Good morning. Good afternoon, everyone. Thank you very much for joining this October webinar from Tropic where we'll be talking about how to run procurement when the deal is never closed. IT procurement now is a constantly moving target, and I've got two very much subject matter experts with me today to to get deep into the questions around this one. So my name's James Meads. I will be your host for this webinar. I'm a procurement guy by background, albeit not in the IT space, but now since the last five, six years, I've been very much deeply embedded in the procurement tech landscape and have been, really, really happy to see all of the different solutions that have come onto the scene since then to tackle both this problem and the whole other range of, of different challenges that technology these days can help to fix.
So with me on this webinar is mister Justin Eckins, CEO of Tropic. Hello, Justin. Hello. Hello. Thanks for having us. Excited to be here. And mister Michael Shields, is Tropic's resident procurement guru. Mister Shields, hi. Good afternoon. You know, we somehow switched roles. You said you're a procurement guy, but then you called me procurement guru. I would I would, like, swap those two things up. But, thanks thanks for having me, James. I still I still am a little disappointed. The three of us were all together in person last week at D 2... DPW. We... You know, several times actually, and we definitely should have figured out how to, like, host from there or record something from there.
Missed the opportunity, but it was fun fun seeing you and and thousands of others in Amsterdam last week. So... It's it's an amazing event. It's very intense, isn't it? I think everyone that went there just said they slept the whole weekend when they when they got home. So for those of you who... For those of you that are watching this that were at DPW last week, maybe not that many of you, but just pop pop pop it in the chat. And also, it's always great to see where people are joining us from. So, just make your presence known in the chat and just pop in where you're joining us from, and if you've got anything specifically that you'd like us to cover.
We're gonna get started just now. Just a couple of housekeeping things. We're gonna tackle the questions and answers at the end, but you can pop them either in the chat section or also in the separate q and a tab that you will that you will see there in the in the section there as well. So the actual content will probably... That will last around forty five minutes ish, and then we'll go into the q and a right after that. So if anything pops up during the presentation, rather than keeping it in your head, just pop it in there and we'll tackle it at the end. So, yeah, we've got a pretty diverse Toronto, South Carolina, WI, is that Wisconsin, Bellevue, Washington. New Hampshire. Okay. Nice.No Europeans in that house. Okay. It must be the only one. Orlando. Alrighty. So let's get this stuff off. Is the foliage in full swing in New Hampshire right now, or are we past that, John?
Anyway, keep going. I just saw you from making sure. Mexico City, Sergio, Buenos Aires, Monterrey. Okay. Awesome. Alrighty. So let's get this kicked off because we're we're talking about how to run procurement when the deal is never closed. So what is it that's actually changed? Has I... Has AI just made procurement faster, or has it broken or substantially changed the model that sat beneath that?
Go ahead, Justin. I was I was in the chat. I didn't hear the question, but I assume you got it. Yeah. I got it. And, James, this is a fun one, I think, to talk about you with in particular just because, obviously, your, you know, your background, you spent a lot of time in in direct procurement and, you know, in in sourcing and and everything like that. And, you know, my my introduction into the world of procurement was... Has been very much a a a kind of distinct difference between the world of indirect sourcing and direct sourcing, right, where direct sourcing, the motions and supply chain management and the providers, the relationship there is one where it's it's always on.
Right? You're always keeping track of commodity prices prices prices and understanding relationships with different providers that can get you better economics, better quality, you know, whatever the the criteria considerations are. And in the world of indirect, it's felt to me like the sourcing and procurement process is much more episodic. It lives on the two to three year renewal cycle where you work on a deal, and that deal is done, and you kinda put it, you know, over in the closet for a while until that renewal reminder pops up again, and it's time to start working on that Salesforce or Workday or, you know, Zoom renewal or KPMG, whatever the, you know, the kind of the the category of sourcing cycle looks like.
And now what we're seeing at least is with AI in particular, sourcing AI looks a lot more like sourcing on direct side than it looks like on the indirect side. Because for companies that are are heavy users of AI, either in their organizations or in their product offerings, with the pace and frequency of releases that we're seeing on new models and new price points and, new entrants, procurement and sourcing teams, I would argue for the first time in, I don't know, you know, years, decades, are now required to very much stay on top of the news to do it... To do it... Their job to the best of their ability and maintain relationships with the different suppliers that are out there so that they are factoring in supply chain risk and new pricing and details that historically was not the case with, you know, the episodic renewals that they were running before.
So to me, this feels like a big paradigm shift. I see a lot of my, you know, customer points of contact that run tech procurement are developing very new kind of muscles and strategies for how to stay kind of thinking about an always on sourcing mentality that has looked much more similar to their direct sourcing roots. Can I can I can I weigh in here? Because I think this is, like, so important because I feel like... You know, you you know, James, you you started off this conversation by saying, like, yeah. You you practice, you know, procurement, not in tech. So AI comes out. I think a lot of people think AI tech. Okay?
Like, AI SaaS. And and I think what Justin said, like, we really need to double click on because so many people, including me for a very long time, by the way, tried to treat AI purchases the same way I... You know, we were treating, you know, SaaS purchases. And, you know, what I heard Justin saying is, like, oftentimes, you know, procurement indirect specifically, whether it's tech or not, but our effort kinda spiked right before signature. Right? You know, gathering requirements, you know, negotiate pricing, terms and conditionings, you know, orchestrating. That's a that's a that's a word that we've been using a lot over the past few years, like getting legal security, finance, stakeholder sign off.
