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The Spend Table is where cost and spend intelligence gets served up fresh—and no topic is too spicy to tackle. Join three finance and procurement leaders for respectful debate (not head-nodding) on what really matters when managing software spend. All powered by real data insights.
Justin [0:00:00]: In a perfect world, we'd be able to take a zero based budgeting approach every year.
Justin [0:00:03]: But the reality is that process is extremely time consuming.
Justin [0:00:07]: It requires a degree of insight and awareness around the intricacies of what this thing does and what that thing does that simply no centralized function can do.
Justin [0:00:17]: It's impossible.
Justin [0:00:18]: To know all of the nuances between this random engineering or Devops tool and and that one.
Justin [0:00:23]: So for one, two type consuming essentially.
Justin [0:00:25]: And for two, two time consuming for the stakeholders.
Justin [0:00:28]: The reason why we run into this problem of a grandfather existing budgets is the the human capital and labor intensive side of making those changes.
Justin [0:00:38]: In a lot of cases is far more expensive than the cost in the tool itself.
Justin [0:00:42]: When evaluating and weighing those trade offs.
Justin [0:00:44]: Should we just keep this shelf on and, you know, some people are using it, but the pain to change will far outweigh the cost to actually renew even if we know there's probably better solutions or or better capital deployed elsewhere.
Russell [0:00:57]: Yeah.
Russell [0:00:57]: You can't make spend or cost decisions in a vacuum.
Russell [0:01:00]: Because it may look good on paper to save the money and cut the tool.
Russell [0:01:04]: But if it means another team, upstream or downstream has to transform how they're doing something, and there's not the okay.
Russell [0:01:09]: Has to do that, then can't go that route.
Michael [0:01:19]: Alright.
Michael [0:01:19]: So we are doing this our very own podcast.
Michael [0:01:22]: This is super exciting.
Michael [0:01:24]: So for everyone joining.
Michael [0:01:24]: Welcome to The Spend Table to show where cost and spend intelligence is served up fresh, and, you know, no topic is too spicy to tackle.
Michael [0:01:33]: So my name is Michael Shields, I'm the vice president of procurement here at Tropic, and this is our inaugural episode, And, you know, at first you you might think, hey, the world doesn't necessarily need another podcast right now.
Michael [0:01:45]: But I think like most things is less about quantity and more about quality.
Michael [0:01:50]: And so, you know, I'm hoping this will be less head nodding and actually more I'm looking at you Russell more respectful debate.
Michael [0:01:58]: I genuinely hope that people listen into this podcast because I think it's going to be really impactful valuable insights, takeaways, certainly things to think about.
Michael [0:02:08]: Hence the name the spend cable, and I freaking love that.
Michael [0:02:12]: So we've got Russell, CFO no extra na, a man who's seen basically, every budget based plant known demand.
Michael [0:02:19]: We've got Justin Etkin, our COO and cofounder, who not sure if he knows this, but we call him Uncle Jay, not because he watches Russell and myself spa every day, but because really, he helps hundreds of customers like, figure out why data matters and how they actually use it.
Michael [0:02:36]: So Gents welcome to the show.
Michael [0:02:38]: You ready for this.
Russell [0:02:39]: Let's go.
Michael [0:02:40]: Alright.
Michael [0:02:40]: Well, speaking of what's on the table?
Michael [0:02:43]: Let's go around the room, feel free to correct the introduction that I gave you, but also just tell me, like, what's on your plate right now, and what's one thing that's been dominating your thinking lately.
Justin [0:02:54]: Yeah.
Justin [0:02:54]: I'll go first, you know, we're sitting here recording this October twenty ninth twenty twenty five.
Justin [0:02:59]: And for any responsible business, we're in the thick of planning season.
Justin [0:03:05]: Twenty twenty six is a couple months away.
Justin [0:03:07]: The company is hungry for perspective and direction and excited to hear about what we're planning for twenty twenty six.
Justin [0:03:16]: So I've been sitting down for hours on end with this guy, Russell, to talk about our plans for twenty twenty six.
Justin [0:03:23]: And getting ready to deliver that out to the company so everyone can prepare think and do their own planning for what's gonna matter most to accomplish our goals.
Michael [0:03:34]: Cool.
Michael [0:03:34]: I apologize You have to spend so much time with Russell, but, you know, Russell onto you.
Michael [0:03:39]: Somebody's got to...
Russell [0:03:41]: Well, I have been doing what I have spent a career doing knee deep, neck deep above my head in customer data.
Russell [0:03:48]: So I've been obsessed with better understanding.
Russell [0:03:52]: What are customers doing?
Russell [0:03:53]: Why are they doing it?
Russell [0:03:54]: What does it pretend?
Russell [0:03:55]: What are the signals around product adoption?
Russell [0:03:58]: There's some super spicy, fascinating stuff about customers getting to value using dropping.
Russell [0:04:05]: And so I've just been geek out on all of that, sharing it with Justin blowing up his slack with all of those insights.
Russell [0:04:13]: And so, in addition to the planning season, it's all about the customer, baby.
Justin [0:04:18]: The start somewhere.
Justin [0:04:18]: That's where it is for us.
Michael [0:04:20]: I'm glad I was thinking about the customer.
Michael [0:04:21]: Obviously, that's important.
Michael [0:04:23]: As you know, q four tends to be a lot of renewal.
Michael [0:04:27]: I don't know why In fact, I was literally on a call with a procurement person the other day, and she said I'm trying to restructure all of my deals, so they don't end on in December and January, and that's like a big initiative on her part, but certainly for a lot of procurement people like myself out there, you know, the q four load is heavier this time of year than other times a year.
Russell [0:04:44]: I know why.
Russell [0:04:45]: Do you know what that happens?
Russell [0:04:46]: Because some companies without budget discipline.
Russell [0:04:50]: It's use it or lose it, baby.
Russell [0:04:52]: It's...
Russell [0:04:53]: They're gonna use what I spend this year as the baseline for next year.
Russell [0:04:56]: So I better spend it and By the way, that's a horrible way to manage your budget and we'll get into that in a minute, But that's why the Q4 four spike.
Michael [0:05:05]: No.
Michael [0:05:05]: I have a stat about that.
Michael [0:05:06]: We're gonna share later.
Michael [0:05:07]: I think also, there's the fact that you've got the sales trying to push for the...
Michael [0:05:11]: Wrapping up the end of year clothes.
Michael [0:05:12]: So it's this confluence of of events like ongoing.
Michael [0:05:16]: Mh.
Justin [0:05:17]: Well, okay.
Justin [0:05:17]: Let's jump into it.
Justin [0:05:18]: So I've had the pleasure of watching these two spends lots of time battling it out behind closed doors talking about our spend and expenses and vendor relationships.
Justin [0:05:30]: And so I get to share with everyone else today.
Justin [0:05:32]: And so we're tackling today some of this happening right now.
Justin [0:05:35]: If companies ever everywhere ourselves included, budget season.
Justin [0:05:38]: And There's some real tension here.
Justin [0:05:41]: That's worth unpacking between the different powers at play.
Justin [0:05:44]: And before we jump into it though, Russell, I wanna turn to you as CFO and president at Tropic, budgeting is just one element of the cycle.
Justin [0:05:55]: So what goes into this process and why is it matter to get it rate?
Russell [0:06:00]: Yeah.
Russell [0:06:00]: We were talking recently about this.
Russell [0:06:02]: It kind of presents a pet peeve of mine, and that is people use the terms strategy, planning and budgeting, and sometimes even forecasting all interchangeably, and they necessarily mean something completely different.
Russell [0:06:18]: They also often look to the budget process to answer questions that are supposed to be answered by the annual planning strategy setting process.
Russell [0:06:29]: So strategy is really about where you play and how you win.
Russell [0:06:34]: Annual planning is where we translate our choices that we're making into target and initiatives.
Russell [0:06:39]: And then the budget under gu that.
Russell [0:06:43]: But people invert it.
Russell [0:06:45]: They always like, let's start with the budget and then answer what our strategy should be and that the recipe for disaster.
Justin [0:06:51]: Yeah.
Justin [0:06:51]: Absolutely.
Justin [0:06:52]: And having the discipline to beat thoughtful and and first principle of thinking is really important get these things Right?
Justin [0:06:58]: So, you know, let's jump into some of these, we'll fast forward into the budgeting phase because I know that's where the intersection of the finance and procurement teams really comes to bear.
Justin [0:07:09]: So I Know, I know I've heard the complaints.
Justin [0:07:11]: We've all heard the complaints.
Justin [0:07:13]: Biden says, procurement surprises blow below their budgets.
Justin [0:07:16]: Chairman says, biden doesn't understand the reality of software buying that these things are unpredictable.
Justin [0:07:23]: That there's incentives that play to make the timing of this completely out of whack.
Justin [0:07:29]: And I heard one person say, budget of season is really procurement annual humiliation ritual.
Justin [0:07:36]: Russell.
Justin [0:07:37]: Is that true?
Russell [0:07:40]: It gets to whether procurement is a noun or a verb.
