Spend Analytics in the Mid-Market: The Real Story

SPEND ANALYTICS IN
THE MID-MARKET
THE REAL STORY
A Research Report from SpendWorx LLC | May 2018

Spend Analytics in the Mid-Market: The Real Story A Research Report by SpendWorx
© Copyright SpendWorx LLC 2018. 1
SPEND ANALYTICS IN THE MID-MARKET: THE REAL STORY
The last few years have seen significant changes in the world of spend analytics with
development of new technologies and consolidation in the solution provider market. At
the same time, enterprises have continued to face many of the same challenges they
have struggled against for years such as poor quality of data, decentralized buying, and
fragmented procurement processes.
In November 2017 I met with a focus group of 18 Southern California procurement
executives to capture input for a presentation I was preparing on the subject of spend
analytics in the mid-market. The companies represented ranged in annual revenue from
$250M to $900M and operated in industries that included healthcare, industrial
manufacturing, financial services, retail and telecommunications. In addition to the
numerous learnings and insights shared by individual executives based on their
company experiences, four findings surfaced during the day that were notable by the
fact that they were relevant to the majority of the companies present:
• 16 of the companies were facing challenges with the “block and tackle” spend
analytics processes of data extraction, cleansing and classification
• 12 of the companies had used newer spend analytics tools such as
autoclassification and dashboard reporting but had experienced mixed results,
due in most cases to poor underlying data quality
• All companies present felt that spend analytics technology providers did not
understand the unique procurement environments of mid-market companies
• All companies present recognized the value proposition of having a formal best
practice spend analytics process
Following the meeting I decided to investigate whether the above themes were
representative of the mid-market as a whole. To this end I worked with a third-party
survey company TTL Inc. during January and February 2018 to issue an online survey
to the executive responsible for procurement at 6,717 US companies with annual
revenues between $100M and $1B across multiple industry sectors. The survey asked
the executives for input in the following four areas as they related to their own
companies:
• The priority of spend analytics compared to other procurement initiatives
• The ease of difficulty of obtaining accurate and timely procurement information
• The main issues that prevent access to procurement information
• The most important spend analytics capabilities to develop or acquire

Usable responses were obtained from the head procurement executives at 419
companies. This equates to a response rate of 6.2%, which is in line with typical
response rates for comparable surveys. A breakdown of the 419 companies by industry
is shown in Figure 1 and a breakdown by annual revenues in Figure 2. The three largest
industry sectors represented by the respondents were manufacturing (109 companies,
or 26%), wholesale (88 companies, or 21%) and retail (71 companies, or 17%). In terms
of annual revenues 45% of the companies fall in the range $250M - $499M, 35% in the
range $100M - $249M, 13% in the range $250M - $749M and 7% in the range $750M -
$1B.
Survey Questions and Results
Question 1: How much of a priority is it for your company to have a strong spend
analytics capability?
Of the 419 responding procurement executives, some 222 (53%) stated that spend
analytics was either a high or essential priority in their companies (see Figure 3). Of the
84 executives working for companies with annual revenues of $500M-$1B this
percentage increased to 61% (51 companies) confirming the widely held view that larger
companies with higher procurement expenditures will generally implement tighter
control over their spend. For the 335 companies with annual revenues of $100M-$499M,
the percentage of them for which spend analytics was a high or essential priority stayed
respectably high at 51%.
Question 2 - How easy or difficult is it to obtain accurate and timely procurement
decision making information in your company?
Here the survey respondents were asked to assess ten types of procurement-related
information in terms of the ease or difficulty of obtaining the information in an accurate
and timely form in their companies. The results in Figure 4 show that the three types of
information assessed as being most difficult to obtain in accurate and timely form are
company-wide cleansed and classified spend, transaction level procure-to-pay data,
and market price information. Procurement-related information presenting less of a
challenge is internal systems information required to support procurement processes
(e.g. financials, inventory, HR. etc.) functional requirements for sourcing, and user
demand forecasts.
Question 3 - What are the main issues preventing access to accurate and timely
procurement information in your company?
In this question the survey respondents were provided with a list of 20 commonly faced
procurement data issues and asked to indicate the degree to which each was an issue
in their own company. It can be seen from the results in Figure 5 that the issues
identified as causing the most problems are strongly correlated with the types of

