While enterprises are clearly able to recognize and communicate the benefits of utilizing spend analysis technology, they have not yet bridged the gap to action. Sixty percent of organizations currently rely on manual tools to collect and analyze spend data, resulting in limited spend visibility and the inability to improve cost savings.
Best-in-Class Performance Aberdeen evaluated over 700 enterprises in July and August of 2007 and distinguished Best-in-Class enterprises by the percentage of enterprise spend under management. Best in Class enterprises in this study are notable for their superior performance and credit spend analysis solutions for delivering the following benefits:
12.7% savings due to sourcing effort based on spend analysis data
9.1% reduction in manual correction of spend cleansed and classified
73% rate of compliance to contractual agreements
Competitive Maturity Assessment Best-in-Class performers shared many common characteristics with respect to their spend analysis strategies. Best-in-Class companies are:
40% - 94% more likely to establish executive support for spend analysis initiatives
40% more likely to utilize spend analysis reports that provide details at the transaction level
30% more likely to have enterprise-level visibility into spend
Required Actions
Establish executive support by demonstrating the ROI of a spend analysis investment
Know what you can and can’t do – establish a baseline for spend analysis capability
Move beyond sourcing cost savings – contract compliance will also positively effect the bottom line
Spend Under Management The classic measure of procurement’s impact upon an enterprise is the percentage of non-payroll-related spend that falls under management of this group, what is commonly referred to as spend under management. Aberdeen research has shown that enterprises have been able to achieve a 5% to 20% cost savings for each new dollar of spend brought under management.
“If you take away spend analysis capability from a company, you might as well turn the lights out on the procurement department. Then all they’ve become is a transactional processing group that doesn’t add much value to the organization.” - Vice President, Large Property and Casualty Insurance Enterprise