Russell [0:07:43]: I mean, procurement, the noun, the team, the role is often owned to buy finance.
Russell [0:07:48]: But procurement is the action of buying things that you didn't plan to buy.
Russell [0:07:52]: As a verb absolutely does blow up the budget and can be the villain of the budget.
Michael [0:08:00]: Can I wait in here for a second?
Michael [0:08:01]: I got two things I wanna say.
Michael [0:08:03]: And number one, you know, this is an interesting fun fact, but I started taking boxing classes about the same time that Russell came into my life.
Michael [0:08:10]: I'm not saying those two things are correlated, but, you know, I just wanted to kinda throw that out there.
Russell [0:08:14]: Defend yourself.
Russell [0:08:15]: Defend yourself here.
Michael [0:08:16]: Maybe this is a bit of a spice to take.
Michael [0:08:17]: Okay?
Michael [0:08:18]: I actually believe that there is too much scrutiny for new budget spend requests, but not enough scrutiny for existing line items.
Michael [0:08:32]: And so Russell, what I heard you was, like, you know, you're saying, hey, like, getting caught off guard, like, totally get that, like, you need the ability to forecast, but I do think there's a lot of truth to that because when you are buying something new.
Michael [0:08:46]: There's a lot of unknowns.
Michael [0:08:47]: So there's a lot of unknown variables.
Michael [0:08:48]: There's a lot of assumptions being made.
Michael [0:08:50]: Okay?
Michael [0:08:51]: And so naturally, you're not gonna have all the answers.
Michael [0:08:54]: You wanna make you wanna der risk it as much as possible.
Michael [0:08:56]: For existing purposes you actually have a lot of that data.
Michael [0:09:01]: You've used the tool for a year or two years whatever the case may be, and yet Sometimes it feels like the existing budget is much easier to get, but new budget is really hard to get and that feels backwards to me.
Russell [0:09:14]: Yeah.
Russell [0:09:14]: I mean, I agreed, but the reason finance gets exercised about the new stuff, is the new stuff is what's likely to go above and beyond the budget.
Russell [0:09:23]: It's the new stuff that was unplanned that somebody's hair brain idea, or it's gonna save our conversion rates or it's gonna be the miracle that turns the quarter around that new stuff those are the budget busters.
Russell [0:09:35]: But I think you have a point that the existing stuff can be the silent killer cholesterol of the business and of the budget...
Russell [0:09:42]: Because if we just in a sleepy way, just rubber stamp approve that.
Russell [0:09:46]: That's how you have spoil in the system.
Russell [0:09:49]: And I do think we should do a better job figuring out...
Russell [0:09:54]: Wait a minute.
Russell [0:09:54]: Should we renew this tool?
Russell [0:09:56]: Is it doing what we hired it to do, and we probably over index on new, but that's why we do it because it's the budget.
Michael [0:10:03]: But get the reason why and Just will love for you to weigh.
Michael [0:10:06]: And I guess, like, in my mind, I think why do we have budget to begin with?
Michael [0:10:10]: Like, we spend money keep the company hopefully achieving what it needs to achieve.
Michael [0:10:15]: Right?
Michael [0:10:16]: And if the existing spend, if we're not putting that scrutiny on it, then is it and we have more data, but is it helping us achieve those goals whereas the new stuff you know, you're never gonna have a perfect set of data there, you're gonna have a lot of, like, assumptions.
Michael [0:10:29]: So...
Justin [0:10:30]: I think we can all agree that in a perfect world, we'd be able to take a zero based budgeting approach every year and say, Here's what we actually need to accomplish and where can we allocate budget to do so?
Justin [0:10:41]: But the reality is that process is extremely time consuming because it requires a degree of insight and awareness around the intricacies of what this thing does and what that thing does that simply no centralized function can do.
Justin [0:10:56]: It's impossible to know all of the nuances between this random engineering or Devops tool and that one to defend why we can tear it all down and build it all back up.
Justin [0:11:06]: So for one, two type in essentially.
Justin [0:11:08]: And for two, two time consuming for the stakeholders.
Justin [0:11:11]: The reason why we run into this problem of kind of grandfather existing budgets is the human capital and labor intensive side of making those changes in a lot of cases it's far more expensive than the cost in the tool itself.
Justin [0:11:25]: And when evaluating and weighing those tradeoff offs between, should we just keep this shelf wear on and you know, some people are using it, but the pain to change will far outweigh the cost to actually renew even if we know there's probably better solutions or better capital deployed elsewhere.
Russell [0:11:42]: Yeah.
Russell [0:11:42]: You can't make spend or cost decisions in a vacuum because it may look good on paper to save the money and cut the tool But if it means another team upstream or downstream has to transform how they're doing something, and there's not the capacity to do that, then can't go that route.
Michael [0:12:00]: Okay.
Michael [0:12:00]: I can subscribe to a lot of that.
Michael [0:12:02]: I think that there is more work and to your point, Justin, I'm actually kinda surprised you took as extreme of stance you did not that as extreme.
Michael [0:12:11]: But, like, being the data king that you are, it feels like there is data that we can have this says, hey.
Michael [0:12:17]: Show me the data that proves that we have the right tool versus, like, let's look at this new spin that were you trying to convince that it's the right tool.
Michael [0:12:25]: Does that make sense that whole, like...
Michael [0:12:27]: Yeah.
Justin [0:12:28]: So...
Justin [0:12:28]: Sure.
Justin [0:12:28]: And I think that there's no binary.
Justin [0:12:30]: Right?
Justin [0:12:30]: Right?
Justin [0:12:30]: Like, ideal state, zero based budget.
Justin [0:12:32]: Let's take it all no sacred cows.
Justin [0:12:34]: But reality state is you could make some of those decisions and decide where is the capital investment on the human side worth it for the order of magnitude improvement and efficiency or productivity for the team.
Justin [0:12:48]: We're seeing with the Ai wave, these decisions are happening increasingly as part of the budget cycle.
Justin [0:12:54]: How can I level up my technology stack to ultimately give more leverage to my humans that are doing their jobs day to day with a generation of solutions that take a lot of the heavy lifting off their plates?
Justin [0:13:08]: So, yes, does that required imply some brain damage going towards unwinding existing infrastructures and existing tooling.
Justin [0:13:17]: Yes.
Justin [0:13:18]: But the decision there as part of the business cases, it's worth it because the long term or even short term roi online benefits are gonna far out outweigh the cost to get there.
Russell [0:13:26]: Yeah.
Russell [0:13:26]: I feel like, embedded in one of your questions, shields was to budget or not budget?
Russell [0:13:31]: Or, like, what's the point of budgeting.
Russell [0:13:34]: Right?
Russell [0:13:35]: You kind of asked that a little bit earlier and, like, think about what happens if a household operates without a budget?
Russell [0:13:40]: Or, like, just a mindset of the opposite of a budget.
Russell [0:13:45]: Right, Without that sense of operating with a scarcity mindset, what you have is people don't act as good stewards of the business, It's a free for all.
Russell [0:13:56]: There isn't a disciplined approach to what to spend how to spend where to spend.
Russell [0:14:00]: So I think budgets are necessary, but they should not drive strategy they can be a constraint against, you know, just doing anything and everything, but they need to flow in sequence as a handoff from the annual planning process.
Michael [0:14:17]: Yeah.
Michael [0:14:17]: And I hope I never come across as selling this saying hey no.
Michael [0:14:20]: Right?
Michael [0:14:21]: And...
Michael [0:14:21]: But I will say this.
Michael [0:14:22]: I know...
Michael [0:14:23]: I'm sure we gotta move on to the next topic, but I think, you know, right now, everything's budgeted like, to the tea where it doesn't leave much room for anything else.
Michael [0:14:31]: I do subscribe to the notion that you can collect data.
Michael [0:14:34]: And I think I don't know that we're collecting all the right sorts of data, but that does challenge some of that existing.
Michael [0:14:40]: Maybe not fully zero based all the time, but also allows some room to say, hey, we're gonna leave this un budget for ideas that come up, and then we're gonna prioritize those throughout the year, and I don't see that happening as much as it should.
Justin [0:14:54]: Well, I think a fair question to ask is what is the purpose of the annual budget.
Justin [0:14:59]: Are we in business cycles right now that are too fast into fluid that a rigid twelve month budget is the right answer for giving that clarity?
Justin [0:15:09]: Or should we be dis this strategy planning and budgeting cycles such that sure strategy and planning can be an annual ambition, but budgeting is happening on a shorter time frame and a more iterative cycle.
Justin [0:15:22]: Russell, I don't know if you've over experiments with this adult Yeah.
Russell [0:15:26]: For sure.
Russell [0:15:26]: Obviously, if you're publicly traded, you have to give guidance to the market in a budget is absolutely critical for compliance standards for the board to approve and rat your plan, and otherwise.
Russell [0:15:38]: But even if you're privately held, there is the investor sentiment to remember that if you just get them to agree to fund the business on a quarterly cycle as too short term focus, and you may not see far enough down the road to know if there is liquidity issue or a missed opportunity.
