Vista Group is a boutique IT strategy consulting firm. We provide business solutions in spend analysis by using data science and converting data into business insights. Vista helps businesses to improve visibility to their IT sourcing data, and total IT spend under management. This ultimately serves the decision making process and leads to cost reduction, operational changes, improved flexibility and agility in the IT organization and directly impacts short and long term profitability of the company.
What is Spend Analysis?
Spend analysis is the process of collecting, categorising and evaluating expenditure data, either by human hand or through software.
Spend analysis is performed by companies to increase profitability through identifying wasteful spending and flagging contracts that can be renegotiated. CPIOs and CFOs use spend analysis to help the global companies, to have better visibility on spend and identify saving opportunities. Read more…
Technically, spend analysis is the process of aggregating, classifying, and leveraging spend data for the purpose of gaining visibility into cost reduction, performance improvement, and contract compliance opportunities. It is part of an overall spend management and visibility process that includes the analysis and monitoring of corporate spend. Additionally, it is the first and last step of the strategic sourcing process that drives total value.
Generic spend analysis enables one to answer the following questions:
- Who is buying?
- From whom
- (optionally) Where
- At what price
Who needs it?
However, good spend analysis is much more than that. It is the process of organizing a company’s spend in such a way that one can understand it, slice it, dice it and uncover hidden savings opportunities. Additionally, it impacts more than just the sourcing team. Spend analysis / visibility serves three internal user community groups:
Leadership and CxOs: who need up-to-date reports to drive strategic direction
Managers, accountants, etc: who need to drill down into a spend data set to explore specific areas of interest or track down payment specifics
Sourcing power users: who need to locate, drive, and monitor the next set of savings initiatives.
Why ERP Systems Are Not Enough
ERP systems used many different approaches but they eventually focused on three main areas: vendors, commodities, and cost centers.
Spend Analysis originated when they realized that the ERP or accounting system data did not adequately support sourcing because it’s generally incomplete, contains duplicate vendors, does not contain good commodity information, and is far more static than spend data which changes all the time. Read more…
Additionally ERP systems do not provide any data standardization and categorization tools. Getting spend data into a clean and detailed format that can be used to determine spend is critical. Why is cleansing and categorizing data so important? Understanding the volume of a category and the number of suppliers who provide your organization with goods and services in the category provide the primary tools for negotiating better pricing.Furthermore, many organizations have more than one ERP system, especially if they have grown through mergers and acquisitions. The data in each of these systems does not talk to each other or share a “common language,” thereby making it difficult for sourcing to run reports. When we say common language, we do not mean the spoken language, but how the data is described from one system to the next.
How it affects your Strategy
Strategic approach to sourcing is essential for achieving immediate needs as well as for sustaining enterprise-wide cost reductions. Locating a supplier and pricing an item simply isn’t enough. Sustainable savings come from identifying cost-cutting opportunities, deﬁning and executing a supplier selection process, and creating contracts that convert them into actual savings. And this requires being able to evaluate the total cost impact of sourcing decisions, while shortening the amount of time and effort spent on administrative tasks. Read more…