Spend Management: Technology or Strategy?

I was trading notes with a reader last week about whether Spend Management is a technology or a strategy. Certainly, both of us agreed, the answer is not black and white. But there are clearly proponents and vendors in the market who fall into one of the two camps.

Vendors like Ketera and Rearden Commerce (formerly Talaris) fall squarely into the Spend Management-as-technology camp. What's interesting, though, is that technology does not necessarily imply enterprise software. Ketera and Rearden Commerce provide only hosted applications to their customers (like Salesforce.com), shunning an installed or hybrid delivery model.

On the other extreme are consultants like AT Kearney and McKinsey and Company who approach Spend Management as strategy. But again, these cases are a bit intriguing as well, as both firms have tried their hands at Spend Management applications, and failed to varying degrees by taking a technology-centric approach (perhaps, because, as Pierre Mitchell has pointed out, the ”the lure of the billable hour directly conflicts with the investment required to run a software business”).

We all know what became of AT Kearney's failed attempt to get into the Spend Management technology game. eBreviate was quietly folded back into AT Kearney, while its founders, Sarah Pfaff and Niul Burton, left in a not-so-quiet fashion. Interestingly enough, Sarah and Niul have a reputation as being two of the most affable and knowledgeable executives in the Spend Management arena today. Today, Sarah runs her own venture Variante, while rumor has it Niul has gone over to Accenture.

But back to the discussion at hand. At least ATK had lift off with eBreviate, even if the venture did not make it into orbit. The same can't be said for McKinsey’s stealth JV with Oracle, Questrix, which never quite got off the ground. Even the website is toast (you can buy the URL for $470 bucks, or roughly what McKinsey bills one of its consultants at on an hourly basis). Personally, I think the URL is probably a better value (just kidding).

Regardless, it's clear to me that Rearden Commerce and Ketera represent one extreme on the technology versus strategy continuum, and McKinsey and AT Kearney represent the other. But who is in the middle? Ariba, certainly, with its FreeMarkets merger, believes that technology and strategy are central to Spend Management. As does Emptoris (with its Zeborg acquisition) and Verticalnet (with its Tigris and B2eMarkets acquisitions). Even smaller vendors like Procuri which don't have a broad Spend Management footprint, are blurring the line between strategy and technology with their services offerings.

Some believe that Spend Management goes beyond just technology and strategy. EBS, a consulting and research firm, believes that a Spend Management blueprint has four layers: "strategy, services, business process management, and technology applications." AMR Research, Aberdeen Group, and others have all written about the importance of incorporating both strategy and process into all of the Spend Management steps (including spend analysis, sourcing, procurement, contract management, etc.) to maximize investment returns.

So it's clear to me that organizations must balance their Spend Management success recipe with varying parts technology (including software, innovative approaches, etc.) and strategy (including planning, analysis, operations, etc.) But personally, I don't want to get into a semantics argument about what every Spend Management layer or element looks like. It suffices to say that the best Spend Management organizations incorporate both technology and strategy. And perhaps even more.

-Jason Busch

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