Procurement has likely entered the beginning of a massive swell in the adoption of advanced analytics tools. Researchers from The Hackett Group have found that mainstream adoption of advanced analytics in procurement functions is expected to more than triple in the next two to three years, increasing from the current 20% to 63%. Given the benefits associated with the effective use of analytics, the increased adoption makes sense. Earlier research has found that analytics-driven organizations are twice as likely to be top financial performers and five times as likely to make faster and better decisions.
Spend Analytics SolutionMap ratings provide comparative rankings and insight into how each provider scored from a Solution perspective and Customer Value perspective.
Earlier today Spend Matters released its Q1 2018 SolutionMap. The release now comprises six technology areas with individual vendor rankings (spend and procurement analytics, sourcing, supplier management, contract lifecycle management, e-procurement and invoice-to-pay) and three composite suite views (strategic procurement technologies, procure-to-pay and source-to-pay).
Our goal with SolutionMap is very different from what other analyst firms seek to achieve with their ranking systems. This is apparent even at our “free” level. The SolutionMap approach starts by releasing the ranking charts in the public domain, providing multiple persona-based views of vendor capability (45 comparative 2/2 matrices in total for the Q1 2018 release). We take a truly data-driven approach to plotting vendors, where an “average” score positions a provider in the dead center of a chart. SolutionMap ranking charts also make it easy to distinguish analyst scoring from customer scoring, plotting the data on separate analyst and customer axes. Finally, the Q1 2018 release actually reflects the time frame of its publication: We update the underlying data set and charts for SolutionMap on a quarterly basis.
Admittedly, the “free” stuff is designed to pique your interest. Unlike some of our peers in the analyst world, we have not made SolutionMap “reprint friendly” for the maximum number of vendors through grade inflation. Why? Because in the world of procurement technology, not everyone is “above average” like the children of Lake Wobegon. There’s an average, and there’s a deviation from average — positive and negative. Obfuscating these deviations might produce charts that make people feel good about buying decisions up front, but other than a near-term CYA, how useful will these be in the long run for those relying on them for, well, anything?
At the new SolutionMap subscriber level — separate from Spend Matters PRO — the tangible value of SolutionMap becomes even clearer. At this level, we unpack the underlying data we show for the analyst scoring by rated sub-category. For example, in the Supplier Management SolutionMap, you can see individual, tiered-based scoring for capabilities such as master data management (MDM), supplier onboarding support, core supplier information management (SIM) and supplier performance management, among other areas. Customer ratings (e.g., level of value perceived, quick deployment, ROI) are also visible.
To see the full level of data available to SolutionMap subscribers, check out the currently available reports from the Q1 2018 release:
There are views of the data beyond those provided in these reports (e.g., tiered-based scoring and ranked scoring for all sub-components that comprise an area, such as master data management within the Supplier Management report). Per our competitive intelligence policy, however, we reserve this view for practitioners going through a selection process (or the consultancies advising them), with strict licensing. This prevents comparative information from falling into the hands of competing vendors participating in SolutionMap. We take intellectual property protection and data privacy, for providers and practitioners, very seriously here at Spend Matters; otherwise, we’d find ourselves out of business quickly.
So, how exactly does all of this work? Read on as we unpack a SolutionMap Insider-level example within Supplier Management from the Q1 2018 SolutionMap. Specifically, we compare Jaggaer with Jaggaer Advantage (formerly BravoSolution) to showcase how it all works.
A procurement organization’s spend data usually resides in various databases and spreadsheets, often making it difficult to collate them into one coherent form for reporting purposes. However, procurement organizations can reap enormous benefits by bringing in much needed visibility into spend patterns. The importance of spend analytics has not gone unnoticed: 38% of procurement leaders had rated spend analysis as the most critical area to receive investment, according to Deloitte's 2016 Global CPO Survey.
After years of relative stability in the e-sourcing and spend analytics market, 2018 appears to be ushering in a period of disruption and innovation for solution providers. From the early rise of artificial intelligence to greater adoption and innovation around sourcing optimization to the rapid emergence of contract-based analytics as a complement to traditional spend analysis, 2018 promises to be the year where change is just about the only constant in these markets. And, of course, we expect M&A activity to continue in 2018, as well, fueled by private equity interest in the sector and a general trend toward consolidation — which may or may not be good for customers, depending on the circumstances.
This is the third installment of our 2018 procurement technology trend and forecast series, focusing on solution provider trends and priorities within e-sourcing and spend analytics. Part 1 and Part 2 of this series provide an analysis and exploration of customer trends. In today’s PRO research brief, we turn our attention to the rise of artificial intelligence (AI) and the continued trend toward M&A and consolidation within the procurement technology suite, sourcing and spend analytics markets. We also include a chart showing Jason Busch’s top five vendors most likely to be acquired in the next 12–18 months in the sourcing and spend analytics markets, along with a quick rationale as to “why” and “who”.
Following today’s analysis, the final installments in this series will feature additional trends (e.g., the rise of contract-based analytics) and conclude with our 2018 e-sourcing and spend analytics market sizing, forecast and adoption outlook.
