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Getting the Most From Analytics and Benchmarking

Nearly all of the vendor management system (VMS) providers that Spend Matters has spoken to in recent years suggest analytics and reporting is what differentiates them from the rest. Yet in terms of absolute capability, Spend Matters believes that procurement, HR and IT organizations rarely get what they need from VMS analytics in the their own deployments. This might represent a reflection of functional orientation and internal skill sets and awareness more than anything else.

Historically speaking procurement has been one of the least analytical and data-driven professions. Consider how the practice of using spend analysis to understand basic company-level spending information (e.g., what do I buy, from whom, at what price, etc.) has only recently become commonplace. Rather than addressing issues such as this, many first-generation procurement technologies targeted either combinations of process automation and decision support (e.g., e-sourcing, reverse auctions) or process governance and transactional efficiency (e.g., eProcurement, purchase-to-pay systems). Due to a lack of true insight into spending patterns, supplier behavior and internal compliance, many procurement organizations end up getting exactly what they bargained for—incomplete and insufficient visibility into buying activities outside of their direct control.

Fortunately, the recent uptake in spend analysis and supplier management solutions with the addition of embedded analytics—including reporting engines often OEM'ed from third parties such as SAP Business Objects, TIBCO Spotfire and QlikTech—has helped organizations gain greater general spending views into both what they buy and specific trending over time (e.g., purchase price variance [PPV] from one reporting period to the next). Armed with this information, procurement executives and data analysts alike can begin to ask the types of questions that lead to enhanced savings and compliance (e.g., why is one location not buying off of a centrally negotiated agreement with a vendor they are already using?). While this signals a trend in the right data-driven spending direction, nearly all the information these technologies present in run-of-the-mill deployments is only partially sufficient for driving the level of insight necessary to effect change in complex and unique services categories such as contingent labor and legal spending.

When it comes to services procurement, the fundamental challenge is that rather than using analytics as a means to explore a potentially infinite number of datasets and opportunities, Spend Matters has observed that the majority of VMS deployments rely on no more than a dozen or so canned reports to drive basic insights and reporting on a periodic (e.g., quarterly) basis. This Spend Matters Compass report explores two key (and often confusing!) services procurement subjects, analytics and benchmark data. For example: how do practitioners sort through vendor claims and prioritize how best to make decisions on how to use the capabilities? What is the difference between relying on standard reports, drilling into datasets or deploying contextual analytics? This paper also explores the challenge of arriving at accurate and truly usable benchmarks for services and people relative to goods and processes.

If you're interested in actionable and practical use cases including the types of basic reporting capabilities, queries and data sets that VMS providers can support as well as more advanced analytical strategies and capabilities, this Spend Matters paper can provide invaluable perspective.

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