208HarborDrive•Stamford,CT06912-0061•(203)973-6700•Fax(203)359-8066•metagroup.comCopyright©2002METAGroup,Inc.Allrightsreserved.18September2002File:ADS1188LeveragingClosed-LoopEnterpriseSpendManagementApplicationDeliveryStrategiesJohnVanDeckerOrganizationsmustdevelopaclosed-looplife-cycleprocesstoenterprisespendmanagement,andintegratedisparatepurchasingsourcing,execution,andanalytical/benchmarkingprocessesinternally.Currenteconomicconditionshavecreatedarenewedfocusonmanagingcorporateassetstoimprovethebottomline.Organizationsareattemptingtocutcostsatgreaterratestooffsetflatrevenues,butmanystumbletointelligentlymanagebusinessexpensesbecausetheylackanenterprisespendingstrategy(andtools).Manyfirmsdonothaveanunderstandingofenterprisespendingand,consequently,donotleverageaconsolidatedspendwithkeysuppliers—norcantheycomparetheirspendingbehaviortoindustrybenchmarks.Thesefirmsoftensufferfromthefollowing:•Poorspendingvisibility:Nospendclassification,multiplepurchasingsolutions,lackofspendingcontrol•Littleornosourcingleverage:Supplierandspendfragmentation,lackofsourcingcoverage,nocontractvisibility•Poorcompliance:Roguespending,minimaluseradoptionFormanyfirms,spendmanagementhistoricallyhasnotbeenaconcern,andithasbeenlefttochance.Thiscanalsobeevidencedbythenumerousfirmsthatdonotuseaformalpurchasingsolution,eitherstandaloneorERP-based.CFOsareconcernedaboutconsistentlymanagingspendingacrosstheenterprise,whichincludesvisibilityacrossdiverseERPandbest-of-breedsolutionsaswellasallspendingcategories(e.g.,travel;commoditygoodsandservices;projects;maintenance,repair,andoperations[MRO];directmaterials).Althoughmanyorganizationshaveimplementedane-procurementsolutionfrombest-of-breedvendors(e.g.,Ariba,CommerceOne,Clarus)aswellasERPvendors(e.g.,SAP,Oracle,PeopleSoft)forindirectspendingandhaveincreasedimplementationsofsupplierrelationshipmanagement(SRM)solutions,manycontinuetorelyonlegacyprocesseslooselylinkedtoaccountspayableandcontractmanagement(oftenmanual),withminimalvisibility(seeADSDeltas959and1089).Asaresult,manyfirmsdonothaveanunderstandingofwhattheyarespendingforgoodsandservices,andwithwhom.AlthoughSRMsolutionshavetraditionallybeenlinkedtoindirectmaterialpurchasing,manyofthesesolutionsareincreasinglybeingexpandedtoincludedirectcommoditygoodsandservices(seeEBSDeltas1201and1202).However,manyfirmsthathavenotpursuedSRMstillrequiresolutionstohelpbetterleverageandconsistentlymanagespendingacrossadiverseglobalorganization.Spendmanagementfocusesoneffectivelymanagingcorporateassetsandcash-flowprocesses,andoftenfallsundertheauspicesofthechiefpurchasingoffier(CPO)andCFO(seeEBSDelta1220).Foranorganizationtoeffectivelymanagespending,itmustknowwhatitsinternalandexternaldemand-siderequirementsareforgeneraladministrativeexpenses,directmaterials,andMRO,anditmusteffectivelymatchthesetosupply-sidemanagementprocesses(e.g.,purchasing).Thisoftenrequiresamultifacetedsolution,consistingofanin-depthanalysisofhistoricalspendingpracticesthroughamanagementconsultingservice(e.g.,ATKearny)orinternallythroughpurchasinganalytics(e.g.,Cognos,Ariba,Analytics,Emagia),aswellasre-engineeredbusinessprocesses(andoftenaccompanyingpersonneladjustmentstoensuretheappropriateskillsareinplace).In2002,economicconditionswillforceorganizationstocutspendinginmostcategories,andmanyfirmswillnothavetheMETATrend:During2002/03,ERPv...
