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United Kingdom 2011

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.

Spend Management Pulse UK 2011


INTRODUCTION
Zycus recently launched its Pulse of Procurement and
Spend Management in Europe/2011 research initiative. The research has multiple objectives:
To document adoption of enterprise spend management approaches throughout Europe,
To benchmark spend management maturity
achieved thus far among European companies,
To understand the unique challenges that European
companies may be facing in their spend management journeys,
To grasp the extent and directions in which European companies are investing in automation technology to enable enterprise spend management, and
To comprehend which technology enablers appear
to be contributing most to various spend management maturity and success metrics.
While the research will be deployed over a period of
time in multiple countries and languages, this special
reportreleased to delegates at the 2011 eWorld
Conference in Londonrepresents the results of
Phase 1, which focused exclusively on procurement
and spend management organizations based in the
United Kingdom.

INSIDE this report


Highlights .......................................... 2
Spend management baselines.................. 3-5
Performance benchmarks.......................6-8
Technology investment landscape........... 9-15
Critical challenges ................................16
Collaboration scores ..............................17

Information quality scores.................. 18-21


Enablers for cost savings.................... 22-27
Enablers for SUM ............................. 28-30
Process automation scores ................. 31-33
Summary conclusions............................ 34
More about the study. ........................... 35

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

SPEND MANAGEMENT baselines

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.

Does your procurement organization have


a mandate to manage spend from an
enterprise level?

NO
39%

YES
61%

What is more, some 87% of those companies have


been pursuing enterprise spend management for
longer than one year. More than half have been
at it for longer than three years and better than
one-third are five or more years into their spend
management journeys.

100%

For how long has the mandate been in place?

% responding

80%

60%

36%

40%

28%
20%

23%

13%

0%
Less than 1 year

1-3 years

3-5 years

5+ years
Page 3

SPEND MANAGEMENT baselines

Despite impressive lengths of time with


enterprise spend management mandates in
place, though, only 10% of study participants
rate their organizations as global best-in-class
in terms of maturity compared to 69% who
place their companies near the middle or
lower down on the spend management maturity curve. Underpinning the general lack of

100%

% responding

80%

On a scale of 1-to-5, how would you rate the


maturity of your organization in terms of its
strategic spend management capabilities?

60%

40%

33%
26%

20%

0%

Page 4

progression to best-in-class is a complex set


of challengespoor information infrastructure, time-consuming manual processes, and
organizational obstacles that culminate in an
inability to reshape enterprise culture into
something that is consistently mindful and
disciplined around the way it spends money.

10%
Just starting

21%
10%
Global
best-in-class

SPEND MANAGEMENT baselines

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?

the maturity curve at various intervals in the


coming five years. According to the study, investment in technology enablement for spend
management is expected to play a big role in
making this anticipated trend a reality.

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

PERFORMANCE spend under management

Spend Under Managementthe portion of


total spending that is either controlled directly or influenced strongly by enterprise
procurementis an important success metric
as it correlates directly with the amount of
total potential cost savings achievable by
an enterprise. Based on study results shown

100%

60%

56%
40%

44%

20%
0%

For analysis in this


report, participating
companies have been
grouped as follows:
LOW SUM: Less than
60% of total spending

100%

HIGH SUM: 60%


or more of total
spending

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%

PERFORMANCE cost savings

Even at relatively low levels of perceived


spend management maturity and with large
percentages of spend categories still unaddressed by procurement, the study finds
that UK companies have managed to bank
billions in cost savings through enterprise
spend management. In pages 22-30 of this

100%

report, we investigate the specific technology


investments these companies have already
madeand what they are planningin order
to sustain high cost-savings rates and convert
more spend categories from unaddressable to
addressable by enterprise procurement.

Please estimate the percentage of total cost savings


delivered since procurement first received its mandate
to manage spending from an enterprise level.

% 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

SUCCESS METRICS for spend management

While the study hypothesized (correctly) that


cost savings and spend under management
(SUM) would be among the most popular success metrics for enterprise spend management organizations, a surprise is that supplier
performance ranks ahead of SUM as a top way
in which UK enterprises value and measure
their spend management organizations con-

tributions. Similarly, contributions to working


capital performance and supply-risk mitigation and avoidance are valued more highly
than process-efficiency metrics. This suggests
an exciting shift in top executives perceptions around how procurement can contribute
strategically (versus just tactically) to corporate success.

