3 Reasons Why Focusing on Spend Analytics Matters
As a veteran in the space of procurement technology, I can honestly say there is a wider variety of procurement technologies available today than ever before. Consider the evolution of all solutions that can touch procurement, including strategic sourcing, purchase-to-pay, and the expansion of niche solutions in areas like contract management, supplier management, and services procurement. Despite all these technology solutions available at our disposal, many enterprises still struggle with their abilities to manage the nuances of their spend data and transform them into actionable intelligence.
A recent Harvard Business Review article points out that 80 percent of respondents say they deploy self-service analytics on the job, helping their companies move quickly toward a culture of data-driven decisions. But a significant number of these workers aren’t satisfied with the tools’ functionalities and benefits. To elaborate on this challenge further as it relates to procurement, according to Ardent Partners, 53 percent of CPOs acknowledge data visibility and analytical capabilities are still needed for establishing the next level of performance. The research also points to the fact that the challenge of getting to best-in-class performance is, in part, attributable to the saturation of data from both internal and external sources.
As arbiters of improving spend under management with technology and services purpose-built for sourcing and procurement, SpendHQ has come to identify achieving data visibility for spend analysis to be challenging, despite innovations within procurement and wider business technology. Here are 3 reasons why:
#1 – Challenge of Data Management
First, knowing where all your spend data resides is not a one-and-done process, but an ongoing exercise. Regardless of how mature a procurement organization is with technology, spend data will invariably come from many different places, including AP systems, P-cards, T&E or expense management, and/or payment consolidators (transportation, utilities, etc.), not to mention third-party sources for things like enriched vendor data. Moreover, organizations are in constant flux due to mergers and divestitures, so even if the goal is to put all data in one place, like an ERP or source-to-pay suite, there is no guarantee it will always come from one data source.
For instance, given the rapid pace of change in industries like biotech/pharmaceutical, healthcare, and technology, it’s not uncommon to have multiple instances of the same ERP or procurement technology that still need to be reconciled. So, whether by API interface or file load, merging data with multiple data formats from dozens of locations in multiple currencies requires expertise to interpret, understand and separate the spend data into procurement-centric spend categories that are sourcing ready.
#2 – Challenge of Data Visualization
The process around data optimization (collection, normalization, and enrichment) is only part of the challenge. Even if you have good-quality data that you transform into useful information, the ability to interpret and tell a story is not always easy. Whether data visualization is an art or a science, end-user adoption requires UI/UX design that aligns spend data in a way that sourcing and procurement professionals can leverage it in both an exploratory way (i.e., identifying spending trends or patterns), and in an explanatory way for sharing where savings and compliance opportunities exist for the business.
Along these lines, today, there is a variety of business analytics solutions that are available for doing spend analysis. For instance, most organizations use traditional tools like MS Excel in some shape or fashion. Excel can provide a quick means for many learned users to manage custom formulas and manipulate data for analysis efforts. But relying on spreadsheets alone for spend analysis can end up taking a lot of time and resources based on the difficulty of managing and scaling in the long run.
Others take on spend analysis as part of their wider business intelligence (BI) efforts. Tools like Microsoft Dynamics, Tableau and Qlik are often recognized by analysts for offering the latest in visualization and self-service analytics. However, since they are not designed for procurement, they often fail to provide the desired results for spend analysis initiatives because the data is not provided in the vernacular of procurement. Further still, while BI dashboards may be customizable, the effort to manage and accommodate spend requirements makes BI difficult and expensive for procurement teams to manage, especially if the tool is being managed centrally by IT, and not by the business.
#3 – Challenge of “Too Much Procurement Technology” under One Roof
Finally, there are spend analytics tools that come as part of strategic sourcing or source-to-pay suites that offer spend analysis as one of many offerings. Many of these technologies started in strategic sourcing, but have since focused their direction on building a platform or suite with wider purchase-to-pay applications. Others have acquired the spend analysis technology as part of their source-to-pay solution, but have little in-house expertise to help in understanding the data, or may be limited in their ability to apply analysis outside the technology suite.
While focusing technology on improving process and workflow between sourcing and procurement processes and establishing a common data model across an entire suite, managing data outside these technologies is still necessary. Also, due to this focus on integrating modules, there are often limited native spend analytics and visualization capabilities within these tools designed specifically for spend analysis, further enhancing the need for using third-party tools that are not natively built. Therefore, despite the ability to bring many process areas under “one roof,” they are not always easy to use, and they lack purpose-driven experiences for those focused on spend analysis efforts related to sourcing or category management.
Given these challenges, focusing on a spending intelligence system that provides rapid, accurate and detailed visibility into spending data, combined with data optimization and expertise, should still be in vogue, despite all the trends telling us how procurement technology and services should work.
To learn more about these challenges and how to be purpose-driven in your spend analysis efforts, join us on September 28th for our webinar – Avoid Common Spend Analysis Pitfalls: Get Better Adoption and Become World-Class.
SpendHQ is a spend analysis solution that provides rapid, accurate and detailed visibility into enterprise spend data. This full-service SaaS (Software-as-a-Service) spend analytics solution delivers actionable insight for sourcing and procurement professionals. With SpendHQ as your command center, you give procurement leaders inside your organization the power to impact the bottom line.
Recognized for innovation and industry impact in the procurement space, SpendHQ was named the best Best Big Data Reporting & Analytics Solution and Best Data Visualization Technology solution in the 2018 SIIA CODiE Awards. With SpendHQ at their fingertips, clients ranging from Fortune 500s to mid-market companies are finally able to see their enterprise spend clearly and drive savings confidently.