decision making information that are most difficult to obtain in accurate and timely form
from Figure 4. For example, the top 3 issues in Figure 5 (decentralized buying, lack of
detailed transaction data and poor data quality) all directly contribute to the fact that
accurate and timely company-wide cleansed and classified spend is the most difficult
type of information for procurement decision makers to obtain in Figure 4.
Other issues identified as either extreme or moderate by more than 50% of the
executives included non-useful chart of account descriptions, lack of detail on vendor
invoices, lack of a consistent vendor performance measurement methodology, and too
much spend without a purchase order. Issues identified by the responding executives
as less of a concern towards the bottom of Figure 5 included insufficient internal
resources for data collection, spend data in non-electronic format, poor or incomplete
requirements forecasts from users, and lack of internal analytical skills to identify
insights and opportunities from spend data.
Question 4 - What in your opinion are the most important spend analytics
capabilities for your company to develop or acquire? In this final question the
responding mid-market procurement executives were provided with a list of spend
analytics-related capabilities and asked to identify which in their opinion were the most
important capabilities for their company to develop or acquire bearing in mind their
company’s unique procurement and data environment. From Figure 6 it can be seen
that over 80% of the procurement executives identified techniques to efficiently and
effectively cleanse and classify spend data from all AP and other source systems as
either very important or important. Over 50% of respondents further identified line item
analysis, user friendly analytics and reporting tools (for working on the already cleansed
and classified data) and supplier compliance as capabilities that were also either very
important or important for their organizations. Some of the capabilities regarded as
lower in importance (at least at this moment in time) included artificial intelligence (AI),
predictive analytics and machine learning.
Conclusions
The survey of mid-market procurement executives produced findings consistent with
the November 2017 focus group in a number of areas, namely:
Continuing challenges with basic spend analysis issues. The survey confirmed the
finding of the focus group related to continuing issues with procurement data. Based on
the survey results, mid-market companies still experience significant difficulties in
achieving enterprise-wide spend visibility due to challenges in extracting, cleansing and
classifying spend data.
Advanced spend analytics technologies not yet on radar. A clear finding from the
survey was that mid-market procurement executives are more concerned with ‘block
and tackle’ issues like cleansing, classification and getting a basic analysis and

reporting capability up and running than they are about AI, cognitive procurement or
machine learning. The implication is that until the mid-market has spend visibility
mastered, the penetration of advanced analytics into the sector will be limited.
Smaller companies are on board with the power of procurement. For over 50% of
responding companies between $100M-$500M annual revenues to identify spend
analytics as an essential or high priority is a clear indicator of how far smaller mid-market
enterprises have come in embracing the value of a proactive approach to procurement.
Small companies that move first to implement strong spend analytics capabilities stand
to gain significant and sustainable cost and profitability advantages over their similarly
sized competitors.
Lessons for solution providers. Another theme of the March 2017 focus group
corroborated by the survey was the perception that technology providers did not
understand some of the unique requirements of mid-market companies compared to
Fortune 500 companies when it came to spend analytics. The surprisingly low
importance placed on the newer technologies in the survey should be a warning to
solution providers that the majority of mid-market companies still need help finding their
way out of the spend visibility forest. Only then will they be able to look ahead and
appreciate the value that the new technologies will bring.

Author
Mark Usher
Founder and CEO | SpendWorx LLC
Mark is the Founder and CEO of SpendWorx LLC, a provider of procurement analytics
and consulting services to mid-market corporations. Mark has over 20 years of
procurement and supply chain experience as a practitioner and a consultant. He holds an
MBA from the University of Chicago Booth School of Business and is a Supply & Demand
Chain Executive Pro to Know.
SpendWorx
199 W. Hillcrest Drive, Suite 100, Thousand Oaks, CA 91360
800-666-8138
www.spendworx.com

Spend Analytics in the Mid-Market: The Real Story

Recommended

Recommended

More Related Content

What's hot

What's hot (18)

Similar to Spend Analytics in the Mid-Market: The Real Story

Similar to Spend Analytics in the Mid-Market: The Real Story (20)

Recently uploaded

Recently uploaded (20)

Spend Analytics in the Mid-Market: The Real Story