Over on Spend Matters affiliate blog Metal Miner, my wife and blogging partner in-crime Lisa Reisman recently printed a useful anecdote that goes against the grain that Mexico can once again beat China on price -- at least in some categories. According to Lisa, "Several weeks ago, a gentleman that we know ... mentioned to us that he was looking to re-source a number of different assemblies that he currently has in China, hopefully to Mexico. The assemblies are fabricated parts, quite heavy by weight, powder coated with some welds. It's a classic mid-market assembly ... relatively low volume (less than 10,000 assemblies annually), high individual dollar value but low aggregate value (a couple of hundred thousand dollars). The gentleman leading the effort at the company shared his frustration over not identifying a single source in Mexico that was remotely competitive. How uncompetitive were the Mexican sources? Nearly double the delivered costs from China!" I won't give away the rest of the post, but it suffices to say that the nuances of the Mexican market -- as well as margin requirements of some suppliers -- suggest that the country might not be competitive across the metals industry board as an alternative to China. But in some categories, you can't beat the South of the Border option given what's happened to the China price of late. To wit, "If you have a machined part or a stamping or something not made of steel, try Mexico on for size. No hay una problema!"

- Jason Busch

Even though this will be a short dispatch owing to a crazy schedule as I settle back into the office as conference season winds down, I thought it prudent to let Spend Matters readers know that Hubwoo is once again on the acquisition prowl. This time the provider has snapped up AchatPro in what appears to be both a consolidation play in Europe as well as a small footprint extension to Hubwoo's offerings. Hubwoo is buying AchatPro, a European procure-to-pay provider with its own technology footprint, for 2.9 million Euro (which amounts to exactly AchatPro's 2007 revenue). At the time of the announcement, AchatPro had 40 customers and generated approximately 90% of its revenue from SaaS offerings (according to Hubwoo). I heard that the company was either close to or at break-even in their most recent quarter.

My sources tell me the plan is ultimately to migrate AchatPro's customers onto the Hubwoo SAP platform, but salvage aspects of the offering which Hubwoo does not offer today on the payment -- and the broader EIPP -- side of the Spend Management house. In addition, Hubwoo sees a strong opportunity to upsell the AchatPro customer base its sourcing and contract management offerings. On unrelated note to the acquisition, Hubwoo is also raising additional funds.

I will take a closer look at this acquisition in the coming week, although on first glance, it looks to be a smart financial move giving what appears to be a low-valuation for a good customer list and the associated revenue, not to mention the potential up-sell opportunities and footprint extensions the deal brings. The key will be keeping AchatPro's customers happy through the transition period before and after deal close (as well as convincing them to pay more in the future for a broader product set -- 40 customers and 2.9 million euro in revenue in the procure-to-pay space suggests a rather small deal size given industry norms).

- Jason Busch

For any company interested in building a blogger relations group, I'd strongly suggest you take your lessons from SAP. Yet again this conference season, SAP takes the cake for upping the ante from a blogger relations standpoint. Not only did they keep the "Blogger's Corner" for us in the media room, they continued to facilitate the same level of executive access that they typical analyst or member of the press would dream about. In my case, I opted for a more customized, in the trenches agenda around SAP's SRM program this year than the higher-level one from the previous year which featured meetings with most of the key executives. The blogger relations team at SAP did an exceptional job not only at making me feel welcome by developing a customized program, but helped overcome a two-way spat I had with one member of their organization last year over my SRM 6.0 coverage by facilitating introductions to other members of the team.

What does SAP do right relative to other providers from a blogger relations standpoint? First, they know why they're making the investment in building out the program (such as covering the cost to fly bloggers out to the event, unlike Ariba). They've come to believe that bloggers will be among the most influential groups in technology buying decisions in the middle market and beyond and they're willing to invest ahead of the curve to influence this group. Second, SAP realizes that blogger relations is not media relations or analyst relations -- that it's something else entirely.

