Pulse of Procurement UK

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, time-consuming 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 manage-ment 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 ana-lyze, 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 DedhiaCEO, Zycus Inc.

Spend Management Pulse UK 2011

Zycus recently launched its Pulse of Procurement and Spend Management in Europe/2011 research initia-tive. The research has multiple objectives:

T o document adoption of enterprise spend manage-ment approaches throughout Europe,

T o benchmark spend management maturity achieved thus far among European companies,

T o understand the unique challenges that European companies may be facing in their spend manage-ment journeys,

T o grasp the extent and directions in which Europe-an companies are investing in automation technol-ogy to enable enterprise spend management, and

T o comprehend which technology enablers appear to be contributing most to various spend manage-ment 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.

INTRODUCTION

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

Information quality scores .................. 18-21Enablers for cost savings. ................... 22-27Enablers for SUM ............................. 28-30Process automation scores ................. 31-33Summary conclusions ............................ 34More about the study. ........................... 35

INSIDE this report

HIGHLIGHTS

E nterprise spend management is well entrenched among UK com-panies and UK companies are highly intent on reaching best-in-class maturity levels for spend management. However, at present, rela-tively few study participants believe their enterprises are approach-ing 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 custom-ize 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.

T op 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 ePro-curement/eCatalog, eSourcing, and Spend Analysis.

Spend Analysis, SIM, and Contract Management are the three discrete technology enablers showing the greatest positive influence on qual-ity and actionability of information for spend management; combin-ing two or more technology enablers yields more dramatically posi-tive 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 organiza-tions have explicit mandates to manage corporate spending from an enterprise level.

YES61%

NO39%

Does your procurement organization have a mandate to manage spend from an enterprise level?

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.

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For how long has the mandate been in place?

Page 3


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 matu-rity curve. Underpinning the general lack of

progression to best-in-class is a complex set of challengespoor information infrastruc-ture, 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.

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

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

Page 4


There is, however, clear evidence that UK-companies 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

the maturity curve at various intervals in the coming five years. According to the study, in-vestment in technology enablement for spend management is expected to play a big role in making this anticipated trend a reality.

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5%How would you say your enterprise compares to what is considered global best-in-class for procurement and spend management? And how do you see that comparison changing over time?

Page 5

PERFORMANCE spend under management

Spend Under Managementthe portion of total spending that is either controlled di-rectly 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

here, UK companies still have enormous un-tapped opportunity to define discrete spend-ing categories and to source those categories strategically and competitively on both the direct and indirect sides of their spending landscapes.

Please estimate the percentage of spending currently under management by your enterprise spend management organization.

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Low SUMLess than 60%

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For analysis in this report, participating companies have been grouped as follows:

L OW SUM: Less than 60% of total spending

H IGH SUM: 60% or more of total spending

Direct spending

Indirect spending

Page 6

PERFORMANCE cost savings

Even at relatively low levels of perceived spend management maturity and with large percentages of spend categories still unad-dressed 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

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.

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HIGH savingsMED savingsLOW savings

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Please estimate the percentage of total cost savings delivered since procurement first received its mandate to manage spending from an enterprise level.

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

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other

Other forms of value delivery e.g. collaboration, process improvement

Processeffectiveness

Process efficiency

Risk mitigation/avoidance

Working capital performance

Spend under management (SUM)

Supplier performance

Cost savings (hard + soft)

Cost savings (hard) 63%

61%

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While the study hypothesized (correctly) that cost savings and spend under management (SUM) would be among the most popular suc-cess metrics for enterprise spend manage-ment 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 mitiga-tion and avoidance are valued more highly than process-efficiency metrics. This suggests an exciting shift in top executives percep-tions around how procurement can contribute strategically (versus just tactically) to corpo-rate success.

How does your enterprise measure procurement and spend management performance?

Page 8

SPEND ANALYSIS investment landscape

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To begin to understand the influence of technology enablement on spend-man-agement 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.

Spend analysis investment landscape for UK companies

In the early days of enter-prise spend management, most procurement organiza-tions would start out analyz-ing 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 sourc-ing opportunities would be identified. While such an approach can be quite suc-cessful for a period of time, it does not scale, is prone to inaccuracy, does not fill holes in source spend data, suffers

from inconsistency as per-sonnel change, copes poorly with multiple and disparate sources of spend data, limits views into spending to high-level categories or suppli-ers only, leaves many spend categories off the table for management due to com-plexity, is too infrequent to engender true cultures of enterprise spend manage-ment, and does not enable powerful blending of spend with other enterprise data for strategic management of compliance, supplier per-formance, 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 partici-pating companies that have been pursuing spend manage-ment 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

