In fact, 74 percent of respondents said they are still using desktop software, such as spreadsheets and databases, moderately or extensively for spend analysis, while 47 percent said they rely on their information technology (IT) organizations to generate specialized reports out of enterprise resource planning (ERP) or other systems.
These approaches to gathering and analyzing spend data can be a significant stumbling block when attempting to do spend analysis enterprise-wide, according to Nathanael Lentz, president and CEO at Verticalnet, a provider of spend analysis and supply management solutions, who was asked to comment on the survey results for this article. "A buyer who wants to analyze his or her own purchases may not have trouble loading that information into a spreadsheet," Lentz says. "But when you start looking at a corporate sourcing organization trying to understand activities across hundreds of buyers, across multiple divisions that use different systems, using a spreadsheet or an Access database really blows up on you."
It's not surprising, then, that 56 percent of the respondents said that their companies' use of spend analysis is limited either to individual locations or to a single division, while just 44 percent reported being able to use spend analysis on a cross-divisional basis.
Time was a constraining factor for nearly a third of the respondents to the CCMI survey: 30 percent said they simply lack the time to devote to spend analysis because they had to devote their hours to processing purchase orders and other day-to-day activities. In this regard, Elliff says: "People have not had the time to get out of their In Box to do higher value-added activities. That has been purchasing's Achilles' heel for a long, long time.
"But on the other hand," Elliff continues, "that means that spend analysis and e-procurement tools really do have a significant role to play if they can eliminate that In Box clog and help people add more value in the procurement area." And the results of the survey point to a growing recognition of the need to bring new tools to bear on the spend analysis challenge. Fully two-thirds of respondents said their companies are actively pursuing initiatives to increase their use of spend analysis tools and their overall spend analysis capabilities. Moreover, nearly half of those companies that are pursuing initiatives are already in the process of implementing new tools or methods (46 percent), while the balance are evaluating alternative solutions (31 percent) or are planning and budgeting for an initiative in the coming year (23 percent).
As a result of all these current and planned activities, nearly 90 percent of companies expect to be able to apply spend analysis on an enterprise-wide basis within the next three years, according to the survey. Elliff believes that these figures point to a coming boom in the use of spend data — and spend analysis tools — as companies look to improve their sourcing processes. "I do think we're looking forward to a dramatic uptake versus where we are today," he says.
Barriers to greater adoption of effective spend analysis clearly remain, however. For example, fully two-thirds (66 percent) of respondents cited better utilization of existing ERP systems and internal data warehouses as a key priority in their spend analysis initiatives. Verticalnet's Lentz sees this reliance on ERP systems as a key barrier, since the time and effort necessary to pull data out of back-end systems makes it difficult to turn spend analysis into the kind of repeatable process that can help a company ensure compliance and drive significant savings across the enterprise.
About one-quarter (27 percent) of respondents said that licensing a dedicated spend analysis software tool would be essential for their efforts to address gaps or limitations of ERP systems, while — perhaps surprising, given the limitations noted above — 18 percent said that they would be looking to increased use of desktop spreadsheets and databases.
Many companies are looking outside their organizations for assistance, with respondents saying that consultants play an important role either as partners in collecting data and developing strategies (22 percent) or for specialized tasks in support of internal efforts (39 percent). In a handful of cases (2 percent), companies have largely outsourced spend analysis to external consultants.