Evaluating Spend Solution Providers
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Transcript of Evaluating Spend Solution Providers
Power Advocate, Inc. Confidential 1 1
Evaluating Your Spend Solution Options
Power Advocate, Inc. Confidential 2 2
Today’s top energy executives recognize the huge value in effective spend analysis…
Millions in Cost Savings
Operational Efficiencies
Optimized SRM
Power Advocate, Inc. Confidential 3 3
…but often overlook the most important criteria when considering vendors
! ! !
Power Advocate, Inc. Confidential 4 4
Many variables seem important; others actually are important
Total Spend Analyzed
Speed of Data Cleansing
Number of Features
Number of Rules
Energy Spend Analyzed
Usability for Energy Professionals
Energy-Specific Rules
Quality of Data Cleansing
vs
vs
vs
vs
Most Important!
Integration w/ Transactional Platforms Integration w/ Strategic Platforms vs
Power Advocate, Inc. Confidential 5 5
And when executives prioritize the wrong variables, they end up with solutions that pose meaningful risks
Millions in Lost Savings
Bad Data
Inaccurate Reporting
Total Spend Analyzed
Speed of Data Cleansing
Number of Features
Number of Rules
Integration w/ Transactional Platforms
Power Advocate, Inc. Confidential 6 6
“Experience in analyzing spend in your industry”
What to Look For in a Spend Analysis Solution
“To succeed at spend intelligence, it would help if you were to hook up…a solution provider that has familiarity with your industry”
Steps to Success for All Enterprises
So what do the industry experts recommend?
Power Advocate, Inc. Confidential 7 7
Is it really that risky to choose a cross-industry provider?
Well, let’s take a look…
Power Advocate, Inc. Confidential 8 8
Here are some of the biggest customers that one cross-industry provider has…
Power Advocate, Inc. Confidential 9 9
The things these companies buy…
Power Advocate, Inc. Confidential 10 10
…are VERY different from the things these companies buy
Power Advocate, Inc. Confidential 11 11
Different suppliers
Different products
Different services
Different data
And…
Power Advocate, Inc. Confidential 12 12
Complexity of Spend Data High
Plus, data from some industries is more complex
Commodities Engineered products
Specialized vendors Vendors providing many products & services
Centralized purchasing Distributed purchasing
Basic services Highly-Technical Services
Products purchased
Services purchased
Suppliers
Organization
Data Complexity Low High
Power Advocate, Inc. Confidential 13 13
Complexity of Spend Data High Data Complexity High Data Complexity Low High
Turns out, energy company data is especially complex
Power Advocate, Inc. Confidential 14 14
And we’re not talking about a small difference
Vs.
Power Advocate, Inc. Confidential 15 15
10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
Accurately classifying cryptic, energy-specific items like this requires highly specialized rules and schemas…
Power Advocate, Inc. Confidential 16 16
…which cross-industry vendors cannot profitably develop
Energy
Consumer Goods
Automobiles
Airlines
Beverages
Fast Food
= Cross-Industry Vendors’ Profitability Threshold
Complexity of Spend Data High
Data Complexity Data Complexity Low High
Power Advocate, Inc. Confidential 17 17
After all, items like this need to be decoded piece-by-piece, and even then – hundreds of permutations are possible
Material Group
Shape Steel
Wire Rod
Tubing
Piping
Casing
Alloy Ingot
Manufacturer
Hyundai Automobile
Hyundai Railway
Hyundai Steel
Hyundai Ship
Hyundai Plant
Hyundai Electric
Outside Diameter
6 inches 8 inches 10 inches 12 inches 14 inches
10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
Power Advocate, Inc. Confidential 18 18
Now imagine this 1 transaction…
…multiplied by millions
10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
Power Advocate, Inc. Confidential 19 19
So what happens when energy firms actually buy cross-industry spend solutions?
Power Advocate, Inc. Confidential 20 20
They’re left with shocking (real-life) examples like this:
HVAC Mechanical Construction Service
Cross-Industry Vendor Classification: Correct Classification:
Cooling Tower Maintenance ✓
Line Item: Cooling Tower Maintenance
Price: $38,300,000
Supplier: Bunneys Inc.