While eSourcing technology is clearly gaining traction among UK companies, it is somewhat surprising that nearly half of study partici-pants 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-

ing technology has evolved substantially and there is evidence that maturing spend management organiza-tions are beginning to see eSourcing for what it really is: a means for automating and speeding up many dif-ferent kinds of competitive sourcing processes. State-of-the-art eSourcing technology standardizes, centralizes, and structures information around sourcing events. It enables pipeline manage-ment and tracking of spend-management opportunities through to savings delivery and increases opportunity-to-sourcing 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 sup-pliers cost-effective ways to participate easily in sourcing events, to communicate with buyers, and receive informa-tion they need throughout sourcing events. eSourcing empowers fewer spend man-agers to manage more cate-gories and to conduct com-plex analyses and modeling of sourcing event outcomes and award scenarios. What is more, eSourcing has got-ten easier and more intuitive to learn and use, making it more accessible as a produc-tivity tool.

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eSourcing investment landscape for UK companies

Page 10

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ePROCUREMENT investment landscape

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/eCata-log as a point of departure for technology enablement, it signifies they have a poor history of documenting pur-chase transactions via pur-chase order, invoice/payment using ERP or similar financial backbone systems. Espe-cially in companies with long histories of allowing employ-ees to purchase via check request or expense-account reimbursement, it is often

imperative to establish pre-cise, trackable mechanisms for conducting transactions as a means for generating sufficient spend source data for strategic opportunity analysis.

eProcurement has other ben-efits as well:

I t automates and speeds up order/purchase transac-tions,

L ocks down spending by enabling procurement to control what items can be purchased from whom,

C ontrols product pricing and availability through supplier eCatalogs,

C an direct purchasers to

buy on-contract and to con-sider lowest-cost options as transactions are being executed, and

M anages workflow for buy-ing permissions and spend authorizations.

Nonetheless, where sufficient transaction data exists, in-vestment 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.

eProcurement/eCatalog investment landscape for UK companies

Page 11

CM investment landscape

Contract management (CM) solutions appear to have gained less traction among UK companies participating in the study.

This may stem from a mis-conception that contract management solutions de-liver process efficiencysoft cost savingsrather than identifying and delivering more tangible or so-called hard types of cost savings.

But while contract manage-ment solutions certainly deliver process speed and productivity gains, they con-tribute directly to hard cost savings in several ways. For

example, they:

E nable measurement of contract utilization and easy detection of off-con-tract spending,

E nsure that savings and other favorable terms achieved in sourcing events flow through and survive the contract-writing pro-cess,

S tructure key contract dataprices, rebates, discounts, and so forthmaking it possible to track compliance to terms throughout contract life-cycles,

E nsure that strategic sourcing professionals can

lock in terms quickly when markets are favorable to buyers (rather than watch-ing benefits erode through long contract cycle times),

M ake certain that procure-ment is always alert to easy spend management oppor-tunities tied to imminent contract expirations or sub-stantial changes in market conditionssuch as price reopenersthat can erode cost savings if unnoticed.

Combined with solutions such as spend analysis, contract management solutions cre-ate powerful platforms for tracking and managing spend compliance.

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Contract management investment landscape for UK companies

Page 12

EIPP investment landscape

Only one in four UK com-panies participating in the study say they have already invested in technology en-ablement for supplier invoice and payment processes, but there appears to be consider-able growing interest in this area with some 36% citing plans to invest in the future.

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.

What is more, this dovetails with two other study find-ings: first, that enterprise

procurement in UK compa-nies tends to be most closely aligned with both strategic and tactical finance func-tions and that contribution to working capital improvement is now being counted among the most popular success metrics for enterprise pro-curement.

In addition to automating and speeding up the invoice-payment 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.

More important, EIPP sup-

ports on-time and/or early payment to suppliers, allow-ing companies to:

Actively manage Days Pay-able Outstanding (DPO) and other cash management levers,

Avoid interest charges for late payments, and

G ive procurement leverage to negotiate discounts and develop beneficial com-mercial relationships with suppliers using creative financing options.

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EIPP investment landscape for UK companies

Page 13

SPM investment landscape

Supplier Performance Man-agement (SPM) ranks highest in the UK study in terms of intention to invest, dovetail-ing 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 partici-pating companies has already invested in SPM technol-ogy enablement, this may be a function of a general marketplace absenceuntil relatively recentlyof flex-ible, highly configurable SPM

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 ap-plications, 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 consis-tently to only the highest-performing 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 man-agement 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.

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Supplier performance management investment landscape for UK companies

Page 14

SIM investment landscape

Supplier Information Manage-ment (SIM) is another relative latecomer to the technol-ogy landscape for enterprise spend management, but some 33% of study partici-pants say their organizations have intentions to invest in SIM.

