Survey Says: Only One in Five CFOs See Procurement Contributing to Competitiveness

Princeton, NJ — December 21, 2007 — Fewer than 20 percent of chief financial officers consider the work of chief procurement officers and their staff as having a very positive impact on competitiveness, according to a new benchmark report by technology consultancy Aberdeen Group.

The report, underwritten in part by spend analysis specialist Zycus, also revealed that of the 11.9 percent of average annual identified savings, only 3.2 percent actually gets booked, indicating a fall of 73 percent from identification to realization of potential savings.

The communication gap between the procurement and finance departments has emerged as a significant challenge in procurement's ability to deliver savings to the enterprise, according to the report, which was based on a survey of more than 500 finance professionals.

Zycus believes that the findings in the survey underline its own contention that the finance department and top management should be stakeholders in every spend management initiative. The spend management approach also should be aligned with overall company objectives in order to establish executive support.

"Finance and procurement are natural allies in the battle for bottom-line growth," noted Andrew Bartolini, vice president of global supply management research at Aberdeen. "Neither department can stake [a] claim to operational excellence without a relationship that promotes open communication, visibility and precise alignment on goals and objectives."

Call for Partnership

Aatish Dedhia, CEO at Zycus, agreed, saying: "It has been a long established fact for Zycus that no enterprise spend management initiative is complete without the partnership of the finance department and executive support. Enterprise leadership is a very important user for all our spend management solutions. Zycus helps simplify procurement operating metrics into meaningful and actionable information for the CFO."

Zycus said its spend management solutions help procurement departments of Global 2000 companies identify, manage and track savings opportunities through a process akin to a sales funnel in customer relationship management, as well as highlight these opportunities to the enterprise leadership (including the CFO), thus ensuring greater buy-in and greater chances of realized savings.

In other findings from the report, Aberdeen found that procurement executives continue to have issues getting on the chief financial officer's agenda, leaving procurement's transformation incomplete. On average, only 46 percent of CFOs feel that the procurement team has contributed to enterprise growth, while just 57 percent feel that procurement contributes to enterprise profitability.

Aberdeen recommends that enterprises encourage improved communication between finance and procurement, beginning with the definition of a "common language" between the two groups. By creating uniform metrics and aligning departmental performance objectives, CFOs and CPOs can fill the communication gap and create strategic alignment, the analysts said.

The full report is available for free (registration required) through January 25, 2008, at http://www.aberdeen.com/link/sponsor.asp?spid=30410356&cid=4202

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