Which of the following is required in order to execute a successful spend analysis?

There are so many reasons that spend analysis projects fail that it’s hard to wrap every potential issue up into one question that will ensure the right decision.

Most companies who have attempted spend analysis and had a less than optimal outcome will cite one of the following:

• The system or approach didn’t meet my business needs. Examples of this problem are that the solution they chose (often times a one-size-fits all approach intended to meet every customer’s requirements) couldn’t be altered to specifically meet any individual business’ requirements.

• Data Accuracy. Or more specifically lack thereof, creates lack of trust in the data and ultimately lack of end user adoption.

• Too time consuming. With many of the approaches and solutions being offered today, it’s simply too time consuming to get the spend analysis insights required in order to make good decisions and impact behaviors. And by the time those insights are available, the data is stale, making it virtually impossible to proactively affect change and impact cost.

•  Too daunting. This one goes hand-in-hand with too time consuming. The problem many companies face is that their data is so disparate and non-uniform (as is the behavior of their employees), that pulling together all their data requires significant filtering, aggregating, and normalizing of global data sets that simply do not come together easily or quickly. And because most vendors (not Sourcing Force by the way) require a clean, normalized, uniform data extract to be provided in order to process spend data, many companies find it difficult to support this effort with the limited resources they have in this economy.

• Difficult to use. Some reporting & analysis tools have come a long way towards usability. But unfortunately, most have not. This has created an environment of bottlenecks across the enterprise, because the resources trained on how to use these tools (typically senior analysts) are not the resources who are tasked with managing the spend categories and assigned the cost reduction goals. That’s a problem, right? It typically means most category managers are spending a lot of time using Excel to manage spend, instead of having direct access to the constantly changing information they need to make decisions and affect change.

These are just a few reasons spend analysis projects fail. So how can a company seeking a successful spend analysis outcome, get to the bottom of whether or not the vendor they are considering will bring them negative results?

The number one question to ask:

    “Did your spend analysis vendor deliver to your expectations?”

(Followed shortly by “Why?” …..regardless of whether their project was successful or not, you’ll find out which vendors are good, and which are bad.)

As you’ve probably guessed already, this is not a question to ask the vendor.  

But what you may not have considered is that you probably shouldn’t even ask a vendor’s reference customer this question. Any vendor can likely produce at least one customer who will say nice things about them – maybe even two or three if they have a large enough customer base.

But if you really want to know how well a vendor can really support you, ask your peers. Ask companies who your potential vendor hasn’t provided as a reference. 

Seek out global peers (both inside and outside of your industry) who have executed spend analysis, and ask them what worked and what didn’t. And it’s important to survey at each level of the organization.

Ask everyone from top level management and executives, down through actual end users who used the solution daily, as this will ensure you’re not getting an answer that does not represent the entire organization’s perspective, is guided by internal politics, or swayed by vendor friendships, etc.

There’s a lot of time, money and just as importantly your professional reputation on the line when making a decision that can have such an immense positive (or negative) impact to your company’s business. Don’t simply take the vendor’s word!