A New Era in Spend Analysis


By Jeremy Stierwalt, Senior Director – Analytics at NTT DATA

In decades past, the adage of ‘doing more with less’ in business was tightly wedded to dips in the economy. Tough times required belt tightening, and procurement organizations led the charge to reel in spending across the company. Things got better, purse strings loosened, and business spending returned to normal.

In contrast to this, ‘doing more with less’ today is the new normal. It is a mandate, independent from economic ups and downs. Procurement organizations are under constant pressure to not only reduce costs, cycle times and risks, but also to provide strategic value, drive innovation, and help sharpen their business’s competitive edge.

Spend analysis to understand basic company-level spending information (e.g., what do I buy, from whom, at what price, etc.) is commonplace. But the combination of spend analysis software from SAP and Ariba and new insight generated by the rapidly growing Ariba Network marks the beginning of a whole new era of spend analysis.

By the numbers…

A report by Ardent Partners in 2011 found that, on average, the leading procurement organizations handled more than 80% of total enterprise spend. More recently, Gartner reports that advances in global procurement technology will drive billions in savings in 2014.

80% is a sobering number. Billions in savings is a staggering amount. How these two report findings connect is easier to understand if we take a look at a few additional, telling numbers…

The Ariba Network, with more than 1.6 million connected companies in 190 countries, is the largest and most global business network in the world and this network is growing at an amazing clip.  Ariba just reported that a new company joins the Ariba Network every minute!

Additionally, nearly $600 billion in commerce is transacted annually on the Ariba Network. That’s more than the volume of commerce on Amazon, eBay and Alibaba combined!!

Factor in the network effect…

As a refresher, Metcalf’s Law, commonly referred to as the network effect, states that the value of a network is proportional to the square of the number of connected users.

Similarly, the network effect considers the value one user of a good or service has on the value of that good or service to other people, meaning the value of the network-based service increases for all participants with each additional network member.

The near infinite amount of data and insights made available to members of the Ariba Network, harnessed and fed to NTT, SAP and Ariba spend analysis solutions, takes spend analytics possibilities to unprecedented heights.

Cost savings will probably always be the raison d’être for procurement operations and a foremost benefit of spend analytics.

But today businesses can begin applying spend analytics to more strategic and business-meaningful goals, such as discovering and driving product and service enhancements, driving sustainable productivity and efficiency gains, improving order accuracy, shortening delivery times, and more.

To learn more about NTT DATA, SAP and Ariba spend analytics solutions, come visit us at http://americas.nttdata.com/

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