After a short April Fools hiatus, I'm back. Bloggers are too vein to not see their posts on a daily basis, I supppose. Could not resist the RSS call of the wild. Well, let's get to today's regularly scheduled programming ... In the past few months, I've probably had close to a dozen interactions with different services procurement vendors or practitioners taking a closer look at their services spend (often for the first time, in certain categories). Given the findings from a CAPs report that European Leaders sites in a recent blog post, it's no surprise that the general interest in services procurement is rising as companies discover the potential of the opportunity as well as some of the unique challenges it brings. It's important, however, not to downplay these hurdles. According to the post, the study found that "two-thirds of supply chain professionals viewed the procurement of services as being more problematical than just plain old materials and component procurement."

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Earlier in the week, I posted a news announcement of Ariba's latest foray into the on-demand world with its recent 9s5 release. As one astute reader pointed out in a comment, the name "9s5" does not exactly have any market/marketing connation -- in fact, in my view, it flies in the face of the non-software focus of on-demand -- so perhaps Tim Minahan, as the commenter suggests, will get around to changing the release names. I'd second this suggestion. But enough on superficial branding. In today's post, I'd like to expand on my earlier analysis, digging into some of scoop behind the enhancements of 9s5 and what it means for the market. In a final post on the subject early next week, I'll get into even more product analysis detail.

To begin, let me preface my analysis with the fact that I have not demoed the release yet (I intend to spend a number of caffeinated hours at the Ariba product showcase area at LIVE playing around). Still, I have a good sense that if Ariba is claiming functional parity with the installed release in most areas -- and if this statement is true -- exactly how the application stacks up to others in the market. But what is not clear to me at this point is the phase out of the Procuri product line (which I also intend to find out much more about in the next couple of months). I suspect it will be a fast phase out of the Procuri product name and I will also guess based on some early feedback from Procuri customers that they will be encouraged -- encouraged is such a polite word, isn't it? -- to move onto the Ariba product suite as well.

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We got word yesterday that MFG.com scored $26 million in a round led by Fidelity Ventures and Fidelity Asia ventures. Even though it seems there are fewer funding deals happening in the sector, this round is further proof that some ventures are still getting dollars. In some cases, big dollars. What made MFG.com interesting enough for Fidelity to take such a plunge? We reckon that investors are tired of traditional enterprise software and SaaS deals. Instead, they're looking for new business models that leverage not only technology, but advertising and content as well. Certainly, Fidelity is banking on the fact MFG.com has the opportunity to be the next Alibaba in China and beyond as well.

In our office, we've used both Alibaba and MFG.com on global sourcing projects -- in some cases, the same project -- and found MFG.com more useful for identifying suppliers which are more appropriate for industrial products sourcing. In general, it's been our observation that MFG.com's built-in sourcing capabilities are excellent for build-to-print parts compared with traditional vendors in the space without a direct material orientation, though MFG.com's existing end-to-end sourcing capability is rudimentary compared with the traditional vendors. Alibaba's global sourcing capabilities, in contrast, serve as more of a type of Chinese business yellow pages where it's hard to distinguish manufacturers from trading houses. Still, given the increasing challenges and costs with China sourcing of late, MFG.com will have to look to new markets -- or focus more on serving the Chinese market domestically -- if it is to grow into the type of multiple and valuation that its investors are no doubt expecting.

- Jason Busch and Lisa Reisman

Just a quick postscript to our original post ... I find it absurd how some blogs like Techcrunch with no knowledge of a core business draw comparisons such as Alibaba and MFG.com without exploring the details or interviewing experts. It's sensational, shoddy journalism -- not even blogging. If they bothered to pick up the phone and call me, Lisa, Michael Lamoureaux, Mickey North Rizza, Debbie Wilson or another expert in the space, they'd realize that comparisons to Alibaba are misleading and that what MFG.com could become is much different indeed. Simply eating a vendor interview hook, line and sinker is something I expect from Purchasing -- not other bloggers breaking news and covering the sector. Seriously, guys. You've got a responsibility here as bloggers breaking news. Pick up the phone or reach out to your network to get an informed expert opinion. - Jason

Earlier this spring, I had the chance to give a presentation on the future of procurement and supply chain technologies to a bunch of procurement executives from the Ivy League and Big Ten schools. It was a cordial gathering, yet I could tell from the group that in general, most of these non-profit institutions did not feel the same pressure to reduce costs and do more with less like their counterparts in the private sector. Nevertheless, ever since that night, I've been paying closer attention to procurement-related headlines coming out of academia. And one that Tony Poshek passed along to me a couple of weeks back is absolutely hilarious.

