In the first post in this series, we explored the methodology and highlights behind a recent Zycus study of over 500 procurement professionals focused on the correlation of technology adoption to savings/performance results across the Spend Management solution spectrum. As I noted in my first post, I had a few nits with the sheer volume of information in the study and the way it was portrayed visually, but given the audacity of the effort -- and the fact Zycus is essentially giving away something that many analyst firms charge for -- it's easy to forgive the need to have an extra cup of coffee before reading the analysis in its entirety. In today's post, we'll turn our attention to looking at some of the findings in the contract management area.
In regards to contract management, Zycus reports that "companies falling into the top or best-in-class performance tier for cost savings attributable to spend management (with accumulated spend reductions of 30% or greater) report contract compliance rates that are, on average, two times greater than companies falling into the bottom (<5%) cost savings tier." But what's more interesting is how contract management technologies relate to contract compliance. Within the "high" tier of reported/measured contract compliance levels, 61% of companies reported a high contract management technology adoption level. For "medium" levels of contract compliance, this number to dropped to 20%. And for low-levels, it fell all the way to 5%.
From the study's findings, it appears that the top tactics for contract compliance focus less on just simple tools usage and more on reporting, communication and collaboration in tandem with platform adoption. In this regard, of the top performing organizations in the study, 60% reported that "monitor and reporting" on contract compliance was a favored tactic. "Communicate benefits and business case," "compel with performance objectives and metrics," "compel with policy," and "make on-contract the easiest way to spend" came in at 49%, 42%, 27% and 26% respectively among top performers.
An even more useful finding for organizations prioritizing contract compliance is how the combination of contract management and other Spend Management technology toolsets come together to drive incremental benefits above and beyond isolated tools use. In this regard, "Companies that extensively adopt two or more integrated solutions report contract compliance rates that beat the study weighted average (41%) by some 35-37 percentage points and either double or triple the compliance rates being achieved by companies that invest in the technology but fall down on adoption." Companies that reported that "monitor and report" was a favored strategy with high technology adoption had deployed a combination (and/or various assortments of) of contract management, spend analysis and eProcurement technologies together vs. separately. Organizations with low levels of technology adoption were far less likely to deploy combinations of solutions together in an effort to drive contract compliance.
Specific to the combination of spend analysis technology and use alongside contract compliance results, high performers for contract compliance reported high levels of spend analysis adoption 49% of the time. Mid-tier performers for contract compliance reported high levels of spend analysis adoption 21% of the time. And the lowest-tier performers reported high spend analysis adoption levels only 11% of the time. The numbers look somewhat similar in looking at the intersection of contract compliance and e-sourcing adoption. Top-tier performers for contract compliance reported high levels of e-sourcing adoption 40% of the time. Mid-tier performers reported it 18% of the time and low-tier performers, 7%.
As our analysis of Zycus' study continues, we'll next explore some of the specific findings for supplier performance management and sourcing -- including the intersection of different technology-type deployments and adoption results. Stay tuned!