The State of Spend Management

Earlier this fall, Ariba conducted a survey of 550 procurement professionals to better understand the top priorities they face today and going in 2007. When I had a chance to sift through the results earlier this week, what struck me the most is what companies are not prioritizing as much as what they are. For it goes without argument from me that such areas as "delivering measurable results, accessing and analyzing spend data, completing projects on time and within budget, and building internal commitment" would rise to the top of the list. This makes perfect sense, especially the top two.

The notion of delivering results which align and track to the needs of the business is absolutely essential. In fact, I remember taking a close of read of Hackett data earlier this year that found top performing procurement organizations almost always have enterprise-level involvement in coordinating budgeting and planning from sourcing and operational initiatives. It's precisely the "measurable result" in the eyes of the business which is key in this regard. And it's great news that such a large percentage of companies are putting this on the top of their list.

I can also understand why so many respondents believe that spend analysis is such a critical first step "in the spend management journey". And it would also explain why the sector is such a hotbed of activity, innovation, and adoption at the moment. For without strong visibility into spending and supplier data, it's impossible to create sustainable Spend Management strategies.

But what I have a more difficult time comprehending is why study respondents put a number of initiatives on the bottom of the list. As an example, "External support to manage non-strategic spend categories" and “procurement outsourcing for no-strategic categories and processes” together came in last and second to last respectively out of a list of 33 Spend Management priorities respondents were asked to consider. I'm sure that Everest, TPI, AMR Research, Gartner, Aberdeen and others that track the procurement outsourcing market would find this surprising as well, given the high number of evaluations currently taking place, and the forecast demand for procurement outsourcing in 2007. In other words, this is certainly a curious result, and one that I'm very surprised about given the large sample size of the respondents.

The other initiatives which were lower down on the list that jumped out at me included "access to pre-enabled supplier content" and "reducing the risk of failure". Without question, one of the demands that I hear most often from users is the need to access global supply market information to make better total cost sourcing decisions. The fact that supplier content ranked so low on the list of priorities surprises me a bit, as does the low ranking of reducing risk or failure (especially given the rise of supply risk management).

Curious to learn more? I certainly am, and plan to take a closer look at the vertical industry break-outs from the study in the coming weeks. But you should dig into the details and judge the findings for yourself. You can download the full report here (registration required). I commend Ariba, Accenture, CGE&Y, Emptoris, Procuri, and other vendors and service providers who are taking the time to survey and benchmark their customers and the market. In particular, Ariba's research is an excellent piece of survey work, and one that shows that vendors and service providers can seize the day when it comes to thought leadership in the Spend Management market. Even if I question the respondent rationale behind some of the findings, the fact that there's controversy in the results should spur debate that can only help the market.

Jason Busch

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