Spend Management or Something Bigger?

I've had a fun time either selling to Sourcing and Procurement professionals the solutions I (fervently) believe in, or advising clients on buying and implementing those solutions, and a recurring theme has emerged. It is that, ironically, in diligently applying best practices in the sourcing of spend-management solutions (for them!) management professionals end up missing or significantly delaying the very benefits they were originally looking for.

It reminded me of the old aphorism that doctors make the worst patients. Why do sourcing (and procurement) folks put their sourcing and procurement vendors through the same ringer they put all vendors? You'd think they'd cut them some slack, given that the solutions in play are meant to benefit the actual buyers. As a seller of these solutions, I was frustrated, of course, because I wanted not only the sale but also the satisfaction of seeing customers benefit from what I built.

I'm sure there are tons of tactical reasons for this: best practices should be applied regardless of which organization is benefitting, all vendors have to be pushed on their pricing because that's how it works, if procurement gives special consideration to their vendors, the others in their organization will cry foul, etc.

All true to an extent, but let's step back a bit. It's not just in buying spend-management solutions that Sourcing acts this way; other organizations are sometimes frustrated with including Sourcing in their big buys because of the focus on managing spend to the detriment of benefits. This is especially true in big buys where the relationship with the supplier is becoming partner-like; no one wants the Sourcing "bad cop" to poison that relationship just as it's getting started.

Better that spend-management best practices somehow incorporate the benefits (and time value thereof) into their calculations and activities. I'm sure this is done in practice today by spend managers who are thinking about the business as a whole and not just about cost-reduction targets. But is there an established school of thought about this out there already? It would sure be nice to make such an approach a regular topic of discussion here on Spend Matters.

In the meantime, try not to delay solutions with a 3:1 first year ROI just to get a 10% cost reduction. The math just doesn't make sense.

Paul Noël

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