Category Archives: Spend Analysis

Analytics8 SpendView: An Affordable New Mid-Market Spend Analysis Solution

While the analytics marketplace, like the e-Sourcing marketplace, might be well established with most Procurement organizations able to name half a dozen likely providers off the top of their heads and most analyst firms able to name two dozen, the fact remains that less than half of Procurement organizations use real analytics and only the leaders go beyond basic spend reporting to index tracking, what-if savings estimates, or predictive trending.

There are numerous reasons for this lack of adoption, but a big reason was that early analytics solutions often came with a hefty six figure price tag. And that was just for the initial project. Then there were quarterly data warehouse refresh fees, report update fees, maintenance fees, and consulting fees to help interpret the patterns and identify the biggest opportunities. Many early adopters ending up paying seven figures annually, often for a limited return. Why? Because by the time the warehouse was refreshed, the reports run, the analytics done, and the spend opportunities identified, the business demand changed, the market dynamics changed, the prices changed, and the analysis was of limited relevance.

However, as newer solutions, like Spend Radar and BIQ came on the scene, spend analytics became much more affordable, and useable, as analysts could refresh data on monthly, weekly, and daily basis and obtain the solution in the five figure range. Plus, they had a fair amount of control over what data was loaded, what cubes were built, and what reports were available — with the ability to generate their own cubes and reports, sometimes on the fly with solutions like BIQ. Analytics stated to take off. And so did the e-Sourcing suite providers that gobbled them up. As a result, there are now few analytics solutions that are affordable by the mid-market and fewer still targetted there.

This is where Analytics8 SpendView comes in, built on over a decade of big data analytics experience and over 15 years of spend analytics experience by the solution designers, SpendView is a new analytics offering designed to bring modern easy-to-use spend analysis capability to any organization with over 10M in annual spend at a price tag it can afford, but good enough to satisfy even large multi-nationals with unique needs. What kind of price tag? A price tag that starts in the low five figures for a perpetual license (with low annual maintenance fees). (This is a price tag that can allow an average mid-market organization to obtain at least a 10X ROI every year.)

The new Analytics8 SpendView suite is a set of 4 integrated modules that allows an analyst to family and normalize suppliers, identify preferred and manage suppliers, categorize spend, and create and drill into spend reports. The vendor normalization module allows the analyst reviews all supplier records and maps all duplicates to one master record. It’s got a very simple interface, search, filter, select, and associate with a single click. The supplier assignment allows the analyst can select all unmanaged or un-preferred vendors, choose whether or not to manage or prefer them, assign suppliers to parents, and quickly see what percentage of spend is with preferred and/or managed suppliers. The categorization module allows the analyst to categorize transactions to categories by defining rules. The interface, currently supplier or description driven (but which should also be department and / or GL-code driven), allows a user to drill into uncategorized transactions, filter for similarity, and define rules that map groups of transactions to categorized spend. The rule is added in numeric order, but can be re-ordered as needed. And the reporting module ontains a set of canned widget-based drill down reports that allow an analyst to drill down into spend data, by supplier, department, category, geography, or other attribute and extract a report on the data, and only the data, they want to see it — which could be invoice data, payment data, or purchase order data. It’s built on QlikView and has the full capabilities thereof.

It’s power and usefulness to the average organization is more-or-less on par with its more established primary competitors — which SI sees as Rosslyn Analytics, Sievo, Spend 360, and SpendHQ (especially since BIQ and Spend Radar, named above, were among the acquisitions of the previous generation of best-of-breed stand alone analytics providers) — and it is a quick entry into spend analytics for any enterprise already using QlikView for other analytics needs.

SI recommends you check out the deep dive on Analytics8 SpendView by the doctor and the prophet over on Spend Matters Pro [membership required] that goes deep into strengths and weaknesses, corporate SWOT analysis, and the market landscape. (Part I, Part II and Part III now available) You won’t be disappointed.

Why Does Tail Spend Take Your Head for a Spin?

In our last post on why you shouldn’t let tail spend take you for a tail spin, we noted that tail spend could be keeping an additional 3% of revenue from hitting the bottom line (and, depending on your industry, and its margins, reducing your profit potential by up to 50%) and severely impacting your organization’s profit potential (and operating budget, which Procurement rarely has enough of).

We told you the answer to that was Sourcing Innovation’s new white paper on An Introduction to Tail Spend — and why you need a technology-based solution (registration required), sponsored by Claritum, because, unlike most papers, it tells you not only what tail spend is, and why not addressing it is costing your organization more than you know, but how to do something about it.

