Friday Rant: Spend Jihadists vs. Non Believers

Earlier this week, I met a number of practitioners deeply involved in spend analysis as the global Zycus Experience Tour kicked off its US leg in New York (I'm speaking at the Chicago event today and Houston and Los Angeles in the coming weeks as well). The event was well attended (50+ people), especially considering it was held within a couple hundred meters of where the car bomb was found in Times Square over the weekend. But what struck me most was not the tenacity of the attendees who made it -- some people did in fact beg out over terrorism concerns -- but rather their general sophistication around spend analysis, not to mention their near religious support, in some cases, of leveraging UNSPSC as their core commodity coding and classification taxonomy (if you're curious to read about the latest in spend analysis technology, check out our recent Compass research brief on the subject here). This event was in marked contrast to the talk on supplier risk management technologies that I co-presented with Sherry Gordon at ISM last week. During that discussion, the audience was clearly eager to learn, but most were starting from a much less mature technology context and understanding.

I think what's happened in the past couple years is that the market has bifurcated into companies (and individuals) who clearly understand the power of spend analysis, supplier management and supply risk management to impact their organizations versus those who are just investigating these areas for the first time, or have simply checked the box with periodic spend analysis efforts in the past. Earlier in the day at the Zycus NYC event, Forrester's Andrew Bartels presented on technology adoption and a technology outlook in the procurement sector. Even though I think we disagree on some areas of adoption patterns, I agree with Andrew's quantitative findings that spend analysis adoption ranks at the bottom of the overall procurement technology adoption spectrum (according to Forrester's recent vendor survey, eProcurement leads, with sourcing, contract management, services procurement and supplier management in between). However, even though spend analysis penetration represents only 10% of the penetration of eProcurment, the companies who are using it on a regular basis clearly get it -- and they're almost evangelical in the power of it to change their business.

What's also interesting is that the folks typically running spend analysis programs for their companies aren't the ones you might assume (young, techie, data analyst types). They're often more senior in their careers and they understand the business as well as technology. And the ones at Zycus' event, which clearly represent more of an early adopter and innovator contingent, are also willing to make choices and expend internal political capital on decisions (e.g., leveraging standard UNSPSC vs. a customized taxonomy) to move quickly rather than achieve a truly optimal solution for different stakeholders in the business (i.e., an approach that enables multiple taxonomies).

Another observation I'll make over active spend analysis users is that many are passionate about their particular tools unlike other areas of Spend Management technology. The typical reaction when you ask someone about their sourcing or P2P tools is that "it works" or they'd like to see "XYZ" without having to pay a bundle more. But with spend analysis, you have ardent supporters. In the past six months, I've spoken to a range of users of BIQ, Endeca, Spend Radar and Zycus, nearly all of who are passionate about their chosen tools. Of all these, BIQ especially, seems to engender a truly fervent response -- i.e., love it or hate it or more appropriately "love it" or "don't get it."

As companies do their due diligence on spend analysis tools -- even those involved in re-sourcing technology in this area as original contracts come up -- it would behoove them to spend a lot of time not just checking vendor references but actually learning from them, asking questions like:

• Why did you go down a certain classification path? Has it worked as expected?

• What types of reports do you run on a regular basis? Do you do any "off-roading" in the data?

• Do you consider non-traditional spend datasets (e.g., supplier provided information, VAT information, customs/brokerage information, global enrichment, warranty claims data, etc.)?

• What is your data enrichment strategy in the US? Globally?

• Are you managing supplier risk or supplier diversity programs through the spend analysis tool?

- Jason Busch