Power Advocate, Inc. Confidential 21 21
Cross-Industry Vendor Classification: Correct Classification:
Development Environment Software Real Estate ✓
…and many, many (real-life) examples like this:
Line Item: Improvement Allowance
Price: $3,200,000
Supplier: Red Hat Software
Power Advocate, Inc. Confidential 22 22
Chemicals
Not Chemicals
9%
91%
$51.5M
CHEMICALS, GENERAL
Cross-Industry Vendor Classification: Correct Classification:
…which combine to form (real-life) categories like this:
Production Chemicals $2,641,910
Painting and Coatings $1,487,143
Nitrogen Services $443,150
Pumps $10,088,197
Motors $9,037,047
Electric Submersible Pumping (ESP) Lift Services $3,704,851
Variable Frequency Drives $3,165,546
Pump Seals $3,034,483
Drill Bits $2,691,688
Valves $2,641,910
Separators $1,487,143
Wire and Cable $1,390,791
Casing and Tubing Services $882,221
Coil Tubing services $822,310
Motor Maintenance $708,009
Power Advocate, Inc. Confidential 23 23
The analysts for these energy firms spend days fulfilling simple requests…
…and have no choice but to circulate incomplete reports
Power Advocate, Inc. Confidential 24 24
Meanwhile, unactionable categories like this one…
Engineering Spend Misclassified Elsewhere
+$32.6 M
$58.9 M Spend Classified as “Engineering”
Portion that Wasn’t Actually Engineering
-$11M
…cost them millions in lost savings every year
Power Advocate, Inc. Confidential 25 25
Ok, so can I do it myself?
Well, let’s take a look…
Power Advocate, Inc. Confidential 26 26
Let’s look at 1 transaction.
10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
Curious how an analyst might decode and classify this?
It’s a bit complicated…
Power Advocate, Inc. Confidential 27 27
Manufacturer
Hyundai Automobile
Hyundai Railway
Hyundai Steel
Hyundai Ship
Hyundai Plant
Hyundai Electric
…
He would likely recognize “HYUNDAI” as a Hyundai Corp manufacturing facility, but that still leaves hundreds of plausible classifications
?
10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
Power Advocate, Inc. Confidential 28 28
Material Group
Shape Steel
Wire Rod
Tubing
Piping
Casing
Alloy Ingot
Manufacturer
Hyundai Automobile
Hyundai Railway
Hyundai Steel
Hyundai Ship
Hyundai Plant
Hyundai Electric
… …
So, he would need to know that the code “ERW” denotes casing, tubing, and piping; this narrows material groups, but still leaves 3 possible variations
? ✓
10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
Power Advocate, Inc. Confidential 29 29
Material Group
Shape Steel
Wire Rod
Tubing
Piping
Casing
Alloy Ingot
Manufacturer
Hyundai Automobile
Hyundai Railway
Hyundai Steel
Hyundai Ship
Hyundai Plant
Hyundai Electric
… …
Outside Diameter
Third, he would need to know that 10” indicates an outside diameter, and that this measurement rules out piping and casing
✓
6 inches 8 inches 10 inches
12 inches 14 inches
Tubing ✓
✓ ✓
10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
Power Advocate, Inc. Confidential 30 30
This single transaction could have been classified in more than 200 different ways…
See how difficult accurate energy spend classification is?
Power Advocate, Inc. Confidential 31 31
Now imagine that 1 transaction…
…multiplied by millions (50% of which is unclassified, blank, and/or inaccurate)
It’s a decoding job not fit for a human
10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
Power Advocate, Inc. Confidential 32 32
Out of curiosity…
Let’s see what it would take a human (your analyst) to cleanse this data to a 98%+ level of accuracy?
Power Advocate, Inc. Confidential 33 33
Scrubber, 24" x 4', Horizontal, 300 # MAWP Scrubber, 24" x 4', Horizontal, 300 # MAWP
An analyst would need to cleanse 312 transactions per hour (or 1 transaction every 12 seconds) for a full year to cleanse just 1 year of data!
