Presentation including questions and answers from webinar cosponsored by ISM Silicon Valley and purchasing solution provider Cloud Buy. Discussion of why Spend Analysis is the most important process for business to business purchasing professionals and what criteria should be considered when considering options. Includes contact information for free trial.

1. CPO CHALLENGES UPDATE
SPEND ANALYSIS DRIVES SUCCESS
ISM SV BILL KOHNEN JULY 21 2015

2. INDIRECTSUPPLYCHAIN.C
OM
A Cloud Based Digitally Native Application To Locate World Class Corporate Social Responsibility (CSR),
Sustainability-minded & Diversity Suppliers For The Worlds Broadest Range Of Indirect Spend
Categories ISM SV BILL KOHNEN JULY 21 2015

3. SPEND ANALYSIS IS THE TOP TOOL
FOR A CPO
CPO
CHALLENGES
•MORE
•SPEED
•GROWTH
SAVINGS
•2% NOW
•10% MONTHS
•30%
POTENTIAL
BENEFITS
•TRANSPARENCY
•BASELINE
•ORGANIZATION
TECHNOLOGY
•HELPS
•CLOUD SaaS
•ROI of 10X
ISM SV BILL KOHNEN JULY 21 2015
IN PRACTICE FEW ORGANIZATIONS HAVE THE CAPABILITY TO
CONDUCT A COMPREHENSIVE SPEND ANALYSIS EVEN AS A
SINGLE EVENT.

4. EXAMPLE
Immediate Savings
•$10,000,000
Achievable Savings In 12 Months
•$50,000,000
Longer Term Savings Opportunity
ISM SV BILL KOHNEN JULY 21 2015
A Company with a Billion Dollars of
Revenue would typically spend $500M
• $
150,000,000

5. REAL LIFE EXAMPLES
UK Health Systems
$500,000,000
Health Services Organization $
20,000,000
Multinational Semiconductor Company $ISM SV BILL KOHNEN JULY 21 2015

6. CPO CHALLENGES ARE THE SAME AS THOSE SHARED
ACROSS AN ORGANIZATION
COST
LEGACY
SYSTEMS
GLOBAL TRANSPARENCY
ORGANIZATION CSR MOBILE RISK
ISM SV BILL KOHNEN JULY 21 2015
More than anything the CPO needs real visibility to global
spend to:
set a baseline, manage operational needs and determine a

7. SPEND ANALYSIS WILL SHOW
Opportunities Current State Baseline
Immediate
Savings
ISM SV BILL KOHNEN JULY 21 2015
WHICH LEADS TO ACTIONABLE STRATEGIC AND TACTICAL
RESULTS

8. WHY AFTER OVER 100 YEARS OF
CORPORATE PURCHASING IS SPEND
ANALYSIS NOT WIDESPREAD
• HARD TO GET
• DISPERSED
DATA
• PEOPLE
• TOOLS
RESOURCES
• SHARING DATA
• REVIEWING
COLLABORATION
PROJECT
ISM SV BILL KOHNEN JULY 21 2015
• NON REPEATABLE EVENT
• STATIC RESULTS

9. TECHNOLOGY TO THE RESCUE - NOT
SO FAR
TECHNOLOGY CONSTRAINT
MAINFRAME Access to Data
No User Interface
CLIENT SERVER/NETWORK Data Further Dispersed
ERP Access to Data
Poor Analytics
MS OFFICE SUITE Start to Analyze Data
Driven by Strategic Sourcing
CLOUD SOLUTIONS Security
Process and Capability
ISM SV BILL KOHNEN JULY 21 2015
EVEN WITH IMPERFECT DATA YOU CAN START THE PROCESS AND GET IMMEDIATE VALUE FROM
SPREADSHEETS

10. SPEND ANALYTIC CLOUD
SOLUTION
What Does this Mean:
•You will provide raw spend data in any format to the solution provider who will transform the data
into meaningful views.
•Solution provider delivers the service via an internet connection so no hardware is needed
•Implementation is measured in weeks
•Complete ROI should be achievable in 6 months or less
•Repeatable Process
ISM SV BILL KOHNEN JULY 21 2015

