Professional Documents
Culture Documents
Spend Management
Pulse Report
Dear Colleague,
Zycus is pleased to present this 2011 Pulse Report on the State of Spend Management in the
UK. The research is part of a larger initiative to comprehend enterprise spend management
best practices and challenges throughout Europe.
Some of the serious challenges enterprises face today include poor information quality, timeconsuming and costly manual sourcing and procurement processes, weak cross-functional
integration and difficulty obtaining interest and support from internal spend stakeholders.
At Zycus, we are passionate about ensuring maximum ROI for our customers spend management initiatives. We offer innovative product solutions that are easy to learn and use and
which promote process automation and collaboration across enterprises. We are driven by
these principles, which led us to pioneer the use of Artificial Intelligence for Spend Analysis
way back in 2001!
Zycus Spend Management solutions combine state-of-the-art functionality, ease of use, and
superior responsiveness to customers to help enterprise spend management organizations analyze, plan and source through intuitive and objective driven processes.
The research contained in this report focuses on the technology investments that distinguish
mature and highly successful enterprise spend management organizations. We hope you find it
useful and instructive as you map out your own spend management journey.
Aatish Dedhia
CEO, Zycus Inc.
HIGHLIGHTS
Enterprise spend management is well entrenched among UK companies and UK companies are highly intent on reaching best-in-class
maturity levels for spend management. However, at present, relatively few study participants believe their enterprises are approaching or at global best-in-class.
Change management among spend stakeholders is the number one
spend management obstacle for UK companies.
More UK companies have invested in eProcurement/eCatalog than in
any other technology enabler for spend management.
Supplier Performance Management (SPM) has the most attention
at present in terms of where UK companies would like to invest in
future technology enablement. Close followers are Electronic Invoice
Presentment and Payment (EIPP), Supplier Information Management
(SIM), and Spend Analysis.
True process automation, high quality of information, and strong
cross-functional collaboration/integration around procure-to-pay
processes remain elusive for many UK companies.
UK companies are somewhat more inclined to invent and customize internally than they are to adopt best practices or solutions for
spend management, as is, from the marketplace.
Top two technology enablers favored by companies reporting the
highest cost savings rates are eProcurement/eCatalog and Spend
Analysis.
Top three technology enablers favored by companies reporting the
highest percentages of direct spend under management (SUM) are:
eSourcing, eProcurement/eCatalog, and Contract Management.
Top three technology enablers favored by companies reporting the
highest percentages of indirect spend under management are eProcurement/eCatalog, eSourcing, and Spend Analysis.
Spend Analysis, SIM, and Contract Management are the three discrete
technology enablers showing the greatest positive influence on quality and actionability of information for spend management; combining two or more technology enablers yields more dramatically positive results on information quality.
Page 2
There is no question that enterprise spend management as a discipline has gained a strong
hold among UK companies. Some 61% of study participants say their procurement organizations have explicit mandates to manage corporate spending from an enterprise level.
NO
39%
YES
61%
100%
% responding
80%
60%
36%
40%
28%
20%
23%
13%
0%
Less than 1 year
1-3 years
3-5 years
5+ years
Page 3
100%
% responding
80%
60%
40%
33%
26%
20%
0%
Page 4
10%
Just starting
21%
10%
Global
best-in-class
There is, however, clear evidence that UKcompanies have ambitions to achieve global
best-in-class status for their enterprise spend
management efforts. The chart on this page
shows where they see themselves falling on
How would
you say your
enterprise
compares
to what is
considered
global bestin-class for
procurement
and spend
management?
And how do
you see that
comparison
changing over
time?
7%
100%
4%
5%
Very far from
global best-in-class
20%
62%
40%
20%
80%
Moving toward
global best-in-class
Approaching or at
global best-in-class
58%
75%
60%
56%
40%
31%
20%
0%
22%
Today
In one
year
In two
years
In five
years
Page 5
100%
60%
56%
40%
44%
20%
0%
100%
High SUM
60% or greater
Low SUM
Less than 60%
Indirect spending
% responding
80%
60%
66%
40%
20%
0%
Page 6
Direct spending
80%
% responding
Please estimate
the percentage
of spending
currently under
management by
your enterprise
spend
management
organization.
here, UK companies still have enormous untapped opportunity to define discrete spending categories and to source those categories
strategically and competitively on both the
direct and indirect sides of their spending
landscapes.
34%
High SUM
60% or greater
Low SUM
Less than 60%
100%
% responding
80%
60%
46%
40%
20%
0%
27%
27%
LOW savings
MED savings
HIGH savings
Project participants were asked to estimate the total cost savings percentage
achieved since they first received their mandates to take control of spending
from an enterprise level. For this report, HIGH savings is classified as 41% or
more of total spending, while MED savings is 21-40%, and LOW savings is 20%
or less.
