Spend Analysis: Get Beyond The Basics And Put Your Data To Work

Annie Vaseekaran

The intelligent use of innovative technology and insights from large volumes of data affects every aspect of our life today. For instance, if you are a fitness fanatic, your life probably includes some high-tech exercise equipment and devices that collect all sorts of data that helps you develop a more effective workout. Innovative technology and insightful data are available in the world of procurement, too.

Spend analysis tools, although not new, can help procurement teams work more effectively. Every procurement team knows about these tools and uses them to some extent to capture a certain degree of cost savings. But even companies that claim they are taking advantage of spend analysis aren’t using it to its fullest extent, which is not only unfortunate but is actually putting their companies at risk.

There is an abundance of undiscovered potential in spend analysis and the data behind it. The effective use of spend analysis can have a significant impact on a company’s profitability and operating margins by enabling intelligent planning, forecasting, budgeting, and risk mitigation.

Analytics and the data behind it are key to efficient spend analysis

EY white paper Empowered by Analytics: Procurement in 2025 discusses the role spend analysis can play in companies that take full advantage of it. The report says, “Analytics will enable procurement leaders to be even better at their jobs: planning purchase timing and inventories to meet manufacturing and consumer demand schedules, identifying cost savings, and predicting future risks. And this will also mean that procurement leaders become indispensable for strategic planning.”

The data that drives this kind of spend analytics is plentiful, as enterprises generate higher and higher volumes of it all across their organizations. So why aren’t procurement organizations putting it to good use? The answer: Most of them face the dilemma of determining how to piece together procurement data from various sources across the enterprise so it can make sense.

However, when they finally overcome this challenge with an intelligent spend-analysis solution, they can use this tool to achieve a higher rate of spend under management, more strategically sourced spend, and a higher percentage of on-contract spend. They can also drive significant cost savings and gain a deeper understanding of how spend can affect corporate finances and enterprise performance.

Benefits beyond just cost savings

When enterprises fully embrace spend analysis, they quickly realize that there are multiple areas throughout the procurement process where they benefit. For example, companies that leverage comprehensive spend analysis can:

  • Advance overall data management and quality. Right off the bat, when companies take full advantage of spend analysis solutions, they have a more effective way to collect, store, and manage the enormous amount of data they have from all their various sources. They can integrate data from ERP and other financial systems into one centralized location, which helps close the gaps between disparate enterprise systems, especially when they are located all across the globe. When data is converged as a single source of truth, the procurement staff has quick and easy access to it, allowing them to acquire a better understanding of current and historical spending habits, trends, and patterns. They can also gain deep, insightful intelligence into the how, where, why, and with whom of future spend.
  • Enhance supplier management. Using spend analysis effectively, companies get the spend visibility they need to identify and leverage opportunities with vendors and reduce risk. For instance, they can identify duplicate vendors and consolidate and optimize the number they work with by determining which vendor opportunities are the most valuable and cost effective. Spend visibility also helps control spending related to non-approved suppliers. Additionally, companies gain the ability to align with suppliers that encourage diversity in their organizations. Spend analysis can also identify companies that have same or varying payment terms and can encourage suppliers to transact electronically.
  • Improve product categorization. Once there is a single source of truth, companies can gain a higher degree of visibility into their spend, because diverse groups of products are easily identified and categorized within industry standards and customized taxonomies. For instance, it’s through this kind of advanced categorization that organizations promoting diversity can be identified. This kind of consistent and intelligent classification uncovers insights – such as spend patterns and trends – that reveal the true value of spend analysis data and allow for faster decision-making.

Spend analysis data can also help companies:

  • Identify commodity spend trends
  • Pinpoint risk associated with commodities
  • Accelerate planning and forecasting, regulatory compliance, and the management of complex projects and contracts
  • Facilitate internal and external process compliance with best practices and regulatory requirements

How do best-in-class companies take advantage of spend analysis?

The benefits of a robust spend-analysis strategy are significant and undeniable.

An Ardent Partners report, “How the Best-in-Class ‘Strike It Rich’ with Spend Analysis,” reinforces this concept. The paper notes that a key differentiator in most (60%) of best-in-class performers is their use of spend analysis to drive spend intelligence across the source-to-settle process.

To learn more about best-in-class practices, get your copy of the Ardent Partners white paper.

Follow SAP Finance online: @SAPFinance (Twitter)LinkedIn | FacebookYouTube

About Annie Vaseekaran

As a product marketing manager on the SAP Ariba Portfolio Marketing team, Annie Vaseekaran handles product marketing for the SAP Ariba Spend Analysis, SAP Ariba Sourcing and SAP Ariba Contract Management solutions. She has over 11 years of experience in the IT products and services industry. Prior to SAP Ariba, she was with Oracle in marketing and business development roles. Annie holds an engineering degree in Industrial Engineering and Management from Visvesvaraya Technological University, and an MBA in Marketing and Human Resource from Mount Carmel Institute of Management, India.