Apparently, MiraCosta College "has been charged almost $200,000 by [an] investigator hired to probe [a} campus palm-tree scandal that began in February 2006." What's the issue you ask? It turns out that the college's only loss from the scandal was $305. That's right, three hundred bucks and someone in the administration -- and procurement, by extension -- has managed to run up bills with a private investigator for more than what it costs to license a solid e-sourcing platform for years. I suppose that it's no surprise that MiraCosta is not looked at in the same light as Arizona State, Michigan State, or Georgia Tech when it comes to its procurement and supply chain academic programs ...

- Jason Busch

I was sitting next to Tony Poshek in the office this morning and he flipped me this story which I must say, I got a chuckle out of. Apparently, Iowa paid AT Kearney "more than $3.4 million" for a sourcing project which resulted in "fiscal year 2007 [savings] that were found in the auditor's report [totaling] nearly $2.9 million." This compares with a savings that Iowa and AT Kearney projected in the $10.5 million range.

What's the problem here and who is in the wrong? I'd say that it's probably not AT Kearney's fault (though, if history is any indication, their fees were probably significantly more than boutiques firms or other Big 5 providers which probably could have done a similar job for less). I'm guessing what happened is that Iowa failed to fully implement identified savings opportunities -- something that occurs far too much in strategic sourcing exercises led by consultants without skin in the game to make their recommendations stick.

In my view, this could have just as easily happened to any public or private sector organization hiring AT Kearney or just about any other sourcing consultant. My suggestion to avoid this type of thing is to make sure that your consulting partners play a key role in not just identifying savings, but implementing them as well. And base their upside on actual returns -- not just forecast ones.

- Jason Busch

On every St. Patrick's day, I worry that the city of Chicago did not bid out the thousands of gallons of dye that they use to turn the Chicago river green. One local blogger has an older quote which is as relevant as ever in the Windy city. In the above-linked entry, the recently retired FBI Bureau Chief for Chicago is quoted before leaving his post as saying that "I never cease to be amazed at the level of corruption” in Chicago. I'm sure this extends to green dye purchases as well. Alas, at least the streets are clean and the snow gets removed -- and the green river flows freely, at least today.

- Jason Busch

Even though it's usually the job of a finance organization and tax professionals to put their heads together in order to create corporate structures that minimize taxation, I believe that procurement should now get involved as well. Consider how Illinois, the manufacturing and services hub of middle America -- we're home to such companies as Caterpillar, John Deere, Accenture, AT Kearney, and scores of other household names in the procurement and operations world -- is contemplating raising corporate taxes through a new VAT.

According to the local papers, the Governor, Rod Blagojevich, "wants to raise $6 billion through a new 'gross receipts' tax that would apply to nearly all types of business transactions. [For example] suppliers selling raw materials to manufacturers would pay the tax." Specifically, the Democratic has "proposed a tax of 0.05 percent for manufacturers, wholesalers and retailers - or $5,000 for every $1 million in gross revenue - and 1.8 percent for other businesses, such as the service industry."

Caterpillar, an industrial bellwether company for the state, would face in excess of over $100 million in new taxes if the plan passes. For all of the European readers in the audience accustomed to a VAT already, I would remind you that Illinois is essentially proposing double -- or even triple -- tax (since this tax would come on top of Federal taxes as well as import / sales duties and other levies which companies already pay). But companies don't need to just hire lobbyists to fight back at this type of VAT nonsense. They can also vote with their feet, moving manufacturing operations and their corporate headquarters if need be. In addition, they can also set-up new subsidiaries in other states and countries. And they can buy more than they make, as well.

All of these efforts will help companies like Caterpillar to get around new taxes such as this (which they will do, if the Governor's nonsense passes muster with his fellow tax and spend cronies in office). Perhaps the only good news in this is that procurement organizations can elevate their status by playing a key role in many of these decisions to outsource operations-related spend, buying more and making less (not to mention optimizing supply chain design to reduce tax consequences). But for the rank and file worker in Illinois, taxes like this bring no positives -- only a higher chance that they'll collect an unemployment check in the future (which, as a local business owner, I'll be footing the bill for).