And it’s not just the typical solutions that the paper throws at you, which include:

  • tacking it on to managed spend,
  • using a GPO,
  • e-Catalogs, and
  • optimization-backed sourcing platforms

because:

  • strategic suppliers want to supply high-volume or high-value products, not low-volume or low-value products, and certainly not as a condition for supplying strategic categories
  • GPO pricing is only as strong as their constituents and if the majority of the constituents don’t want the products or services that constitute your organization’s tail spend, their prices won’t be much better
  • tail spend is too unpredictable to be managed through a single catalog, especially since only a portion of tail spend should generally be made as catalog spot-buys
  • as optimization-backed sourcing platforms have the power to source much of tail spend, but don’t provide the guidance, and the strategy is often the most important thing

That’s why the paper provides not a single strategy, but a process for selecting the right strategy for each type of tail spend, as well as guidance on how to choose a platform to support it.

So download Sourcing Innovation’s new white paper on An Introduction to Tail Spend — and why you need a technology-based solution (registration required), sponsored by Claritum, and get your tail spend management on the right track.

Don’t Let Tail Spend Take You For a Tail-Spin!

Download Sourcing Innovation’s new white paper on An Introduction to Tail Spend — and why you need a technology-based solution (registration required) today (sponsored by Claritum) and find out how tail spend could be keeping an additional 3% of revenue from hitting the bottom line (and, depending on your industry, and its margins, reducing your profit potential by up to 50%).

The first thing that the paper does is define just what tail-spend is. It’s more than just the “tactical” (or “nuisance”) spend in the lower-left quadrant of the famous 2*2 Krajlic matrix, which describes the traditional strategy of “purchasing management” to manage non-critical abundant supply that can be sourced locally in a de-centralized manner for maximum efficiency. And it’s less than any transaction less than $200,000 which is how Accenture describes tail spend.

Tail spend is essentially that spend that shouldn’t be put through a rigorous sourcing project, because the ROI that would be obtained is not enough to warrant the effort. If the ROI is not at least 3x, the spend just needs to be appropriately managed. Maybe that’s a low bid auction. Maybe it’s the cheapest product or service in a vetted catalog. Maybe it’s the preferred item from a catalog (or even strategic) supplier to increase total spend and negotiate additional volume based discounts.

It’s not leaving it up to whomever to do whatever whenever with whomever they like. When tail spend is not managed, the following can happen:

  • rebates and discounts can be lost
    when contracted volumes are not met
  • process costs can increase
    as tail spend invoices, often submitted through fax and e-mail, continue to increaseas tail spend will inevitably expand over time (and it will increase with no accompanying or referenced purchase order)
  • liability risk increases
    when service vendors without appropriate insurance are contracted
  • reputational risk increases
    when junior buyers buy from a supplier with a poor CSR record
  • supply risk increase
    when junior buyers buy from unstable suppliers
  • non-compliance risk increases
    when mandated MWVDBE vendors or fair-trade vendors are bypassed
  • (personnel) fraud risk increases
    as buyers can put charges on p-Cards with little or no documentation (and submit the same receipt 3 times over 6 months)

In other words, tail spend needs to be managed, but it can’t be managed until you understand what it is and how it should be dealt with. This is where Sourcing Innovation’s new paper on An Introduction to Tail Spend — and why you need a technology-based solution (registration required) today (sponsored by Claritum) comes in. It will help you understand what tail spend is, why it is important, how you can manage it, and the value that can be extracted from good tail spend management.

Decideware: Taking Marketing Magic to a Whole New Level!

When we last briefed you on Decideware, they were Taking Agency Expense Management to the Next Level! Their Production module had just entered beta, and they had the facility to track not only quotes but actual costs down to the lowest level of detail and associate it with tasks, budgets, providers, and even individual resources.

In the production module, clients define jobs in detail, associate team members, define workflow, assign to vendors, breakdown costs, and go. The definition of job can be quite detailed — name, scope, lead, budget and budget period, type, geography, org unit, and so on. It can be as detailed as necessary, supporting everything from the creation of a simple banner advertisement to a full-scale shoot of an extended informercial, with costs ranging from 10 thousand to 10 million.

Costs can be broken up by phase, and then broken down by expense type, and even resource. The module can track estimated, actual, and will then compute the variance automatically by line item, task type, and phase. This may simply sound like an enhanced version of their scope of work, but the breakdown is much more detailed and their ability to capture data much more refined. This is important, because it supports their new dashboard module.

Their dashboard module, which needs a better name, is not a dashboard at all, but the release beta of their new deep BI capability. Decideware have recently integrated Tableau and can finally bring Marketing the deep insight into spend, and performance, that Marketing has until this point lacked.

Using Tableau, they have developed custom level 1 and level 2 dashboards for over a dozen big clients and are providing marketing spend insights that are going light years beyond what Marketing has ever seen, with the deep drill down you’d expect from a standard spend analysis tools.

At level 1, clients can see how much they are spending by agency, project type, phase, task, or resource, drill down on any available dimension, and, once and for all, see average costs for resources, tasks, projects and other deliverables. They can see when the average cost per hour for banner ad creation and management is $75 and one firm is charging them $125.