Russell [0:15:57]: So I do believe I'm still a proponent of annual budgeting.
Russell [0:16:02]: But I think you have to give flexibility for the forecast to update.
Russell [0:16:08]: You know, I hear people say all the time, should we adjust to the budget?
Russell [0:16:11]: No.
Russell [0:16:12]: The budget is set annually.
Russell [0:16:14]: It is the forecast that changes quarterly.
Russell [0:16:17]: And then what is that cycle to figure out what variances to the original budget do we need to rat as part of the new forecast?
Russell [0:16:25]: And how do we put at the center of table those decisions that need to be made if we're running well against plan and there's found money to be deployed?
Russell [0:16:34]: How do we decide who gets that?
Russell [0:16:36]: If we're running behind plan and we need to claw back.
Russell [0:16:40]: Where do we call back?
Russell [0:16:42]: You can't do that annually.
Russell [0:16:43]: You have to do that.
Russell [0:16:44]: I mean, probably even more frequently than corporate.
Michael [0:16:47]: So if ann is kind of a unnecessary evil and you didn't say that, but that's kinda how I interpret it in some ways.
Michael [0:16:53]: Like you kinda have to have it.
Michael [0:16:55]: Do you think...
Michael [0:16:56]: Well, actually, I'm just gonna make a statement instead of asking a question a leading question I have often seen that we're not collecting the right data always.
Michael [0:17:04]: Does that make sense?
Michael [0:17:05]: So we're collecting a lot of historical data what we spent it on, and I'm not saying they use, you know, peanut butter spread to figure out where we go from there.
Michael [0:17:13]: But I do think, and this is where procurement and finance can really help each other out is going one level deeper from not only utilization, but understanding kind of the Roi as well as some of the trends for the software itself.
Michael [0:17:29]: Right?
Michael [0:17:29]: And obviously, it can really play a a factor here.
Michael [0:17:33]: And I don't see that second kinda of sub layer of data being collected.
Michael [0:17:36]: But then the third aspect of the data is really coming from the users themselves.
Michael [0:17:41]: And I totally get that stakeholder time is really important.
Michael [0:17:43]: But are we collecting some subset of data from users both within our company and users outside the company as well that we can act on, and I think that that helps us understand what impact this potentially can have how satisfied we are with a particular supplier and thinks that nature.
Michael [0:18:02]: So I see a lot of that tier one stuff, but I don't see a lot of those other two levels of spend occurring.
Michael [0:18:08]: And then I worry that it impacts your forecast that you, you know, really, really need.
Michael [0:18:12]: Well, and
Russell [0:18:13]: we're thinking about budgeting mostly from a cost perspective, but budgeting also, of course, includes revenue and therefore, you're thinking about the overall operation of the business and the interconnected nature of it, and I am frustrated that no matter the company Have ever worked for global or start up, multi billion dollar or, you know, starting at zero.
Russell [0:18:35]: It seems like there's a poor understanding of how the overall system itself, which is comprised of all these investments that we're making?
Russell [0:18:45]: How do they interact together to drive the targets and how well are they functioning.
Russell [0:18:51]: We kind of view them in silos.
Russell [0:18:52]: Right?
Russell [0:18:53]: This is marketing budget for their tool set.
Russell [0:18:57]: This is sales budget.
Russell [0:18:58]: So the functional approach to budgeting kind of prevents a business from self actual some of what you're saying, that second tier stuff that would really get to the heart of, are we spending money on the right things.
Russell [0:19:11]: I think functional budgets enter that.
Justin [0:19:14]: I think one big evolution that I'm seeing across over our most sophisticated customers that are effectively blending procurement finance in the budgeting process is moving from an Erp and expense based budgeting process to a contract and solution based budgeting process.
Justin [0:19:32]: In an Erp budgeting process, all you have is spend balance.
Justin [0:19:36]: Right?
Justin [0:19:37]: You know how much you're spending every month, and you can am that out?
Justin [0:19:41]: You can factor in some uplift, whatever it might be, but your divorce from the reality of...
Justin [0:19:46]: When do I actually have a decision point around you might wanna be restructuring, re evaluating my stack and recon figuring how people interact with the systems and solutions that they have access to.
Justin [0:19:57]: And the most sophisticated teams are taking a much more proactive stance on a contract driven budgeting cycle because they know when these key dates are, and they can work that into some of their planning.
Justin [0:20:11]: And understands, we have a big sourcing event that's coming up in nine months that can actually set the direction and trajectory of what our technology strategy is gonna be for years to come.
Justin [0:20:21]: This time while spent so that we can get to the place we want to be in advance of that point in time.
Justin [0:20:27]: So maybe that's a happy medium where we can get to, which is helping more and more companies evolve from this Erp kind of dumb budgeting approach, which takes everything for what it is on a grandfather approach, and move them to a more proactive and intelligent approach, which factors in dates, and moments that actually matter for decisions, and that give us the opportunity to layer in the valuable intelligence and data that helps inform good decisions.
Russell [0:20:56]: Yeah.
Russell [0:20:56]: Is your point that the Erp and the general ledger is not capturing all the proper metadata that you actually need to make the decision because it's too sterile.
Russell [0:21:05]: It's too binary of a look at.
Justin [0:21:08]: Exactly.
Russell [0:21:09]: It's just dollars and cents.
Russell [0:21:10]: It's not the background behind why did we make the investment, what were we hoping it would achieve what alternatives were considered.
Russell [0:21:16]: Are we getting a fair price and on and on.
Michael [0:21:19]: So with some of our customers, Justin, you know this.
Michael [0:21:21]: We do like these technology stack analysis and reviews.
Michael [0:21:24]: A lot of those, by the way, happened to coincide with budget season, which is...
Michael [0:21:28]: I think there's an interesting phenomenon on there, but some coaching I usually provide to whoever I'm talking to and oftentimes is procurement or finance or or a mix of the two, then they I say, hey, go out and ask three simple questions.
Michael [0:21:39]: Right?
Michael [0:21:39]: Number one, like, how critical is the supplier to the business.
Michael [0:21:42]: And by the way, on the scale of one to five.
Michael [0:21:44]: You know, what business goals does this help us achieve?
Michael [0:21:47]: These are all multiple choice type questions and in number three, like, how open are they two exploring other solutions?
Michael [0:21:54]: Like, even collecting...
Michael [0:21:54]: Would you can collect...
Michael [0:21:56]: And we used to do it manually and then ent rolled out was honestly is my favorite feature of the year, the the pulse surveys.
Michael [0:22:02]: You know I'm very enthusiastic about these.
Michael [0:22:04]: But even collecting those three data points.
Michael [0:22:06]: Those aren't gonna be found in Erp system anywhere.
Michael [0:22:09]: Okay?
Michael [0:22:09]: And it's really not that hard to get, but what it allows you to do is it allows you to start to connect the historical kind of and required budget process to sourcing.
Michael [0:22:20]: You start to, like, connect those two things together because you can say it to Justin's point, hey, this kind of comes up for renewal in June.
Michael [0:22:29]: Let's say it, whatever the case may be.
Michael [0:22:30]: Right?
Michael [0:22:30]: And oh, by the way, like, we feel like it's critical to business, but we're very open to exploit other solutions because maybe there's some pain points or things that nature.
Michael [0:22:38]: Guess what now you can start to control your destiny a little bit more through the budgeting and the sourcing connective tissue.
Justin [0:22:45]: Yeah.
Justin [0:22:45]: Absolutely.
Justin [0:22:45]: I think the...
Justin [0:22:46]: What where a lot of people run into problems from my dash point is that...
Justin [0:22:50]: This process is hard.
Justin [0:22:51]: It's time consuming, and the ability to do it as the way it should be done without the right systems and tools and data available is, like, a order of magnitude more complex and more time consuming.
Justin [0:23:05]: So the better your systems will flag and share the key data that you need to make these informed decisions.
Justin [0:23:11]: The faster you can get through some of these cumbersome challenging processes and focus more on the actual strategic decisions that needs to be made and think about the preparation and planning in advance of those decisions.
Michael [0:23:24]: If I wanted to kinda put a bow on this because this is very much an actionable, like, insight type podcast, you know, Justin, like, what would you recommend?
Michael [0:23:33]: In addition to what they've historically collected.
Michael [0:23:36]: What are a few data points that they should try to go get you.
Michael [0:23:40]: Like, for example, you mentioned end dates.
Michael [0:23:42]: Right?
Michael [0:23:42]: Contract end dates.
Michael [0:23:43]: But, like, go a little bit deeper.
Michael [0:23:44]: I I don't know if you can go so far as say your top five or whatever the case may be.
Michael [0:23:48]: But, like, for someone listening to say, hey, am I collecting that information and then, like, how can I get that?
Justin [0:23:55]: Yeah.
Justin [0:23:55]: Totally.
Justin [0:23:55]: I think that there's probably four things.
Justin [0:23:57]: End date slash opt date, you need to know, like, what's your milestone so that you're not gonna interrupt service have that that's key one most important thing.
Justin [0:24:05]: Number two, sentiment.
