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What Would a Salesforce Purchase by Microsoft Look Like?

With rumors of a possible acquisition of Salesforce circulating – and with Microsoft a leading contender to make that buy – it’s interesting to wonder what such a purchase might entail, and what its impact on the procurement market would be.

Jeff Muscarella of the spend management consultancy NPI offered several important considerations of such an acquisition in a recent Spend Matters post. In general, he saw such a purchase as a wise buy:

“As old guard vendors like Microsoft try to re-architect their businesses for a cloud- and mobility-first approach,” he said, “acquiring the technology and customer base of a pioneer in those areas looks like a smart idea.”

Muscarella identified several useful points of interest to be scrutinized in any Microsoft/Salesforce merger.

- Pricing. The two companies employ vastly different pricing strategies. Either side would have a rough time assimilating the other’s approach.
- Quality of service. Microsoft makes vast bargeloads of money from support. How would it live alongside a completely different support model/infrastructure? Or would Salesforce be forced to adopt its parent’s support, and how would that go over?
- Innovation? Microsoft needs to innovate in this domain if it is to become a serious player in procurement – and given its lofty goals for Azure, that would be essential. Given Redmond’s penchant for recycling and mixing/matching, could it manage?
- Contractual practices. Microsoft’s approach to contracting and negotiation would need to soften. Could it manage? And if not, what would be the impact on Salesforce?

Microsoft/Salesforce is fascinating what-if; but if it comes to pass, Muscarella said, “One thing is certain – it will have an impact on the thousands of customers that use both vendor solutions.”

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Acquisition of Salesforce Could Have a Profound Effect on the Procurement Market

Speculation about the fate of CRM giant Salesforce includes its potential impact on the procurement market, suggested Pierre Mitchell, Managing Director of Azul Partners, in a recent article for Spend Matters Network.

With Salesforce currently valued at $50 billion, the circle of potential buyers is very small, but also very interesting, Mitchell pointed out. Depending on who bites, in the end, Salesforce’s vast armies of users might find their world changing dramatically.

A number of the potential buyers are already in the procurement business, it turns out, and many – Microsoft, IBM, Google, Oracle, Amazon – are already gigantic platform providers. To which of them would Salesforce be a strategic plus?

Mitchell pointed out that Microsoft’s cloud presence is strong and growing rapidly, but that it isn’t yet a player in procurement. Acquiring Salesforce would change that. How would this affect current Salesforce users’ perceptions of security and ease of use? Azure has expanded a great deal, but is still an evolving creature.

IBM, Mitchell said, is strong in the market, but passe and in need of a face lift, which Salesforce could provide. Oracle could buy Salesforce without missing the money, but already owns Siebel.

Google might be the most interesting buyer, because it has steered clear of real business integration and would have to rally and innovate to make it work.

Whatever happens, Mitchell concluded, the potential impact on terms, pricing, service and security could be significant, and all players should have their responses gamed out in advance.

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Is Single-Vendor Sourcing Still the Way to Go? Assessing Vendor Risk

Single-Vendor Sourcing has been a strategic go-to for many years, offering companies stronger collaborative relationships, easier relationship management, stronger supplier response and greater cooperation in production/logistics synchronization and sharing of data.

But Joshua Nelson, The Hackett Group’s Director in the Strategy and Operations Practice, recently suggested that single-vendor might not always be the best sourcing strategy.

Globalization, for instance, may increase the risk brought on by a single-source strategy, he pointed out: single-vendor sources are often foreign, and as such can introduce intellectual property risks, financial risk from foreign exchange fluctuations, and political instability – risks that are all mitigated by a multi-vendor sourcing approach.

Some companies, like Pricewaterhouse Cooper, eschew single-vendor sourcing altogether, implying that a one-size-fits-all strategy may not exist, and that there are scenarios where vendor sourcing is an open question.

Nelson suggested that a strong discriminator for choosing between single- and multi-vendor sourcing may be the degree of dependency between partners. He described “lopsided dependency,” in which the relationship is not a symmetrical one: both sides will tend not to respond consistently with behaviors that are mutually beneficial, because one partner is far more powerful than the other and has far less at stake in the relationship (Walmart is a classic example).

When the partnership is lopsided in favor of the supplier, the buying partner must live with it when capacity shifts result in reducing the buyer in priority. When the partnership is lopsided in favor of the buyer, demand shifts can leave the supplier unable to respond quickly enough, increasing financial pressure and threatening stability.

Both of these scenarios are mitigated by a multi-vendor sourcing strategy, Nelson concluded. Where a partnership is “lopsided,” multi-sourcing is safer all around.

When dependency is mutual, however, and both partners consider the relationship of high importance, the supplier is more responsive and flexible when demand changes, and both sides are motivated to keep costs low and quality high. In this scenario, single-vendor sourcing makes more sense.

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Lean supply chain, Pt. 4: resource planning in parallel

Manufacturing resource planning is increasingly essential to lean supply chain efficiency. But having MRP in place may be only a partial measure.

Process expert Jakob Bjorklund has suggested that, while having MRP in place is certainly a step toward operational efficiency in manufacturing, it can often take the enterprise only halfway as far as it might go.

“Even as companies try to focus on the disciplines normally associated with the idea of a lean supply chain,” Bjorklund said, “another fundamental paradigm shift that must take place within their organization, and it is often overlooked.”

That paradigm shift involves re-thinking the points at which manufacturing operations commit, keying ever more closely on demand. When demand is stable and highly predictable, “make-to-stock” (MTS) is a model that works well: resource planning is simple when demand is flat. Raw materials may be ordered in large, inexpensive quantities, because the timing of their use is easily established.

The problem, said Bjorklund, is that it seldom works out this cleanly in the real world. Even when some demand is flat, it is more typical that a significant portion of any manufacturer’s products will be ordered with fluctuating frequency, rendering a “make-to-order” (MTO) model more advisable.

His take-home point is that it makes sense to simply run both planning processes in parallel: identify flat-demand patterns and plan manufacturing resources for those products accordingly, but implement MTO planning for those products where customer demand requires more agile responsiveness.

“By continuously analyzing demand patterns and inventory turns, the point of postponement can be changed over time to achieve the optimal balance between efficiency and responsiveness,” he said.

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