How does your enterprise measure procurement and spend


management performance?
63%

Cost savings (hard)

61%

Cost savings (hard + soft)

57%

Supplier performance

Spend under management (SUM)


Working capital 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%

SPEND ANALYSIS investment landscape


To begin to understand the influence of technology enablement on spend-management performance, it is helpful to establish a baseline for what solutions
are in place. This section includes baselines for the UK portion of the study.

100%

Spend analysis investment landscape


for UK companies

% responding

80%

60%

40%

39%
20%

0%

29%

Already have

In the early days of enterprise spend management,


most procurement organizations would start out analyzing spend manually andby
extensioninfrequently.
One-time A/P or ERP data
dumps would be moved into
electronic spreadsheets for
classification, aggregation
and analysis by individual
spend category managers
from which strategic sourcing opportunities would be
identified. While such an
approach can be quite successful for a period of time,
it does not scale, is prone to
inaccuracy, does not fill holes
in source spend data, suffers

32%

Plan to invest

No plans to invest

from inconsistency as personnel change, copes poorly


with multiple and disparate
sources of spend data, limits
views into spending to highlevel categories or suppliers only, leaves many spend
categories off the table for
management due to complexity, is too infrequent to
engender true cultures of
enterprise spend management, and does not enable
powerful blending of spend
with other enterprise data
for strategic management of
compliance, supplier performance, and other levers.
State-of-the-art solutions for
spend analysis address all

of these shortcomings and


are clearly gaining traction
among UK companies. There
is also evidence in the study
to suggest that enterprises
are becoming less likely to
wait; more likely to dispense
with the manual phase of
spend analysis altogether.
For example, among participating companies that have
been pursuing spend management for less than one year,
20% have already invested in
technology enablement for
spend analysis while another
60% say they have plans to
do so.

Page 9

eSOURCING investment landscape

100%

eSourcing investment landscape


for UK companies

% responding

80%

60%

40%

45%
35%

20%

20%
0%

Already have

While eSourcing technology


is clearly gaining traction
among UK companies, it is
somewhat surprising that
nearly half of study participants cite no plans to invest
in eSourcing solutions. This
may be an outgrowth of the
poor reputation earned early
for the eAuction subset of
eSourcing technology. Rapid
introduction of eAuction
technology to markets with
little to no previous price
transparency combined with
high learning curves among
both buyers and sellers led
to some extremely negative
outcomes and beliefs that
eSourcing is a negative for
long-term collaboration and
innovation relationships with
suppliers. However, eSourc-

Page 10

Plan to invest

No plans to invest

ing technology has evolved


substantially and there is
evidence that maturing
spend management organizations are beginning to see
eSourcing for what it really
is: a means for automating
and speeding up many different kinds of competitive
sourcing processes. State-ofthe-art eSourcing technology
standardizes, centralizes,
and structures information
around sourcing events. It
enables pipeline management and tracking of spendmanagement opportunities
through to savings delivery
and increases opportunity-tosourcing event throughput.
eSourcing supports controlled
workflow and secure, online
collaboration among procure-

ment professionals, internal


stakeholders and suppliers
participating in competitive
sourcing events. It enables
multiround competitive
sourcing events. It gives suppliers cost-effective ways to
participate easily in sourcing
events, to communicate with
buyers, and receive information they need throughout
sourcing events. eSourcing
empowers fewer spend managers to manage more categories and to conduct complex analyses and modeling
of sourcing event outcomes
and award scenarios. What
is more, eSourcing has gotten easier and more intuitive
to learn and use, making it
more accessible as a productivity tool.

ePROCUREMENT investment landscape

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

imperative to establish precise, trackable mechanisms


for conducting transactions
as a means for generating
sufficient spend source data
for strategic opportunity
analysis.

buy on-contract and to consider lowest-cost options


as transactions are being
executed, and
Manages workflow for buying permissions and spend
authorizations.

eProcurement has other benefits as well:

Nonetheless, where sufficient


transaction data exists, investment in spend analysis is
a more typical starting point
for technology enablement
as it can provide a faster
pathway to finding and acting
upon opportunities for spend
management.