Justin [0:24:07]: You mentioned pulse surveys, getting an understanding around how users are feeling about a solution is highly informative around whether we wanna keep this, whether we wanna double down on this or whether we wanna start pulling back because we're not getting the value in Roi out of what we invested in.
Justin [0:24:24]: Number three, alternatives.
Justin [0:24:26]: You wanna be able to go into these moments to have an understanding around what does the landscape look like?
Justin [0:24:33]: Are we missing something for this big investment of ours that might be underperforming and have those alternative solutions in your back pocket?
Justin [0:24:44]: And ready to deploy a sourcing strategy to be able to bring the bond.
Justin [0:24:48]: And number four is the actual pricing and benchmark data.
Justin [0:24:52]: You may have a solution that's a target for rev evaluation and learn that you've got bottom dollar dirt cheap pricing, best you're gonna find anywhere?
Justin [0:25:04]: Best not to rock the boat.
Justin [0:25:07]: Or you may find that this low priority, low value solution is extremely expensive relative to what you should be paying?
Justin [0:25:15]: Perfect.
Justin [0:25:16]: We've got a replacement opportunity.
Justin [0:25:18]: That's not only gonna drive a ton of savings, but will also unlock value and make all the users much happier that engage with that system every day.
Michael [0:25:25]: Yeah.
Michael [0:25:25]: One thing I wanna make sure listeners know is that benchmarking what you're talking about there doesn't need to be reactive.
Michael [0:25:31]: Like, if you have your system hooked up to the right tool, it can proactively flag that for you because I need a lot of people are thinking like, oh my gosh.
Michael [0:25:40]: Like, what resources do I need to, like, go pull that data?
Michael [0:25:43]: And I just wanna make that very clear.
Michael [0:25:45]: A lot of that, you know, once again, with technology that by way, it wasn't available to me as a procurement person until, like, very recently, you know, we were stuck in the stone age of tools even as recently as seven eight years ago, you know, lot of that has changed.
Michael [0:25:57]: So just wanna make sure people understand that.
Justin [0:26:00]: Alright.
Justin [0:26:00]: Let's shift gears a bit.
Justin [0:26:01]: Let's say we've gotten through our iron cloud budgeting process, and we're tight.
Justin [0:26:07]: We're ready to go.
Justin [0:26:08]: It's now March first, and we've got a six figure indigo popping up out of nowhere.
Justin [0:26:15]: Not budgeted.
Michael [0:26:17]: Wait he's buying.
Michael [0:26:18]: Okay.
Michael [0:26:19]: Keep going.
Justin [0:26:20]: And apparently not so wearing cloud.
Justin [0:26:22]: Apparently, very leaky me, lots of falls in this bucket?
Justin [0:26:25]: Whose false that?
Justin [0:26:27]: Is that finance or is that procurement?
Michael [0:26:30]: I'll fall on my sword honestly, like, I genuinely feel like that would be a big procurement miss, frankly speaking.
Michael [0:26:37]: The reason why is because And that's probably the answer you expect.
Michael [0:26:40]: I was probably you expecting probably expecting me, like, point over to finance.
Michael [0:26:43]: But, no.
Michael [0:26:44]: I've stood up a procurement function many times.
Michael [0:26:46]: And one of the first things I do is I I go to finance and say, give me a data dump from the Erp system of and that should be very easy to pull of who we're spending money with and how much.
Michael [0:26:55]: Okay?
Michael [0:26:56]: And then what I do at that point is go find the contracts or talk to the suppliers to figure out.
Michael [0:27:03]: And so I I really shouldn't, lack that visibility because job number one for any procurement person should be, like, enhancing that visibility.
Michael [0:27:13]: And so if that's the case, then I would argue it's...
Michael [0:27:17]: I'm not gonna say poor procurement because let's be honest, like, some of these are very complex, but I do think that falls more on procurement.
Michael [0:27:24]: So probably not the answer you're expecting, but it's an honest one.
Michael [0:27:27]: I'm a huge ent for procurement and I'm also our biggest critic too, just Fyi I.
Michael [0:27:32]: So...
Michael [0:27:32]: Well, I'll give you a hot take.
Michael [0:27:34]: Neither.
Russell [0:27:37]: It's the fault of the budget owner.
Russell [0:27:39]: It is the fault of the person making the purchase.
Russell [0:27:42]: You know, I think this is a problem with companies of every size that fiscal discipline and stewardship Too many people re that to that's finances job or that's procurement job.
Russell [0:27:57]: Let's step back for a moment.
Russell [0:27:59]: We all know when we talk about customer success, whose job is customer success.
Russell [0:28:05]: Is it just the customer success team?
Russell [0:28:07]: No.
Russell [0:28:09]: We've all been taught...
Russell [0:28:10]: It's the whole company.
Russell [0:28:10]: Right?
Russell [0:28:11]: So whose job is it to properly manage the company money?
Russell [0:28:16]: Obviously, finance has that formal responsibility?
Russell [0:28:18]: I am chief fiduciary, ultimately, the buck truly does stop with me.
Russell [0:28:23]: And, yes, I expect my procurement leader to have their hand on the pulse of that and avoid surprises, So I'll be greatly disappointed.
Russell [0:28:32]: But I hold chief accountable, the person that's spending the money.
Michael [0:28:37]: I'm gonna push back on that just a little bit to be honest with you because I think in theory, you're probably right, but it's almost like a moot point because it's expecting budget owners or stakeholders to act in a certain way is almost...
Michael [0:28:52]: I'm not gonna say naive, but it's never gonna happen.
Michael [0:28:55]: Frankly speaking.
Michael [0:28:56]: It's never gonna happen.
Michael [0:28:57]: So to expect something that's never going to happen.
Michael [0:29:00]: It's hurting cats, You know, and cats don't hurt super well.
Michael [0:29:03]: There are gonna be...
Michael [0:29:04]: I'm not trying to insult budget out.
Michael [0:29:06]: There's a lot of very good responsible budget owners out.
Michael [0:29:08]: There's that's not what I'm trying to do here.
Michael [0:29:10]: What I'm trying to say is procurement you know, the stakeholders do their part, the budget owners do their part and procurement should be that fail safe to be honest with you.
Michael [0:29:21]: Now the problem is that so many historically have operated out of excel files and it's moving targets that's not an use anymore either because tools should automate so much of that.
Michael [0:29:32]: Like, tools should be able to flag, especially in the world of artificial intelligence to be able to flag.
Michael [0:29:36]: Hey, we have a spend here, and we don't have a contract here.
Michael [0:29:39]: You know, it's kinda of table stakes at this.
Michael [0:29:41]: Point.
Michael [0:29:41]: So I hear what you're saying.
Michael [0:29:43]: But it's this it's expecting a level of perfection that is never gonna happen.
Russell [0:29:49]: Fair enough shields, but I'll give you a counter point.
Russell [0:29:51]: Imagine if we thought the same way about information in security, and we said only the Cis is responsible for securing our data.
Russell [0:29:58]: And therefore, you leak data to a competitor or you leak data that is publicly identifiable, who's it fault?
Russell [0:30:06]: Our Cis or you you're at fault.
Russell [0:30:08]: You're the one that leaked the data.
Russell [0:30:10]: So my only point is, I agree, ultimately formally, procurement is responsible, but we need everyone in the business to be fiscal minded and understand if you're a big boy and big girl and you own a budget you need to manage that budget and be responsible for avoiding surprises.
Russell [0:30:29]: But you need a tool to do that.
Russell [0:30:31]: Obviously.
Russell [0:30:31]: We can't expect them to do it through us.
Michael [0:30:33]: J jay, we're gonna need you to weigh in here because I don't think we're talking about a little bit of rogue.
Michael [0:30:36]: Spend what I heard you say it was a hundred, like, a six figure purchase, like, let's be honest if Russell, if someone came to you and said, hey, a Whoops seat for a six figure spend and here at Traffic.
Michael [0:30:46]: Like, that's not gonna be like, well, you know, stakeholders should have done that.
Michael [0:30:50]: Right?
Justin [0:30:51]: I think it's interesting because my default answer is that's finance fault.
Justin [0:30:55]: You know, I'm thinking I trust...
Russell [0:30:58]: Well, then that's like every other thing.
Russell [0:31:00]: Blame finance
Justin [0:31:01]: verizon exactly.
Justin [0:31:01]: And where I'm coming in, I can trust my robust.
Justin [0:31:04]: And thoughtful and thorough finance team to look under every rock to find all the gaps and make sure that we're buttoned up.
Justin [0:31:12]: And so missed renewal in my mind that cost us that much money.
Justin [0:31:17]: I go straight to my Cfo, Russell and say, Wtf man.
Justin [0:31:21]: I thought we had this fund up, malware where Russell goes.
Justin [0:31:24]: That's up to Russell to decide where the responsibility should go and who needs to be.
Russell [0:31:30]: And then I go, oh, Justin, you never loaded this into our system of record.
Russell [0:31:34]: So we were blindsided and didn't see it.
