Spend Analysis Saves

October 11th, 2007 at 05:23am David Bush - Iasta

As August came to a close, Aberdeen released their latest spend analysis research study, Working Too Hard for the Money (free, courtesy of Iasta). A few bloggers, like Tim with his Aberdeen’s Spend Analysis Benchmark: The Penultimate Study?,
Why Spend Analysis?, and Spend Analysis: Building the Business Case posts and Eric with his Aberdeen on Spend Analysis: Lost in the Trees post, picked up on it quickly.

In his trio of posts, Tim pointed out the following key takeaways:

• too few enterprises have efficient or effective spend analysis programs
• even fewer utilize automation to make spend analysis an efficient and repeatable process
• disparate data sources, poor data quality, and lack of standard procedures are still chief barriers to spend analysis effectiveness
• enterprises under-performing in the area of spend analysis are at a significant competitive disadvantage
• top performing spend analysis programs have some common attributes
  • twice as likely to deploy a solution to automate spend data
    collection
  • 40% - 90% more likely to establish executive support
  • 40% more likely to utilize spend analysis reports that provide
    details at the transaction level
  • 30% more likely to have enterprise-level visibility into
    spend
• spend analysis software delivers the following benefits
  • 34% increase in total spend under management
  • 75% increase in savings from sourcing efforts
  • 33% improvement in compliance with negotiated agreements
  • 22% reduction in sourcing cycle time

In his post, Eric pointed out that the report contains a fascinating chart that shows survey respondents’ opinions of the “importance” of data analysis, data management, reporting, and supplier content, plotted against those same respondents’ classifications of their “current ability” in those four areas. It appears that “current ability” deeply lags “importance” in all four of them. He then points out that Aberdeen fails to draw the obvious conclusion from this — namely, that legacy approaches to spend analysis are disappointing their users across the board, despite causing an uptick in procurement efficiency.

And they’re both right - spend analysis will

• increase total spend under management
     best-in-class will achieve spend under management in excess of 90%
• significantly increase savings
     best-in-class organizations in the study increased savings by 75% on average
• improve compliance with negotiated agreements
     best-in-class organizations have compliance rates that are 30% better than all others
• noticeably reduce sourcing cycle time
     organizations in the studied averaged a 22% reduction in sourcing cycle time

as long as it is true spend analysis that is properly selected, deployed, and utilized by the sourcing team. As Eric points out, this spend analysis tool will go beyond mere data collection, cleansing, and classification and provide:

• Powerful analysis and ad hoc reporting tools (”data analysis” and “reporting”),
• Flexible and ultra-fast dataset creation (”data management” and “supplier content”),
• Real-time dataset modification (”data management,” “data analysis,” and “reporting”), and
• Flexible deployment (powerful spend analysis is now deployable for small dollars, on individual analysts’ desktops, without an organization-wide commitment).

The Iasta solution, meets all of the requirements of a proper spend analysis solution. If you would like more information on spend analysis, please free free to contact Iasta at any time.

Or, feel free to download the free report from Aberdeen here.

Entry Filed under: Analysts/Research, Spend Analysis, Technology

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