In our introduction to The State of Spend Analysis in 2012, we flowed from sourcing seamlessly into spend analysis to make a point. Thinking about sourcing without spend analysis is like drinking coffee without caffeine. Yes, you can do it, but why bother.

Today we continue with another look at

The State of Spend Analysis in 2012

First, for the uninitiated, Spend Analysis is the name of the process used to

Collect the spend data from the different enterprise source systems, validate it, and then place it in a standardized and usable format

Organize the information into a standard classification structure and cleanse the information by eliminating any mistakes, discrepancies, and/or flaws in the data set

Enrich the spend data with complementary information that can provide greater context around the category, supplier, and usage within the enterprise and

Analyze (i.e. “slice & dice”) the spend data to identify opportunities and support decisions.

Last time, we presented some disconcerting (to put it mildly) data that showed that only 32% of enterprises had standardized their spend analysis processes and just 29% of all enterprises had enterprise-level visibility into their spend*. Disconcerting!

These data points stand in diametric opposition to the concept of a CPO (and his/her procurement organization) Rising. But, these data points are not, unfortunately new. The problem is disconcerting, but it is not surprising. And, while these figures have been around for years, in many of my presentations (including this one), I still try to take dead aim at those organizations that lack enterprise visibility into spend and aren’t actively trying to change their situation. Rather than write another 400-500 word argument why spend analysis is critical to sustainable procurement success, I’ll let the numbers speak for themselves.

Enterprises that fully automate their spend analysis process save twice as much as those that are fully manual.

If you are one of the 71% lacking “spend vis,” what are you waiting for?

More next time.

To read more on the subject read “CPO Rising 2011: The State of Spend Analysis” a recent report which was sponsored by SAP and is available for download (registration required) here (the report is currently the second report from the top).

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* As a reminder, the research presented in the State of Spend Analysis report was part of a larger, broader research effort – the CPO Rising: Innovative Ideas for the Decade Ahead report which presented an industry-wide view into what is happening in the world of procurement today by drawing on the experience, performance, and perspective of nearly 250 Chief Procurement Officers and other procurement executives.

Tagged in: Ardent Partners Research, Solution Providers, Sourcing, Spend Analysis, Strategy, Technology