Saturday 16th Dec 2017 - Logistics Manager

Do software vendors take advantage?

Procurement and finance professionals are at risk of being hoodwinked by spend analysis software vendors, warns Rosslyn Analytics.

A survey run by the technology specialist has revealed that more than half of the 100 UK procurement and finance professionals interviewed do not know if and when a spend analysis software system should deliver a return on investment.

Rosslyn chief executive Charles Clark, said: “The findings from our survey reveal that spend analysis vendors are taking advantage of procurement leaders who, confidentially, admit that they do not know when they should realise a return on investment.

Rosslyn is calling for vendors to become “more accountable to customers”, including stating when their solutions will deliver returns on investment.

The survey showed that more than half of the procurement and finance leaders pointed to identifying cost savings as their top priority. However a third of them cited lack of data quality as the main obstacle to obtaining an accurate view of their company’s spending.

Deborah Wilson, research director of procurement strategies & systems, Gartner, said: “Spend analysis is a diagnostic tool that lays the foundation for savings by enabling procurement to identify where its efforts will be most effective, both in terms of technology investment and supplier rationalisation. 

“Conducting de-duplication and classification by category, on a manual basis, is an overwhelming project that does not yield timely information or adequate data quality. This explains why Gartner is observing renewed interest from organisations for spend analysis solutions.”

Clark added: “There is no reason why organisations should not know exactly when their spend analysis solution will deliver a return on investment.  In today’s era of affordable, easy-to-use and fully automated web-based technologies, vendors have all the necessary tools to deliver significant cost savings in weeks, not months. Procurement and finance professionals must not accept anything less from the industry.”

Further survey statistics:

* 57 per cent of respondents view identifying cost savings as their number one business priority, followed by increasing profit margins (29 per cent), managing supply risks (12 per cent) and other (2 per cent).

* 61 per cent of procurement leaders rate identifying cost savings as their number one business priority compared to 46 per cent of finance leaders.

* 40 per cent of finance leaders view increasing profit margins as their number two business priority compared to 24 per cent of procurement leaders.

* The three biggest obstacles to the adoption of spend analysis, after a lack of data quality (51 per cent), are a lack of stakeholder buy-in (23 per cent), inadequate budget (23 per cent), limited understanding of spend analysis (18 per cent), followed by other reasons (2 per cent).

* 33 per cent of procurement leaders rank a lack of data quality as their number one internal obstacle to the adoption of spend analysis, followed by lack of stakeholder buy-in (26%), lack of budget (23 per cent), lack of understanding of spend analysis (17 per cent).

* 33 per cent of finance leaders identify a lack of data quality as their number one internal obstacle to the take-up of spend analysis, followed by a lack of budget (30 per cent), understanding of spend analysis” (20 per cent) and stakeholder buy-in (17 per cent).

* 61 per cent of those surveyed leverage spend analysis to identify greater saving opportunities within categories.  The next three most cited benefits of spend analysis, for both roles, are negotiating lower supplier contracts (14 per cent), improving information on contract compliance (8 percent) and managing supplier performance (5 per cent).

*55 per cent of respondents rank a lack of time in the day as the top pain point followed by additional time sensitive issues (23 per cent) such as team meetings, communicating with stakeholders and prioritising tasks.  Other (22 per cent) pain points most frequently cite were people management and a lack of training.

*Though 83 per cent of procurement leaders are content with their current spend analysis provider, 48 per cent of the respondents did not know if and when their vendor delivered a return on investment.   42 per cent of procurement said they had witnessed an ROI after three months while only 10 per cent experienced this after a week.