This is great, but the real value comes when you start importing performance data and contrasting it against cost. Nowhere is it more true than in marketing that “it’s not what you spend, it’s the impact you make”. It’s not how much more or less than the average you pay for social media campaign marketing, it’s how many impressions you make and clicks you get. If the average impressions on a campaign that cost $5000 is 500, and the average click throughs 15, then paying a company $10000 for a campaign that gives you 2000 impressions and 100 click throughs is a great deal, as you are paying 100 per lead vs. 333. And while most good marketers will get this data from a focussed campaign, how many can integrate it with the cost of campaign (banner ad) creation, how many can contrast it against similar campaigns, and how many can do that against normalized costs around the globe? None. But now they can.

With their latest development, DecideWare have not only taken (Marketing) Agency Management to a whole new level, they have also taken the insight into the ROI into a whole new level. Which creative genius is worth the $500 / hour (as his contribution can now be compared to end results across all his projects and his cost per effect normalized and compared against the other creative geniuses at the other agencies)? And which one isn’t even as productive as a $50 grunt doing stock art. With the new Decideware platform, not only can Marketing win the Agency Management Battle, but the cost management war.

What the Hell is Automated Spend Analysis?

While reading a “must-read” post on “next generation spend analysis” (which shall not be named or linked to because it was not must read and contained no useful information on spend analysis, and definitely did not contain anything that would make it next generation), the doctor encountered the claim that automated spend analytics yields spend intelligence. Now, despite claims to the contrary, there aren’t that many technologies in the Supply Management world that truly deliver spend intelligence (and that’s probably why there are only two advanced sourcing technologies that have been found to deliver year-over-year returns above 10%, namely decision optimization and spend analysis). Moreover, nothing about these technologies is automated — they require a skilled user to define the models, do the analysis, and extract the insights.

So if someone is claiming a technology offers spend intelligence, that perks up the doctor‘s ears. And if someone is claiming it offers spend intelligence and is automated, that really gets his attention because if it’s real, it deserves to be shouted from the rooftops, and, if it’s not, shenanigans must be called on the charlatans. And even though calling shenanigans on the charlatans won’t stop them, as proven by the fact that repeated exposes have been done over the years on mediums (who claim to talk to the dead, but really don’t) and televangelists (who claim God is telling them to raise money for personal jets even though they aren’t even religious, and if you don’t believe the doctor, then please feel free to donate to Our Lady of Perpetual Exemption), at least the truth will be out there for those willing to look for it.

the doctor knows what automated spend reporting is, what automated spend refresh is, what automated spend cleansing and enhancement is, and what automated spend insights are, but what the hell is automated spend analytics? And how does it provide spend intelligence?

So, the doctor did some research. According to a meritalk blog post, which defines it as a must for every Federal agency and which appears to be using Spikes Cavell’s spend analysis technology, it is the automated data collection, cleansing, classification, enrichment, redaction, collation, and reporting through cloud based systems, which makes sense, but this isn’t spend intelligence. This process will turn data into a collection of facts that provide the analyst with knowledge, and maybe even actionable insight, but not without human intervention.

A human will have to look at the reports and identify which opportunities are real and which are not. Simply knowing how much is spent by Engineering, spent on cogs, spent with Cotswell’s Cosmic Cogs, and shipped by Planet Express is not providing an analyst with any real intelligence. Knowledge on its own is not intelligence. Knowing that the average price paid per cog was $1.50 when the market price for the same cog appears to be $1.30 is not intelligence. Intelligence is know that the price of steel is projected to continue to drop due to an influx of new supply and a fall in current construction projects, that in a month the price is expected to be $1.20, that the best time to lock in a long term contract will be in six to eight weeks just before the steel price hits the expected low point, and how to go about sourcing that contract to get a long term price at or below $1.20.

Rosslyn Analytics, who claimed to launch the “world’s first, and fastest, fully automated cloud-based spend data integration service”, defines it’s platform as a web-based automated spend analytics platform, defines spend intelligence as an 8-step process that starts with planning and includes a detailed data analysis phase, both of which require human intelligence to complete.

Further searching turns up a post titled “can we ever fully automate spend analysis or do we need” on Capgemini’s Procurement Transformation Blog from 2013 that clearly states that on their own, the analytics tools cannot interpret the data so the tools must be programmed and algorithms developed which “tell” the software how the data should be mapped and that even though we have now reached a level where human interaction with a data analysis tool is diminishing … human intervention is still required to tell software what can be learned.

These are just three examples where bloggers, consultants, and solution providers all agree that while much of the spend analysis process can be automated, human intervention is still required to extract intelligence out of the facts that the tool identifies.

There is no automated spend intelligence, and any claims to the contrary are false. the doctor sincerely hopes that this is the last time he sees this phrase, because if he ever sees it again, a rant of epic proportions is sure to follow (and fingers will be pointed)!