Sub-surface-spend - the need for federated spend analytics

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Many procurement teams have harvested the low hanging fruit and easy pickings. They must now delve deeper into the spending behaviors of their organizations to achieve the sub-surface spend …

Many procurement teams have harvested the low hanging fruit and easy pickings. They must now delve deeper into the spending behaviors of their organizations to achieve the sub-surface spend economies. This article argues that the way ahead lies in federated spend management platforms that offer the potential to indentify and act on sub-optimal spending behaviors that lie deeper within the norms of buying behavior of the enterprise.

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  • 1. $ub-$urface $pend Mining the Untapped Spend Economies Ian Tomlin How Federated Spend Analytics software taps into hard-to-reach sub-surface spend economies with its ‘all seeing eye’ and fine-grained analysis
  • 2. The Pivotal Role of Procurement to Raise Enterprise Standards of Operational Excellence People not acquainted with procurement so often see the discipline as a reactionary back-office function. Anyone who’s dealt with high performing procurement teams knows that it’s one of the few discipline areas tasked with looking ACROSS the silos of operation that tend to build up in organizations. Procurers have the rare opportunity to invest time in seeking better ways of working and find cost reductions through more thoughtful buying approaches. Often what procurement leaders lack are the insights to drill into deeper sub-surface layers due to short-comings in spend analytics. 2
  • 3. Although there is no obvious single journey to better ways of buying, procurement teams will quite sensibly start cost reduction initiatives by tackling higher spend areas first. Next will come the poor performing or poorly controlled areas spend. Then a third tranche of cost economies is gained through rationalization and compressing the supply-chain (these are typically more complex ‘root and branch’ changes that demand more transformation and change in the way the enterprise works and so quite sensibly fall further down the transitional scale even though sometimes the rewards can be something akin to a step-change). 3
  • 4. Drilling Down to Deeper Layers of Spend Economies As procurement teams venture through this life-cycle, they change their own DNA and transition from reactionary to proactive. Mature procurement teams might well have delivered ALL of these initiatives and are now on the march to find new sources of stakeholder value, cost reduction and improvement (think of it as a mining company that initially searches out mineral reserves on the surface to then move deeper and deeper through the strata in search of new reserves). Contemplating this next-stage sub-surface procurement initiative is where many procurement leaders now find themselves – but they also know, to achieve the best results whilst keeping their own operational costs down, they need better exploratory tools for their teams. 4
  • 5. When the cost of mining sub-surface spend economies outweighs the return The obvious areas of cost economy in sub-surface procurement initiatives comes as the result of better understanding the ‘when, where, hows and whys’ of procurement behavior to then benchmark approaches to ‘best practice’ (sometimes happening in different industry sector) to then install new – better - behaviors. Unfortunately, the costs of identifying, qualifying and acting on sub-surface procurement changes can rack up. Procurement professionals need tools to more easily speculate on areas that look on the surface to be efficient that MAY hide deeper or unpredictable costs. Time-to-value in turning potential weaknesses in procurement to rewards in terms of cost savings becomes a key measure of success. One hurdle that most procurement teams encounter when transitioning from a ‘reactive’ to ‘proactive’ procurement stance then is the need to source richer spend-analytics across all disciplines. This is the role of spend analytics. 5
  • 6. About Federated Spend Analytics Federated Spend Analytics software is cloud-based business software that places a lens across back-office administrative computer systems to expose areas of potential spend economy. In this article I explore how the latest generation of cloud-based applications platforms are facilitating fine-grained analysis of spending behaviors to expose new opportunities for cost reduction and efficiencies in the procurement function. 6
  • 7. Why Federated? • Few organizations truly operate ONE computer system across their business. Even companies that have committed to a core technology stack - such as SAP, ORACLE, IBM or MICROSOFT - will often have multiple ‘systems’ of their chosen platform to cater for disparate operating divisions, geographical variances, group companies (etc.). This means SOMEHOW data needs to be harvested, mashed together and normalized, then presented in a data-mart that allows it to be interrogated. • Like most systems that revolve around ‘people being curious’, good Spend Management systems don’t simply regurgitate data in the form of charts and dashboards, what they do is provide a platform for users to ask new questions about what, where, when, how, why and whom in the enterprise spends money. 7
  • 8. Role of Federated Spend Analytics Platforms 8 Federated Spend Analytics platforms are the newest breed of performance tooling for procurement professionals operating in large and complex organizations. Federated platforms should as a minimum provide the following capabilities:  Harvest data from existing applications without requiring manual interventions  Transform and normalize data to produce coherent data perspectives  Form a unifying data-mart that auto-refreshes with the latest data from back- office systems  Present user interfaces supporting interactive charts, maps, dashboards, side- by-side comparison tables and other visualization tools to distill key facts  Support the ability for users to create their own KPIs, alerts, chart and map views  Install RASCI role accountability to spend analysis process  Provide an always-on (secure) platform accessible via browser-based devices  Scale to meet enterprise needs
  • 9. Rewards By implementing a Federated Spend Analysis platform, what should procurement teams expect? While each organization will benefit differently from adopting a federated system here’s a quick run-down of some of the more common ROI outcomes: 9 • Multi-threaded sourcing and multi- linking of data; Tooling to harvest data from multiple sources and augment automation of information flows to route data and place it into a data-mart. • Ready-to-use design elements; Tooling that provides self-service creation of situational applications and analytical dashboards, interactive charts, maps etc. without coding. • The means to be curious; to ask ‘when, where, how and why’ questions without hugely increasing frictional costs associated with the enquiry process itself (such as time spent authoring reports, sourcing data, manual data entry and data crunching, time spent working spreadsheets etc.). • The means to expose fine-grained economies; which, by minimizing enquiry and analytical costs, become economic to act on. ADD GROW • Opportunities for sub-surface procurement economies by distilling fine-grained operational behaviors (made affordable by reducing enquiry/reporting/analytics unit costs). • Time-to-value; expose weak-points in procurement faster by having the ability to interrogate data rather than creating and running ad-hoc reports time and again in the hope that a sub-optimal behavior will be uncovered. ADD GROW Reporting and analytical overheads Software change/upgrade costs Technology complexity; save on the number of tools needed to harvest, analyze, report, share insights and related cost of authoring situational applications to ACT on learning lessons.
  • 10. Thank You. Article Sponsors: Workforce and Talent www.workspend.com IT and Technology www.ustechsolutions.com Data Engineering and Customer Science www.ndmc.uk.com Ian Tomlin is a management consultant and author. He's written several books and hundreds of white papers and articles on the subject of customer science, organizational growth, technology and the evolution of the workplace. Books by Ian Tomlin: Agilization – The regeneration of competitiveness Cloud Coffee House – The birth of cloud social networking and death of the old world corporation SOS - Social Operation Systems 10 If you have implemented projects or tools to source sub-surface spend economies it would be great to hear about them. Otherwise, if you’ve yet to explore the potential for sub-surface spend projects I would be happy to talk over the subject with you.