And so... And and then then the and then the, you know, the contract gets signed. And then, you know, maybe because of volume or because of how much goes on, like, the signature becomes the endpoint in... Until maybe, like, the renewal pops up a year or three days later, whatever the term was. Right? So if we put that on a timeline, it feels like procurement's involvement has historically ended when a contract is signed. And by the way, I'm not saying this is the way it should be. I'm saying it was... It's the way it often has been. Right? And the starting point kinda depended either maybe when we were looped in or maybe when we were trying to be proactive and engaged thirty, sixty, like, ninety days out.
So, like, that's what we've... That's the model we've been historically doing. And what Justin is saying is, like, that's not the way direct has been doing. And even though, like, I left the world of direct and and, frankly speaking, don't really wanna go back to the world of direct, what I will say is that we need to be taking a page out of our cousin's playbook over on the direct side, and we need to be adjusting our product accordingly. And I think that that is a a mindset shift, a a change that I know I've had to make. And and, you know... But I I don't know that everyone's kinda turned that page just yet.
Yeah. It's it's it's an interesting point. I think what you're both referring to, and I can definitely sort of speak to this having... I mean, I bought both direct and indirect, but I... I've never I've never deeply bought SaaS. I think one of the things on the direct side that you're constantly aware of is just anything that you can get in terms of market intelligence that could have an impact on the price. So traditionally, if you're buying any sort of raw material or ingredient, geopolitical events are gonna play a much bigger role in in in how that's priced because of supply chain and availability materials and and supply and demand and all that all that typical stuff that's sort of economics one zero one when you when you look at a supply chain.
And what both of you alluded to is you can't any longer just sign the contract and then, okay, maybe do a little bit of demand management around number of licenses and and sit back with your feet on the desk for three years is what I think you're saying. So when did you both notice that that sort of old playbook was was starting to crack and no longer worked anymore? Because it's it's certainly not a phenomenon that's just happened over the last three months. It's been more gradual than that, hasn't it? Yeah. There was a there was a customer conversation that I remember having, and and, you know, we've we've all seen the headlines, but having this conversation more explicitly with the customer where, you know, they migrated from a Anthropic teams plan over to an Anthropic enterprise plan and, you know, didn't necessarily have great controls or kind of deployment schedule, you know, in in consideration and open up the floodgates.
And within one month, they expired their entire annual budget for their tokens because of the the way that... Kind of the way that process was managed. And, you know, that's a... You know, one of the horror stories that you you certainly... We've all heard and seen at different scales. But that was, I think, a a wake up call for a lot of other practitioners that were seeing and feeling this that they need to be much more thoughtful around how AI is getting consumed and deployed across their organization and be much more dialed around the kind of unit cost implications in a category that's extremely murky and hard to get your get your arms around.
There's so many of our customers that talk to Anthropic reps that have said, you know, what what should I be expecting to pay as part of my transition from a Teams plan to enterprise? And the numbers they quote are just complete, like, erroneous. Like, it's... There's no basis, no backing to it because it's just like we... I... We don't know, and, like, there's no way to validate it. So the the the role of, like, forecasting and planning and and kind of real time measurement is is much more critical in this new age of of sourcing than it ever was when it was just a Salesforce renewal that you were agreeing to buy, you know, 1,500 seats and move on with your life. This is now...
You commit to a certain amount of spend, and you have... And many people in the organization are now very maniacally focused on how are we pacing and trending towards that spend. Spend.
And the thing I'll say too is, like, you know, Justin, you've talked about, you know, Claude in the past and how quick... You know, how fast that they are, you know, changing their, you know, their models and and their pricing and things of that nature. Right?
I just wanna be very clear. Like, yes. Like, that's happened in the world of AI. But, you know, James, you mentioned SaaS and how, you know, historically, we signed a contract and maybe do some, like, demand management for licenses. You know, SaaS is changing really quickly. Right? Like, the the product that was evaluated and sold when the contract was signed is likely evolved quickly. You know, pricing's evolved. Needs of the company have evolved. The competitive landscape is changing so quickly. Champions are... Have changed. Like, sprawls happening. Buyer expectations have changed. ROI requirements have changed. And it's not just SaaS either. I... I've been at conferences where I'm talking to, you know, people who are working in industries like, you know, food or or agriculture, and and AI is impacting all of the categories.
Does that make sense? So, like, this rate of change is really... When I started to notice that rate of change, to answer your direct question, is is when I realized that the deal that we just signed is never done. It requires ongoing attention, you know, which is why today we're talking about this always on sourcing, model. I I... Maybe maybe... Can I can I pose a a question real quick? Would that would that be too, out of out of line here? No. Go for it. It's only slightly obnoxious, but... Yeah. Well, that's that's that's... It's it's it's true to who I am. So it kinda... We'll have to roll with it.
And by the way, I would love for anyone in the audience to kinda weigh in here. But, like, if we're honest with ourselves and we think about, you know, sourcing kind of in the historical sense, you know, focusing on the world of indirect procurement, You know, if we're doing sourcing events like RFPs and stuff like that, what was the catalyst for those events typically?
I would argue that the catalyst was often compliance, maybe a desire to exert competitive pressure on the incumbent. But at the end of the day, more often than not, despite these, quote, unquote, sourcing events, and I'm gonna put that in, you know, air quotes, like, you look at the renewal rates, and, historically, they were they were sky high. You look at, like, metrics like NRR and GRR and stuff like that. It it was through the roof. Like, we would do these sourcing events, but, like, not much changed. Now... And this was the moment that I realized, James, that, like, things have changed, is the catalyst for sourcing events wasn't compliance anymore.
