Category Archives: Spend Analysis

On the Ninth Day of X-Mas (Emptoris vs. BIQ)

On the ninth day of X-Mas
my blogger gave to me
spend vendors lancing,
thoughts for a shilling,
strategies for winning,
tactics for saving,
five golden rings,
four little words,
tri-focal lens,
two boxing gloves,
and a lesson in strategy.

In this corner, hailing from Burlington, at a whopping 800 lbs, the heavyweight champion of the space, Emptoris (acquired by IBM, sunset in 2017) and in this corner, hailing from Southborough, at a lean and mean 200 lbs, the lightweight contender, BIQ (acquired by Opera Solutions, rebranded ElectrifAI).

Amidst a flurry of Much-Ado-About-Something, all started by a few innocuous postings over on Spend Matters in the month of Shimo tsuki, the spend visibility debate has been kicked into sixth speed maximum overdrive as the result of an all-out-melee sure to satisfy even the most staunch of Stephen King fans. Even my declarative proclamation that Spend Matters Not!, as a rebuttal to my inquiry as to whether or not Spend Matters Most? has been lost in the virtual mortar fire between Emptoris and BIQ’s legal quests to prove that the pen is indeed mightier than the sword.

Emptoris, the apparent Victor Von Doom of the Spend-Analysis-Driven-Intelligent-Savings-Targets mindset, or S.A.D.I.S.T, has the most extensive offering of any contender on the playing field, with its various spend data manager, real time classifier, spend analyzer, data enrichment, and reporting engines which combined appear to provide more raw power than the Human Torch, the Thing, the Invisible Woman, and Mr. Fantastic put together. In comparison, BIQ, your friendly neighborhood Spiderman, is clinging to the field with its single Veg-O-Matic offering (It Slices! It Dices!) and its unique Meta-aggregation-Shifting-of-Classification-Hierarchies-in-Subsecond-Time capability, or M.a.S.o.C.H.i.S.T., which has me singing the praises of Mr. Popeil.

Both have their virtues. Emptoris is probably the only solution that can allow you to analyze not only your relative spend internally, but relative spend against the rest of the market – and maybe help you break through the curse of those rose colored glasses normally worn by your executives. In comparison, BIQ is probably the only solution that can allow a buyer to look at her data any way she wants to, at any time, allowing her to find and exploit hidden relationships with its transmutative engine, helping her break out of The Metamorphosis she will someday awake to find herself in without it.

Both have their failings. The S.A.D.I.S.T. view of the world is a single view from within the walls of a single, but complete, cube, boxing you in to one vision of the world. In comparison, the M.a.S.o.C.H.i.S.T. view, borrowing a piece of technology from The Guide, Mark II permits you an infinite number of views of the world, with the caveat that they are all potentially incomplete. In short, if you asked mirror-mirror-on-the-wall, who’s the fairest of them all, I would be tempted to say that even he would not be able to answer you. The fact of the matter is, for all you techies out there, (and maybe even a few of you Trekkies), that while Emptoris wins on breadth of solution, BIQ wins on depth, and the best single solution for you depends on your view of the world and the best solution overall is probably the adoption of both types of solution. The single world view to please your executives who like to stare into space with their rose coloured glass intact and the changing world view for your sourcerers to gain the insight they need to make better buys.

But all I can say, is when it comes to legal sparring between two obviously different solutions, even though they both exist on the same coin, is the offing was barred by a black bank of clouds, and the tranquil water-way leading to the uttermost ends of the earth flowed somber under an overcast sky. For if the fight continues, only Wolfram and Hart will win in the end.

For those of you who want to review the debate-to-date, here is a brief history in time:
“Spend Management and M&A”*, Spend Matters [WayBackMachine], (Nov 3, 2006)
“It’s Only the Beginning for Spend Visibility and Analytics Growth”*, Spend Matters (Nov 17, 2006)
“Emptoris: Readying the Spend Visibility Armaments for Battle”*, Spend Matters (Nov 28, 2006)
“A Spend Visibility Smack-Down”*, Spend Matters (Nov 30, 2006)
“Ariba: Not Sitting Still in the Spend Visibility Arms Race”*, Spend Matters (Dec 1, 2006)
“Spend Visibility Gets Legal: Emptoris vs. BIQ”*, Spend Matters (Dec 5, 2006)
“BIQ Respond to Emptoris’ Lawsuit”*, Spend Matters (Dec 6, 2006)
“Sourcing Innovation Adds to the Spend Visibility Controversy”*, Spend Matters (Dec 11, 2006)
“Emptoris: Blurring the Legal and Marketing Line”*, Spend Matters (Dec 12, 2006)
“What is the ROI of Spend Visibility and Analysis Solutions?”*, Spend Matters (Dec 13, 2006)

Merry Christmas Spend Fool!

