Spend Analysis: Dying or Morphing Into Something More?
For years, spend analysis was one of the most important areas of procurement technology (even if spending on it was minimal compared to P2P, sourcing and other areas overall). Zycus built its entire business on the area -- classification, originally -- before expanding their suite value proposition. Many other smaller providers have as well, including some in more recent years (e.g., Rosslyn, Spend Radar). But much of the overall spend analysis business, at least as measured by absolute dollar-volume, has gone to the suite vendors and even the ERPs. Moreover, the analytics specialist in the field, BIQ, sold its business to Opera Solutions after pushing capabilities far beyond the canned reporting capabilities that ship with most solutions (and Opera appears to be up to some fascinating things that we hope to share in the future if they'll let us).
In the past few months, we've seen fewer informal and formal spend analysis RFPs independent of broader suite deals and requirements than before -- and compared with other areas of the procurement solutions market. We think there are a number of potential explanations for this, some of which are more disconcerting (for the viability of this market on an independent basis) than others. First, let's start with one of the more innocuous explanations: larger players (SAP, Ariba, Emptoris, Zycus, BravoSolution, etc.) are keeping existing business or winning new deals with less competition (for spend analysis independent of other areas) than before; we believe this is especially true of the ERPs and Ariba (especially when Ariba offers aggressive pricing).
But there are more subtle (and important) explanations at work, including:
- The value that category specific datasets and data-mashups can bring (versus just canned reporting); this often requires specialist providers (e.g., in the marketing spend area) or those with a focus on flexible analytics
- A greater awareness of the need for broader procurement analytics rather than just spend analytics to drive sourcing and reactive compliance efforts (i.e., broader data-sets, real-time visibility versus just refreshes)
- A new focus on leveraging spend visibility to drive a range of different procurement initiatives beyond sourcing (savings implementation and management/budget tracking, integrated compliance/classification during the P2P buying process, supplier management/VMO visibility, SPM analytics, invoice/statement auditing, etc.)
What do you think? We're curious to collect opinions on the subject. But it's our gut that the spend analysis market will not just go the way of suite vendors (although that in part explains some of the changes in market activity), but will morph into something broader.