It wasn't competitive pressure anymore. It was to figure out who should we be aligned with. Should we use the incumbent? Have they changed enough? Have they evolved them up? Should we look at a a, you know, a competitor which may not existed, you know, a year or two years ago? Should we build versus buy? The catalyst changed, and all of a sudden, sourcing has become front row and center for our roles in procurement. And that was the life slips and moments for me is if the catalyst changed, why did the catalyst change? Why are we doing this? And it and it and it is because we're trying to make sure we align it with the right provider, and there's so much change happening.
So we do need that always on mentality. Well, and I think to your point, it's just a lot easier now for software companies, more generally speaking, to ship products, isn't it? Thanks to Claude code and just the cost of the development cost having gone down because one developer can now essentially do the work of what, three or four historically. So so, yeah, you're right. Just with product changing so fast, and I recognize that myself with trying to maintain my software director... Directory database that I have as as part of my business, it's it's becoming increasingly difficult to... With a small team to to stay on top of that because things are changing so fast.
And you can... Yeah. Yeah. You can you can deploy AI to scrape websites and to and to give you stuff that three or four years ago just wasn't possible, but still the the speed of change that that vendors are shipping product is... I I don't know what you guys would say, but I'd I'd say it's probably two x, three x what it what it what it was just just a few years ago. No. You're exactly right. And if you look at the validation from the chat, by the way, like, you know, because I think I asked that question and and you saw it like, hey. The reasons were cost, the reasons were competitive leverage, any of you, Sean here, who maybe...
You know, once again, I'm not saying that's how it should have been, but that's often how it was. And then, of course, you had better, like, you know, more mature, you know, more progressive, you know, procurement functions or or or or... But but, obviously, dissatisfaction with the company. So we're not switching because we wanna explore what's changed. We're switching because there's a pain point that, you know, is happening where there's there's dissatisfaction. Like, that was the catalyst, and now that is completely different. In fact, this is something... I have said this to procurement folks at different dinners, at different events. And when I say this, it typically is so well received.
Like, it is a mindset shift. It is something they're like, I'm stealing this. Okay? And so let me... I'm encouraging procurement folks when you're talking about your pipeline, when you're talking about the workload, when you're talking about what you're doing. Stop using the word renewal. Don't say I've got 40 renewals this quarter. Don't say I'm working on 15 renewals or etcetera. Replace that word renewals with expiring contracts or expiring spend. Because the idea that the the thought process, the mindset that you have when you say I'm working on renewal is the default is we should stay with the incumbent. And when you have as much change as happening right now in this market, the default cannot be to stay.
That doesn't mean we switch for the sake of switching. I just wanna be very clear. That doesn't mean we just burn the supply base down. It means that when we're looking at expiring spend, we need to have options. We need to make sure that we are aligned with the right supplier, and and the default should not be, with with the incumbent. Although renewals can and should happen, they're probably not gonna happen 90% of the time because that is not reflective of the amount of change we're seeing right now. And so if we have signals flowing in all the time, that's where we can, you know, always have...
Always on sourcing. Feel like Nathan. Yeah. Sorry, Justin. Go ahead. I was responding to one thing. You know, I think, like, in in concept, I think everyone on the... Around the table would probably, you know, agree with you in terms of, like, expiring contracts rather than renewals. But I think with Greta's point, you know, the chat makes a lot of sense, which is like, sure. But, like, what about me convincing my CTO to rip and replace and spend a year trying to transition to a new provider to optimize for x, y, and z pricing or partnership or whatever it is. There is a real human and organizational cost around, you know, the the supplier relationships and change that can exist with a a better partnership going forward.
And and sometime... Sometimes the the reason for this renewal mindset is just the inertia of of maintaining existing relationships even when we know they're suboptimal or even when we know that they're installed in a way that could be better, but the the pain to change is just outweighs the the the optimism around new partnership. I I I I agree with that. I do think that just like AI is is making more competitors prop up, AI is bringing down switching costs. Right? And I'm not saying change for the sake of change by any chance. That is not... I mean, that that would be... You know? And I I...
And I wanna be sensitive to that. But keep in mind, you know, an optimized supply base can be a competitive advantage for the companies that we support. Like, that's the whole point of spending money to begin with. Companies spend money to achieve business objectives. And if we can spend money better than our competitors spend money, we have a leg up. And that, by the way, is tremendous value that procurement can bring to the equation. Yeah. I think the the one of the... To to that point, one of the most common, you know, conversations I'm having with the procurement leaders I'm talking to is, you know, the the organization is is constantly pushing, why do we need to renew this supplier?
Why can't we do it with AI? And, like, you know, that that question, I'm sure everyone here will will do a gigantic eye roll first for many of their their supplier relationships. But the premise is true regardless, which is the AI tools are very powerful. You know, guess what? You can now build a renewal calendar in Cloud or ChatGPT or Codex or whatever and replicate a lot of the functionality that historically procurement solutions, you know, like ours would really hang their hat on. A lot of that kind of simple software type capabilities where you're using a UI and, you know, populating data or extracting data, all those things now are are very possible with AI.
And and the question is being asked constantly, I'm sure, in in all of your organizations as well. It's like, why can't we do this with AI? What is... Give me a really good reason why we must maintain the supplier as opposed to establish something that we get to choose how we wanna build, deploy, and and manage on an ongoing basis. So so going back to the original point, Michael, that you made around, expiring contracts versus renewals, is it just... Is it a mindset shift then that renewals is kind of a dirty word that it did because it implies that you're just gonna renew with the incumbent?
Because inevitably... You know, let's be realistic here. We're we're probably not gonna be able to get rid of Salesforce or or your... Or or an ERP system or something that's deeply embedded at the at the first layer of data as a single source of truth within a business. But if it's if it's a rip and replace kind of SaaS product, you know, it depend... If you've got a piece of project management software and and the other one improves its product and is and is the same price or offers you a good deal to get in there, then it's kind of a different conversation, isn't it? So not not everything's the same, I think, is what I'm trying to say.
