Spend Matters welcomes a guest post from William Murcia, Procurement Practice at Archstone Consulting.

Sourcing managers frequently re-evaluate indirect spend to deliver bottom line results. While conducting spend analysis and re-sourcing spend categories is very valuable to drive cost reductions, people seem to rely on a baseline assumption of organizational need. Companies that aggressively source but do not aggressively evaluate the needs of their organization can become extremely efficient -- at spending money that doesn't need to be spent. Organizations should periodically build bottom-up budgets through zero-based budgeting to continually challenge spend that occurs using traditional budgeting.

Zero-based budgeting is an aggressive budgeting process that forces evaluation of organizational need to allocate funds for expenditures on a line-by-line basis. Business operators must justify each dollar of spend in the upcoming year. This bottom-up approach forces business operators to think strategically about spending and simultaneously builds strong budget ownership. Budgeting is thus not owned by finance, but rather by the entire organization.

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There's much ado about supplier management at Sapphire this year. Yesterday, we sat down with the solution managers for two products: SAP Supplier Lifecycle Management (something new!) and SAP Supplier InfoNet. We'll give a detailed introduction and analysis to SAP Supplier Lifecycle Management (internally called "SLC" to differentiate from the real SAP SLM - i.e. Software Lifecycle Management) soon, and also take a closer look at the latest in our favorite multi-tier supplier management product, SAP Supplier InfoNet. But today we'll give our cursory thoughts at both solutions, beginning with our initial impressions of Supplier Lifecycle Management in this post (check back later for a quick update on InfoNet).

SAP Supplier Lifecycle Management is designed to serve as a core supplier information toolset. It supports both closed registrations (i.e., those in which you invite pre-selected suppliers) as well as open registrations (e.g., a supplier diversity registration portal). 70% are currently doing closed registrations primarily and 30% are predominately doing open registration approaches, according to SAP. Supplier Lifecycle Management differs from SAP's On Demand Sourcing Supplier Management toolset in the following ways:

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Spend Matters welcomes a guest post from Eric Arno Hiller, Managing Partner at Hiller Associates.

Hello again, SpendMatters followers. I've been off the air for several years, but my name is Eric Arno Hiller, and I am the "product cost management" guy. I started working on product cost management years ago while completing my masters thesis in mechanical engineering at University of Illinois. After years in product development the auto industry, and after business school, I founded a software company to solve the product cost management problem "once and for all." After six years as CEO and Chief Product Officer there, I realized that the problem was big enough that a tool alone would not solve the problem for companies. So, I founded Hiller Associates to help discrete manufacturing companies increase product profit, whether the product is before or after launch. We have helped many Fortune 1000 companies save tens of millions of dollars by first setting up the right cultural change, processes, and team roles to make any tool enablers successful.

Back in the day, when I was the author of the blog CostCents, Jason was kind enough to allow me to post a whole series on cost modeling techniques and some other aspects of cost management. Perhaps you remember such timeless classics as What's The Language of Your Business, The Fourth F, and The Fundamental Dimensions of a Cost Model. No? Well, they were good times, let me tell you!

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Spend Matters welcomes a guest post from Mark Schaffner at Verian.

Though the stories broke a couple weeks ago, I can't help but discuss the all too painful reminders that some government entities have an extremely hard time managing spending. We are referring, of course, to the GSA and Secret Service scandals. The details of how thoroughly the Secret Service and military explore the local brothels on advance trips, and who pays for it, are still coming to light.

The lavish GSA spending was only exposed because two years later the Office of the Inspector General (OIG) decided to investigate excessive spending and produced a report. What did the OIG find out about the GSA conference?

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Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom, transportation and energy.

A couple of weeks ago, Amazon pushed the envelope once again by expanding its offerings to include an enterprise software retail store. Quentin Hardy of The New York Times blogs:

"Amazon.com's Amazon Web Services business, facing looming competition for its business of renting online data storage and computing, is introducing a store where customers will be able to rent business software from a number of third-party providers, including I.B.M., Microsoft and SAP...The store, called AWS Marketplace, will use the Amazon Web Services billing and fulfillment system. Payments will be based on use, either by the hour or the month...The offering appears to be something of a blend of the software as a service, or SaaS, business of companies like Salesforce.com and NetSuite, and the mobile app stores popularized by Apple and Google."

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How can you operate successfully in another country without respecting their traditions, and following their customs? If you say that you can't, well, how about Walmart's current problems with their operations in Mexico? Starting with a NYT article, Walmart has been skewered in the press amidst bribery and corruption accusations in Mexico. Technically, Walmart's Mexico operation is only 69% owned by Walmart in the US, but it is a substantial slice of the Walmart's pie (keep in mind as you read this column that they opened 365 stores in 2011 -- one new store per day in the region!) And they are now under scrutiny owing to allegations of extensive bribery.

But isn't this the Mexican way of life? It is. So, why all the hubbub?

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Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom, transportation and energy.

When it comes to complex IT purchases, few vendors can match CA for complexity and variability. That's because their product portfolio is so vast and diverse, the company's divisions price autonomously, account teams have latitude in pricing and terms, and the sales tactics at any given time vary based on the company's market share and competitive displacement strategy for specific solution areas.

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Please click here for Part 1, Part 2, and Part 3 of this series.

Jason Busch (Spend Matters): How much should suppliers expect to pay on an APR basis through the Oxygen system?

Mark Hoffman (Oxygen Finance): It's very modest. Think of it as a short-term loan (this also helps conceptualizing how a buyer can book the "payment" back as revenue). It could be 30 days, 60 days, 90 days, etc. Most important, because the buyer secures it, once the buyer has accepted the goods or services from a supplier, the early payment in effect becomes this loan. There is very little risk to anyone in the transaction. Even though the architectural funding model might look like a p-card/credit card, from a risk and APR perspective, it is more like a highly secured loan, more like commercial paper.

Jason Busch (Spend Matters): Where is this going in the future?

Mark Hoffman (Oxygen Finance): Think about what you can begin to see from this model. You begin to layer analytics on top of what we provide and you can see the flow of trade around the globe...to understand what that is, the data has huge value itself. It's a neural network across businesses. Some day this will be a very big thing. You could truly see the flow of goods and services -- and Oxygen could collect level 3 p-card-like invoice detail which is missing in so many transactions today. Think about the possibilities -- seeing aggregate COGs, SG&A, volume numbers, in real time. It's a huge amount of information and the true pulse of the market.

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Spend Matters welcomes a guest post from Craig Guarente, President, Palisade Consulting Group.

Tax day is nigh! For many of us, the prospect of getting that letter from the IRS telling us we are about to be audited is, to say the least, not something we look forward to. For those of us responsible for software compliance, similar feelings arise with the prospect of getting a letter from large software vendors like Oracle announcing that you are the lucky company "randomly" chosen for a license audit. Oracle users want to be in compliance -- they just don't know how to do it. I once heard someone say that Oracle clients are all over-licensed and at the same time they are out of compliance. Simply buying more and more licenses is not a long-term solution to compliance management.

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