So What Exactly is Spend Management?

Ever since launching Spend Matters, I've wanted to get a better definition of the phrase "Spend Management," as many readers ask exactly how I define the term. Until now, perhaps the most comprehensive definition could be found on Wikipedia. But recently, I asked Lora Cecere of AMR Research if she had a definition we might be able to use, and I've listed below what she came back with:

Spend Management: "Spend that is currently under control or management. Control includes the use of structured events (RFX, auctions), contract management, preferred suppliers with active supplier development programs, and spend analysis/visibility involving spend data management (definition below) and the use of third-party content."

Lora also took the time to define the phrase "Spend Data Management," a term that I often get questions about as well. Her definition is: Spend Data Management: "A collection of best practices in management of 'spend' data, (i.e data related to sourcing and procurement) leveraging software tools built around core data classification and enrichment technologies. This enables delivery of enterprise spend visibility to ensure compliance and control. The core technologies include processing spend data for supplier classification, item data classification, master data cleansing/enrichment and harmonization (to convert data from disparate coding standards to one global standard such as UNSPSC), along with spend analytics tools for alerting, measurement, and reporting. The benefits include the ability to analyze the impact of sourcing strategies on key categories, along with assessments of business results (savings), and measurement of KPIs (periodic review of compliance with preferred suppliers and contracts, savings realized etc) along with ongoing control of spend for improved profitability."

For those who don't know AMR Research well, the venerable Boston firm is not just about providing definitions (though we certainly appreciate when they do). According to a study my firm, Azul Partners, completed with end-users and vendors earlier this year, AMR Research is one of the most respected research organizations in the market, especially with vendors and those end-users who know them (for those who are curious about the study, drop me a line; Aberdeen Group and Gartner also did well). And the good news for all of us is that AMR is currently ramping up their coverage, and we expect some more announcements to be coming from them soon, as they continue to increase their Spend Management research and staffing.

Jason Busch

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