No. And and and you... So so step number one, yes. We need we need to make renewals a dirty cuss word, you know, that, you know, we can't use anymore. That is step number one. Right? But once again, that doesn't just imply change for the sake of change. So... And and by the way, ERPs are even facing more competitive pressure than they've than they've faced in the past. We've seen eve eve... That's a great example, James, of, like, historically. Like, you try to ever negotiate with NetSuite, it sucks. Like... Or at least it historically did just because they're so sticky, the incumbent. Now am I am I making light of the situation that we can just rip out NetSuite, like, just like that?
No. Or is NetSuite seeing more competitive pressure than they've seen in the past five years? Absolutely. 100%. So once again, it's not just a, oh, yeah. We can just replace it. No. But that is where we need to look at data. There is so much talk. I heard it at the connect event. Of course, that one was centered around data. I heard it at DPW. Right? Like, data is a moat. Data is... And so for us in procurement, no... Yes. Step number one is, like, let's stop using the word renewal. Step number two is let's look beyond end dates. Right? And step number three is, you know, to ignore some of the the the biases and the assumptions that we've historically had, whether it's that assuming the supply base is optimized or assuming the existing supplier is outdated or the wrong supplier.
Like, we need to we need to do that, and we need to, you know, look at it from a data vantage point. And so how do we make that happen? We arm ourselves with data. I think that is, like, really, really important. Real quick, I'm gonna go completely rogue here, and I'm just gonna share a screen or share a slide that I shared at a at a at a conference a few... A little bit ago. Can you can you see this?
Yep. So so look at all of these signal inputs. Does that make sense? Like, obviously, CSAT business objectives, which are constantly changing, how things are going with the current supplier, etcetera. You know you know, we're we're representing Tropic here, but not all of the data that can just come from ChatGPT or Claude. Right? We we need that benchmarking data. We need those compliancy gaps. We need those category insights of, like, what's changing with our suppliers. We need consolidation, duplication flags. We also need, like, expand... We need to know what's changing with this part. We need information from them. We need utilization data, those sort of things.
If we have those things... And and this slide... This is, by the way, shows how fast we're changing. This was like, hey. I was advocating collecting this at the midpoint. Now I'm advocating, hey. Let's have these things, like, being sent to us proactively, being pushed to us proactively, and this becomes a always on sourcing model, which helps us determine our sourcing strategy. So I don't know. I just... I I I I think the question of reflection that you should be having right now is, like, look at your data. That is gonna be step number one. That is gonna be, like, an action you can take both in...
And and maybe the things that I would encourage you to kind of look at would be, things like, like, how's the quality of your data? Let's clean that up. What's the accessibility of your data? Like, let's connect it all together. What's the breadth of your data? Right? So those internal resources pulling from your ERP system, your, you know, CSAT, you know, financial system, etcetera, as well as, like, external sources. You know? And, yes, I think sometimes you're gonna need to, you know, pay for that. That's why Tropic is having so much success right now. But... And then and then is that data being pulled, or is it being pushed?
And I would I would subscribe to the notion that being pushed is way better.
So does that mean then that multiyear deals are kind of dead, or or do you... Or are you just advocating that you need to bring that bigger picture into it in terms of being being a little bit more stubborn and robust in your negotiations with with that vendor to ensure that you get some of the things in the contract that it... That enable you to to get out or to change the terms if the if if the playing field changes during that time. If they go straight to the contract, a pain, isn't it, with everyone that has to be involved and the time it takes to to to get it through the the internal sausage machine to get it approved?
Yeah. I think I think the data that we're seeing, I think, you know, we've seen a much higher incidence of, you know, one year renewals, taking precedent over the the historical two to three year renewal because I think the prioritization of the business is shift... Is changing. You know, used to two to three year renewal to avoid, you know, doing the negotiation, you know, one year later or dealing with the uplift costs from Salesforce and better to lock it in for a longer period of time. But I think that the perspective being driven by, you know, CFOs, CIOs everywhere is we need to stay nimble. We can't predict what's gonna happen in the next, you know, three months, let alone the next two years.
And if we're beholding ourselves to legacy partners that aren't gonna innovate with the time, then we are potentially risking some of the competitive advantage that we're trying to create for ourselves, like Shields was saying. So we're seeing nimbleness being an increasingly high priority, in some cases, at the expense of cost. We will take the the near term cost impact and increase in order to prioritize being nimble and be able to stay abreast of the market trends of the changes in the landscape and be ready to move at a moment's notice once we have the kind of organizational inertia to be able to make that decision. Yeah.
I would agree with Justin, that we definitely seen a trend. Right? That being said, I'm of the position that term length should not be a policy. It's a strategic decision based off of data. Right? So I think historically, like, you know, some teams were were more inclined to lock in multiyear deals because that's how they get the discount. Others, not only just one year deals, they're they're pushing, like, month to month because in their mind, like, the market's moving too fast. But in both scenarios, I think if you take a this is how we do it approach, that's guessing. Right? Because on the one hand, you're probably, in some cases, paying a premium for flexibility that you'll...
That maybe you'll never use, and and you're just kinda eating up lifts, and and you're running that same negotiation over and over again where in other situations, you know, you go along on a tool and a category that's just changing every quarter, and you might be stuck with something obsolete. Right? So... But my point is is why I would argue that nimbleness is probably more often the right thing to do, that that doesn't mean that it's always gonna be the right thing to do. And you let the dis... You let the data drive the decision, which could be different.