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

Spend Matters Not

Not long ago, sometime after my post where I asked Is it the Case that Spend Matters Most?, the posts “Emptoris: Readying the Spend Visibility Armaments for Battle”* and “Ariba: Not Sitting Still in the Spend Visibility Arms Race”* appeared on Spend Matters and generated quite a buzz. I’m now convinced that most of the providers still have not progressed beyond Spend Analysis 1.0 and, more importantly, that spend, or at least the amount of spend, doesn’t matter.

It’s not how much you spend, how you store it, how you cube it, or how you report on it – it’s how much you get, how you profit from it, and how you improve on it. It’s all about value, profit, and continual improvement. The fact of the matter is, sometimes spending more is the right thing to do. If you’re spending more to build higher quality products that allow you to double your profit margins and drastically increase revenue, compared to spending less, building the same products, and having your profit margins shrink to nil because they are not innovative and desirable compared to the rest of the products on the market, then you’ve made the right choice. Just like you should focus on Total Value Management, and not Total Cost of Ownership, when you make your award decisions, you shouldn’t be focused on how much you’re spending when doing spend analysis. It’s what you are spending it on, who you are buying from, the prices you are paying relative to the prices you could be paying and the rest of the market, and opportunities you have to drive value from the spend.

So, how do you figure this out? Analysis. Flexible, powerful analysis that allows you to aggregate, slice and dice, associate, break-out, normalize, aggregate, and slice-and-dice again. Analysis that allows you as the user to see the data any way you want to see it, any time you want to see it, any how you want to see it. A rigid view on a fixed set of dimensions might tell you that you’re spending 30% more on supplier X, but it might not tell you that you’re spending 60% more on servers, 10% more on workstations, and 10% less on laptops compared to other suppliers. In other words, a rigid cube analysis might lead you to conclude that you should be dropping supplier X for suppliers Y and Z, when really you should only be dropping them as a server supplier, aggressively negotiating with them on workstation pricing, and routing more laptop purchases through them for a larger discount.

I have to agree with Eric (Strovink) of biq (acquired by Opera Solutions, rebranded ElectrifAI). It’s the analysis. The value added services, especially those provided by Emptoris (acquired by IBM, sunset in 2017) in their new release, are great, and they can be used to create some top notch reports that will knock the socks off of your stodgy old CFO, especially compared to what you can pull out of a traditional ERP, but that’s not how you drive maximum performance. Drop the spend. Focus on the value. Which supplier is giving you the highest value ratio (the most quality product for the least spend)? On which categories? Why? Which categories are performing the worst? On which categories? Why? Which suppliers do you have multiple contracts which? Any way to leverage the volume? And so on. You need to be able to build a cube, analyze it, slice off dimensions, extract a sub-cube, aggregate the data, run a report, and then compare it to a report generated off of another sub-cube for a different, but complementary, data set.

After all, it all comes down to the bottom line. It’s not what you spend. It’s not the revenue you take in. It’s not your operating costs. It’s how much profit the business makes at the end of the day and the value it returns to its shareholders. And that requires smart spend management based on actionable intelligence – the kind enabled by next generation spend analysis and visibility solutions. Everything else is just reporting – sometimes really, really, really good reporting – but just reporting.

And if the user can’t hack it … then the user needs to be trained or be replaced. Commodity prices are going up. After the third reverse auction, there’s no more fat left to trim. Once you’ve implemented the latest IT system, there’s little room for productivity improvements. That simply leaves collaboration, innovation, and smart spend management.