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One of the most fun aspects of vendor conferences is finding attendees who are not yet customers but are evaluating solutions from vendors -- including the one throwing the shindig they're attending -- and picking their brains for candid opinions. One such prospect I spoke with had dabbled in sourcing with a competitive provider. Another attendee used an exchange for various services and was considering Ariba. What struck me in both cases was how both were somewhat underwhelmed by Ariba's overall positioning in the market -- there was not an attitude of "we won't get fired for buying Ariba" as is common with market leaders in some categories -- but individually liked what they saw on the product and services side at the event. Ironically, given Ariba's past reputation for charging a price premium, one even remarked how they liked Ariba's pricing relative to the competition. In other words, Ariba was the low cost provider. Now that's something I would not have expected, although it's a signal that Ariba is clearly interested in buying marketshare -- or they've gotten their solution delivery cost down -- in some segments of the Spend Management market.

- Jason Busch

As I was running at a six minute mile pace through the Vegas B terminal for my flight on Wednesday afternoon, out of the corner of my eye in the terminal I saw Bob Calderoni -- or at least I thought it was him -- stopping by Burger King for a quick bite. If indeed it was Bob, it's good to see CEOs flying commercial -- especially in the Southwest terminal. Even though many have criticized Bob in the past for being more of a CFO/accountant type than the typical software/services CEO, there's something to be said for financial types that practice what they preach on the company dime. But more important, what a change from the B2B .com days when executives chartered jets for jaunts of all sorts. On an unrelated note, look for a number of additional dispatches from LIVE in the next week, including specifics on solution direction and strategy.

- Jason Busch

Over on Supply Chain Matters, Bob Ferrari reports that once again Apple has sent the benchmark for supply chain and overall financial performance. According to Bob, "Apple announced financial results for its fiscal 2008 second quarter ended March 29, 2008, announcing a blowout revenue and profitability picture (revenues up 43% and profits up 36%)." Bob believes that Apple preaches and practices an "agile and responsive supply chain, in spite of product supply and/or demand imbalances" and that "the latest quarterly results provide yet more evidence." Apples growth represents some "235,500 shipments per day, from Apple's direct sales outlets, retail partners, and other channels" and "Apple has additionally executed long-term supply contracts, in some cases up to the year 2010, for critical NAND memory and other supply." In other words, "Apple's ability to ramp and sustain extraordinary high volumes of shipments, flex with market conditions, while maintaining an edge in truly innovative products is a benchmark for supply chain excellence."

While I agree with Bob that we all have much to learn from Apple, we should not forget the supply risks that the innovative provider has taken to ring the most from its supply base, such as geographically concentrating suppliers in potentially natural disaster prone regions. In addition, the length and outsourced nature of the iPhone supply chain is not one that would make me sleep well at night if I was the supply chain manager responsible for it. So perhaps a better way to look at Apple rather than simply as a star supply chain and Wall Street performer is to describe it as an intelligent risk taker which so far has beaten the odds.

- Jason Busch

Psst ... we've got a secret for all those vendors out there hawking their SaaS wares. And it comes courtesy of AMR Research who just published a recent brief titled "Voice of the Customer: What Buyers Value about SaaS". What are some of the findings in this brief (which was available for free for some-time to non AMR subscribers)? According to AMR, "TCO aside, dozens of interviews with SaaS customer references uncovered several major categories of benefit." These include: "faster time to deployment and value, Leading-edge functionality, the network effect, remote availability, customer satisfaction, and domain experience and guidance". If I consider such vendors as Ariba and Emptoris in the E-Sourcing space, I'd say that they only really deliver around 50% of these value propositions in full in their SaaS models. For example, the "network effect" and "domain experience and guidance" I'd argue is only partially available in what they have to offer today. These providers will need to move more to an MFG.com/MFGx model which leverages the power of a network to both rank and rate suppliers and provide community context and guidance to fulfill the AMR vision (and MFG.com will need to take its functionality up a level as well to meet AMR's vision as well).