Okay. I'm just conscious of the time. I wanna move on now, guys, a little bit into more than nuts and bolts of this sort of always on sourcing concept that we... That we've already touched on a little bit already. So I wanna drill down into into that concept and and kind of ask what does that look like on a week in, week out basis? Because we we sort of set the scene and said, you can't just sign a contract and then put your fees up on the desk and and ignore it until it comes up to renew... Sorry. Contract expiry date. And so if that's the case, what is the new normal in terms of always always being switched on?
Who who needs to be in this loop? How often do do they need to meet? What do they talk about? Yeah. Some of the best practices that I'm seeing right now is kind of this this relation... This triumvirate of, particularly in the AI world, token management. And that triumvirate basically consists of procurement, FP and A or finance teams, and an engineering leadership or, you know, DevOps. The three kind of stakeholders that are involved with how do we optimize our AI costs, deploy them as effectively as possible, and forecast what the costs are gonna look like into the future. And so each team within that group has a role to play to make sure that we are kind of collectively operating at the...
In the best practice capacity. I've seen this group get together on a biweekly or a monthly basis, depends on how fluid or how much kind of movement is ultimately happening in terms of, you know, token consumption and costs and things like that. But it becomes this new kind of reliable group that needs to be collaborating. And and why is that the case? Because, you know, James, you... One thing you mentioned right at the beginning was the idea of kind of global, you know, global news having impact on on certain direct supplier relationships. That's happening all the time with the with the LLMs and the hyperscalers every, you know, week, month, etcetera.
Whether it's, you know, NVIDIA, we're keeping track of their earnings call because that's gonna then dictate our... You know, how far are we into this bubble. And the moment that changes, then we expect to see unit cost changes come downstream from Anthropic and OpenAI as they start to push more and more towards real profitability instead of, like, adjusted EBITDA in their, you know, s one statements or the... And and so, you know, all these things are interrelated, and keeping a pulse on them actually has a a clear bottom line impact. And so procurement being aware of of these trends so they can be ready to engage with their their rep and and be in a position to, you know, adjust commitments and renegotiate unit costs, on new models that are getting introduced or existing models that are falling out of favor.
And having that relationship is is really critical from the procurement side, while the finance and f and a team needs to be understanding exactly how these forecasts are trending towards our cost of revenue, our, expected OpEx across the organization. And finally, engineering, of course, being responsible for the actual deployment, the instrumentation, and making sure that we are doing so in as optimized, capacity as possible. Yeah. You mentioned NVIDIA, actually. I I read an interesting book a couple of years ago around how precarious the supply chain is for for for chips. And there are a couple of... There there are a couple of bottlenecks in there. There's one...
There there's one lithographic factory in in The Netherlands that that... That's that's really dominant in that sector. And and obviously, t... TMS, can't remember the acronym, but they're the the Taiwanese chip manufacturer. And especially if you think of what's happening geopolitically with China right now, that could have a big impact on on this spend and anything that comes in the news if you're if you're buying this sort of stuff is... Going back to your point around how this... There are similarities with with how we traditionally manage direct spend. It's, yeah. It's it's very, very true.
Let me ask you There's some interesting, comments in the chat too, by the way, worth, reading. Keep going. The one thing I was just gonna say, James, is, like... And Mike... And Shields mentioned this earlier, like, in terms of taking the page out of our kinda direct procurement cousins, like, understanding what those cadences are on the direct side for how does, you know, sourcing plus, you know, the finance team and, you know, whoever the, you know, actual kind of users and consumers of the various commodities that are being purchased, like, what that cadence looks like. Those are some of the best practices that I think we should be trying to emulate and replicate on the indirect side as this always on sourcing mindset gets applied to this new commodity, which is a token, and how we choose to manage it on an ongoing and a proactive basis.
So with that in mind and just be that ongoing proactive management concept, what is it then as procurement professionals that the likes of Michael and me in my... In our previous lives should be should be asking... Should should be giving to finance and what should we be asking from them to to be able to make that successful relationship and be able to, you know, make this always on sourcing an ongoing discussion rather than just a a q four budget discussion. Yeah. I think the the biggest thing is is, like, what what Shields mentioned earlier as well, is data and visibility. You know, this is an area, and I'll I'll show this in a in a moment, but an area that we've really invested in heavily to be able to give procurement teams the tools that they need to understand what is happening across our token and AI spend across the business at any moment's notice.
We hear in a lot of cases, you know, engineering has built dashboards that they use to, you know, track, you know, the deployments and use and error rates, things like that. But there isn't a ton of procurement centric and focused dashboarding and intelligence around where are we spending, how does that compare, and and look relative to our commitments so that we can keep a real pulse and and stay on top of of where all these tokens are ultimately going. So I'm just gonna share my screen real quick if I can figure out how to do it. Yes. We got it. Just to give a little bit of, like, a a view into some of the stuff that we are doing here.
Right? So, you know, we've we've built various integrations with different providers like Anthropic where I can now understand exactly, you know, what am I committed to spending or budgeted to spend across these different providers, And how does my spend look relative to those commitments? And where am I projected to spend on my forecast? And this type of information is exactly the type of tooling, dashboarding, and insights that the triumvirate needs to know, are we on track to what we expected? Are we ahead of schedule? Are we behind? And where is this going to leave us if we if we expect to continue our trends and spend in the way that we see it going right now?
And of course, above and beyond just having access to the overall, we need to be able to diagnose and digest exactly where all the spend is going down to the models that are being consumed and the tokens and spend and costs for the inputs and outputs of each of these items. You know, for the, you know, users that are now deploying across their organizations, You know? And as an example, proactive alerting that says, you know, hey. Spend with Nathan is spiking. You know? There's some amounts of token consumption that's... Exceeds the historical use, something that we probably wanna look into to make sure that this isn't this isn't gonna be a new trend or at least we're we're familiar and aware of it.