Russell [0:31:37]: It's actually you that's spending the six figure.
Justin [0:31:39]: We're in a situation where the cofounder is personally owning a six figure contract, then we're in batch shape.
Justin [0:31:44]: That means there's more of those and we're in more trouble.
Michael [0:31:47]: Blind finance if they...
Michael [0:31:48]: Won't approve my...
Michael [0:31:49]: You know, once again, table stakes, spend management tool.
Michael [0:31:53]: That's where finance can get the blame.
Michael [0:31:55]: So nice.
Justin [0:31:57]: Okay.
Justin [0:31:57]: So that's our one scary story Scary center.
Justin [0:32:01]: Let's think about another one.
Justin [0:32:02]: Okay.
Justin [0:32:02]: We talked a little bit about...
Justin [0:32:03]: We set the budget and Shi, he mentioned these new purchases that we should be much more fluid in thinking about supporting against the budget.
Justin [0:32:12]: Now, how have you guys seen scenarios where the budget can get thrown out the window because there's an opportunity that's too great to pass?
Justin [0:32:21]: Or how should our customers and teams that are out there be thinking about, what's the level of fluidity?
Justin [0:32:28]: Plus or minus x percent that we should tolerate?
Justin [0:32:31]: In order to take advantage of the big opportunity to drive our life of the business.
Michael [0:32:36]: This is a great question.
Michael [0:32:37]: It's kinda proving my earlier point, which I don't know that we fully landed on.
Michael [0:32:41]: And and Russell, I don't know that we were exactly saying the same thing because I do think that there needs to be a budget.
Michael [0:32:46]: What I was guess is saying there's, like, not all parts of the budget have to be allocated exactly right away.
Michael [0:32:52]: So, hey, there's approval to spend up to whatever certain amount of.
Michael [0:32:55]: But maybe there's a little bit left in there for.
Justin [0:32:58]: Was that?
Michael [0:32:59]: The flush.
Michael [0:33:00]: That's a negative connotation to it, but it's like, the fun for reason, you know, high Roi type activities that, you know, need to beat to certain criteria.
Michael [0:33:09]: Like, if we can think of like, strong acronym for that besides less one, I think that would be great.
Michael [0:33:14]: Because in the absence of that, you have a lot of problems.
Michael [0:33:17]: Number one, You have stuff that gets approved and then later on, you're like, I really need it, but the budget is there.
Michael [0:33:22]: So let's go spend it is q four.
Michael [0:33:24]: Right?
Michael [0:33:25]: And so once again, I think that kinda pushes that down a little bit, but it also ignores the notion that when you define every penny in a budget, you ignore the fact that stuff will pop up, but it absolutely pop up.
Michael [0:33:37]: And then it becomes as okay.
Michael [0:33:38]: Where do we pull from and and we really pull from that if we're kinda locked in.
Michael [0:33:42]: So I worry sometimes that we over rotate on deciding where every penny is gonna go upfront where it's more like, hey, eighty percent is gonna be, hey, this is where it's going.
Michael [0:33:51]: It maybe it's not exactly eighty twenty, but there is a portion of here that we're gonna...
Michael [0:33:55]: Hold and reserve because we know stuff is gonna pop up or we know that there's gonna be opportunities to invest in things that positively impact our business.
Michael [0:34:04]: Justin and you and I are having that conversation offline right now where I want to spend money in a certain category, and they're like, well, it's above budget.
Russell [0:34:12]: And I'm like, but this is a good opportunity.
Russell [0:34:14]: Let me let you in enroll a little secret.
Russell [0:34:16]: Every Fp team does that.
Russell [0:34:19]: We already do that.
Russell [0:34:20]: What you're describing.
Russell [0:34:21]: We already reserve funds for things that we're uncertain about.
Russell [0:34:25]: We do it on the revenue side of the budget where we der risk certain levers, and we do it on the cost side where we accept Hey, maybe we don't have full precision vault precision for this particular item, and it shows up in some interesting places.
Russell [0:34:43]: So for example, assuming a company will run at full staffing, assuming certain levels of T e.
Russell [0:34:50]: These are very common places that Fp and teams s away like, proverbial squirrel nuts for the business to unlock areas of opportunity to spend on things, but you can also proactively just carve out and say, okay, tech stack investment.
Russell [0:35:06]: We know something's gonna come along this year.
Russell [0:35:09]: We don't know what it is.
Russell [0:35:10]: It's unnamed, and we did this last year by the way, here.
Russell [0:35:12]: And we're gonna set aside whatever, couple hundred thousand dollars for unknown investment.
Russell [0:35:18]: And it's in the budget.
Russell [0:35:19]: It is budgeted, but it's unnamed.
Russell [0:35:21]: It's una allocated.
Russell [0:35:22]: I think most finance teams if they were on here and responding to you.
Russell [0:35:27]: They would say, we agree and we already do that.
Russell [0:35:30]: The problem comes when market environment squeeze or out pace in a negative way beyond what you s away and squirrel away.
Russell [0:35:41]: And that's when you run into problems where you're having to steal from somewhere else to fund the great idea that you have.
Michael [0:35:47]: Sounds like there's funding for what I wanna do, but we'll take that one not fine you.
Justin [0:35:52]: And, Russell, I mentioned another approach at this even before we tap into the slash fund, as I'm calling it.
Justin [0:35:58]: Part of every...
Justin [0:35:59]: Strong department leader is thinking proactively and strategically about their budget.
Justin [0:36:05]: Right?
Justin [0:36:06]: And I know those conversations can happen where you're talking to our sales leader our marketing leader and certain decisions are coming to you that look outside the budget.
Justin [0:36:15]: But there's an understanding and a discussion around okay, where where's is coming from that might have already been rubber stamps and approves, and now we're trying to free up capital and think about where we're gonna fund this investment from existing investments or spent.
Russell [0:36:31]: You know what my favorite thing is Justin related to that?
Justin [0:36:34]: Tell.
Russell [0:36:35]: You know what I really love.
Russell [0:36:35]: When really smart leaders that are paid a lot of money get together and work through the trade offs together and they don't expect finance to be the police officer around that process.
Russell [0:36:49]: That is like a gift to finance.
Russell [0:36:51]: When they come and They say, hey.
Russell [0:36:53]: So we've talked, I have this in the budget, and I don't need it and my partner over here needs it, and I'm willing to fore go, it could be a head count.
Russell [0:37:04]: It could be a tool.
Russell [0:37:05]: And where I see this work well often is in go to market between sales and marketing, there's some give and take that's really healthy.
Russell [0:37:13]: And you could see why I would love that so much is because if you always wait till the end of the line for the Cfo to be the one to figure that out, it creates an unhealthy where I am the Cfo no, instead of the Cf, let's go, it creates this tension where we're always the ones that are having to show up as the bad guy.
Russell [0:37:33]: I far prefer a culture an environment where the leaders have latitude and freedom.
Russell [0:37:38]: Figure that out on their own.
Justin [0:37:40]: This to me is honestly also the single and most strategic opportunity for how procurement can get involved and drive business forward.
Justin [0:37:49]: Because if these conversations are happening at the department level, and now procurement can be coming in with data, and intelligence that those department teams don't have access to themselves, the supplier landscape, the dates, the benchmarks, The things that are gonna help them make real cost trade off decisions, So they can bring a fully informed perspective to the Cf, let's go and have it fully built out.
Justin [0:38:16]: That becomes a much easier thumbs up because the research been done.
Justin [0:38:20]: It's credible from trustworthy sources, and there's a real business justification behind it.
Justin [0:38:26]: I'm cf if let's go.
Justin [0:38:28]: Coo, let's go.
Michael [0:38:30]: Yeah.
Michael [0:38:30]: I would agree that that's definitely been my experience too is and it it's something I've talked, you know, quite a bit about where You know, you get numbers from sales that let's be honest are fluffy sometimes or general in nature, and, you know, look, as a Cfo.
Michael [0:38:44]: I'm sure you see a lot of spend.
Michael [0:38:45]: Like, it is my job.
Michael [0:38:46]: I think it's your job.
Michael [0:38:47]: We actually talked about this today.
Michael [0:38:48]: Async, you know, But it's our job to, like, push back on spend, not because we, like pushing back on spend, but because we wanna make sure it's worth the capital.
Michael [0:38:57]: Like, capital is very valuable.
Michael [0:38:59]: And so...
Michael [0:38:59]: And good procurement should be...
Michael [0:39:02]: Helping define, you know, strong decision criteria, making an objective decision, but also, you know, using data to show and to kind of, you know, prove as much as possible that it is a good spend.
Michael [0:39:16]: I like that.
Justin [0:39:17]: When I talk to some of our procurement leaders and we talk about the opportunities for being proactive and strategic with this type of data, it seems pretty revolutionary to them.
Justin [0:39:26]: It's a new way to engage with the business where procurement is able to bring data, bring intelligence to them proactively, versus being seen as the reactive kind of deal negotiator when the renewal is coming up and lands on procurement desk?