11. QUESTIONS TO ASK
ISM SV BILL KOHNEN JULY 21 2015
Data Acquisition
• Formats
• Data Prep
Data Processing
• Automated
• Proprietary
User Experience
• References
• Configurable
Product
• Standalone
• Information
Security
Implementation
• Time
• Professional
Services
• ULTIMATELY USER EXPERIENCE WHICH IS VIEWING MEANINGFUL
OUTPUT IS MOST IMPORTANT
• TO BEST DETERMINE CAPABILITY HAVE PROVIDERS RUN A DEMO USING
A PORTION OF YOUR DATA

12. BUSINESS TERMS FROM
PROVIDERS
•Higher Value Solution as part of total spend process
•No Cost Upfront Options with Value Sharing
Cost
•Subscription
•If Event Based Typically Would Be Via Consultant
Term
•Legitimate Initial Set Up Costs
•Most Do Not Provided Spend Consulting
•Solutions With Embedded Industry Intelligence
Services
ISM SV BILL KOHNEN JULY 21 2015

13. CONCLUSION
SPEND ANALYSIS IS THE MOST POWERFUL TOOL AVAILIBLE FOR PURCHASING
• Most Organizations are NOT capturing full value of Spend Analysis
• Immediately focusing on Spend Analysis process even if it is not optimized will deliver results
• Emerging Cloud Based Spend Analysis solutions are secure, are easy to start up and have a
near immediate ROI and a 12 month ROI of 10X or more
Next Steps
•Make Evaluating options for Spend Analysis an immediate
priority
•Before the end of 2015 engage with a Cloud Spend Analysis
provider for a trial
ISM SV BILL KOHNEN JULY 21 2015

14. START WITH A FREE SPEND
ANALYSIS
Contact ISM – Silicon Valley and they can connect you with world class
providers that will work with you at no cost to do a spend analysis for
your company.
There are similar opportunities if you are interested in other
purchasing solutions such as sourcing, auctions, contract
management, transactional systems, catalog management and
supplier management.
info@indirectsupplychainISM SV BILL KOHNEN JULY 21 2015

15. QUESTIONS AND ANSWERS
Please elaborate on how a spend analysis helps with organizational
development?
Done well a spend analysis will give a complete picture of what is being
spent by the organization and also will identify opportunities for
improvement. With this information purchasing leaders can demonstrate
how constraints are limiting the ability to deliver better results.
Purchasing leaders can identify current areas of strength and also show
where added resources, people or training will result in better performance.
Conversely it can also help show the broader organization what goals are
achievable with the current process and protect against focusing on goals
which are not as important or unlikely to be obtained. ISM SV BILL KOHNEN JULY 21 2015

16. DISCUSS IN MORE DETAIL THE "PEOPLE SKILLS" NEEDED FOR SPEND
ANALYSIS AND HOW THEY RELATE TO CLOUD BASED TOOLS
The first “people” challenge is simply finding time in busy schedules to conduct
the spend analysis whether it is manually or with a cloud based tool.
Then there is definitely a skill set for someone to be able to gather and develop
formats for the information. It includes Project Management, Ability to
persuade others organization to provide information, technical information
about how the information will be processed and enough experience across the
company and commodities to make decision about when enough information
has been gathered. (Not letting perfection get in the way of progress)
Once you get the spend analysis it takes a different set of skills to interpret the
information and transform it into actins that capture savings or other
improvements.
In both cases you are talking about people that are likely your top performers.
If a cloud based tool can automate spend analysis and move it more from a
project to a process where the focus is getting the information to the
Commodity experts and Leaders for action then you can improve performance
more efficiently and faster. ISM SV BILL KOHNEN JULY 21 2015