And finally, the API keys themselves so that we can see as these tools actually get deployed in the organization and in the product for a lot of our software businesses, We know what the cost center of each of these deployments and use cases are. So that... I think that, you know, Tim mentioned it in the chat, but being able to say understanding outcomes or revenue associated with the various tokens that we are consuming in product can then allow us to understand, you know, returns and margins and all the details that matter so much to the CFO when thinking about embedding AI into their product offering. So lots of customers are just getting a lot of value out of using this kind of reporting and view to be able to centralize the conversations with the various stakeholders that are involved.
And and what about the other factors? I mean, you can... It might be actually better to keep to to keep your screen on on there if you wanna just Don't have to. Do a real quick quick talk through the through through the rest of the signals. But what what what else is important that should prompt action that in terms of what you're tracking from a from a vendor? You know, things like market intelligence or or any any internal communication that's coming from the business. And do you maybe have any thoughts... Michael, you into this as well in terms of how you'd rank those in terms of importance if you if you if you have to triage it and you can only track a few.
Well, that... That's what that's what's kind of interesting, James. It's like, you know, for a long time, you know, we had a bunch of data that that was hard to, like, you know, proactively chase, or we'd have to dig into it or something like that. There had to be some sort of trigger that would say, hey. You know, we we need to go, like, dig into this and get get the data. Right? Now... And and so, like, I think about, like, how I used to operate. And and, you know, I know you may have retired from the world of, you know, procurement, James, but I haven't.
Right? I'm still very much a... Very much an operator. And so, like, you know, the way the way I used to operate it was very much... In fact, I would get on calls with Justin because we would be doing, like, monthly spend reviews. And, Justin, you might recall this, but we were looking at what spend is expiring over the next, you know, three to six months, and we're trying to be proactive there. And then we would actually take actions like, hey. This is coming up for a renewal in six months. Let's kick off a a pulse survey or or let's maybe look at... Has the market changed?
Like, basically, the the triggering event was an expiring contract, and then we would go take action accordingly and then and then gather that data. Now once again, the the world of AI is these things are being pushed to you. Right? So it's like, hey. I'll get notification in in my little, you know, dashboard where, you know, it could be about, you know, a a pricing change, or it could be like, hey. Your your price is too high based off a benchmark, but it also could be like a consolidation opportunity. Meaning, hey. This supplier released new functionality, which means that, you know, you can go from, like, two to one.
It's worth looking into. Or, hey. You... We got CSAT coming in because that's something that's kind of being done regularly, and so there's low sentiment. Or, You know, you know, you released... Or your company released new, like, compliance guidelines, and here's three gaps that you need to be looking at. All of these things are coming in, and I'm like... And so I can look at them in real time and say, oh, that's interesting. I need to take action on that, or that's interesting. And so I'm not prioritizing is consolidation better than, like, you know, a a benchmark better than, like, a a new product release. I'm looking at all of these things and saying, hey.
This is one that I need to take action on. Here's why. And then by the way, I'm pushing that to the business. I'm pushing that to finance. I'm pushing that to stakeholders. And so now some part of the value I bring is bringing these kind of insights, these signals to them, and that's been really cool. I think we... Everyone knows of Tropic in some context around price benchmarking and intelligence as a way to help prioritize savings opportunities. You know, one that we we are are really excited about that's kind of a newer investment area is really thinking about consolidation, where we can now look at across the full supplier landscape based on when different relationships are contract ending, not coming up for renewal.
Their end... Their contract end is approaching, and we can now say and make some informed decisions around, you know, what does overlap and redundancy, you know, look like in this case. So, you know, one example here, we have this kind of Gong and Clari review suggested, you know, redundancy moment. And what we're seeing here is that our our... The system is telling us that there are some SKUs within these different contracts that actually do the same thing. You know, we've got this Gong forecast essential SKU that does the exact same thing as these revenue forecasting growth or a query for rep SKUs from another supplier. And if we were able to remove the the overlap, say, we're...
We chose to deprecate this Gong forecast skew, we could save $40,000 to the organization. Right? So this is the type of signal that, you know, Shields is mentioning that is is increasingly so valuable to our... You know, to procurement practitioners, you know, writ large is being served up. Here are the areas to look into and to address and take those things, those signals, and bring them to the business to have a more proactive strategic planning conversation. Being able to go to your rev ops team and say, hey. It looks like we've identified some overlap here. What if we chose to deprecate or consolidate some of these tools and free up budget to deploy elsewhere so that you can continue growing and doubling down a competitive advantage rather than sticking with the status quo when we know that there is clear opportunity to consolidate and and save a bunch of money.
So that's an example of one that we're we're pretty excited about. But, you know, like she just mentioned, there's there's a bunch of these different signals that we're we're trying to highlight from the savings opportunities based on benchmarking to the compliance gaps, all of which are now being organized, prioritized for people to take action on proactively.
Yeah. And one one of the things actually, Michael, that you you said in that... In in that last session was was around survey... Surveying internal users and understanding what's what... What's important to them and and what they wanna track. And we haven't spoken about build versus buy in this conversation, kind of for good reason because we're talking about about software pricing and and and what's changed in terms of how you track that. But building a simple internal survey tool is a great example actually of something that you can via code and it is pretty difficult to mess up, you know, because it doesn't have to have workflow automations or user permissions or anything like that.
And it's so much better than having individual people filling in an Excel sheet because everyone can ultimately see what what others have put in there as well, and you can share dashboards the way that you can construct it these days. So I, yeah, I just wanted to put that out there that I think that's a particularly good example of how you can build something internally and get some value, without, you know, having to use the excuse if I don't have supplier relationship management software and and it's more complicated to do it. So, yeah, I wanna spend the last five minutes or ish minutes before we move into the q and a just to look at procurement in the eyes of the CFO and how some of what we've discussed on the webinar today is changing that perception.