On a side note, I applaud Iasta for basing their new spend analysis solution on BIQ’s solution instead of trying to build their own from scratch. It takes years to build a good spend analysis solution, and since they are on-demand, they can easily integrate BIQ’s on-demand solution into their platform and extend it with value added services, which is where the real value is. This complements their core strength, the executable sourcing cycle, with a SaaS solution that helps the user determine the best category candidates for dedicated eSourcing events. Furthermore, as time progresses, they can build up baseline cubes and reports for common categories to jump-start the process for new customers and junior analysts. And, since it’s a partnership and not an acquisition, you don’t have one company swallowing another. Although this sounds great in principle, what usually happens is that the development teams merge, the new blended company adopts “one focus”, and a lot of the distinctive expertise that made the acquired company the best at what they do gets masked or disappears. BIQ is going to continue to build a better, differentiated, spend analysis product, Iasta is going to continue to develop better services around the product for the sourcing professionals it serves with its end-to-end executable eSourcing suite, and everyone is going to win. The only thing keeping it from being a perfect solution is the ability to easily integrate 3rd party data sources for spend augmentation and market-based reporting. But I’m sure that will come in time.

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

Is it the case that Spend Matters Most?

As per my Noteworthy last week, Iasta (acquired by Selectica, merged with b-Pack, renamed Determine, acquired by Corcentric) is about to release it’s new Spend Analysis platform SmartAnalytics, Emptoris (acquired by IBM, sunset in 2017) building on it’s acquisitions of Zeborg and diCarta, just released the new version of its enterprise suite with its new and improved Spend Analysis Solution, and earlier this year Procuri (acquired by Ariba, acquired by SAP) consumed TrueSource to offer TotalAnalytics – and Zycus is gaining ground everyday. It looks like the time has finally come for the big spend analysis vendors. And none too soon. After all, how can you identify your ripest targets for strategic sourcing without understanding your spend? And as Jason points out over on Spend Matters, spend visibility and analytics applications can become an invaluable solution for tactical everyday procurement activities as well as areas that are truly strategic on the board level. It’s definitely a growth area for the eSourcing vendors – especially the on-demand ones.

But is it ready for prime-time? Not only are some of these offerings new and relatively unproven in the field, but they also require a level of sophistication well beyond your simple RFXs and reverse auctions that are still the mainstay of many eSourcing users. And I know there are still many individuals that believe a centralized ERP will give you the spend visibility you need to do proper spend analysis – which is not the case, and you should check out Tim’s response in the comments to Jason’s post for a real world example as to why.

In most cases, I know the solutions are there. Zycus is one of the only remaining pure players and has a very attractive offering based on its success stories alone. Zycus has amassed numerous wins over its seven year history and Procuri has successfully integrated TotalAnalytics to amass some success stories of their own. As noted in Spend Matters, Consider the case of a pharmaceutical company — who will go unnamed — which has used TotalAnalytics to help quantify and accelerate procurement cost savings synergies in three multi-billion dollar acquisitions. This company has used the solution’s capabilities to define and track over 60 category management programs, enabling them to leverage spend and rationalize suppliers across acquired and existing divisions. This leaves us with Emptoris and Iasta.

Iasta’s solution makes the cut since they based it on one of the most powerful on-demand spend analysis engines available, integrated it into their platform, and extended the out of the box reporting capabilities available. I’ll have more to say after the formal release, which is forthcoming in the very near future.

Emptoris has also had some big wins, and has had their eSourcing suite with their initial spend analysis solution ranked #1 by Forrester in Q4 of 2005. So they are definitely a real player, but I’m a little concerned if their new solution is ready for prime time from a usability perspective. It is probably the most aggressive spend analysis offering on the marketplace today, with a new Spend Data Classifier, a new Real Time Spend Classifier, new import / export facilities, and a slew of add-ons for government watch list, credit score, and diversity rating integration, among other features. Now I know that Emptoris knows their stuff, it’s a challenge to find a question on an Emptoris product or capability that Kevin (Potts) cannot answer and Avner (Schneur) is absolutely correct when he says that with accurate and granular spend visibility, companies can gain greater control over and impact on their bottom line through improved sourcing and supply and contract management – and they have already delivered significant results. But when your average eSourcing user is still daunted by basic spend classification and decision optimization (just look at the recent Purchasing Survey), I wonder if they are going to be able to digest Emptoris’ new offering, especially considering Emptoris is still a traditional installed behind-the-firewall application where you only get maximum value from maximum deployment? I know it looks great in a power point presentation, but it can be hard to hide that much underlying complexity. If you’ve seen it in action, used it, or have your own take, please feel free to leave a comment.

Aberdeen’s Global Supply Chain Benchmark Report

Aberdeen Group’s “Global Supply Chain Benchmark Report: Industry Priorities for Visibility, B2B Collaboration, Trade Compliance, and Risk Management” report, released in June, contains an alarming statistic, especially in today’s information technology driven networked world. An astounding 90% of all enterprises report that their global supply chain technology is inadequate to provide the corporate finance organization with the timely information it requires for budget and cash flow planning and management.