17. ISM SV BILL KOHNEN JULY 21 2015
Can you tell me more about IndirectSupplyChain.com?
The site is in development by the ISM Silicon Valley and is scheduled to officially go live in early
August.
The directory's mission is to assist indirect sourcing organizations to identify spend category
knowledgeable suppliers. The directory features suppliers that are diverse and sustainability
minded.
There was a recent article on Spend Matters website about artificial intelligence and spend
analysis. Is this something that will improve things?
Certainly the leading solutions have strong algorithms for sorting and classification of data.
Whatever method is used there needs to be some level of “learning” to be able to classify data in
a meaningful way and deliver it to users in formats they want. UNSPC and other data
classification schemes have attempted to do this with very mixed results.
Certainly AI and machine learning with help all kinds of data analysis and deliver view on a near
real time basis as the result of the expansion of the Internet of Things.
However, in the meantime until a review by the client there is almost no solution out their that
still can account for things as simple as multiple naming of suppliers (IBM, I.B.M, International
Business Machines etc.) or that for a particular supplier that can distinguish on a first pass
details where a supplier may provide multiple types of goods and services.

18. ISM SV BILL KOHNEN JULY 21 2015
Comment how the Internet of Things might impact spend analysis and purchasing?
Ultimately will enable more real time reporting. I think it is more likely to impact the direct materials to
customer supply chain rather than Indirect good and services.
In the healthcare field especially group purchasing organizations are popular as consolidators of spend to
create leverage. Is this a way of outsourcing of spend analysis and what is the future of GPOs?
Group Purchasing Organizations (GPOs) are certainly a way that organizations in a specific field have been able
to gain leverage and obtain better pricing and service. However, participation in a GPO does come with
tradeoffs regarding control and really does not give any individual member greater visibility regarding their
total spend.
Certainly there are some very good success stories of GPOs and I think in the right circumstances they add
value but generally the GPO takes in data just to leverage spend across its members.
One thing to watch in this space is for transaction platforms which help connect manufacturers directly with
buyers of all sizes which will offer benefit of lower cost by elimination of distribution layers and also will allow a
more direct relationship between producers and end users.

19. ISM SV BILL KOHNEN JULY 21 2015
Our CFO really wants us to use the ERP system we have had in place for many years. It seems like a difficult fight to try
to add anything else. What should I do?
Certainly a common challenge that many purchasing professionals have encountered. I would recommend still trying to
show via a demo the real difference in capability between options. If the alternatives are not really that much better than
what you have it would be hard to argue for a change. However, it is very likely that there are better options that would
deliver better results. If your organization still will not move forward at least you have identified options for better
performance and generally as business cycles change what may have been a “NO” this quarter may turn to “YES” in the
future.
Way back I remember ERP system startup was expensive, time consuming and risky. Are today's cloud based spend
analysis and purchasing solutions really a risk I should consider suggesting?
Of course any change has some element of risk. However, the wide spread acceptance of cloud based solutions such as
Salesforce and Netsuite in other areas has demonstrated that many organizations have accepted the “risk reward”
proposition for critical Sales and Finance process and systems.
The key is to identify a solutions that is the right match for you not one that has captured the latest industry buzz and
might be viewed by the “herd” as a safe choice. Take advantage of the numerous options that still exist when deciding.
Also if it is just a spend analysis solution you are considering there is little chance that a failure or delay what have any
impact at all on your ongoing operations.

20. ISM SV BILL KOHNEN JULY 21 2015
It seems line my organization just really does not want to make a change at least for several years. Ultimately
do you think we will and what can I do in the meantime?
While since the dawn of purchasing cost seems to have been the primary measure of purchasing it seems that
alone still has not been able to create demand to the point where robust spend analysis capability is common
place even at the “top performing” organizations.
However, I think it will ultimately be continue demand for Purchasing and Supply Chain CSR accountability and
transparency that will ultimately make better spend analysis solutions much more common place. It might be
that this takes the form of a platform that collects all relevant digital information for organizations and is not
focused on just a single function like Purchasing, Sales, Finance, Operations etc….
In the meantime there are low risk high potential reward ways to move forward which include proceeding the
best you can with a manual attempt and engaging with a provider for a demo with a clear understanding up front
of your likelihood to purchase a solution and the criteria for doing that. It might actually turn out that even the
most reluctant organization can find a provider that has a technical and business solution that will meet its
needs. This is still a market space crowded with solution providers and even the big names still have barely
tapped the potential. All the providers have a big incentive to help clients capture value and turn that success
into case studies they can publish.

