These days, every vendor and his dog is offering “spend analysis” solutions to the market, but, as one can easily guess, not all “solutions” are appropriate in all situations, or even capable of producing a true picture of spend for an average organization. Therefore, in order to select an appropriate solution, one has to know what to look for. The right answer is often elusive, because there is a fundamental lack of understanding in the market of what a “spend analysis” solution actually is, and what it should be expected to do. Depending on who is asked, the definition of analysis will vary from the process of building predictive models using historical data, to deciding whether past events or transactions are statistically significant, to sorting through haystacks of data to find meaningful needles that will suggest patterns. Each is a valid definition, but it is not necessarily useful to an organization that just needs a better understanding of what it is spending, where, with whom, by whom, and, more importantly, why. From a practical perspective, spend analysis boils down to “finding stuff in your data” that the organization was not aware of, or was not sufficiently aware of. Spend analysis, therefore, is the process of deriving insight from spend data.
So how do you derive insight? You apply a well understood process to multiple data sets. Emphasis on “you” and emphasis on “multiple”. If the process can only be accomplished by a team of programmers in a back room, it is not useful from a business perspective. You have to be able to use the system to do the analysis you need to do. And if the system can only build one cube on one data set, then it is not a useful analysis system. Depending on your organization, there could be savings in the AP data, the invoice data, the HR data, or the ERP data. You don’t know until you look at all the data sources and build and analyze all the cubes.
So what does this mean from a system perspective? Find out in our article on “What to Look For in a Spend Analysis System” over on the new Next Level Supply site. True spend analysis is a fundamental requirement of a next generation supply management organization.