So is there anything... Michael, you're probably best guy for me to put this to you first. Is there anything that's fundamentally changed in the way that the CFO views procurement since the advent of AI, Or do you see it as a more more natural sort of organic course of procurement generally becoming more mature and more strategic and a bit more prominent in organizations just over the years and especially post pandemic for for businesses that have a supply chain. Yeah. You know, it's interesting. You talked about the pandemic and the supply chain. I was so glad that I wasn't having to deal with, you know, real supply chain issues during the pandemic because, wow, that just felt like a nightmare.
But what I will say is it kinda highlighted the strategic nature of sourcing and procurement, you know, in in the world where all of a sudden, you know, supply was constrained. Right? Does that make sense? And I think that we're kinda seeing a similar moment in in the in the in the sense that maybe supply isn't constrained, but things aren't stable. And when things are very stable, the the focus tends to, okay, go to cost. Right? Let's let's let's drive some savings a little bit. Like, we've got a stable supply base. We like who we're with. Let's try to find efficiencies, operational efficiencies, and that's... And I think we've kind of, over the past few years, kinda fell into that mantra to some degree.
Now once again, it's it's it's about this alignment of optimizing the supply base, but also recognizing that our c... Friend... Our friends in finance, our c... The CFOs, you know, I report to a CFO. Like, they are getting bombarded with request for spend right now. Right? And there was there was, you know, you know, especially in 2025, like, a little more flexibility to kinda try experiment, that sort of a thing. And that that was... That's not sustainable. Right? And so I think that they're looking for procurement to help control, you know, help make better decisions, help, you know, make data based decisions, especially regarding the total cost of ownership, which which goes well into build versus buy, but also goes goes into, like, what supplier you choose and that sort of a thing.
So I think that they're looking at procurement different. I think that procurement has incredible opportunity right now to prove that, hey. We're just... We're more than just, you know, savings and... Because there's a strong business need for that. I was just having a conversation with the head of procurement at a, you know, fintech company, and he said that his CFO was creating mandates for everyone to self report on, you know, the... Their AI use and their time savings that their different AI projects are are delivering. Like, it's a it's a full, you know, initiative. And and in that environment, what you're seeing is is a little bit of what I was saying earlier.
The default stance is why can't we do this with AI rather than why do we need to, you know, justify a new budget or or a new relationship to accomplish this task. Now what's important and the role that procurement can play is why can't we do this with AI? I think for many CFOs they don't necessarily see the cost impact of doing this with AI and the increased token consumption and cost associated with more utilization. And and that relationship is what exists kind of beneath the surface without great reporting, without great visibility that I think procurement can be a pioneer in in bringing to light that awareness for the office of the CFO.
It's great to say, why can't we do this with AI? Let's try to do it, you know, in Claude or in Codex and make that the priority. But they also have to understand what that's what impact that's having on the overall AI bill, And is this actually time well spent, investment well spent, or is it just kind of performative use of AI as opposed to, you know, efficient productive use of AI? Yeah. That's really 200 k a year as a as a as a as a software engineer and and and their their vibe coding apps instead of building the core product. Is it is it really a good use of their time? Yeah. It's...
Yeah. Really good point. The the the other thing I would mention here... And I'm I'm a bit of an economics nerd in my in my spare time, and I think it would... It's probably fair to say that we're gonna go through an extended period of inflationary pressure if we look at geopolitically everything that's out there and obviously, western nations generally are quite indebted and they've got to try and pay that back somehow.
If if my presumption is right, procurement naturally then should rise up the pecking order in a business if if if we're if we're gonna have to combat inflation. What one would assume? I mean, would you guys concur with that? I think if, if positioning yourself, strategically and, intentionally, absolutely. And this is where bringing the data and the insights and being a spokesperson around some of these trends within the organization and what impact it's having on the overall cost basis allows procurement to be the go to person to mitigate, address, and and opine on some of these trends. But if procurement is stuck being paper pushers and process, you know, executors and orchestration masters, then they're never gonna be earning the seat at the table to have these more strategic inflationary related conversations.
And so this is my call to arms to take... To harness the data and insights and and intelligence that... Not just companies like Traffic. You can get all of this stuff from a lot of different providers, but bring it into the fold so that procurement can elevate the role they're having as this kind of paradigm shift takes hold within businesses and redefines what doing always on sourcing should look like.
And you've kind of answered the next question that I that I that I was gonna ask, but what should procurement not be doing or where where a CFO is just not interested? You've you've mentioned just that process for process sake, but is there is there anything else out there? Because you you talk to a lot of CFOs in the way with with what you do.
I think that procurement needs to... I say that, like... Oh, go ahead. No. You you go first. Well, I'll just say that, like, our value needs to very much be in line. And not that this is new, but I think it's it's more important. Right? So maybe I'll say this and be like, well, no. Duh. But, like, the value we bring should be aligned with the needs that the organization has right now. Does that make sense? And and and, look, savings is always gonna be important, especially in a world where spend is, like, really being focused on, but, you know, savings can be secondary. Save... Savings can be the output, not function. Right?
Because if you're optimizing the supply base, if you're driving higher ROI, you know, obviously, there's going to be savings associated with that, but it's not savings for the sake of savings. So I would just think of, like, hey. What are the business pain points, and then how are we helping them solve those pain points with, you know, the the tools that we have in place?