Page 7
61%
57%
Supplier performance
Risk mitigation/avoidance
Process efficiency
Process
effectiveness
46%
43%
39%
24%
20%
Other forms of value delivery
e.g. collaboration, process improvement
20%
4% Other
0%
Page 8
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
100%
% responding
80%
60%
40%
39%
20%
0%
29%
Already have
32%
Plan to invest
No plans to invest
Page 9
100%
% responding
80%
60%
40%
45%
35%
20%
20%
0%
Already have
Page 10
Plan to invest
No plans to invest
100%
eProcurement/eCatalog investment
landscape for UK companies
% responding
80%
60%
40%
40%
40%
20%
20%
0%
Already have
eProcurement/eCatalog
emerges from the study as
the most popular form of
technology enablement for
spend management among
UK companies.
Typically, when enterprises
choose eProcurement/eCatalog as a point of departure
for technology enablement,
it signifies they have a poor
history of documenting purchase transactions via purchase order, invoice/payment
using ERP or similar financial
backbone systems. Especially in companies with long
histories of allowing employees to purchase via check
request or expense-account
reimbursement, it is often
Plan to invest
No plans to invest
Page 11
CM investment landscape
100%
% responding
80%
60%
50%
40%
20%
0%
29%
21%
Already have
Page 12
Plan to invest
No plans to invest
example, they:
Enable measurement of
contract utilization and
easy detection of off-contract spending,
Ensure that savings and
other favorable terms
achieved in sourcing events
flow through and survive
the contract-writing process,
Structure key contract
dataprices, rebates,
discounts, and so forth
making it possible to
track compliance to terms
throughout contract lifecycles,
Ensure that strategic
sourcing professionals can
100%
% responding
80%
60%
40%
40%
36%
20%
0%
24%
Already have
Plan to invest
No plans to invest
In addition to automating
and speeding up the invoicepayment process, EIPP can be
used to prevent off-contract
spending simply by making it
very difficult or impossible
for suppliers to be paid in
any other ways.
Page 13
100%
% responding
80%
60%
40%
20%
0%
21%
Already have
Page 14
41%
38%
Plan to invest
No plans to invest
100%
% responding
80%
60%
48%
40%
33%
20%
19%
0%
Already have
Plan to invest
No plans to invest
parent-child relationships,
and backfill missing supplier
data. SIM creates a secure
environment for onboarding
and approving new suppliers
and ensures that information
being published into ERP is
always up-to-date and complete.
Page 15
51%
47%
36%
Wrong organizational
structure
36%
34%
Inadequate technology
28%
Weak executive
support
28%
Poor xfunctional
integration
Other
0%
Page 16
25%
4%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
From a collaboration and integration perspective, enterprise spend management organizations in the UK are tied most closely to their
companys strategic and tactical finance
management functions. Nonetheless, asked
to score on a scale of 1-to-5 their levels of
cross-functional collaboration and integration, there is certainly plenty of room for
improvement across the board. The overall
composite score comes in at just 2.53 and the
highest scorevis vis the strategic finance
functionfalls just better than half way up
the scale at 3.23. Given that obtaining internal stakeholder interest and support is a
number-one challenge for UK-based spend
management organizations, a general lack
of collaboration with human resources (2.03
score) is telling. Likewise, given very weak
scores for collaboration with sales and marketing and R+D/design, it is clear that spend
management organizations in the UK have
not yet delved deeply into opportunities they
may have for making contributions to top-line
enterprise success metrics.
3.23
3.14
2.82 2.75
Sales+mkting
HR
Legal
Operations
IT
Executive
1.94
1.72
R+D/design
2.54
2.03
Finance/tactical
Finance/strategic
2.62
Page 17
2.57
2.66
Timely
Accessible
Clean
Page 18
2.63
2.76
Usable/tactical
2.73
Usable/strategic
2.61
Accurate
2.61
Complete
An interesting phenomenon is how procurement professionals perceptions of information quality appear to change with time spent
attempting to manage spending from an
enterprise level. The composite score actually declines in the 3-5 year timeframe where
most spend management organizations seem
% responding
3.16
2.54
2.57
2.19
1-3 years
3-5 years
5+ years
Page 19
Page 20
Difference: 28%
4
3.16
2.47
3.91
3.35
3.16
Spend analysis + CM
2.99
SIM
2.84
SPM
EIPP
2.71
Contract management
eSourcing
Spend analysis
2.83
2.91 2.94
eProcurement/eCatalog
3.26
Page 21
10%
No plans to invest
Plan to invest
Already have
80%
50%
60%
40%
36%
20%
9%
25%
55%
70%
20%
25%
0%
Page 22
LOW savings
MED savings
HIGH savings
No plans to invest
10%
27%
80%
Plan to invest
Already have
30%
50%
60%
46%
40%
60%
38%
20%
27%
12%
0%
LOW savings
MED savings
HIGH savings
Page 23
100%
No plans to invest
10%
80%
Already have
34%
44%
40%
8%
60%
12%
40%
58%
20%
0%
Page 24
50%
44%
LOW savings
MED savings
Plan to invest
HIGH savings
10%
50%
Plan to invest
Already have
36%
80%
No plans to invest
40%
60%
40%
20%
0%
55%
50%
50%
9%
LOW savings
MED savings
HIGH savings
Page 25
through off-contract spending. It is no surprise, then, that EIPP stands out as another
area of technology enablement that is popular among HIGH savers. Some 89% of study
participants in the HIGH savings category
have either already invested or are planning
to invest in EIPP compared to just 54% and
50% in the MED and LOW savings categories,
respectively.