And while SIM investment may have other drivers, for example, Master Data Man-agement or ERP harmoniza-tion/upgrade initiatives, the technology is also being recognized in its own right as an important enabler for long-term enterprise spend management success.

For example, SIM together with eSourcing creates a seamless and rapid way for identifying existing suppli-ers to be invited into sourc-ing events and for rapidly onboarding potential new suppliers and getting them transaction ready in advance of their sourcing event par-ticipation.

SIM essentially consolidates all relevant supplier informa-tion 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

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 com-plete.

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Supplier Information Management investment landscape for UK companies

Page 15

CHALLENGE: Stakeholder support

Top executives in the UK appear to be quite strong supporters of enterprise spend man-agement. 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. Mean-while, weak interest and change-management difficulties among spend stakeholders are the

top two obstacles followed by issues with poor information-, organizational-, and tech-nology 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.

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Other

Poor xfunctionalintegration

Weak executivesupport

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Weak interest/support fromspend stakeholders 51%

47%

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What are the three greatest challenges standing between your enterprise and achievement of best-in-class procurement and spend management status?

Page 16

CROSS FUNCTIONAL collaboration

From a collaboration and integration perspec-tive, enterprise spend management organiza-tions 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 integra-tion, 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 in-ternal 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 mar-keting 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.

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Collaboration/integration scores by function

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BETTER INFO needed

Poor information infrastructure ranks third among the list of obstacles standing between UK-based spend management organizations and higher performance achievement. Accord-ing 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: cleanli-ness, 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 par-ticipants regardless of whether or not various technology enablers are present.

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Information quality scores by attribute

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BETTER INFO needed

An interesting phenomenon is how procure-ment professionals perceptions of informa-tion quality appear to change with time spent attempting to manage spending from an enterprise level. The composite score actu-ally 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, more-difficult-to-find opportunities, which often require more granular, timely, and accurate data inputs to uncover.

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Information quality scores by age of enterprise spend management organization

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TECHNOLOGY enablers for info quality

According to the study, and viewed discretely, it appears that the technology enablers Spend Analysis, Supplier Infor-mation Management, and Con-tract Management may have the greatest positive influence on overall quality and action-ability 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 attri-butes regardless of technology enablement. Companies with Spend Analysis in place score 28% higher on the information-quality composite than compa-nies without automation tech-nology for spend visibility.

Likewise, presence of Sup-plier Information Management (SIM) technology, tested alone, brings the composite informa-tion quality score up to 2.99 while Contract Management alone brings it up to 2.94.

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TECHNOLOGY enablers for info quality

Start combining various technology enablers and the deltas start to get more interesting. For example, in companies that have in-vested in Spend Analysis, Supplier Information

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.

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Composite information quality scores with various technology enablers and combinations present

Page 21

TECHNOLOGY enabled cost savings

Inadequate technology is another key chal-lenge 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 in-vested and another 20% planning to do so.

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eProcurement/eCatalog investment status against cost savings achieved

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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 enable-ment category among the HIGH savers with 60% having invested already and another 30% planning to do so. Of note is that UK compa-nies 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-of-the-art spend analysis to their toolkits.

Spend analysis investment status against cost savings achieved

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 catego-ry have plans to invest in eSourcing. This sug-

gests they believe the presence of eSourcing will help them to source more spend catego-ries, 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 opportuni-ties for strategic sourcing.

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eSourcing investment status against cost savings achieved

Page 24

SPM for cost savings

Supplier Performance Management (SPM) is another area in which UK companies ap-pear 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 sup-plier 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.

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SPM investment status against cost savings achieved

Page 25

EIPP for cost savings

Electronic Invoice Presentment and Payment (EIPP) has the potential to deliver cost sav-ings in several ways: by reducing labor and other costs associated with processing paper transactions, by enabling greater control over when payments are made (and there-fore 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 sur-prise, then, that EIPP stands out as another area of technology enablement that is popu-lar 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.

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27%

44%

50% 46%

11%

12%

EIPP investment status against cost savings achieved

Page 26

27%

SIM for cost savings

While Supplier Information Management (SIM) technology does not concern itself with creat-ing cost savings directly, it certainly facili-tates all the processes that do aim to create cost savings within an enterprise. For exam-ple, 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 mar-kets that drive to higher cost savings. Like-wise, ensuring that accounts payable always has the correct information on hand for

paying suppliers promptly and for minimizing payment errors enhances negotiation lever-age with suppliers and supports systematic capture of early payment discounts, rebates, and so forth. Meanwhile, consistent sup-plier naming and clear sight lines to supplier parent-child relationships improves accuracy in spend analysis, leading to more and bet-ter 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.