Furthermore, 79% of large companies say that the lack of supply chain process visibility is their top concern. Considering that, as we pointed out in yesterday’s post, understanding your supply chain is key to success, this is a serious concern. After all, if you have no visibility into your supply chain, how can you map it out and understand the real impact of any decision you might make with respect to your supply chain?

Fortunately, this excellent report also contains some solid recommendations for action to get you started.

  • Extend supply chain visibility.
    Move to exception-based management of global supply chain activities and slowly increase the number of milestones you monitor. Start executing against a longer-term roadmap that adds escalation policies, inventory pipeline visibility, mobile asset management, root cause analysis, and financial settlement and financing integration.
  • Scale business-to-business collaboration.
    The most productive collaboration processes are collaborative forecasting, inventory management, and replenishment, so focus on scaling those first.
  • Go corporate-wide with trade compliance.
    Move toward a single corporate-wide trade compliance platform and comprehensive origin and trade agreement management. Smaller companies should look to on-line tools for restricted party screenings and total landed cost calculations.
  • Institutionalize risk management.
    Make risk assessment and contingency planning part of your standard operating procedure. Institute supplier remediation programs for high-risk providers and increase logistics and supply agility to improve recovery capabilities.

Of course, before you can improve collaboration, and identify key milestones, you need to know where to begin. This is where next generation spend analysis systems that provide true visibility into your spend and the inter and intra organization and product relationships, often referred to as spend intelligence systems, and described in Aberdeen Group’s “The Spend Intelligence Benchmark Report: Turning Data into Action” that also came out in June, play a significant role.

This report also had some solid recommendations to get you started on the road to improved visibility.

  • Securing Executive Sponsorship.
    This is critical for just about any major undertaking, especially one involving an extensive information technology investment. If you don’t have a project champion who can make the case to senior executives, find the one who can offer the most clout.
  • Building a cross-functional team for enterprise-wide spend intelligence.
    Have an intelligence-gathering plan and key stakeholders in place to draw up the goals and expectations of a spend intelligence program.
  • Demonstrating quick hits by assessing spend intelligence opportunities in one or two spend categories.
    Showing the results of a small pilot program can help make the case with senior executives.

Support has to come top down, everyone needs to be involved, and you have to start small and work your way up. But the effort is worth it. After all, the report found that best in class companies reduced sourcing cycles by 19 to 25% while increasing contract compliance rates by 31 to 35%.

There’s No Such Thing as Spend Intelligence

For the last six weeks, I have been exploring problem solving methodologies you could use to help you with your sourcing problems. At a later date, I’m most likely going to take up six sigma and lean, but today I’m going to rant.

There’s no such thing as a Spend Intelligence Solution!

And before you start huffing and puffing about how wrong I am, please read this post in its entirety. Thank you.

A few weeks ago, Aberdeen released its study “The Spend Intelligence Benchmark Report: Turning Data into Action”. This study by Sudy Bharadwaj, Aberdeen’s new Vice President and Research Director of Global Supply Management, and Rick Saia, an Aberdeen Research Analyst, found that companies employing spend intelligence have reduced sourcing cycles by 19 to 25%, reduced the overall number of items they need to purchase by 10 to 15%, and reported contract compliance rates of 31 to 35%, depending on how long the program has been in place. These are some significant results, so there must be something to it.

Shortly after its release, this report sparked a considerable amount of coverage on the blogs. Jason Busch of Spend Matters challenged* the thinking behind Aberdeen’s use of the phrase spend intelligence. The main points of his post were as follows:

Consider how in a recent study, Aberdeen adopted the term “spend intelligence” to describe the broader spend visibility and analytics market. The purpose of my post today is not to rip into the findings — the study itself is highly useful — but to challenge the thinking behind Aberdeen’s use and definition of the phrase, “spend intelligence,” which at this point feels dangerous to me, just as overly political language feels dangerous to Orwell. Why? As an attempt to shoot some Botox into a segment of the Spend Management market that can be challenging to explain and position, Aberdeen’s choice of language shortchanges and over simplifies a concept, potentially corrupting how the market will look at a key Spend Management business process. …

The problem is that spend visibility and analytics is much more complex, requiring data cleansing, rationalization, classification and other efforts which go far beyond what is needed to gain insight into basic HR, financials, IT and other internal information, which fall cleanly in to the BI camp. …

Fundamentally, “spend intelligence” should exist both inside and outside the organization, but Aberdeen’s usage might lead companies to think that everything they need lies within. The problem with this thinking is that supply market information changes all the time …

… by focusing too much on the final insight itself, “spend intelligence” conjures up images of the end-result, rather than the journey or path to get there (which can be as insightful as the data crunching itself). For example, in data gathering efforts, procurement can learn just as much about spend categories by talking with design engineers and operations team members as reading the SAP tea-leaves where dirty data resides.