11%
No plans to invest
Plan to invest
Already have
80%
50%
46%
44%
60%
27%
40%
38%
45%
20%
27%
12%
0%
Page 26
LOW savings
MED savings
HIGH savings
No plans to invest
Plan to invest
36%
80%
30%
Already have
62%
20%
60%
40%
55%
50%
20%
0%
38%
9%
LOW savings
MED savings
HIGH savings
Page 27
100%
No plans to invest
Plan to invest
23%
36%
80%
27%
33%
9%
60%
24%
32%
40%
77%
64%
43%
20%
0%
Page 28
32%
High direct
SUM
Already have
100%
No plans to invest
18%
17%
Plan to invest
Already have
80%
8%
39%
9%
37%
60%
26%
28%
40%
75%
20%
0%
73%
33%
High direct
SUM
37%
Page 29
No plans to invest
25%
Plan to invest
20%
33%
35%
80%
30%
60%
33%
39%
40%
40%
20%
50%
42%
28%
0%
Page 30
High direct
SUM
25%
Already have
AUTOMATION-less technology?
scale of 1-to-5, the extent of process automation achieved so far in their companies, baseline results for the UK portion of the study are
shown here.
3.00
Pay transactions
2.80
Buy transactions
2.37
Spend analysis
Supplier performance
management
2.24
Procurement performance
2.14
management
Compliance tracking
and management
2.11
2.09
1.97
1.71
2
Page 31
AUTOMATION-less technology?
Difference: 42%
4
2.94
2
2.10
With spend analysis
Without spend
technology present analysis technology
Difference: 85%
4
3.00
2
1.62
1
Page 32
With eSourcing
technology present
Without eSourcing
technology
AUTOMATION-less technology?
The overall lack of translation from technology investment to real process automation
may also be an outgrowth of a propensity to
invent and to customize technology solutions
internally, attempting to automate subpar
Outsource
wherever
possible
N/A
16%
Pursue
primarily
internal
invention
path
9%
Emulate
best-in-class and
avoid internal
invention and
customization
5%
16%
54%
Study/emulate
best-in-class/
allow internal
invention/
customization
Page 33
SUMMARY conclusions
With strong executive support, plenty can be accomplished in spend management with or without technology enablement; however, going the last mile (or the
last 20-40% of the way) to global best-in-class levels
for cost savings, spend under management (SUM), and
so forth, appears to require (or at least inspire) investment in various forms of technology enablement.
Dissatisfaction with manual or less-than-state-of-theart approaches to generating information in support of
spend management appears to peak at 3-5 years in the
life of an enterprise spend management organization,
generating a strong appetite for technology investment in that time frame.
Some two-thirds or more of participating companies
that are five or more years into their spend management journeys have invested in spend analysis, eSourcing, eProcurement/eCatalog, and contract management technology enablement; 40-45% have also
invested in EIPP, SPM and SIM.
While investing in discrete technology solutions leads
to improvements in information quality for spend
management, combining solution sets leads to much
more dramatic improvements.
Investment in technology for spend management does
not necessarily translate into process automation; if
automation is an objective, then spend management
organizations may need to incorporate process automation explicitly into solution requirements; they also
need to increase their focus on obtaining adoption of
technology solutions via training, adoption and use
metrics, solution utility, ease of use and intuitive user
interface.
Expect heavy emphasis and innovation around supplier
performance management (SPM) out of the UK in coming years as companies there invest, adopt, and use
SPM technology.
Page 34
Greater
than
$2 billion
11%
28%
Less
than
$500
million
49%
5%
8%
$1 - $2
billion
$500
million $1 billion
4% Executive
vice president or CPO
Support
Purchasing
agent or buyer
Director
4%
14%
16%
or
63% Manager
spend category
manager
Page 35
About
Zycus
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