Earlier in December, I was part of an ISM webinar that talked about the rising importance and interest in spend visibility and analytics to drive better procurement and operational decisions. But I'm not alone in bringing up the subject of late. Indeed, the amount of activity in the sector is higher than it's ever been, at least as I can recall in my five years or so involved with it.
As a quick -- and hopefully humorous -- aside, my earliest exposure to spend visibility tools goes back about five years to when I was at FreeMarkets and we tried to loosely knit together a solution for a major tier one automotive company using a popular BI tool as the front-end. I remember my first look at an early prototype of the product when I remarked that it looked just like Cognos. And then I realized it was (along with a lot of manual data monkeying in the background). Alas, we quickly improved things from there, but never quite caught up to the pure play providers. And when Ariba acquired FreeMarkets, they politely sucked the spend visibility IP dry, but passed on much of the code, I'm guessing, as they were much further ahead than we were.
Well, I've lost a good inch on my hairline since those early kludging efforts. Now, the vendor market is far more sophisticated, as are practitioners buying such solutions. But this little digression does nothing to explain the recent popularity of spend visibility, and why practitioners are increasingly shopping for solutions to address their needs. Personally, I believe that there are a handful of key drivers of the recent interest in the sector. A few of these which I've been thinking about of late are:
1. The need to identify a significant pipeline of savings opportunities that go behind obvious low-hanging sourcing fruit
2. The savings and value creation opportunities that a category management perspective to Spend Management can bring – which can only be enabled through visibility into category and item-level information
3. The impetus to create an environment where internal performance can be actively measured and tracked
4. The rising emphasis on supplier performance and supply risk management (for both, spend visibility and analytics are a core enabler)
5. The need to measure and track Spend Management results not just within procurement, but on an enterprise budgeting and planning level to create a common lingua franca for savings and supplier management
Obviously this list is just a start (and I'd love to hear your thoughts in the comments section or by email). But perhaps most important of all, rather than thinking of spend visibility as a lead-in to other sourcing and procurement technology and process investments and steps, I believe that the majority of larger companies are finally starting to think of it as a core foundation that is necessary regardless of other procurement activities and initiatives. Just as a cash register is essential in a retail setting to track incoming and outgoing cash flows with any scale, spend visibility is a foundational element of procurement that is critical for all companies that want to get past using a proverbial, unscalable abacus across their Spend Management efforts and initiatives.