Where Does Spend Analysis Fit in Digital Procurement Transformation?
As the buzzword of the day, “digital transformation” remains top of mind for most businesses. When I hear about digital transformation, I am often reminded of the trendy commercials from technology behemoths like Dell, IBM, and SAP that promote changing the world by embracing it.
So what is digital transformation? In no-nonsense terms, digital transformation is about how organizations are realigning their people, process, and technology by leveraging the latest innovations. But at face value, going digital is really nothing new. The reality is that most organizations already underwent some digitization long before the term became popular in the mainstream. For procurement, this started nearly 20 years ago with the initial deployments of spend analysis, e-Auctions and e-Procurement solutions looking to address operational procurement challenges and automate processes that were once truly manual.
Yet over time, and with advancements in the power of computing and the development of cloud technology, emerging technologies in areas like AI, machine learning and RPA have captured the imagination of both business and IT. The idea becoming more “digital” in a new era of technology innovation has brought with it a new level of automation and connectivity that is paving the way for procurement organizations to become more efficient and effective across the entire source-to-pay spectrum. For spend analysis, this new normal means rapid and actionable insights from improved data quality, combined with the democratization of data using advanced analytic techniques.
In this regard, one of the world’s leading management consulting firms, Bain & Company, recently conducted a study on the topic of digital transformation. Based on the results of over 240 respondents, the survey shows that 80 percent of procurement leaders believe there is more they can be doing to leverage the latest digital tools, and 70 percent noted still relying on Microsoft Office tools for areas such as category management and stakeholder management. The report highlighted user ratings of 22 digital use cases of applications based on satisfaction and importance. The categorization of these solutions included everything that defines sourcing to contract and procure to pay, where ratings included importance, highest deployment adoption and satisfaction.
Interestingly, from our perspective at SpendHQ, spend analysis was one of the top five solution areas considered most important to the business. Also, by way of its maturity in the marketplace, spend analysis was represented as one solution area with the highest deployments. However, spend analysis did not make it into the top five as it relates to satisfaction. For this reason, spend analysis was placed in a grouping of solutions identified as areas in which organizations should proceed with “caution,” including demand forecasting, contract lifecycle management and market data intelligence. So why do spend analysis and wider spend visualization have lower satisfaction compared to other solutions?
While the paper did not detail these reasons, a recent conversation with David Schannon, partner at Bain & Company and one of the authors of the paper, revealed some thoughts as to what the major problems are. From both Bain and SpendHQ’s perspective, many companies still struggle with spend analytics solutions, including:
- Not having a good spend analytics solution process for data categorization
- Relying on users in the business to self-report and categorize data as they purchase goods and services for the business, which ends up not being useful or detailed enough for good analysis
- As a result of using bad data internally, groups like finance and the wider business units don’t recognize the data and categorization being presented by procurement, which end ups causing a rift
- Some spend analysis tools are not user-friendly for the sourcing and category professionals who are being asked to use them, whose skills sets are typically more traditional
In this new zeitgeist of “digital” technology innovation and adoption, many procurement organizations are looking for leadership to address their existing technology infrastructure while trying to find ways to address the “digital transformation” rally call from their executives. With the pressing fear of lagging behind more innovative competitors, much of the challenge in starting digital transformation lies in not knowing where to start and what processes or solutions to enhance.
Because transformation is predicated on insights from data, it would seem that getting spend analysis correct from the start is necessary for generating procurement-related EBITDA impact. Taking these traditional challenges into consideration, addressing spend analysis and wider spend visualization as a fundamental part of strategic sourcing, digital transformation initiatives represent a renewed opportunity to fix the traditional pitfalls plaguing spend analysis deployments.
Every business in every industry is addressing how to become more digital. To better understand digital procurement and where spend analysis may fit in your digital transformation efforts, join us for a webinar on November 15. During this webinar, we will look at Bain’s study in more detail and glean what these results mean for your own digital transformation efforts.
Register for the webinar, Understanding the Digital Procurement Transformation Journey on November 15, and get discover the digital transformation strategies you can apply within your procurement organization.
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.