Justin [0:39:40]: Like, why is that Feels like, what's causing this gap between this strategic function that Everyone wants to be versus the kind of back, I guess the wall reactive function that it feels like it off it is.
Michael [0:39:55]: Yeah.
Michael [0:39:55]: I like that you used the word gap there for sure.
Michael [0:39:57]: And I do think data and intel way to close that gap because ultimately, in the absence of that, what is the value that procurement brings the value.
Michael [0:40:05]: The procurement brings is like you said, it's getting over the line.
Michael [0:40:07]: It's structuring it the best in a financial way, which is important, but sometimes that's not what the business really cares about.
Michael [0:40:14]: And sometimes that feels counterintuitive intuitive to what the business value really cares about because maybe they actually wanna spend ten percent more on a tool that's gonna help them achieve their goals rather than ten percent less on a tool that's gonna make it hard for them.
Michael [0:40:26]: Right?
Michael [0:40:27]: But when you can come to them and say, here's the data of a supplier that might actually help you hit your goals even more, and oh by the way, like, here's an insights to where we can move faster because we know what a good deal is and how to achieve that prices is.
Michael [0:40:40]: And so we can get...
Michael [0:40:41]: And by the way, here's the way to get it through finance because Here's what they're looking for.
Michael [0:40:45]: All of a sudden, it does take you from this, hey.
Michael [0:40:48]: Here's procurement who's gonna go beat up my a supplier and get the best deal to.
Michael [0:40:53]: Here's a valued partner who's gonna really make sure I have the best tool at the best price and get through the process quickly.
Michael [0:41:00]: So that way I can go, you know?
Russell [0:41:03]: Yeah.
Russell [0:41:03]: You know?
Russell [0:41:04]: I'm a let you in a little secret.
Michael [0:41:06]: This two secrets today.
Michael [0:41:07]: You're just, you know, folks
Russell [0:41:10]: may know.
Russell [0:41:11]: You know, part of what shields does for us is also operate as our head of procurement.
Russell [0:41:15]: And so you're constantly in the system doing all the things that we're talking about.
Russell [0:41:21]: And most of the time, who's gonna be honest.
Russell [0:41:24]: When people reach out to me, I would say seventy five percent of the time at traffic.
Russell [0:41:29]: When people reach out to me, it's because they need something from me.
Russell [0:41:32]: They want something from me, they're asking for something from me.
Russell [0:41:35]: My signature, my approval, deployment of funds, approving some concession, and you come to me and say, hey, heads up, I was able to negotiate x.
Russell [0:41:48]: We saved x more money than we thought or in talking to the stakeholders we found out.
Russell [0:41:55]: We no longer need this tool.
Russell [0:41:56]: It's like, that is what every finance leader is wanting more of is more give than take.
Russell [0:42:03]: Because right now, the way the bank of finance works, it's all take.
Russell [0:42:08]: All take all day long.
Russell [0:42:10]: And then when the budget doesn't materialize because performance doesn't materialize, guess who gets blamed finance.
Russell [0:42:17]: But procurement stands in the gap in the middle of all that with an opportunity to be a give to finance instead of a taker.
Russell [0:42:25]: And I I quite like that about You shields, and it's working
Michael [0:42:29]: with Very appreciate that.
Michael [0:42:31]: Yep.
Russell [0:42:33]: That's nice.
Justin [0:42:33]: That's a good moment.
Justin [0:42:33]: Alright.
Justin [0:42:34]: So last question here.
Justin [0:42:36]: Often word when I'm talking to, you know, new departments that are standing up procurement or trying to enhance their procurement process.
Justin [0:42:45]: One of the biggest things that they run into and it really affects budgeting processes is, I think we're...
Justin [0:42:51]: You know, using a bunch of tools that no one's actually logging into, or you got a bunch of underutilized seats and licenses, and there should be a lot of opportunity to save from that.
Justin [0:43:00]: How can I factor that into my budgeting process and squeeze some savings out of it?
Justin [0:43:05]: And so, you know, we hear it every single company.
Justin [0:43:08]: Whether it's a thesis that the office of the Cfo has about their spend or a reality, it's always is pervasive.
Justin [0:43:15]: And so my question is getting to that point, Is that a process problem or is that a deficiency of the procurement function or responsibility that allows us to happen or both?
Michael [0:43:30]: You go first dr and I'll just refute whatever you say.
Michael [0:43:32]: So...
Russell [0:43:37]: Well, I think there's a chicken and egg here.
Russell [0:43:39]: Right?
Russell [0:43:39]: Because process is in service to policies and standards.
Russell [0:43:45]: So the process is there to try to safeguard against un spending, unauthorized spending, agreeing to contract standards, the process and the tooling can't reinforce using tools that people have said they need and want.
Russell [0:44:03]: And you can't wait until the renewal cycle to bring that up.
Russell [0:44:07]: That's why I do agree to pulse surveys are super interesting shields.
Russell [0:44:11]: Because if you do that, one quarter into a new tool, you'll find out very quickly if people are like, this tool value.
Russell [0:44:17]: This is worthless.
Russell [0:44:18]: I'm not using it.
Russell [0:44:19]: And so I think it is mindset, and I think it's a leadership gap more than it is, a process gap I think the process can help reinforce in Shine a light on the issue with the tool not being used, but I don't think any amount of process can fix people not going in the tool and using it.
Michael [0:44:43]: Okay.
Michael [0:44:43]: Interesting take.
Michael [0:44:44]: I I am gonna go a different route than you, not just because, you know, it's something I enjoy doing.
Michael [0:44:49]: I...
Michael [0:44:50]: Look, at the end of the day, a lot of the go to market motions for suppliers for Saas providers are established in a way to land and expand as much as possible.
Michael [0:45:04]: For example, have any of you ever been shared like, a, you know, for example, a lucid chart license and all of a sudden, you realize that you maybe you don't realize is that you...
Michael [0:45:12]: What you wanted or not are now a lucid type license holder type of a.
Michael [0:45:16]: Does that make sense?
Michael [0:45:17]: Like...
Michael [0:45:17]: And so Expecting a stakeholder kinda know all of that is once again, kinda setting up for fail when the process, especially, you know, on the go to market side was kinda set up to kind of take advantage of that.
Michael [0:45:29]: And so I think that there are ways to build safeguards in.
Michael [0:45:33]: Like, for example, if you're talking about, like, process orchestration, you know, what's to say you can't reach out to your suppliers and say, you know, especially prior to renewal, you know, I'm an advocate for building this send your process, but reach out to the suppliers and say send us utilization reports.
Michael [0:45:49]: Because then, what you can then do is you can start to make decisions at the micro level rather than at the macro level.
Michael [0:45:56]: You can start to say, hey.
Michael [0:45:57]: The question isn't, do we need this tool or not?
Michael [0:46:00]: The question is is what usage falls above an acceptable usage and which doesn't within the same tool.
Michael [0:46:09]: And so I do think I hear what you're saying and maybe we don't have to be completely dia opposed here, but I do think that there are ways that a good procurement tool process, etcetera can build safeguards to protect and limit what otherwise is going to naturally occur.
Justin [0:46:28]: Yeah I mean there's definitely tension that exists in many companies right now thinking about, like, Ai is as an example.
Justin [0:46:34]: And this was true about Saas, you know, five ten years ago.
Justin [0:46:38]: When a company is now going out and deploying Open Ai, Chat Gb licenses, we're in a phase right now where if you say no to a chat License, you're not Ai forward.
Justin [0:46:49]: If you're a user and you're, like, you're given the opportunity to have chat And you say, thanks.
Justin [0:46:54]: No.
Justin [0:46:54]: Thanks.
Justin [0:46:55]: You be worried about your job in a lot of cases because there's so much pressure to be thinking efficiently and productively and using tools to make your job faster to do.
Justin [0:47:06]: And I think what ends up happening, especially right now is there's a lot of experimentation going on.
Justin [0:47:11]: New tools being purchased and over provisioning of licenses and access because the dream state is had of massive efficiency gains everywhere to be found.
Justin [0:47:22]: And the reality is probably not quite that, but you as an organization are still saddle with all of these access licenses, you know, access and systems that may not have delivered on these stated goals, but tough luck.
Justin [0:47:39]: You're stuck, you know, for a year or two years remember the contractor might have looked like.
Russell [0:47:43]: And I think part of why this comes up a lot is a lack of clear champion or stakeholder owner of key systems and tools.
Russell [0:47:51]: Which is why to your earlier point, part of the cleanup process begins with understanding, what are all the tools?
Russell [0:47:57]: Who owns it currently not who owned it a year or two ago, because companies are changing so much.
Russell [0:48:02]: You've gotta keep current the owner of that tool, and that owner, by the way, they need part of their role should be if they own the tool, they should own understanding how it's being used to people like it, and are you getting the value out of it, that you wanted to.
Russell [0:48:19]: That's my only point is process is important.
Russell [0:48:23]: Procurement is ultimately responsible for avoiding unfortunate auto, But ultimately, I want tool owners to understand their role in the process too because they're the one saying we should be paying for this, We should be buying it.
