Deploying AI-driven spend analytics: How to prepare your company for increased visibility

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Modern spend analytics relies on artificial intelligence for a number of reasons, including the need for a robust tool to manage all of the data being generated and the need for advanced technology to make sense of different data streams. This innovation provides new visibility that can benefit procurement operations and generate business value overall, according to research by Spend Matters and others.

In the first article in this series, we discussed how companies decide if they need a full procurement technology system to understand their spend or if a best-of-breed spend analytics solution offers better insights into the future as well as analyzing past performance.

In today’s post, we’ll look broadly at the tech selection process, specific considerations for spend analytics, and the procurement-focused findings of an A.T. Kearney paper that shows how spend analytics fits within the digital transformation of all businesses.

Spend time on tech selection

Spend Matters analyst Magnus Bergfors has five tips on tech selection, including “identify business objectives,” “don’t try to do everything at once,” “focus on the basics first,” and “select a solution and vendor that meets your requirements.” The final tip requires a broader view: “Review and redesign processes — perhaps even your organization — as part of tech preparation and implementation.”

Here’s an example of how spend analytics can change the processes and structure of your business.

Stakeholders should understand that modern spend analytics systems put the power in the users’ hands instead of requiring massive amounts of help and time from the IT department. So that could change processes and the company’s structure. Also, the increased visibility from spend analytics allows for faster response times to cut costs, target risks, ensure compliance or act on opportunities. And when users gain confidence in the data being collected, that can increase adoption of the tool across the business. Systems that are easy to use also add to the adoption rate, with fast “time to value” helping justify the investment in the new technology. More use means a better ROI.

Understand the types of spend analytics

“If you want to extract more value from your spend, you have to extract more insights,” Pierre Mitchell, Spend Matters’ chief research officer, wrote in an analysis titled “So You Want to Buy Spend Analytics — Beyond Spend Cubes.”

He encourages businesses to embrace the process of tech selection, and he lays out the general landscape of options for spend analytics. Here’s an excerpt from his subscription research brief:

Just defining your overall analytics scope and strategy is half the battle in determining the class of solutions you should approach before even diving into the features and functions of individual providers. For example:

  • Is your spend analytics just focused on “spent analytics” (i.e., forensic/historical spend analysis) or do you want the ability to do “strategic spend planning” (e.g., tying into FP&A for indirect spend and S&OP driven supply planning for direct spend)?
  • Do you want to include procurement analytics more broadly such as spend-related savings performance and supplier analytics (i.e., how to get more from your spend via suppliers and your value chain)?
  • How much out-of-the-box analytics do you need in terms of breadth and depth (e.g., category-specific analytics)?

There are also other key considerations that focus on technical aspects of the solution relative to master data management, big data, market intelligence, AI and more that have a real business impact on procurement centers of excellence looking to drive more insight and value from not just internal spend but external supply data. Your strategy and approach in selecting providers is also crucial so that you can drive short-term results, while also giving yourself the option to evolve into new areas.

Mitchell also delves into the key differentiators that should be considered when looking to buy a spend analytics solution. He focuses on data preparation and the use of things like “data lakes,” spend taxonomy management, advances in master data management and auto classification of data.

Know the future, Kearney says

It’s said that the best way to predict the future is to define it yourself.

Technology, for sure, is redefining procurement — so much so that the consultants at A.T. Kearney named one of their research papers “Nearly Everything You’ve Been Told About Procurement Analytics Is Wrong.”

That’s true because the digital transformation of business is changing what CEOs and CFOs need to be paying attention to. And it’s true because spend analytics have evolved from backward-looking spend cubes to AI-driven solutions that gather and crunch so much data, so fast that the very definition of processes and procurement’s purpose have changed.

The Kearney paper lays out a roadmap for companies to gain the spend analytics of the future. Specifically, they need to break with how they measure spend now, prepare for the deluge of new data, turn that information into new insights and put the power of spend analytics at users’ fingertips.

"A solid procurement analytics solution should combine internal and external data and then provide proactive insights into optimization opportunities,” said Dr. Elouise Epstein, Vice President at A.T. Kearney and an author of the paper. “Procurement should be adopting next-generation solutions, which offer both an extensible data lake coupled with procurement analytics.”

A procurement data lake provides a centralized place to store all supplier, transaction and commodity information in order to generate today’s and tomorrow’s procurement analytics.

In the next article in this series, we’ll find out more about data lakes, the issues and the technology when we talk with an expert at the spend intelligence provider Suplari to discuss how spend analytics is used by businesses today.

This Brand Studio post was written with Suplari.

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