It automates and speeds


up order/purchase transactions,
Locks down spending by
enabling procurement to
control what items can be
purchased from whom,
Controls product pricing
and availability through
supplier eCatalogs,
Can direct purchasers to

Page 11

CM investment landscape

100%

Contract management investment landscape


for UK companies

% responding

80%

60%

50%

40%

20%

0%

29%
21%
Already have

Contract management (CM)


solutions appear to have
gained less traction among
UK companies participating
in the study.
This may stem from a misconception that contract
management solutions deliver process efficiencysoft
cost savingsrather than
identifying and delivering
more tangible or so-called
hard types of cost savings.
But while contract management solutions certainly
deliver process speed and
productivity gains, they contribute directly to hard cost
savings in several ways. For

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

lock in terms quickly when


markets are favorable to
buyers (rather than watching benefits erode through
long contract cycle times),
Make certain that procurement is always alert to easy
spend management opportunities tied to imminent
contract expirations or substantial changes in market
conditionssuch as price
reopenersthat can erode
cost savings if unnoticed.
Combined with solutions such
as spend analysis, contract
management solutions create powerful platforms for
tracking and managing spend
compliance.

EIPP investment landscape

100%

EIPP investment landscape


for UK companies

% responding

80%

60%

40%

40%

36%
20%

0%

24%

Already have

Plan to invest

No plans to invest

Only one in four UK companies participating in the


study say they have already
invested in technology enablement for supplier invoice
and payment processes, but
there appears to be considerable growing interest in this
area with some 36% citing
plans to invest in the future.

procurement in UK companies tends to be most closely


aligned with both strategic
and tactical finance functions and that contribution to
working capital improvement
is now being counted among
the most popular success
metrics for enterprise procurement.

Taken in context of traction


observed in eProcurement/
eCatalog, this is hardly
surprising as EIPP addresses
the latter half of the total
procure-to-pay process.

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.

What is more, this dovetails


with two other study findings: first, that enterprise

ports on-time and/or early


payment to suppliers, allowing companies to:
Actively manage Days Payable Outstanding (DPO) and
other cash management
levers,
Avoid interest charges for
late payments, and
Give procurement leverage
to negotiate discounts and
develop beneficial commercial relationships with
suppliers using creative
financing options.

More important, EIPP sup-

Page 13

SPM investment landscape

100%

Supplier performance management investment


landscape for UK companies

% responding

80%

60%

40%

20%

0%

21%
Already have

Supplier Performance Management (SPM) ranks highest


in the UK study in terms of
intention to invest, dovetailing with the study finding
that supplier performance
ranks thirdahead of spend
under managementin terms
of how UK enterprises value
and measure performance
in their spend management
organizations.
While only one in five participating companies has already
invested in SPM technology enablement, this may
be a function of a general
marketplace absenceuntil
relatively recentlyof flexible, highly configurable SPM

Page 14

41%

38%

Plan to invest

No plans to invest

solutions engineered natively


to support what enterprise
procurement organizations
need to accomplish in this
area. For example, until very
recently, there had not been
solutions that would support
easy, flexible modeling of
existing supplier ranking and
rating systems or easy flow
of SPM data into other applications, such as eSourcing
or spend analysis, where SPM
data can be incorporated on
the fly into sourcing decision
making and to make certain
that spend is flowing consistently to only the highestperforming suppliers.
Another likely driver for

growing interest in SPM


technology is increasing
emphasis among UK spend
management organizations
on placing more fragmented,
indirect spend categories
under management. While
procurement organizations
need high performance to
win support and compliance
to indirect strategic sourcing
contracts, performance management systems have been
notoriously difficult to model
in this area as they require
a much broader array of
potential metrics and more
qualitative data inputs from
spend stakeholders. Emerging
SPM solutions address these
longstanding difficulties.

SIM investment landscape

100%

Supplier Information Management investment


landscape for UK companies

% responding

80%

60%

48%

40%

33%
20%

19%
0%

Already have

Supplier Information Management (SIM) is another relative


latecomer to the technology landscape for enterprise
spend management, but
some 33% of study participants say their organizations
have intentions to invest in
SIM.
And while SIM investment
may have other drivers, for
example, Master Data Management or ERP harmonization/upgrade initiatives,
the technology is also being
recognized in its own right
as an important enabler for
long-term enterprise spend
management success.

