Zycus’ Audacious Research Effort — Defining Best Practice For Compliance, Sourcing, SPM (Part 4)

I reserved the final post in this series -- analyzing Zycus' research findings from a study involving some 500+ practitioners -- for the area that I've spent the most time on over the years: e-sourcing. Even though I've long since moved on to other areas of research in the broader Spend Management arena that I find more interesting, at least on a personal and professional level, I still find e-sourcing adoption and usage pattern insightful to consider. I must say, however, that I know some savvy sourcing professionals at companies and in professional services firms who shun at least the reverse auction (or even bidding) component of e-sourcing capabilities, even if they're strong advocates (and users) of other technologies, including spend analysis. A number of these individuals have found that the supplier perception of basic e-sourcing tools can actually limit their ability to maximize savings when they really know the supply market.

This is a curious observation, but one I suspect we'll see more of given the mass adoption of sourcing technology today (sometimes during a negotiation by going against the mainstream model, you can gain negotiation leverage in a contrarian manner, but only if you really know what you're doing). Still, for most companies, the numbers show that there is a fairly tight correlation between e-sourcing adoption and sourcing participation and results. In this regard, Zycus' findings suggest that 54% of companies reporting top-tier ("high") levels of sourcing participation also have high areas of e-sourcing technology adoption and use. This number drops to 19% for mid-tier performers and 8% for low performers (suggest that on the low-end of the performance scale, that there are still scores of platforms that are in use, but perhaps in under-use are miss-applied).

Perhaps not surprisingly, Zycus' findings also insinuate that the strength of sourcing programs and spend analysis adoption is even more tightly linked to overall sourcing performance than e-sourcing adoption. In this regard, 62% of top sourcing performers (from a participation vantage point) are also high users of spend analysis technology. This drops to 21% for mid-tier performers and 6% for bottom tier survey respondents. Here at Spend Matters, we would enthusiastically second the observation -- albeit, anecdotally -- that top performing sourcing organizations almost always have mature spend analysis deployments even if their e-sourcing adoption is less one might suspect.

What tactics do top performing procurement organizations favor when it comes to driving sourcing participation? A number of factors are tightly grouped, in fact. Leading the list with 41% of respondents affirming their use of the tactic is "communicating benefits & business cases." Next on the list is "communicating clearly and effectively throughout process" at 39%. "Ensure people's opinions count heavily in process," "make it easy for people to participate," and "base decisions on facts (vs. intuition or opinions) come in at 37%, 37% and 36% respectively.

When I was getting starting in the e-sourcing world at FreeMarkets, we often suggested that transparency (i.e., basing decisions on facts vs. intuition/past relationships) was the most important reason to leverage an e-sourcing process. Yet today, perhaps it's a sign of how far this market has come, this tactic is not even in the top three when it comes to driving sourcing participation in top performing companies. In fact, "communication" takes the price in all of the top three areas. I find this remarkable, in fact. So next time you're evaluating a core e-sourcing toolset for the bulk of your spend, perhaps it might make sense to evaluate its ability to improve collaboration rather than drive transparency and/or forcing a rigorous process or seek out every last penny of identified savings from some complex transformational auction model.

- Jason Busch

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