Spend Hydroplaning -- Purchasing Magazine Skims the Surface of Spend Analysis (Part 1)

A recent Purchasing article on what $100K buys in spend analysis has already had some rotten tomatoes hurled at it by an irate blogger. In his response to the article, Michael Lamoureux, who posts as "The Doctor," gets only one of his criticisms wrong (e.g., Insight Sourcing), and nearly all of them right, at least as Spend Matters keeps the spending visibility functional score. The fact that Purchasing overlooked BIQ, Rosslyn Analytics, Spend Radar and others, while driving to a $100K price point by comparing apples to oranges, provides a potential disservice to the market. Still, I do think we should applaud a trade publication to some degree for at least trying to analyze a software market that its readers should be thinking about. But I'm not clapping my hands too loudly.

In my view, the question should not be what $100K can buy -- the answer varies widely from vendor to vendor depending on a range of factors -- but rather, what do you need if you only have $100K to spend, based on your individual priorities. Moreover, the article ignores the frequency -- and potential benefits -- of spend analysis as a service delivered by solution/consulting firms to potentially identify sourcing savings and reclamation areas (e.g., invoice audits) more quickly. Moreover, from a technology perspective, companies need to ask themselves whether or not it's important to have their spend analysis capabilities integrated closely into their sourcing, contract management, and supplier performance-management processes and tools. If the answer is "yes," they may very well choose to spend $100K differently than if not.

If Purchasing had reached out to either myself, Michael or other non-traditional analysts in addition to AMR Research and Forrester, we could have provided them with more detailed pricing intelligence than what they gleaned from talking with traditional analyst houses, namely that "procurement operations more likely will need to spend more on spend analysis software, probably about $150,000 to $200,000." Moreover, not all approaches to spend analysis (including data classification and analytics) are created equal, as any experienced procurement analyst knows, and the path you choose in these areas will play a major factor in which vendors you ultimately select and how much you want to spend. For example, there are very real reasons why you might want to invest in multiple spend analysis approaches to accomplish different goals, each with its own justification for either delivering or managing returns (or reducing risk).

In short, it's not a bad thing that Purchasing put the spend analysis question on the table, but those interested in double-clicking on the subject for their own companies would be well advised to look beyond the information shared in the article, which is at best a partial primer, and at worst potentially misleading. Moreover, this story presents a lesson in why it's worth reaching out to additional expert sources (e.g., bloggers, consultants) beyond traditional analyst houses for their opinions to get a more in-the-trenches view of a subject. I could personally have recommended over half-a-dozen true experts to interview on the topic (in addition to sharing my own thoughts) who would have helped Purchasing frame their story in a more pragmatic, accurate and educational way.

Stay tuned for more on the subject tomorrow or next week.

- Jason Busch