams is. With a few customer proof points already, the executives from both companies are very optimistic that they will be able to continue to compete aggressively for full “source-to-settle” suite deals.
How Alcatel-Lucent Increased eAuction Volumes for Four Years Running
After the morning main stage sessions, Bob Bowen, Global Strategic eSourcing Team Lead at Alcatel-Lucent (“ALU”) gave a presentation that laid out the success and fast growth of eAuction volume over teh last few years. The team of 600 procurement managers (400 of whom run eAuctions) have increased their eAuction volumes on the IBM Emptoris tool from under 13% of addressable ‘direct services procurement’ spend in 2010 to more than 28% last year.
Bowen says the keys to ALU’s program growth started with executive sponsorship and having an eSourcing evangelist. It continued with strong training, ongoing coaching and support, and the regular sharing program results and successes. Bowen’s team shares best practices in a monthly newsletter that also highlights star performers and awards prizes based upon different sourcing volumes and bottom line impact. Bowen also noted the company-wide policy of using eAuctions on all contracts above $100K while incentivizing procurement managers to place 25% of their addressable spend on the tool.
As key takeaways, Bowen recommended that eSourcing teams create role models within the sourcing team, recognize their top performers, and promote best practices to make the best ideas commonplace. Finally, Bowen believes that the regular publication of program and user usage metrics has created an environment that encourages accountability for results and drives healthy competition.
In the Q&A, Bowen noted that the broad adoption was aided by the fact that ALU is a high-tech company and likely drew more tech savvy pros to its procurement team than the average company. When I asked Bob about the contract award process and how it is managed, he told me that the use of eAuctions did not preclude the use of non-price attributes in awarding business, and that suppliers were always told that the lowest bidder was not guaranteed to win the business. That said, Bob told me that that the first or second lowest bidder typically wins the award.
While my view is that sourcing teams should share as much of the evaluation criteria as possible with your suppliers during the bidding process (so that they know what it takes to win the business), the ALU team has been very effective in managing the process by clearly communicating how the bids will be used. And, there is no arguing that the ALU team shows that high eSourcing and specifically eAuctions are possible.
The future of procurement is bright, and the examples at IBM Empower 2015 only drive that point home more strongly. Between IBM’s focus on a “one stream” procurement strategy via the newly deepened partnership with Coupa and its new “Design Thinking” approach to product development, it appears that the IBM Emptoris team plans to play a major role in it.