The Spend Matters 2018 Trends and Predictions series is in full swing this quarter. In January, we published our complete e-procurement market commentary and forecast series (see Part 1, Part 2 and Part 3). Then in February, we continued the series with our first installment covering the e-sourcing and spend analytics markets, starting with two of five trends driving customer adoption and priorities. Today, we conclude our look at predictions and trends for these markets by exploring three additional developments: valuing suite optionality, expanding sourcing and spend analytics use cases, and the streamlining of RFI and deployment processes.
Earlier this year we began our 2018 trends and predictions series, starting first with the e-procurement market. This earlier series is a useful primer for this one, and readers may find it worthwhile to read Part 1 (Customer Adoption and Priorities), as well as Part 2 and Part 3 (Provider Analysis and Market Sizing). Today, we continue our procurement technology trend and forecast series by diving into customer adoption trends and priorities within the e-sourcing and spend analytics markets.
We begin this exploration by analyzing what customers are valuing most from a selection and deployment perspective in 2018, as well as trends, such as IBM Emptoris migration, driving these activities. Then, in later installments in this series, we’ll offer insight into e-sourcing and spend analytics technology provider trends and strategies of note. Finally, we will share our comparative 2018 market growth and sizing estimates for both the e-sourcing and spend analytics.
From a customer adoption perspective, we see five distinctive trends, each of which we will cover in Parts 1 and 2 of the series:
Functionality Be Dammed! The Rise of the Nimble Buying Persona
Procurement optimization has become one of the most important EBITDA improvement levers for private equity firms and their operating partners. With investment valuations on the rise, private equity firms are increasingly relying on implementing operational efficiencies to quickly accelerate savings and maximize profits — and focusing in on procurement is becoming the “go-to” strategy. In addition, extended hold times of portfolio companies and lower management fees due to less capital being deployed on a regular basis has led to PE firms to ask their operating partners to do more with less.
In the first installment of this series, we discussed ways to align procurement with the finance function, starting with financial accounting and then moving into cost accounting. Although cost accounting has one foot in the financial accounting world in terms of tracking costs and having them flow to the general ledger (GL), the more important side of cost accounting is its part in managerial accounting and total cost management.
Managerial accounting is about analyzing financials to make good business decisions. It includes analyzing historical costs and spending, but only in the context of improving future spending and reduce total economic costs. One aspect of economic costs is opportunity costs, and procurement must work hard with finance to understand the procurement ROI that comes from strong management of external spending led by the procurement organization. This ROI is measured in triple digits but must be demonstrated with hard numbers.
More importantly, however, procurement’s ability to partner with finance to better influence future spending is the most practical way to influence financial and business results. This comes from procurement aligning well with finance within the financial planning and analysis (FP&A) processes that occur in finance. Hopefully, FP&A is more than just basic budgeting at your organization. Done well, it provides the critical linkage to not only financial planning but also strategic and operational planning that drive success for budget owners, broader stakeholders and shareholders.
Given the importance of FP&A, we’re going to focus on this collaboration area and how to apply it to spend management, which you can think of as “spend planning and analysis” before the spend actually occurs, as opposed to traditional “spent analysis” of spend that already happened. This focus upstream is fundamentally about transformation and changing procurement’s role in the planning and budgeting process. Luckily, this area creates much higher quality of spend influence, which drives proven levels of spend savings.
Spend analytics technology is not new to procurement. Yet a significant number of practitioners report feeling overwhelmed by the amount of data they have to handle, let alone knowing how to make sense of it all in a meaningful way. How can this be when the technology to solve such problems has existed for several decades? The answer lies in the historical flaws of the spend analytics market. Up until now, the dirty secret is that analytics technology has actually performed worse than humans at classifying spend data. But with advances in machine learning, particularly the power of deep learning, the gaps in analytics offerings are beginning to narrow.
While the dust has not yet settled on the Jaggaer-BravoSolution transaction, customers and prospective customers have already sent us multiple inquiries about how both organizations’ suites and modules stack up against each other. In the coming weeks on Spend Matters PRO, we will examine the capabilities of both providers on a module-by-module basis. Starting first with spend analytics, we will also explore both providers (and Jaggaer Direct, where applicable) in the sourcing, supplier management and contract management areas.
In this research brief, we answer the following questions:
Comparatively, how does each respective spend analytics module stack up on a capability basis?
What are the functional strengths of each spend analytics module under the surface?
What are the “best fit” SolutionMap personas for each analytics module?
Who are alternative analytics providers?
What are disruptive forces in the spend analytics market (e.g., artificial intelligence, low-cost solutions) that could affect both providers?
Is there a disadvantage to “going non-suite” in the spend analytics area?
This Spend Matters PRO brief derives insights from our Q4 2017 SolutionMap datasets (analyst scoring) based on our SolutionMap methodology, demonstration notes and Spend Matters PRO research on alternative suppliers (Vendor Snapshots).