- Jason Busch

Last week during a lunch break, I was running on the treadmill at a rather lackluster pace catching a few minutes of Fox News -- BTW: I watch Fox because I'm more comfortable with overt bias than surreptious slanting -- when I saw a ticker flash on the bottom of the screen noting that the Department of Defense is North America's largest employer. Only then did it dawn on me the true purchasing power of this giant, and what a role model it could be for the rest of the US government (not to mention other nations and militaries worldwide). But unfortunately, despite the introduction of strategic sourcing processes into a handful of commodity areas, the DoD remains a backwater of 19th transactional buying.

According to a recent article in Defense News, there is no competition in 1/3 of the DoD's interagency contracts. Senator Claire McCaskill, a Democrat and a former state auditor, is quoted as saying, "It's eye opening for me ... How in the world did we get to the point where one-third of the Pentagon's procurement dollars are spent on non-competed contracts?" The article later quotes findings from the Congressional Acquisition Advisory Panel noting that in 2004, at least "$107 billion in contracts [was awarded] without competition."

But it gets worse. Not only are contracts awarded without competition. Many are "awarded without clearly defined requirements," as well. As a result, the suppliers which are awarded business often "don't have a precise definition of what they are supposed to do or what they're supposed to provide." I suppose things could be worse. If the UN purchasing staff ran the DoD acquisition department, we'd see arms and food siphoned off to the highest bidder. But wait, that's asset recovery ...

- Jason Busch

Jeff Nolan, who for years has authored the excellent blog Venture Chronicles, penned a short piece earlier in the month that captures the irony of global warming given the crop and citrus crop freeze in California. Specifically, Jeff suggests that it's ironic that Nancy Pelosi announced a "House panel with no legislative authority to study global warming in the same week a record freeze in her home state wipes out the citrus crop to the tune of $1 billion in losses." But more important, I agree with Jeff that "considering that members of Congress logged 3,400 trips on private jets last year alone, Pelosi should have convened a panel on the impact of Congress' global travel and junkets habit and the potential reduction of greenhouse gases and emissions from just flying commercial like the people they are supposed to be serving."

It's not like Jeff's suggestion would ever happen given Congress' everlasting self-indulgent streak that transcends partisan politics. But if it did, it would certainly be Federal Spend Management in practice -- good for the pocketbook, and good for the environment. But alas, regardless if it's a Democratic of Republican administration in control of Congress, I doubt we'll see much progress towards smarter spending given DC's insatiable urge to take out the proverbial Visa and pay interest to the Chinese (and other large holders of US debt).

- Jason Busch

... I've got some advice for you. And that's if you value saving tax payers money and letting Federal dollars go further than your left-wing leadership cares to, it will be critical to let the Office of Management and Budget to continue to engage in active debate and analysis over what jobs are best to keep on the Federal payrolls and those which are not. But from the headlines in DC rags of late it looks like you've made up your mind already. That's unfortunate. In the past three years, competitive sourcing and analysis projects conducted under the OMB's leadership have identified savings opportunities which could top $5 billion in the next decade.

But the days of competition and Federal strategic sourcing could be over. According to the Federal Times, "In 2007, agencies could see more restrictions on competitive sourcing, such as the exclusion of employee benefits costs from consideration in job competitions or caps on what the government can spend on competitions." And according to the Paul Denett, procurement policy administrator for the Office of Management and Budget, "These actions, which have been used in the past to impede outsourcing, will cost the government significant savings in the long run ... Can you imagine [Congress] saying in some instances they're prohibiting us from using best value when we're trying to decide who the winner is ... To me this is unconscionable."

It looks like the major Democratic contributors (i.e., unions) are getting their money's worth out of their dole outs. The non-partisan article continues: "Looking forward to 2007, the [major Federal] union is hopeful Democrats will put the brakes on the competitions it says threaten federal jobs and the quality of government work."

Let's pause for a moment and think about that last point: threaten federal jobs and the quality of government work? Where do we live, the EU? And don't think for a minute that Federal jobs necessarily pay less than the private sector (in addition to the cushy benefits). If you have any doubt, check out this article in CNN that compares private and Federal wages. Alas, now I realize that despite my strong criticism of the Bush administration when it comes to Spend Management practices on this blog over the years, that the left wing of the congressional Democrats is an order of magnitude worse both philosophically and in practice when it comes to stretching tax dollars and setting an example of smart spending.

- Jason Busch