Justin, anything that you wanna add to that? Michael went before you on that. I think that the... I think procurement should be very willing to say no to the nonstrategic run of the mill sourcing events that constantly come, you know, to them to them. Right? The, you know, the... Well, I'm gonna call it a renewal in this case because it is, you know, a crappy, like, low value renewal that we know is gonna get renewed for whatever reason. You know, there's... I I think procurement can drown in the ocean of work that that needs to happen and being very thoughtful around what's my cut line in terms of where am I intentionally empowering the business based on the protocols and, you know, definitions and policies that we have internally and arming them with the data intelligence to do this job kind of well enough while I can go focus on the strategic empowerment of of the organization to be proactive, to be thoughtful around some of these, you know, build versus buy decisions or doing the sourcing for, you know, strategic competitive advantage considerations.
Do not get roiled into the the kind of... The never ending slog of renewals is my is my emphasis here. The never ending slog of expiring contracts. But you're right. Like, there needs to be a smarter way to prioritize contracts because some of it can be self-service, should be self-service. An early, you know, contract, you know, a new one in replace of the old one, light touch, that sort of thing versus, you know, when you're actually doing those full sourcing events, etcetera. Like, you need a better way to prioritize that work. Awesome, guys. So we've got about five minutes to go. So I'm gonna open it up to the floor for q and a.
I saw you you, ladies and gentlemen, were pretty active in the chat. So if you've got a question that you wanna put to Michael or Justin or or even myself for that matter, then please drop it in the q and a. While I'm just giving you a minute to write your questions in the q and a, I'm just gonna pose one final question to to both of you. So if a team is still viewing this as a renewal calendar, what's the single biggest first step that they can make? And the second part to that question is where does it not make sense to spend energy if they're right at the beginning of their journey?
Just maybe tackle that while I wait to see if anyone's got any questions that they're popping in. I think there's nothing wrong with the renewal calendar. Maybe we we can disagree on the naming of what that'll look like, the expiring contract calendar Yeah. Because that... That's visibility. That's that's step one, and needing to have that is critical. I think step two, which is easy, is enriching that renewal calendar now with data and insights to be able to inform prioritization and decision making. And it's... There's there's plenty of of ways to accomplish that. You can even do it in Claude, you know, if you wanna rely on kind of public, you know, AI generated data, or you can do so with various MCP connectors like Tropix or whatever.
But being... Taking that established foundation around what is coming up when and now being able to start to start to enrich it to understand and determine where should I be spending my time to have the biggest bang for the for for the buck across the organization is a is a very easy next step to to accomplish.
Okay. I'm just looking. There's nothing that's come in, so I'm just scanning the chat to see if anyone's popped any questions in there, but it looks like they were mainly comments as we went through the webinar. Let me just check. Yeah. Looks like looks like Tim Tim just dropped in a question. What's best practice... Oh, there we go. Yeah. Regarding sales spend management managed by procurement. Yeah.
This is a great question. I would say this is very cultural and organizational specific. I see some companies that choose to send it to the lines of business and say there's... This is our cut line below a 100 k. You know, you as a business owner need to manage your own tail spend, And we equip you with data. We equip you with intelligence to do it the best you can, but it's not gonna be our priority. And I think that can work. It obviously requires alignment and enforcement and, you know, kind of a full company understanding around why this matters because, inevitably, business stakeholders are gonna deprioritize this, you know, basically beneath everything else on their list.
But if they understand and and can appreciate the value and the importance as driven by senior leaders in the organization, yep, business stakeholder tail spend management can work. In a lot of cases, we see this outsourced, whether it's to, you know, a team, you know, like ours where we're handling tail spend or, you know, whether you're kind of using some new autonomous negotiation or sourcing type solution or or an offshore BPO, you know, there's a... There's definitely an offshoring kind of trend that's happening. I think it is rare to see this actually being managed internally in house because the cost just doesn't make sense in terms of a sourcing professional internally staffed to cover smaller deals, it's hard to to really justify the the time and energy and the and the dollars to support it.
Yeah. That that was certainly my experience in my corporate enterprise corporate procurement days as well that anything that was under 20 k US dollars was typically handled by an outsourced buying center and we had... In our case, was in... We had one in Eastern Europe and we had one in... I think it was Costa Rica depending on on where where where it was in the world.
And, typically, that would... That didn't have to go through a competitive bidding process. Yeah.
Great. And then Ishaan Ishaan just dropped one in. Do we manage this this? It's tricky with...... Management. Yeah.
Yeah. I mean, the... Tying it back to value is is... Can be really, really tricky and challenging. I think that I think that what I've seen to be successful... Like, there there has to be some amount of measurement and tracking around a project basis, whether that's timeline to complete an OKR or, you know, some target around the end date of a specific engagement and being able to now speak to the shortened cycle or the, you know, the speed with which that was executed. Those are some, you know, examples of the more qualitative kind of business, you know, related initiatives. In the actual kind of product lens, if AI is now becoming a core part of the offering, there are very clear ways to be able to measure measure costs with specific AI deployments and then be able to tie revenue growth, you know, some sort of value metric associated with that kind of specific deployment to to assess value there.
And I think that's where... And increasingly, a lot of the costs are going into these product related initiatives, and therefore, can measure the the, you know, return on those investments.
Okay. Guys, I'm gonna have to wrap it up. I've noticed that we just slightly overrun. I know this is a topic that we probably could have quite easily spent another twenty minutes on, but time is of the essence as lawyers would say. So, any final closing remarks before we, be... Before we close it out? No. Thanks. And if you have any questions, just, you know, reach out to Justin or I. It's been a great conversation. Really appreciate the, you know, the the chat and and the involvement. Love seeing that coming from the community. Thank you, everyone. Thanks, guys. Great to see you all. Thanks, everyone. Have a great rest of your day.
Thank you for joining us.
