When it comes to spend analysis there is at least one particularly powerful tool out there that will meet the majority of the needs of any organization and probably at least one tool that will do, with elbow grease, just about any analysis an analyst can think of. Since businesses have wanted reports and analytics since the days of the first spreadsheets, analysis tools are always advancing and most are beyond the ability of the average user to fully utilize their functionality.
So, given this fact, how would I improve spend analysis? And given that this question may imply that I may only make one improvement, just what would that improvement be? Especially since most tools don’t do (true) federation, don’t support full reg-ex (regular expressions), don’t understand semantics, and don’t run fast enough on large data sets — indicating that, as a PhD in CS with deep expertise in analysis, modelling, optimization, and semantics, there are theoretically a number of advancements I could bring to the table if I put my mind to it?
Despite the plethora of options available, today there is only ONE thing I would do to improve spend analysis. I’d make it impossible to do anything but spend analysis. Specifically, I’d make it illegal to include dash-boarding capability in any (spend) analysis product.
Why would I do such a thing? Besides the fact that I’ve been ranting since 2007 that dashboards are dangerous and dysfunctional, I would do such a thing because, among other things, they give you a false sense of security that, if mismanaged, could be so grave that, like the myth of Nero, you would fiddle while the factory burned.
Why would I ditch the dashboards and make it a crime punishable by any fate one could devise that was worse than death to include any capability whatsoever designed to support a dashboard? Because I just read this post on Purchasing Insight on the inordinate cost of poor spend analytics that said that it’s reckoned that more than 50% of businesses employ between 2 and 5 people to prepare and create procurement dashboards and spend reports. This is ludicrous. (No, not Ludacris.) If these people are senior analysts, then a large organization is spending more than 500,000 a year on salary and overhead to create dangerous and dysfunctional dashboards that spit out shiny spend reports that, after being analyzed the first time for inefficiencies, provide zero value to the organization. Once the report is analyzed, the inefficiency identified, and the problem corrected, and once this is verified in the next report, no subsequent report is going to tell the analyst, or management, anything new.
As SI has said again and again, the value of spend analysis is actually doing spend analysis, again and again, testing new hypothesis every time they pop into the analyst’s head. Yes, most hypotheses will yield nothing, but that’s not important because it only takes one insight to yield 100,000 worth of savings. If the tool is flexible, powerful, and configured appropriately, the user will be able to explore dozens of different analyses in a week, and if even one yields 10,000 of savings, that’s an (amortized) ROI of (at least) 5X. Spend analysis is analysis. Not dashboards and reports.
So if you really want to improve spend analysis — ditch the dashboards and focus your talent on real analysis. Otherwise, just download a free reporting engine off the internet. You’ll get the same worthless result, without forking out six figures for a tool you’re not really using.