Plan to invest

No plans to invest

For example, SIM together


with eSourcing creates a
seamless and rapid way for
identifying existing suppliers to be invited into sourcing events and for rapidly
onboarding potential new
suppliers and getting them
transaction ready in advance
of their sourcing event participation.

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.

SIM essentially consolidates


all relevant supplier information into a single, structured,
accessible and yet controlled
database. Top SIM solution
providers will be able to
standardize supplier data,
de-duplicate, correct old
inaccuracies, map supplier

Page 15

CHALLENGE: Stakeholder support

Top executives in the UK appear to be quite


strong supporters of enterprise spend management. Asked to name their top three
challenges in spend management, participants
in the UK study ranked lack of executive
support near the bottom of the list. Meanwhile, weak interest and change-management
difficulties among spend stakeholders are the

top two obstacles followed by issues with


poor information-, organizational-, and technology infrastructures. In the next segments
of this report, we take a deeper look at the
infrastructure problems preventing many UK
companies from progressing more rapidly to
best-in-class performance levels.

What are the three greatest challenges standing between


your enterprise and achievement of best-in-class
procurement and spend management status?
Weak interest/support from
spend stakeholders

51%
47%

Internal resistance to change

Poor info infrastructure

36%

Wrong organizational
structure

36%
34%

Inadequate technology

Inadequate skill sets

28%

Weak executive
support

28%

Poor xfunctional
integration

Other

0%

Page 16

25%

4%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CROSS FUNCTIONAL collaboration

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.

Collaboration/integration scores by function

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

BETTER INFO needed

Poor information infrastructure ranks third


among the list of obstacles standing between
UK-based spend management organizations
and higher performance achievement. According to the study, that weakness extends across
a spectrum of key information attributes.
For example, the study asked participants to
score, on a 1-to-5 scale, the quality of spend
management information currently available

to them on the following attributes: cleanliness, completeness, accuracy, timeliness,


ready accessibility, usability for strategic
sourcing decision making, and usability for
tactical procurement decision making.
The chart on this page shows the baseline for
how each attribute was scored by study participants regardless of whether or not various
technology enablers are present.

Information quality scores by attribute

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

BETTER INFO needed

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

to progress through a critical transition from


having plentiful, easy-to-find opportunities
for strategic sourcing (due to many years
of uncontrolled spending) to fewer, moredifficult-to-find opportunities, which often
require more granular, timely, and accurate
data inputs to uncover.

Information quality scores by age of enterprise


spend management organization

% responding

3.16
2.54

2.57
2.19

Less than 1 year

1-3 years

3-5 years

5+ years

Page 19

TECHNOLOGY enablers for info quality

According to the study, and


viewed discretely, it appears
that the technology enablers
Spend Analysis, Supplier Information Management, and Contract Management may have
the greatest positive influence
on overall quality and actionability of information for spend
management.
For example, the following
figure shows the composite
information-quality scores for
enterprises that have invested
in automation technology
for Spend Analysis compared
to those that have not. The
red line marks the composite
baseline score (2.65) across
all information quality attributes regardless of technology
enablement. Companies with
Spend Analysis in place score
28% higher on the informationquality composite than companies without automation technology for spend visibility.
Likewise, presence of Supplier Information Management
(SIM) technology, tested alone,
brings the composite information quality score up to 2.99
while Contract Management
alone brings it up to 2.94.

Page 20

Difference: 28%
4

3.16
2.47

With spend analysis


Without spend
technology present analysis technology

TECHNOLOGY enablers for info quality

Start combining various technology enablers


and the deltas start to get more interesting.
For example, in companies that have invested in Spend Analysis, Supplier Information

Composite information quality scores with various


technology enablers and combinations present

3.91

3.35
3.16

Spend analysis + eSourcing

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

Spend analysis + CM + SIM

Management and Contract Management, the


composite score for information quality across
all attributes soars to 3.91 or 48% above the
baseline composite of 2.65.