Not long after, Tim Minahan, who used to occupy Sudy’s position at Aberdeen, of Procuri (acquired by Ariba, acquired by SAP)came to the defense of Aberdeen’s Spend Intelligence Moniker on his blog Supply Excellence [WayBackMachine]. The main posts of his post were as follows:

As an analyst, every software vendor — … — touted their spending analysis capabilities. The caveat: you just needed to give them the data in a cleansed, classified, and structured format. … In short, most vendors pitched building a data cube or data warehouse from which you could run analyses and reports as spending analysis. They were wrong. And they confused the marketplace (possibly intentionally).

It is the automated and repeatable classification of spending information to a structured schema (e.g., UNSPSC, eClass, proprietary schema, etc.) and then the enrichment of this data with related business information (e.g., parent-child relationships, financial risk scores, contracts, performance information) that turns spend information from “dumb” data into true spend intelligence that a company can use to make fact-based sourcing and supply decisions rather than gut-based or hunch-based decisions.

The distinction between spend data and spend intelligence is an important one. Bravo Aberdeen for calling out the difference between dumb data and actionable intelligence.

And just a few days ago, Purchasing Magazine sponsored a webinar on the report where Sudy presented the main findings of the report and Brett Mauser of NCR, a corporation that recently implemented Zycus‘ spend management solution, discussed how spend intelligence has kicked NCR’s spend management program into overdrive. (Note that Zycus was one of the sponsors of the Spend Intelligence Benchmark Report.)

According to the study, and reinforced in the webinar, companies with best-in-class spend intelligence solutions have a process maturity that is twice that of their counterparts, and those processes are almost twice as likely to be aligned company wide. In addition, those processes are twice as likely to be automated. And mature, automated, processes get results. So why am I insisting that there is no such thing as a spend intelligence solution, when it appears that these solutions not only exist, but get great results?

Let’s start with the definition of intelligence.

Intelligence is a most complex practical property of mind, integrating numerous mental abilities, such as the capacities to reason, plan, solve problems, think abstractly, comprehend ideas and language, and learn.

And since spend management solutions are software, let’s review a definition for software.

Software is the (collection of) program(s) that enable a computer to perform a specific task, as opposed to the physical components of the system (hardware), where a program is the collection of source code and libraries which have been compiled into an executable or otherwise interpreted to “run” in (active) computer memory, where it can perform both automatic and interactive tasks with data.

Simply put, intelligence is a property of mind and software is a property of machine. And despite the efforts of the artificial intelligence community, I do not expect the property to cross the chasm anytime soon. Artificial intelligence is simply a collection of very sophisticated algorithms processing large data stores, instruction sets, and probabilities very quickly to come up with reasonable responses to queries – it is not thought, although it might appear to be thought since today’s computers can perform billions of calculations in a second. And that’s where my beef with the term spend intelligence lies.

Furthermore, as Jason Busch of Spend Matters points out, the term is very misleading and overlooks the fact that results from enhanced spend visibility and analytic efforts require data cleansing, rationalization, classification and other efforts which go far beyond what is needed to gain insight into basic HR, financials, IT and other internal information, which fall cleanly in to the BI camp.

So if you want to call it spend visibility, actionable spend, or maybe even spend knowledge, I’m all for it. But since the real intelligence lies in the user of the tool who takes the actionable data and uses it to get results, there is no spend intelligence software, only spend intelligence enablement software. And when you get right down to it, that’s what you really need as an expert power procurement user – software that helps you make the right decisions, not software that purports to make those decisions for you.

However, regardless of what you call it, check out the “The Spend Intelligence Benchmark Report: Turning Data into Action” while you have the chance. Just like the “On Demand Supply Management” report, it is top notch research, whatever you want to call it.  After all, as Tim Minahan pointed out, the distinction between spend data and spend intelligence is an important one, and the Aberdeen report is one of the first reports to call it out, even if I may take issue with the impreciseness of the terminology used.

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.