In the past few months, I've talked to a range of spend visibility providers about their capabilities. And I've also spoken with a number of consultants and analysts that cover the market as well. In fact, this sub-sector of the Spend Management technology world seems to be the one that has captured the most of my research time of late.
What I found in looking at the market is for the most part positive: virtually all vendors with solutions today can enable basic visibility to drive one-time category sourcing initiatives. But this level of sophistication, however, is just a start. To insure that a visibility and analytics provider can meet your ongoing technology needs as your Spend Management approaches become more sophisticated -- to understand more about the levels of sophistication and adoption, check out a chart in the linked whitepaper that I wrote on the subject of innovation -- I believe it is critical to consider each providers ability to target three key areas. These are:
• Content Integration -- I simply don't buy the notion that auto-classification and cleansing tools will ever be sufficient on their own. Consider how it is critical at least at some point in an implementation lifecycle to cleanse or validate a supplier master by working with an outside data provider such as an Austin Tetra or a D&B. When it comes to this level of external content integration, it's essential to insure that your vendor has a solid partnership with third parties or an offering of their own to make content integration as inexpensive and simple as it can be. But looking at the supplier master is just a start. External content providers can also help manage other data such as supplier credentialing (e.g., certification management), supplier financial viability, and quality and operational related information. In the near future, industry leading procurement organizations will begin to think about how to build visibility and analytical implementations that build in external content from the start, creating a single go-to platform and dashboard to analyze both internal and external supplier information (see more below in the vision section).
• Vision -- Does the vendor have a good story to tell about how to improve your Spend Management capabilities outside of just one-time cost reduction and category sourcing efforts? For example, what is the vendor thinking about when it comes to broader supplier performance management and supply risk management? What can they offer in this regard? Don't get me wrong. One-time rationalization, cleansing, and analytical efforts can yield stellar results. But if you’re just looking at spending data on a one-off basis to drive sourcing strategy, then you're behind the competition. I reckon that in a few years time, leading procurement organizations will think about spend visibility, supplier performance, and supplier risk management as a single implementation where one vendor -- or a home grown solution -- integrates data from multiple internal and external information sources.
• Integration -- Is the provider's solution part of an integrated Spend Management suite? If the answer is no, does it at least have strong ties into other systems of record and data stores (from ERP to eProcurement to P-Card)? And can the solution support visibility into heterogeneous environments that combine dozens of instances, versions, and applications? While real-time integration is not essential, the notion of periodic, (e.g., quarterly) batch-based approaches is no longer enough when it comes to tying spend visibility and analytics to supplier performance management and risk reduction. Monthly, weekly, or daily updates are becoming more and more critical to enable true visibility. If it's not current, then you can't act on it when you most need to. The need for better integration speaks to the value of treating spend analysis and visibility as a continuous process rather than a periodic initiative.
When thinking about how best to select a spend visibility and analytics vendor, these three areas are just a start. But obviously, it is critical to think about how a vendor can best meet an organization’s long-term needs – rather than what is required next week or next month. And one last piece of advice: don't waste your time with the ERP providers at this point, despite the claims they may make in their black papers on the subject. Their spend visibility and analytics capabilities today simply are not broad or deep enough when it comes to building cross-system visibility to drive more than one-off -- or even partial -- category-based sourcing initiatives. That is, unless you are running the same ERP instance and version of across your entire company. But seriously, how many of us are doing that?