3 misconceptions restricting your spend analysis and data-driven strategies for spend visibility

Big data and business intelligence are more than just buzzwords ─ they drive successful businesses when applied strategically. With more data sources than ever before, the importance of spend analytics and clean spend data in organizational decision-making is paramount. For procurement, it’s about aligning your data-driven goals with wider business imperatives around spend data. This starts with spend analysis.

When used effectively, spend analysis activities create greater intelligence and deliver value. You can use the business intelligence derived from visibility into spend to recapture lost savings from maverick spend by identifying which suppliers are being used on which categories. Spend analysis helps you identify new strategic sourcing opportunities for rationalizing a supply base or for renegotiating contracts.

In a recent survey of global procurement leaders, the identified high performers were 4 to 5 times more likely to have fully deployed advanced analytics and visualization solutions. To stay ahead of the game, you need real-time insights into spend data. Your data-driven procurement strategy must start with spend analysis.

Dispelling 3 common misconceptions

There are many ways of engaging in spend analysis. However, if you’re less familiar with spend analysis as a discipline, you may oversimplify what it takes to be successful. Many make the mistake of believing one or more of these top three fallacies about spend analysis:

Misconception No. 1 — “We have the expertise to manage spend analysis efforts in-house”

Spend data invariably comes from many different places, including AP systems, P-cards, T&E, expense management, and/or payment consolidators (transportation, utilities, etc.) — not to mention third-party sources for enriched vendor data. Regardless of how mature your organization is with its spend analysis efforts, knowing where all spend data resides and managing it for spend analysis is never a one-and-done process. You will need to maintain more of an iterative data exercise over time.

Optimizing spend data to get to that source of truth can be a tedious process. It requires extensive analysis and use of best-practice data techniques beyond traditional IT consulting engagements. Unfortunately, you’ll find it rare for a highly skilled IT person who also understands the nuances of procurement.

The bottom line is that doing spend analysis well requires significant investments in data handling technology, categorization taxonomy design, emerging technologies related to machine learning and AI, and other automation technologies to create repeatable processes. For even the largest companies, it typically does not make sense in terms of cost or focus to attempt to build this capability in-house when it is so readily available from industry-leading providers without the high overhead.

Misconception No. 2 — “Spend analysis is just BI for procurement”

Today there is growing pressure to leverage technologies used by other parts of the business for engaging in data-driven analytics. To do this, many organizations have invested in advanced business intelligence (BI) technologies as part of broader efforts to replace the use of Excel or homegrown tools.

But BI tools are like a Swiss Army knife and can do anything you ask. They’re simply not designed for a specific business function out of the box, and they often fail to provide the insights necessary for full spend visibility. It’s no wonder that research surveys from Gartner find that more than 87% of organizations have low BI and analytics maturity.

You’ll find general BI tools lack specific procurement intelligence and typically end up requiring expensive manual categorization and vendor resolution. A BI-centric approach tends to fall short for spend analytics.

Additionally, internal IT groups often lack expertise in spend data management, leaving you and the rest of your procurement team on your own to build and maintain a complex data management operation.

Misconception No. 3 — “A ‘spend suite’ can handle all of my spend analysis needs”

A handful of strategic sourcing or source-to-pay suites today offer spend analysis as one of many offerings under one “platform” or “suite.” The philosophy of a suite seeks to be all things to all people, often treating spend analysis as just a small piece of its solution instead of as an essential source of business data.

Another challenge with spend suites is assuming that all data flows through one system. In theory, a suite-based spend analytics solution makes sense, as it can analyze the spend that comes through the other modules, such as a procure-to-pay platform. A core argument behind using the suite is that putting all data analytics under one technology enables better data-sharing and integration. Your spend data, however, doesn’t pull into those systems in a clean, normalized and categorized state. A suite can only do so much with bad spend data.

Elevating procurement with spend analysis from SpendHQ

Procurement data is inherently messy. Businesses will never be static, and you need a spend analysis solution that can keep up as you continue to scale.

You know you have rogue spend, but you don’t have the visibility across data sources to identify where. Built for procurement experts by procurement experts, SpendHQ is the spend analytics solution that provides rapid, accurate and detailed visibility into enterprise spend data that industry leaders need.

The core of our business is providing clarity and context to your messy spend data, resulting in strategic decision-making with confidence and bottom-line savings across your business.

Powered by AI and machine learning, SpendHQ aims to change the game of spend analytics through actionable insights driven from our deep procurement expertise and experience gained from working with the over 300 leading organizations leveraging our platform.

Schedule a demo with the experts at SpendHQ to see how you can optimize your spend and elevate procurement to the next level.

Jason Bray is SpendHQ’s Chief Technology Officer.