Russell [0:48:37]: So they should feel some accountability to how it's being used, but to do that, they need tooling.
Russell [0:48:42]: They need a way to know are users using it, how many licenses are used, what are we paying for the...
Russell [0:48:48]: What's the sentiment about the tool?
Michael [0:48:51]: Yeah.
Michael [0:48:51]: I can agree.
Michael [0:48:52]: And so I definitely think that all of that stuff can be built in a scalable way using the right tool.
Michael [0:48:57]: Hundred percent.
Justin [0:48:58]: Yep.
Justin [0:48:58]: Agree.
Justin [0:48:59]: Alright.
Justin [0:48:59]: We are moving on to my favorite section of our burg version podcast here called data a la carte.
Justin [0:49:08]: Mh Data a la carte.
Justin [0:49:10]: Each week, we're gonna serve up some data points that caught our attention.
Justin [0:49:13]: Numbers that made us stop and think, wait, really.
Justin [0:49:17]: The rule is simple, You bring a stat.
Justin [0:49:20]: You don't tell the others, what's stat you're bringing, and we'll talk about if it really matters.
Justin [0:49:26]: So Russell, and Michael.
Justin [0:49:29]: You guys have been looking at some data?
Justin [0:49:32]: I've got mine.
Justin [0:49:32]: Do Have you guys wanna start with your data points?
Michael [0:49:37]: Can we just all acknowledge that Uncle J has an unfair advantage in this category, but I will go first so as not to be under overwhelmed if I go second or third here.
Michael [0:49:47]: Once you again, this our first time.
Michael [0:49:48]: I'm not sure if I'm doing it exactly right, but I saw an article rapport put up on Mckinsey c.
Michael [0:49:55]: And maybe in your mind, Justin, Know, not put up by bain, it doesn't matter, but They're basically saying that this idea of zero based budgeting programs typically unlock as much as...
Michael [0:50:06]: And their range was ten to twenty five percent in savings and cost.
Michael [0:50:10]: And so that you once again, kind of, of course, reinforces the notion I held earlier is that, like, I believe that there's not enough scrutiny on existing spend and some of the stuff that we've had for a long time that's kind of been grandfather in potentially should be challenged.
Russell [0:50:29]: K.
Russell [0:50:29]: Agree.
Russell [0:50:30]: Yeah.
Russell [0:50:30]: Maybe even more than depending upon the company, maybe even more than that stat.
Russell [0:50:34]: It probably far more spoil happening in most companies throw Ai into the mix and who knows what efficiencies could be squeezed if we truly were zero base.
Russell [0:50:44]: Alright?
Russell [0:50:45]: You guys ready
Michael [0:50:46]: for my number?
Russell [0:50:48]: And you gotta a guess...
Russell [0:50:49]: The way this works is you gotta guess what it is.
Russell [0:50:51]: My number is two hundred and fifty three.
Russell [0:50:53]: The number of Cfo in
Michael [0:50:56]: the United States who have a positive, you know, reputation.
Russell [0:51:01]: No.
Russell [0:51:01]: Good guess.
Russell [0:51:03]: Justin, what?
Justin [0:51:05]: The number of weekdays in or business days and Calendar year twenty twenty six?
Russell [0:51:11]: That's a very astute guess.
Russell [0:51:12]: That's not it.
Russell [0:51:13]: I mean, we do as a rule of thumb and Fp a assume there's two hundred and fifty two working days, two hundred and fifty three.
Russell [0:51:20]: That is the total number of budgeting and forecasting tools available according to g two.
Russell [0:51:27]: That means if you are someone that owns budgeting, if you're a finance practitioner, you could use a different tool every single working day of the year.
Russell [0:51:38]: That's bonkers.
Michael [0:51:41]: Probably won't look it's with Ai too.
Michael [0:51:44]: That's what's even crazier.
Michael [0:51:45]: Tell me that
Russell [0:51:47]: it's the deli proliferation of tools in this category.
Russell [0:51:49]: I mean, it tells me a bunch of things.
Russell [0:51:52]: It tells me no one player is solving this well for one, two, people probably think a lot of different things about budgeting and forecasting and what they need, but just like, the barriers to entry must be incredibly low as well...
Russell [0:52:08]: I don't know.
Russell [0:52:08]: I think that number's is telling me a ton of things, but what's it telling you?
Justin [0:52:12]: I think the Rfp that we're gonna have to run on our Fp and A tool is gonna be pretty crazy in shi.
Justin [0:52:17]: I hope you're ready for the challenge.
Michael [0:52:19]: Yeah.
Michael [0:52:19]: It sounds like so much fun.
Justin [0:52:23]: Okay.
Justin [0:52:23]: I got one.
Justin [0:52:23]: This is crazy.
Justin [0:52:24]: I'm not gonna play your game, ross.
Justin [0:52:26]: I'm just gonna share it because it's...
Russell [0:52:27]: That's okay.
Russell [0:52:28]: I was the surprise metric.
Russell [0:52:29]: That's fine.
Justin [0:52:30]: Only fifteen percent of Ai decision makers reported an Eb lift for their organization in the past twelve months.
Justin [0:52:37]: And fewer than one third can tie the value of Ai to any P and L changes.
Russell [0:52:42]: And those that are saying they can
Justin [0:52:47]: Here's my take that's crazy because for all of us that are pretty, like, Ai enabled people, there are undeniably major value experiences that we're having every day that is driving us to be more efficient and more productive.
Justin [0:53:03]: Now my theory is that what's happening right now with Ai is there's a value capture paradigm and going on, where I think that many people and kind of buyers have started to realize that Ai is not a full job replacement solution.
Justin [0:53:22]: It's more of a job enhancement solution right now.
Justin [0:53:24]: So you can make super powerful full.
Justin [0:53:26]: People are unlock super superpower for people to become super humans in their day to day.
Justin [0:53:31]: But you can't replace them fully.
Justin [0:53:33]: And so when I as a stakeholder, let's say I'm an account executive at a company, and I'm now empowered with all of these Ai tools and able to do my job that much faster that much better.
Justin [0:53:47]: I am capturing a ton of value.
Justin [0:53:50]: Let's say that means I can now hit my quota in three quarters of the time, that I could otherwise.
Justin [0:53:56]: Does that necessarily mean that that additional twenty five percent is getting red deployed into the business?
Justin [0:54:03]: Or am I capturing that value to go hit some golf balls?
Russell [0:54:08]: Watch that?
Justin [0:54:09]: Yeah.
Justin [0:54:09]: And my perspective is right now, the majority of the value capture is actually happening with the humans, rather than the businesses, and that businesses have not gotten very good at measuring the actual productivity and efficiency gains tie to Ai.
Justin [0:54:25]: And so because they can't measure it.
Justin [0:54:27]: They're saying this is a failed investment, not working, like, I need to see more until it can actually replace actual functions.
Justin [0:54:34]: But what you are seeing is that some of the most vigilant and aggressive companies are doing massive cuts.
Justin [0:54:42]: Amazon, Microsoft, the company seemingly at the forefront of the Ai paradigm that are surely the best at measuring the impact of Ai are seeing the benefits, and you are seeing the headlines as supporting those benefits.
Justin [0:54:56]: So my take, this stat is crazy because it's just wrong and it's really more of a reflection on where the value capture is going right now, and the companies that don't figure out how to adequately measure the Ai efficiency and productivity that's going on in their companies are gonna get left in the dust, if they let the really aggressive movers and players, act as quickly and decisively as they are right now.
Russell [0:55:22]: Yeah.
Russell [0:55:22]: And I think another paradigm is you have companies that have perhaps gone through cycles of efficiency gains, or head count reductions.
Russell [0:55:32]: And employees may feel like they're overwhelmed.
Russell [0:55:36]: And then in that case, Ai is somewhat of a hero coming to the rescue to help you out in your be chaotic day to just get the work done that you already didn't have the bandwidth to do.
Russell [0:55:48]: But for Cfo, if they don't see it show up in higher revenue growth or reduce costs.
Russell [0:55:55]: It's hard to measure the Roi of that.
Russell [0:55:57]: Now, there's Roi for improved employee morale, reducing regrettable churn of employees.
Russell [0:56:04]: Like, this is a big topic with lots of tentacles.
Russell [0:56:07]: But I do agree with you that the majority of the value is going to the user, not the company.
Russell [0:56:15]: In only really large companies with lots of cuts they could make are able to really benefit by just flat out.
Russell [0:56:22]: But I think it's a pendulum them.
Russell [0:56:24]: I think those same companies, they're gonna realize they over reacted And, yeah.
Russell [0:56:29]: Ai is driving huge efficiencies, but we're gonna see the oh, we're gonna hire some people
Justin [0:56:33]: back.
Justin [0:56:33]: Totally.
Russell [0:56:34]: Right.
Russell [0:56:34]: Because you still need human in the loop.
Justin [0:56:36]: Hundred percent.
Michael [0:56:37]: Yeah.
Michael [0:56:37]: That only reminds me of, like, the age old procurement issue where you go in know, let's say I work with Marketing and go save them a hundred gram on the contract.