Page 21

TECHNOLOGY enabled cost savings

Inadequate technology is another key challenge for spend management identified in


the UK study. The following figures show the
technology enablement profiles of companies
according to how much they have saved for
their enterprises since obtaining a mandate

for spend management. Among companies


falling into the HIGH savings category, the
most popular technology investment has been
eProcurement/eCatalog, with 70% having invested and another 20% planning to do so.

eProcurement/eCatalog investment status


against cost savings achieved
100%

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

SPEND ANALYSIS for cost savings

Spend Analysisinsofar as it creates detailed


visibility into spending and enables rapid
identification of cost savings opportunitiesis
the second most popular technology enablement category among the HIGH savers with
60% having invested already and another 30%
planning to do so. Of note is that UK companies falling into the HIGH savings category
are five times more likely to have invested

in Spend Analysis than companies falling into


the LOW savings category. At the same time,
companies in the MED savings category show
strong intention to invest in spend analysis,
suggesting they see big opportunity in the
ability to identify more strategic sourcing
opportunities more rapidly by adding state-ofthe-art spend analysis to their toolkits.

Spend analysis investment status


against cost savings achieved
100%

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

eSOURCING for cost savings

When it comes to eSourcing technology


enablement, the conclusions are less clear.
On the one hand, there does not seem to be
a consistent relationship between who has
invested in eSourcing and cost savings levels
achieved. What is interesting, though, is that
40% of companies in the HIGH savings category have plans to invest in eSourcing. This sug-

gests they believe the presence of eSourcing


will help them to source more spend categories, make more competitive markets (leading
to higher per-event savings rates), and source
more complex spend categories as they begin
to exhaust their easier-to-execute opportunities for strategic sourcing.

eSourcing investment status


against cost savings achieved

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

SPM for cost savings

Supplier Performance Management (SPM)


is another area in which UK companies appear strongly interested in investing, which
makes sense since nearly two-thirds of the
companies participating in the study measure
spend management success in terms of supplier performance. This is also an area where
companies in the HIGH savings category are
much more likely to have already invested
when compared to their counterparts in the

lower savings categories. Taken in context of


the oft-cited challenges of weak stakeholder
interest and support, this suggests that having
an ability to track, manage and prove supplier
performance to spend stakeholders may be a
key component for achieving high compliance
to strategic contracts, and, by extension,
actually realizing the cost savings negotiated
through strategic sourcing.

SPM investment status


against cost savings achieved
100%

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

EIPP for cost savings

Electronic Invoice Presentment and Payment


(EIPP) has the potential to deliver cost savings in several ways: by reducing labor and
other costs associated with processing paper
transactions, by enabling greater control
over when payments are made (and therefore enabling multiple cash-flow management
levers), and by locking down the methods in
which suppliers can be paid, thereby shutting
down a potential big source of savings leakage

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.

EIPP investment status


against cost savings achieved
100%

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

SIM for cost savings

While Supplier Information Management (SIM)


technology does not concern itself with creating cost savings directly, it certainly facilitates all the processes that do aim to create
cost savings within an enterprise. For example, an ability to identify existing approved
and preferred suppliers within a corporate
system and to rapidly locate and onboard new
suppliers greatly enhances procurements
ability to make the kinds of competitive markets that drive to higher cost savings. Likewise, ensuring that accounts payable always
has the correct information on hand for

paying suppliers promptly and for minimizing


payment errors enhances negotiation leverage with suppliers and supports systematic
capture of early payment discounts, rebates,
and so forth. Meanwhile, consistent supplier naming and clear sight lines to supplier
parent-child relationships improves accuracy
in spend analysis, leading to more and better opportunities for achieving cost savings.
It is, perhaps, not so surprising then that high
percentages of both MEDIUM and HIGH savers
have either invested already or are looking to
invest soon in SIM technology.

SIM investment status


against cost savings achieved
100%

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

eSourcing for SUM

eSourcing, according to the study, is the most


popular technology enabler among UK companies with HIGH percentages of direct spending
under management by enterprise procurement. The logic is simple here: by dramatically speeding up the sourcing processreducing
it from weeks to just days in many caseseSourcing allows more categories to be sourced

in less time, by fewer people. As eSourcing


technology has gained sophistication and also
has become much easier for more people to
use, it also appears to be helping more spend
management organizations to gain traction
among more complex indirect spending categories.

eSourcing investment status


against spend under management (SUM)