- Jason Busch

Ariba bestowed Tyco's Shelly Stewart with a Lifetime Spend Management Excellence Award on the main stage at LIVE this morning. I've known Shelly going back to the earlier FreeMarkets years and I've got to say that his success story is quite representative of the rise of procurement and sourcing overall. Shelly attributes much of the success of his teams not just to technology which is "critical" in his words, but specifically talent management. Shelly believes that "the talent aspect is the biggest part of what I do everyday." In his current role at Tyco, this meant recruiting a team to manage over $13 billion in spend, coming out of 106 disparate systems, sourced from 250,000 suppliers. The results speak for themselves. In only a few years since joining, Shelly's team has achieved 12% net savings (over $250 million dollars) across 500 separate projects. Where does Tyco hunt for talent? According to Shelly, one of the big difference today is that there are now universities where "we can recruit students that show up with the skill-set" from day one based on academic training in procurement and supply chain. This simply did not exist at the same level a decade ago and it's one of the reasons Shelly has given his own time with Howard University, among other institutions, to develop the future leaders of the sector, capturing and educating them before they go onto careers in other areas.

These skills will serve his organization well given that they are "at the inflection point of squeezing suppliers for cost versus improving their process." In other words, Tyco has been able to pluck much of the low-hanging sourcing fruit. What comes next, Shelly hopes, is savings from Six Sigma and supplier development initiatives designed to collaboratively take cost out of the Tyco supply chain. Considering that his "boss continues to raise my target savings numbers despite commodity prices" this is a critical task -- not to mention that 20% of Tyco's supply base are also their customers customers which can make aggressive and competitive sourcing practices impractical in some spend areas. What are Shelly's parting words of advice? "We are so buried in our day to day jobs, we don’t have the chance to be creative, but innovation is critical. You need to find the time to be innovative." So there you have it. Innovation is key (which is something that Michael Lamoureux (AKA The Doctor) will be quite happy to hear, given the name and focus of his blog). But most important, congrats, Shelly. Well earned.

- Jason Busch

Aside from the fact that, in the words of one of my old friends at LIVE, I "wussied out" last night by going to sleep before midnight, I've got to say that I rather enjoyed the first day of the event (and that’s despite not having a coffee maker in my room, having to pay $20 for the gym and being treated like a criminal when my room key stopped working). But these are small complaints. In the important areas, Ariba is doing a good job showcasing how customers at all stages of maturity are driving -- and showcasing lessons learned -- from their sourcing, LCCS/global trade, transactional/operational procurement, contracting and invoicing/payment programs. On the innovation front, Ariba is playing up a few areas: spend visibility, contract management, EIPP and the network, to name a few solution parts. I've not seen much innovation in the sourcing or core procurement products, but then again, I've not talked to the product managers in these areas yet (although I don’t expect to see many breakthroughs).

Perhaps more important, Ariba feels at home having moved entirely away from a software license model with customers – new customers, especially (these were the exact words I heard from a few sources). I sense a “no going back” sort of mentality with all of the executives and managers I’ve spoken with in regards to a subscription and hosted revenue model. As a final wrap from the first day, one session that I look forward to writing up this week was presented by Robert Kane (Weyerhaeuser) on how best to integrate SAP and Ariba efforts together, leveraging both internal and external resources -- including the vendors -- and having them work together with the goal of implementing the best module/system for particular tasks. It was good stuff, even though I felt that there was even more to the story than Bob could let on. The major lesson in it is that Ariba and SAP resources will work together for the common good of the customer.

Stay tuned for a number of more blog dispatches throughout the day (and the week) and live "Tweets". And thanks to everyone for sharing candid comments and emails on whether or not Twitter is helpful.

- Jason Busch

Quick, if you're a large European manufacturer, what's the quickest way to cut costs? Buy more from suppliers who take dollars, that's how. A recent Procurement Leaders post suggested just as much when it cited recent comments from EADS' (Airbus) chief executive, who noted that "the company has called on its suppliers to move more of their production to the dollar area ... EADS is already planning to sell several Airbus plants and one of its own sites, but is now looking towards its suppliers to reduce costs still further." Despite Boeing's own 787 challenges, EADS is caught in a double-whammy of a Spend Management situation. On the one side, it faces a higher cost structure from domestic European suppliers who cost more than those in the United States (thanks to the falling dollar) while also needing to sell planes at a higher cost because of the strength of the Euro or risk cutting too heavily into precious margin points. This situation, unfortunately, is unavoidable given the currency situation. But EADS leadership must take responsibility for the other challenge which is their failure to adequately move to a variable cost structure -- relative to Boeing -- by outsourcing the major elements of design and production to suppliers.

- Jason Busch