Michael [0:56:45]: But it's their budget.
Michael [0:56:46]: Right?
Michael [0:56:47]: And so then they turn around and spend that saved hundred thousand dollars and then the Cfo is was like, well, where's the contribution to the bottom line.
Michael [0:56:54]: Well, the contribution to the bottom line, they should be the top line because they reinvest those hundred grand and spent it on something else, but it is kinda hard to do case.
Michael [0:57:03]: So you saved two million dollars last year, whatever the number is, but the bottom line didn't actually change by two million dollars.
Michael [0:57:10]: Right?
Michael [0:57:10]: So reminds me of that.
Russell [0:57:12]: Should Yeah.
Russell [0:57:12]: You're gonna find...
Russell [0:57:13]: Like, it's gonna require, like, forensic teams to trace the value delivery of Ai unfortunately, because it's impacting so many parts of how we work.
Justin [0:57:23]: Yep.
Justin [0:57:23]: Fascinating saying many more conversations on this topic for us to discuss in the future.
Justin [0:57:28]: Okay.
Justin [0:57:28]: Next section, my least favorite section of our podcast is called story of the week from Michael Shields.
Justin [0:57:34]: And so, actually, you know what?
Justin [0:57:36]: This is just...
Russell [0:57:37]: Yeah.
Russell [0:57:37]: Eight that section.
Justin [0:57:38]: This is just...
Russell [0:57:39]: To be very clear.
Michael [0:57:40]: The section story of the week.
Michael [0:57:41]: This week it's by Michael Shields.
Michael [0:57:44]: So...
Michael [0:57:44]: Just This week,
Justin [0:57:46]: I'll be my least favorite until it's my story or russell Russell is an amazing storyteller.
Michael [0:57:50]: So Russell is a good story in this first year.
Justin [0:57:53]: That.
Justin [0:57:53]: I'll let you dig into a situation.
Justin [0:57:55]: We can hear and and respond, but take it away, mister Shields For procurement okay.
Michael [0:58:01]: Alright.
Michael [0:58:01]: So I'll lay out the background a little bit.
Michael [0:58:02]: So as you know, we use a tool for video recording.
Michael [0:58:06]: And, you know, we found ourselves in a situation from one rule to the next.
Michael [0:58:11]: I think we're about nine months in, and our usage had skyrocketed and essentially doubling from a hundred licenses to two hundred licenses in that first nine months.
Michael [0:58:19]: So imagine Russell, you're in the t of Budgeting, and you look at utilization, and you're, like, oh, my goodness from a hundred license and two end licenses.
Michael [0:58:30]: Like, I'm not gonna ask what would you do in that situation Russell, but maybe just really quickly and this is my story, but maybe just quickly, like, how do you think those sort of situations are typically handled?
Michael [0:58:41]: Like, what number are you
Russell [0:58:42]: putting in the budget there?
Russell [0:58:43]: And well, Cfo is gonna say, how on Earth are we using two hundred licenses for video recording?
Russell [0:58:47]: I mean, setting that aside, if the system says a hundred licenses the risk is you only budget for a hundred.
Russell [0:58:54]: If you don't know that those conversations are happening behind the scenes about the two hundred.
Russell [0:58:59]: It's very possible.
Russell [0:59:01]: Most Fp and a people would just look at the run rate and put in a hundred and you'd be under underfunded.
Justin [0:59:06]: Yep.
Justin [0:59:06]: There's other, like, you know, I think that we've seen scenarios where the most sophisticated Teams.
Justin [0:59:12]: They're watching the trends.
Justin [0:59:13]: Right?
Justin [0:59:13]: You can...
Justin [0:59:14]: For a lot of these consumption based usage base or even seat based type agreements where there's lots of changes happening regularly.
Justin [0:59:19]: You can see these trends every month if you got good reporting to know, wait, are we on a consistent upward trajectory.
Justin [0:59:27]: Do we need to get ahead of this somehow and either restructure, discuss with the team that's in demand of these products?
Justin [0:59:34]: And make sure we have an understanding and better predictability around what's to come.
Justin [0:59:38]: But it's yeah happening a lot you know, not just your video recording commission, but a paradigm that everyone struggles with.
Michael [0:59:46]: Yeah.
Michael [0:59:46]: Totally.
Michael [0:59:46]: In my experience has been one, they don't recognize there's the phonetic genetic postage and so then they budget for a hundred, and then you come renewal time.
Michael [0:59:54]: You're like, wait, what?
Michael [0:59:54]: Or they look at the run rate like, hey, Like, they dig in.
Michael [0:59:58]: They may even look at, like, single sign on data or whatever like, well, looks legitimate.
Michael [1:00:01]: So they budget two hundred.
Michael [1:00:02]: Right?
Michael [1:00:03]: So And once they're you budgeted for two hundred.
Michael [1:00:05]: And one scenario your budget for one hundred, like, that's a big gap.
Michael [1:00:07]: Right?
Michael [1:00:07]: So what we did is once again, I think it's a mistake to rely on a tool like, that leverages single sign on it.
Michael [1:00:13]: It doesn't really show true value, you know, and especially in the world where you only have to authenticate, like, once every thirty days.
Michael [1:00:19]: So we went as our part of our process.
Michael [1:00:21]: We asked the supplier for data.
Michael [1:00:22]: Specifically the number of videos recorded by employee by a month.
Michael [1:00:27]: Okay?
Michael [1:00:28]: And then we actually sat down.
Michael [1:00:29]: And we said, hey, what is an acceptable number here.
Michael [1:00:33]: So wasn't it like, is someone using a license or not?
Michael [1:00:35]: We said, hey, the acceptable threshold is?
Michael [1:00:37]: And I don't remember what the number was nine videos or eleven videos.
Michael [1:00:40]: We tried to be, you know, somewhat conservative.
Michael [1:00:42]: And so we were actually able to look at...
Michael [1:00:44]: Okay.
Michael [1:00:44]: Here's how we actually feel like we need, and then we broke it up when we emailed the people that were using it sufficiently and said, hey, by the way, no change to your license.
Michael [1:00:54]: You're gonna keep it.
Michael [1:00:55]: However, did you know that, by the way, Zoom allows you to record natively right there in the platform.
Michael [1:01:01]: Okay?
Michael [1:01:01]: And we probably had about ten, fifteen percent who are gonna keep their license who said, actually, I don't need it anymore.
Michael [1:01:06]: Then the other group, we said, hey, you don't use it enough.
Michael [1:01:09]: So unless you can justify to us why you should keep it.
Michael [1:01:12]: We're gonna take it away.
Michael [1:01:13]: And probably about ten to fifteen percent so actually.
Michael [1:01:15]: I was on, you know, leave where I just got it a month ago or something like that and so they kept their license.
Michael [1:01:20]: But at the end of the day, I don't remember what the number was, but it was less than a hundred licenses that we actually ended up keeping.
Michael [1:01:28]: And so that is a massive...
Michael [1:01:30]: I think positive impact to the company, but it wasn't a cut that was felt very much.
Michael [1:01:36]: It wasn't super painful.
Michael [1:01:37]: Okay?
Michael [1:01:38]: And I think that
Russell [1:01:39]: that was through insightful.
Russell [1:01:40]: Was that?
Russell [1:01:41]: You saved me more money save.
Michael [1:01:44]: I saved...
Michael [1:01:44]: You know, we together saved more money, but we did it in a intelligent way.
Michael [1:01:49]: And I think that's a big takeaway here.
Michael [1:01:51]: As I meet with Cfo and the finance leaders is you can make cuts that really don't feel like cuts when you remove waste, it isn't super painful to be honest, with you people don't really miss it.
Michael [1:02:02]: Love that.
Justin [1:02:04]: I think that's all We got.
Michael [1:02:05]: Alright.
Michael [1:02:05]: Well I'll just kinda wrap things up.
Michael [1:02:06]: I kinda did the intro like, this is, you know, once again, our a inaugural roll, The Spend Table where cost and spend intelligent and we serve it up for us.
Michael [1:02:15]: We got a little bit spicy.
Michael [1:02:16]: I don't know that we fully came to a conclusions and everything.
Michael [1:02:19]: I think that's okay.
Michael [1:02:20]: I actually I think there's way too much head nodding out in the market right now.
Michael [1:02:23]: And so Hopefully, it gave you some things to think about.
Michael [1:02:25]: But absolutely, hopefully there are some tangible takeaways.
Michael [1:02:28]: And obviously, if you wanna know more or, you know, follow up then, you know, you can reach out to us.
Michael [1:02:33]: But thank you everyone for joining and thank you, Russell, and Justin, this is a lot of fun.
Justin [1:02:38]: Real quick, our next episode, we're gonna be diving into the world of Ai.
Justin [1:02:42]: Ai taxes to expect as part of your budgeting cycle, Ai consolidation, thinking about the balance of humans and Ai and software and All of the intersection of these complex topics.
Justin [1:02:54]: You're not going to miss that one.
Michael [1:02:58]: Looking forward to it.
Michael [1:02:58]: Thanks gentlemen.