Daily Archives: January 19, 2017

There’s Still No Spend Analysis Without the Slice ‘N’ Dice

SI originally ran this post 10, yes ten, years ago today, and nothing has changed. Regardless of how fancy that drill-down dashboard is, how many pre-canned reports come with the system, or how many sub-views you can create, if it’s still off of 1, that’s one, cube, it’s still limited in the value you will get. Moreover, this post is especially relevant because it reminds us of how BIQ changed the spend analysis game and that the individuals that spearheaded the company are game changers. This is particularly relevant because Eric Strovink, the founder and the person that has now changed the spend analysis game twice (first at Zeborg, now part of [IBM] Emptoris, before BIQ) is going to be launching a new analytics company this year, and chances are it won’t just be the same-old same-old rebranded Tableau or QlikView solution).

When I was in Boston, I was lucky enough to spend the better part of the day with Eric Strovink of BIQ, and have a few extended conversations with individuals at some of the local consulting firms that specialize in sourcing, and am now more than convinced that any tool that mandates a single cube, or makes it difficult to change the cube, is not a spend analysis tool, merely a spend data warehouse with built in canned reporting (and, if you’re really lucky, limited ad-hoc capabilities).

Not that there’s anything wrong with a centralized spend warehouse with a consistent view of your total spend, especially one that integrates multiple internal and external data sources and allows you to drill down and understand your spend at a detailed level. Of all the e-Sourcing software tools, it is the one most likely to make your CFO do backflips, especially if it has good reporting (and this is a big if – not all spend analysis tools on the market do), since it makes it really easy for the CFO to tell the CEO where the money is going and comply with all those pesky reporting requirements.

However, the value of such a tool is quite limited to you as a purchasing agent. Now, it’s true that the first time you’ll use it you’ll save big-time, especially if it’s the first time you have visibility into the majority of your spend, but the reality is that this is the only time you’ll see such significant savings. After you’ve identified all of the low hanging fruit identified by the single view provided to you by the system, analyzed each instance of over-spending, and taken corrective actions, you’ll find that you’ll be unable to identify additional savings and the system will simply function as a glorified data warehouse that you only use once a quarter to create those reports for your CFO and check that your teammates our buying off the negotiated contracts – something that you could do almost as well with your existing ERP system and a significantly cheaper Business Intelligence / OLAP tool like (SAP) Business Objects or (IBM) COGNOS and some grunt work.

Remember, I’m not saying that traditional spend analysis systems like those provided by e-Sourcing providers like (SAP Ariba) Procuri and (IBM) Emptoris are not without value – if you do not have a good, integrated, data warehouse that integrates your various accounting, purchasing, and inventory systems to provide you a single view of your spend or a good reporting system to produce all of the reports your CFO needs, then you’ll find these systems very valuable. However, it’s important that you understand that the primary value of these systems is in the total spend visibility they provide from a financial viewpoint, not the spend analysis capability you really require to identify potential overspending and cut-costs, because you’ll only be able to do this once – thanks to the single organizational view they are built on. (In other words, you’ll save big when you fist implement the system but future savings will be limited to your capability to quickly catch and stop maverick spend.) So, if you need a system to consolidate your spend data, produce the tedious reports required by all of the new financial reporting requirements, and give you some basic across-the-board spend visibility, or, more importantly, you need a spend data warehouse that integrates with the rest of your e-Sourcing suite, be sure to check these systems out – but understand what they are really worth to you before you sign the check.

In order to help you understand where these systems fail in true spend-analysis, why you need to be able to dynamically create multiple cubes on the fly which support dynamic dimensions, meta-aggregation, cross-dimensional roll-ups, and even federated data sets, I’m happy to inform you that Eric Strovink has agreed to co-author a series of posts outlining what real spend analysis is, how it differs from basic spend visibility, what it does for you, and why you need to get there.

Eric Strovink was actually kind enough to contribute two insightful series to Sourcing Innovation. Here are the links for your reference.

I: The Value Curve
II: The Psychology of Analysis
III: Common Sense Cleansing
IV: Defining “Analysis”
V: New Horizons I
VI: New Horizons II

I: It’s the Analysis, Stupid
II: Why Data Analysis is Avoided
III: Crosstabs Aren’t Analysis
IV: User-Defined Measures, Part I
V: User-Defined Measures, Part II