Spend Hydroplaning -- Purchasing Magazine Skims the Surface of Spend Analysis (Part 2)
An increasing number of companies also use spend visibility as a means to support other initiatives, including supplier diversity reporting, rather than have individuals and small groups tackle these processes independently through different platforms. (The exception to this is in the case of multi-tier reporting requirements, which few spend analysis platforms support without significant customization). If we look at spend analysis independently today, what is the best way to segment the landscape and the various providers within it? Whom should companies shortlist?
When lecturing on the subject, the first, highly technical way I typically describe the landscape is "frigging confusing." Consider how many kinds of providers offer spending analysis solutions today: strategy consulting firms, BI vendors, ERP vendors, spend/supply management suite providers, Big 5 consultants, offshore data-crunching firms, outsourcing/BPO providers, best-of-breed providers, data enrichment/content companies with front-end software -- the list goes on. The long and short of it is that it's possible to get spend analysis capabilities from just about any flavor of software company, outsourcing firm, consultancy, or content provider. Moreover, it's possible to get spend analysis at just about any price point (including free, from consultants and BPO providers, who will often do it on a one-time basis, to assess savings opportunities).
We typically look at the spend analysis software landscape in three buckets: ERP/suite providers (e.g., SAP, Oracle, Ariba, BravoSolution, Emptoris, Ivalua, Zycus), analytics and other best-of-breed vendors (e.g., BIQ, Endeca, DataFlux/SAS, Spend Radar, Rosslyn Analytics), and content/enrichment providers (e.g., CVM Solutions, D&B). There are many more vendors that fall into each of these categories, and I'm not purposely ignoring them here, but they don't make it to the shortlist as often as others (or they fail to deliver an innovative approach).
The shortlist we typically recommend to clients is based on specific requirements, including the need to drive to line-item or part visibility, the need to incorporate significant forms and types of third-party information, and the importance of analytics capabilities to a company (and its skill set in using analytics capabilities). In many cases, we conclude that companies just getting started with spend analysis may be better served by a provider that can deliver it as a service. Fortunately, as tools have become easier for services firms to work with over the years (and less expensive), dozens of consultancies (and outsourcing providers) have access to software that can drive one-time analyses. These can then become the basis for an installed (or hosted) spend visibility roll-out if a company wants to take it in-house after an initial engagement.
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Why the buckets? In particular, 'best of breed' implies they are better than the suites and, from my experience, this is not inherently true.
Furthermore, I would argue that 'best of breed' spend analysis is integrated (into a suite) so as to streamline the actions that follow the opportunities identified during the analysis.
By way of analogy, spend analysis without action is like being told you are overweight and, then, not doing anything about it. Where’s the value in being told you're overweight if you don’t do something to improve?
I hope we can agree that spend analysis helps identify opportunities to save and/or take action and the suite providers enable the value capture more effectively and seamlessly. It's the combination of analysis and action that creates value -- one without the other is sub-optimal and clearly not 'best of breed'.
I look forward to your insight.
Paul
When you have 50+ providers, buckets help people make sense of the landscape. That's why.
Maybe best of breed is not labeled correctly though because I don't want it to imply they're better. Rather, they're pure plays. Maybe ISV (a term I can't stand) is a better word choice, though.
Thanks for pointing out.
BTW ... I don't think there is one right approach to spend analysis. I think even the same organization might optimize its visibility by taking multiple approaches and using multiple solution depending on what they want to accomplish.
If you start from the result and work backwards it's easy to see that analyzing is the most reviewed user touchpoint. How do I consume or assess this pile of information. Where are the opportunities. But remember the old adage, "Garbage in, Gospel out".
Continuing backwards upstream you see
- Enrichment (tell me more about xyz that I didn't know),
- Validation (is the data correct or just what was entered),
- Classification (what the heck is this thing),
- Verification (did you mess up the collection),
- Cleansing (don't know if it's good, but its consistent) and
- Aggregation (how do I find ALL the data and how do I move it reliably)
The key question then becomes, what value does each of these steps bring to any perspective purchaser and that's a question of perspective. Be honest with yourself, if someone tells you that it's a simple issue, or we can do that ourselves, ask yourself why it wasn't done already. There's more to this than meets the eye.
Only a few suppliers can provide Procurement Intelligence. Most provide Spend Analysis and some provide Spend Reporting. There is a big difference between the two.
Mark Severns | www.emptoris.com
Perhaps what is different is how spend analysis plugs into risk managing strategic supplier relationships. It plugs in as a tool to identifying risk triggering events and as a possible source for mitigation strategy suggestions when analyzing that relationship. Additionally, it may have relevance to developing negotiating positions pertaining to contract administration Contract administration is always a risk condition relating to supply chain risk.