1 average year of data = 1.3 million transactions Assume (conservatively), ~ 50% of transactions – 650,000 lines – require cleansing and classification With no vacation, there are 2,080 hours in a work year Which means…
Here’s the math:
Power Advocate, Inc. Confidential 34 34
That’s right – he would need to decode one of these:
every 12 seconds, with no breaks, for a full year
(and that would just get you one year of cleansed data that is a year out-of-date)
10'' .375 X42 ERW HYUNDAI W/FBE 14-16 MILS.
Power Advocate, Inc. Confidential 35 35
Data scientists spend 80% of their time mired in “data janitor work.”
This is a problem across the board for attempted in-house solutions...
Power Advocate, Inc. Confidential 36 36
There’s another cost that hurts your bottom line
The average, entry-level data analyst makes $60,000/yr. Let’s assume you have a modest team of 5 analysts, who spend 80% of their time cleansing spend data rather than analyzing it Which means…
Let’s look at your best-case scenario:
You spend (at least) $240,000 every year for analysis you never receive
Power Advocate, Inc. Confidential 37 37
But why listen to us?
Power Advocate, Inc. Confidential 38 38
Well, because when it comes to energy spend…
$2+ Trillion Energy Spend
Cleansed $320 Billion Energy Spend
Cleansed
“Largest” Cross-Industry Vendor in the World
…we’re the big kids on the block
Power Advocate, Inc. Confidential 39 39
And, our industry focus allows us to do things that others simply can’t…
Power Advocate, Inc. Confidential 40 40
(an investment that isn’t cost-effective for cross-industry vendors)
…like perfecting a rules engine that exclusively parses and classifies Power, Oil, and Gas data
50+ engineers, analysts, developers Millions of energy-specific rules
Power Advocate, Inc. Confidential 41 41
Remember that line item example from earlier?
Material Group
Shape Steel
Wire Rod
Tubing
Piping
Casing
Alloy Ingot
Manufacturer
Hyundai Automobile
Hyundai Railway
Hyundai Steel
Hyundai Ship
Hyundai Plant
Hyundai Electric
Outside Diameter
6 inches 8 inches 10 inches 12 inches 14 inches
10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
Power Advocate, Inc. Confidential 42 42
Our rules deconstructed and classified it in seconds…
Material Group
Shape Steel
Wire Rod
Tubing
Piping
Casing
Alloy Ingot
Manufacturer
Hyundai Automobile
Hyundai Railway
Hyundai Steel
Hyundai Ship
Hyundai Plant
Hyundai Electric
… …
Outside Diameter
✓
6 inches 8 inches 10 inches
12 inches 14 inches
Tubing ✓
✓ ✓
10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
Power Advocate, Inc. Confidential 43 43
…when a cross industry vendor would have misclassified it as this:
10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
Mainline Pipe x
Power Advocate, Inc. Confidential 44 44
(cross-industry vendors often claim the whole process can be automated, but to achieve 98+% accuracy, human expertise is required)
Raw Spend Data Rules Engine Expert Analyst Cleansed Data
And just to be sure, our energy experts verify all classifications
Power Advocate, Inc. Confidential 45 45
So what does all this mean for YOU?
Power Advocate, Inc. Confidential 46 46
It means you can expect things from us…
…that you could never get from a cross-industry vendor…
Power Advocate, Inc. Confidential 47 47
…like no more time wasted on “data janitor work”…
…and no more anxiety over inaccurate reporting
Clean Data Analyze
✓
Power Advocate, Inc. Confidential 48 48
Plus, you’ll finally be able to manage all of your spend…
“For every dollar of spend under management, Aberdeen has historically quantified 5% to 20% cost savings”
…and save millions of dollars for your organization
Power Advocate, Inc. Confidential 49 49
Ready to see what Best-in-Class Data can do for you?
Complete
All of your enterprise data…
Accurate
…classified to a 98+% degree of accuracy…
Repeatable
…kept up-to-date with regular refreshes
Granular
…organized in useable, natural buying groups…
Contact us and We’ll show you!