21. ISM SV BILL KOHNEN JULY 21 2015
Are there options to obtain tools and solutions to conduct spend analysis internally?
Certainly you can try to create your own process and system using excel and other MS products and maybe also with
general use business intelligence tools and big data analytics. The problem especially when joining purchasing needs
with other company wide data projects is purchasing almost always is not the highest priority. Also the level of effort
put into it often is near what the cost of a cloud solution would be anyway. Also an internal solution would not
incorporate latest purchasing features or remain current without significant allocation of internal resources. In the end
you just want the results to enable savings and supplier performance and do not really want to develop deep
purchasing software data expertise.
However, if your company is very sensitive about sharing its information and is big enough to support an enterprise
deployment (not in the cloud) it is possible that you can persuade a solution provider to license their product as an on
premise deployment. Certainly they will charge significantly more than the annual cloud subscription rate. However,
things may be negotiable and depending on the timing I have seen some cloud providers in other applications offer an
enterprise license to customer they really wanted where there were actually saving in 3 or 4 years relative to the
subscription. However, most of these options are based on a set # of users so the provider is hoping to be able to
increase price down the road based on added total users.

22. ISM SV BILL KOHNEN JULY 21 2015
What are some examples of the benefits that spend analytics can provide?
Reduced supplier spend, improved procurement productivity, greater transparency obtain a P-card rebate based upon
the amount of your company’s annual supplier spend
What categories of supplier spend can be reduced?
All – The system will show you how much overspend by category/vendor/BU/buyer.
Including services for both direct and indirect spend
How many users can use the system at any given time?
Generally Unlimited – Any employee that is trained can use the system. Depending on solution provider may charge fee
per user. The spend analysis should be considered sensitive information and great care given with access and sharing of
passwords absolutely discouraged. Most suppliers are able to configure multiple access process to restrict information
access as needed.
Can the system be integrated into my ERP system (SAP, Oracle, MS, etc.?)
Yes general systems are ERP agnostic and compliments your ERP system. However, for most use cases for spend analysis
the ERP system is just a data source and the spend analysis work takes place outside of the ERP system.
This is basically true even when you try to use a spend analysis tool from an ERP provider

23. ISM SV BILL KOHNEN JULY 21 2015
How many suppliers can use the system at any given time?
Generally unlimited as just additional data points. For spend analytics the suppliers are not using the system as this is for the
Purchasing organization to plan strategy and goals. As such should be considered sensitive information and great care given
with access and sharing of passwords absolutely discouraged.
Does the system support both product and service purchases?
Yes - and this becomes increasingly important as many items once viewed as goods are transforming into service and/or
product life cycle buys
Where did you see the biggest savings once the system was deployed?
It really crosses all categories and depends on a given companies spend profile and would be proprietary to each company
however some general categories include
MRO, Fuel, Travel, Transportation, Shipping, Office Supplies, Capital Equipment
How long does it typically take to run a spend analysis?
Generally the biggest constraint is getting information to the solution provider. If the vendor is not
reviewing your spend data manually it should not take more that (1) week to obtain
your spend analysis results once you have provided them with your spend data.
What data does the spend analysis vendor need in order to run a spend analysis?
Ideally they would like to have the past (12) months of data including your AP, PO, P Card, Expense
Reporting and contract data. If you do not have access to all of this information you may be able to
provide data for a shorter period of time. You will need to check with the vendor to see what specific
information they are requesting.

24. ISM SV BILL KOHNEN JULY 21 2015
Once we have our spend analysis completed, are their organizations that can assist me in negotiating
contracts with my suppliers?
This is a challenge many organizations face. Certainly you can hire consultants to help or tap into
organizations such as ISM to find temp help. However, often it makes sense to use the spend analysis as
the basis for additional people or reorganization of roles.