Procurement View Point – Episode 1 (Sourcing and Spend Analytics)
Reducing costs have taken on a new urgency today in the backdrop of the economic downturn. Cost cuts are not just helping to shore up bottom lines but are also freeing resources for innovation. In the current context it is also important to empower the organization’s procurement group towards “value creation” i.e. supplier relationship, risk management.
Spend Analytics and Sourcing are two process areas that merit strong CXO focus. Better “visibility” drives informed decision making. This allows organizations to ride out the crisis and position them strongly for the new growth opportunities and also the economic recovery. “Sourcing” has always been and continues to be the best bet for organizations to achieve significant savings via quick hits. One of the ways of achieving enterprise competitiveness is to drive the procurement group towards aggregated spend and a rationalized supplier base.
Spend Analytics solutions allows customers the ability to “aggregate”, “cleanse”, “enrich” as well as “slice and dice” their spend data. Commodity and Supplier based classifications are the two biggest areas of focus for most customers. With increased visibility and timely data, executives are in an advantageous position to successfully lead their organizations. However, one must recognize that a successful Spend Analytics initiative is a process of continuous improvement and not a one-off venture. As organizations work towards establishing frameworks to help them achieve excellence in Spend Analytics, they need to consider “source”, “standardization of taxonomy”, “quality”, “timeliness” for their spend data.
The success of a Sourcing initiative depends on the selection of the toolset followed by a robust implementation and most importantly on the rate of adoption. Most have failed to realize the true value of eSourcing solutions due to lack of “category management”, “appropriate” identification of pilot projects, etc. To summarize, it is advisable for organizations embarking on a Sourcing journey to have a powerful plan for evangelization of this program within the company (this includes an adequate training plan for key users). Additionally, a strong executive mandate, along with smooth adoption, is key to this critical initiative generating the desired (or at least realistic) ROI!
While the best-of-breed solutions such as Ariba, Emptoris and Zycus have been around for quite a while. Significant investments made by the Big Daddy(s) of our industry in Frictionless Commerce (SAP) and e-Three (Oracle) is a proof of the growing importance of Sourcing. We are witnessing a similar trend on the Spend Analytics front.
In this context, SAP’s eSourcing and BusinessObjects Spend Performance Management solutions assume significance. In my opinion, these solutions can pose serious competition to the existing eSourcing and Spend Analytics leaders. A thought for consideration –
For existing SAP customers, it is an excellent opportunity to extend their footprint to include these solutions and help achieve a standardized “Analyze-to-Pay” platform. However, for the non-SAP customers, this might be a bigger opportunity to leverage some of these SAP solutions while they continue to seriously consider SRM 7.0 as their future procurement solution.
Plan to share my perspective on SAP SRM and how its scaling up in view of the competition in my subsequent postings. However, in case you are keen to know more about Procurement (and SAP SRM in specific), would like to highlight a webinar that we are co-presenting with our customer Pitney Bowles: Delivering Cost Savings with SAP SRM. Live on July 23rd and on demand thereafter. (URL: http://w.on24.com/r.htm?e=153907&s=1&k=31B8F22D3625C9ACD0BD98C3E69F3109)