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

Low direct High indirect Low indirect


SUM
SUM
SUM

Already have

Transaction control for SUM

Controlling the transactionby presenting


only one way in which an order can be placed
and only one way in which a supplier can be
paidis a surefire way to lock down spending
and to systematically move spend categories
under the aegis of enterprise spend manage-

ment. It is no surprise, then, that some three


quarters of the UK companies reporting HIGH
spend under management on both the direct
and indirect sides have invested in eProcurement/eCatalog technology enablement.

eProcurement/eCatalog investment status


against spend under management (SUM)

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%

Low direct High indirect Low indirect


SUM
SUM
SUM

Page 29

SPEND ANALYSIS for SUM

There comes a time in the life of nearly every


enterprise spend-management organization when manual, infrequent, insufficiently
detailed and difficult-to-repeat approaches
to spend analysis become unsustainable and
inadequate for coping with more highly complex and politically fraught spend categories.
As the chart on this page suggests, most study

participantsregardless of where they sit on


the maturity curve for spend management
understand that closing the gap between 60%
and 100% of spend under management by enterprise procurement will eventually require
an investment in state-of-the-art technology
enablement for spend analysis.

Spend Analysis investment status


against spend under management (SUM)
100%

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%

Low direct High indirect Low indirect


SUM
SUM
SUM

Already have

AUTOMATION-less technology?

An interesting finding to come out of the


study is that investment in technology enablement for spend management has not necessarily translated into process automation for
spend management. Asked to score, on a

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.

Process automation scores

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

Sourcing (RFx, bidding


events)
Supply risk ID/
management
Contract
management

2.09
1.97

1.71
2

Page 31

AUTOMATION-less technology?

While investing, for example,


in technology enablement
for Spend Analysis certainly
leads to an increase in the
overall automation score
(+42%) for the spend analysis
process, the process is still
scored by study participants
at slightly less than halfway
to full automation. Likewise,
while investing in eSourcing
leads to an 85% increase in
the automation score for the
sourcing process, the score is
still only three out of a possible five.
These findings suggest that
companies are either not
emphasizing true automation
in their selection of technology enablers OR that their
automation solutions are not
being well adopted, which
can be a function of high
learning curve, non-intuitive
user interface, and/or lack of
trust in technology solutions
information outputs.

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

existing processes rather than streamlining,


revising or adopting processes that can be
easily facilitated by best-in-class automation
solutions.

Which of the following best describes


the path your enterprise is most
likely to take in its pursuit of global
best-in-class status for procurement
and spend management?

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

MORE ABOUT the study


Dont
know or
privately
held

Phase 1 of the Zycus


Pulse of Procurement and
Spend Management in Europe/2011 research initiative focused only on UKbased spend-management
organizations.
The research was conducted online and introduced
by e-mail and through various social media sites.

Greater
than
$2 billion

11%
28%
Less
than
$500
million

49%
5%
8%

Participants were asked to


self qualify for the study
based on being actively
employed in the function
of procurement and either
being personally based
or working for a company
headquartered in the UK.
Responses were not forced,
meaning sample sizes vary
slightly by question and
have varying degrees of
statistical significance.
Demographics on study
participants by company
size and job title/designation are shown here.

$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

At Zycus we are 100% dedicated to positioning


procurement at the heart of business performance. With
our spirit of innovation and a passion to help procurement

About
Zycus

create even greater business advantages, we have


evolved our portfolio to a full suite of Procurement
Performance Solutions - Spend Analysis, eSourcing,
Contract Management, Supplier Management, Financial
Savings Management, and Procure-to-Pay.
We believe our deep, detailed procurement expertise and
a sharp focus on being responsive to our customers has
reflected in us being positioned as a 'Leader' in the '2013
Gartner Magic Quadrant' for Strategic Sourcing
Application Suites. We continue to see each customer as
a partner in innovation and no client is too small to
deserve our attention.
We are a 600+ company with a physical presence in
virtually every major region of the globe. With more than
200 solution deployments among Global 1000 clients, we
search the world continually for procurement practices
proven to drive competitive business performance. We
incorporate these practices into easy-to-use solutions that
give procurement teams the power to get moving quickly
- from any point of departure - and to continue innovating
and pushing business and procurement performance to
new heights.

NORTH Princeton: 103 Carnegie Center, Suite 201 Princeton, NJ 08540 Ph: 609-799-5664
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