0%

20%

40%

60%

80%


Already have


9%

50%

38%

55%

20%

62%

36% 30%

SIM investment status against cost savings achieved

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eSourcing for SUM

eSourcing, according to the study, is the most popular technology enabler among UK compa-nies with HIGH percentages of direct spending under management by enterprise procure-ment. The logic is simple here: by dramatical-ly speeding up the sourcing processreducing it from weeks to just days in many caseseS-ourcing 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 cat-egories.

0%

20%

40%

60%

80%


Plan to invest

Already have

Low indirectSUM

High indirectSUM

Low directSUM

High directSUM

77%64%

23%

9%

36%27%

43%32%

32%24%

33%

eSourcing investment status against spend under management (SUM)

Page 28

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 eProcure-ment/eCatalog technology enablement.

0%

20%

40%

60%

80%


Plan to invest

Already have

Low indirectSUM

High indirectSUM

Low directSUM

High directSUM

75% 73%

17%

9%39%

18%

37%33%

28% 26%

37%8%

eProcurement/eCatalog investment status against spend under management (SUM)

Page 29

SPEND ANALYSIS for SUM

There comes a time in the life of nearly every enterprise spend-management organiza-tion when manual, infrequent, insufficiently detailed and difficult-to-repeat approaches to spend analysis become unsustainable and inadequate for coping with more highly com-plex 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 managementunderstand that closing the gap between 60% and 100% of spend under management by en-terprise procurement will eventually require an investment in state-of-the-art technology enablement for spend analysis.

0%

20%

40%

60%

80%


Already have

Low indirectSUM

High indirectSUM

Low directSUM

High directSUM

42% 50%

25%

30%

33%20%

25%28%

39%40%

35%

33%

Spend Analysis investment status against spend under management (SUM)

Page 30

AUTOMATION-less technology?

An interesting finding to come out of the study is that investment in technology enable-ment for spend management has not neces-sarily translated into process automation for spend management. Asked to score, on a

scale of 1-to-5, the extent of process automa-tion achieved so far in their companies, base-line results for the UK portion of the study are shown here.

1 2 3 4 5

Contractmanagement

Supply risk ID/management

Sourcing (RFx, biddingevents)

Compliance trackingand management

Procurement performancemanagement

Supplier performancemanagement

Spend analysis

Buy transactions

Pay transactions 3.00

2.80

2.37

2.24

2.14

2.11

2.09

1.97

1.71

Process automation scores

Page 31


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 pos-sible five.

These findings suggest that companies are either not emphasizing true automation in their selection of technol-ogy 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.

1

2

3

4

5

Without spendanalysis technology

With spend analysistechnology present

2.94

2.10

1

2

3

4

5

Without eSourcingtechnology

With eSourcingtechnology present

3.00

1.62

Page 32

Difference: 42%

Difference: 85%


The overall lack of translation from technol-ogy 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.

54%

16%

16%9%

5%

Study/emulatebest-in-class/allow internalinvention/customization

Pursueprimarilyinternalinventionpath

N/A

Outsourcewhereverpossible

Emulate best-in-class andavoid internal invention andcustomization

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?

Page 33

SUMMARY conclusions

W ith strong executive support, plenty can be accom-plished in spend management with or without technol-ogy 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) in-vestment in various forms of technology enablement.

D issatisfaction with manual or less-than-state-of-the-art 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 invest-ment in that time frame.

S ome two-thirds or more of participating companies that are five or more years into their spend manage-ment journeys have invested in spend analysis, eS-ourcing, eProcurement/eCatalog, and contract man-agement technology enablement; 40-45% have also invested in EIPP, SPM and SIM.

W hile 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 auto-mation 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.

E xpect heavy emphasis and innovation around supplier performance management (SPM) out of the UK in com-ing years as companies there invest, adopt, and use SPM technology.

Page 34

MORE ABOUT the study

Phase 1 of the Zycus Pulse of Procurement and Spend Management in Eu-rope/2011 research initia-tive focused only on UK-based spend-management organizations.

The research was conduct-ed online and introduced by e-mail and through vari-ous social media sites.

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/designa-tion are shown here.

8%

49%

11%

28%

5%

Lessthan$500million

Dontknow orprivatelyheld Greater

than$2 billion

$1 - $2 billion

$500 million - $1 billion

4%

63%

14% 16%

SupportExecutivevice president or CPO

DirectorPurchasingagent or buyer

Manager orspend categorymanager

4%

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

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.

Z

AboutZycus

NORTHAMERICA

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Pulse of Procurement UK

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