This column is jointly authored by Spend Matters' Jason Busch and Deloitte's Brian Umbenhauer. Brian is a Principal at Deloitte, with extensive procurement and supply chain experience in a combination of strategy, operations and technology areas.
In the first column in this series, we touched on the importance of looking at some of the total cost factors of P2P, SRM and related implementations that often go overlooked in SaaS/cloud implementations. Today, we'll continue our analysis, double-clicking a key area, integration, which is often the culprit for over budget and underwhelming SaaS/cloud implementations. But first, we'll look at a functional area -- spend analysis -- before getting into more technical cost elements around integration and overall scalability across a suite. Historically, spend analysis has been used as a catch-all phrase for procurement-led programs that examine historical spending patterns in hopes of identifying both future savings as well as potential audit/recovery opportunities. It's evolved in a broader way today, yet for the purposes of this analysis, we'll focus on its historic usage as a potential driver of unpredicted costs SaaS total costs.
When looking at spend analysis roll-outs, it's essential to consider whether or not a system can be managed/operated in an effective manner by the procurement organization itself or if professional services will be required. There's also somewhat of a grey area in many vendor offerings between the services delivered as part of an initial cleansing/classification and refresh efforts relative to additional services on-top of these efforts (e.g., will the integration of a new enrichment field or system lead to increased services costs, are reports standard/customized, etc.). Moreover, we sometimes observe that there are hidden spend analysis costs when companies want to add additional source systems or expand their implementation (even when an additional roll-out was planned all along and previously articulated to a vendor as part of what was desired in-scope from the start). Also contributing to the often hidden costs of SaaS spend analysis are the frequency or refreshes/updates as well as the overall number of transactions.
Going beyond spend analysis specifically, integration complexity should remain a large area of focus for any organization considering SaaS procurement initiatives. Even with SaaS/cloud solutions, there is often technical integration work (which sometimes, ideally, might be limited to file-based work, but is often broader). Integration matters far beyond getting at underlying data analytics. Consider how your organization should think about the total costs and efforts within a SaaS deployment model when it comes to enabling both the flow of master data (e.g., users, suppliers, commodity code classification) and transactional data (e.g., POs, payment/invoicing data, contracts, etc.). You must factor into account the actual implementation and ongoing support costs (if applicable) of pushing or pulling this information to/from a SaaS solution within your organization's back-end systems (e.g. A/P/ERP, user directory, contract repositories, MDM system, etc.).
The biggest challenge with integration (especially SaaS integration) is that the devil is always -- and we mean always -- in the spend details. When considering specific solutions, especially in a transactional environment, we suggest spending as much time on understanding the integration capabilities of the SaaS/cloud solution (e.g., receiving and providing the types of data discussed above to and from your organization's legacy systems) as any other area. In plain terms, you need to discover how open, extensible and simplified the integration layer is of the SaaS solution. Marketing speak may make it sound simple and straightforward, but trust us, we've seen this exact detail cause significant angst in many organizations that have had the cloud pulled over their eyes, especially when it comes to managing complicated integration flows and system updates. For example, the ongoing management of supplier lifecycle data -- especially when combined with transactional data -- can be a significant SaaS integration hurdle that your friendly vendor salesperson isn't likely to highlight until after the ink on the contract is dry.
Stay tuned for the next installment in this series. Spend Matters would like to thank Deloitte's Brian Umbenhauer for co-authoring..
Jason Busch (and Brian Umbenhauer)