The Total Value of Ownership of Spend Management Systems

Transcription

1 The Total Value of Ownership of Spend Management Systems IVALUA Tendances Achats n 1 "Total Value of Ownership des SI Achats" April 2013 Your Spend Solution TM

2 Trending in Procurement Early 2013, Ivalua launched Trending in Procurement, a quarterly survey of the Procurement Community Hot topics, debates, perspectives... Trending in Procurement takes in your opinions and analyzes the world of Procurement on your behalf The 1 st edition of Trending in Procurement was a success, with over 140 Procurement Professionals completing the survey! Thank you!

3 Methodology Online questionnaire sent via to a database of procurement professionals Panel: 148 participants (from 140+ different companies and organizations) Distribution of participants by profile:

4 Objectives Review how the concept of Total Value of Ownership (TVO) is used by companies to calculate the ROI of a Spend Management Solution (SMS) Assess the value created by the Spend Management Solutions Look at the different costs that are added to the initial cost of purchasing a Spend Management Solution in the equation: TVO of SMS = [Created Value / Costs]

5 Main findings 1. Benefits related to the implementation of SMS are not assessed from a financial point of view only 2. Some intangible benefits are considered more important than direct financial gains (i.e. cost reduction) 3. Internal communication and involvement of top management are the 2 most often cited conditions for the realization of the benefits 4. The productivity gains generated by the SMS allow Procurement Departments to improve the quality of the services provided and to focus on missions of higher added value 5. Setting up a SMS is not perceived as beneficial for the marketing process: little or no gain for "time-to-market," little or no gain on market share

6 Which benefits are associated with the implementation of a SMS?

7 Which benefits are associated with the implementation of a SMS? The main benefits are qualitative (i.e intangible) and don t result in direct financial gain: 1. Increased spend under control 2. Structuring purchasing process 3. Productivity improvement Reducing purchasing costs is only ranked 4th A majority of respondents believe there is little or no gain for the marketing process: 1. 53% of respondents say that there is little or no impact on the market share gain 2. 33% of respondents say that there is little or no benefit for the time-to-market

8 Which factors are critical for achieving the SMS project gains? Internal communication is mentioned by 75% of participants as a critical factor for the realization of gains ("regular information on the progress of the project", "user training ) The second most important factor is the involvement of Top Management ( CEO, CPO ) Less than 25% of participants felt that the involvement of suppliers was important for the success of the Spend Management implementation

9 Which factors are critical for achieving the SMS project gains?

10 What is the timeframe for achieving SMS benefits? 65% of respondents felt that the benefits created by the implementation of a SMS are realized quickly (less than a year after deployment) Less than 5% of respondents estimated that more than 3 years were necessary to collect benefits from a SMS

11 How are freed-up resources redistributed following the implementation of a SMS?

12 How are freed-up resources redistributed following the implementation of a SMS? Productivity gains created through the implementation a SMS are mainly distributed in favor of improving the quality of service of the Procurement Departments and focusing on tasks with a higher added Value: 1. Strengthening relationships with suppliers (71%) 2. Implementing a responsible procurement strategy (63%) 3. Development of new services (61%) The financial gains generated (i.e. reduction of procurement costs) are mainly used to strengthen the company's bottom line (49%) or redistributed internally (34%)

13 Which costs are associated with a SMS considered when calculating a ROI? The costs considered when calculating the ROI of a SMS are (excluding purchase cost): 1. Specific development cost 2. Integration with other IS cost 3. Transition cost

14 Conclusion Spend Management tools have successfully proved their added value to Procurement departments, beyond direct financial returns: productivity gains, reduced risks, process restructuring These benefits are especially important as they are obtained very quickly after the implementation of a Spend Management Solution However, as underlined in the survey, the next step is to use these same tools to create a stronger collaboration between Procurement professionals, suppliers and internal Clients. Thus realizing the potential of businesses on topics such as customer satisfaction (customer value), time-to-market, innovation, market share gain.

15 Coming soon Ivalua On Air is entirely dedicated to procurement professionals. Coming to this event will allow you to discover all the innovations of Ivalua Buyer V8. You will be able to share the Best Practices of international companies facing Purchasing challenges, and several moments during the day will be dedicated to Networking to let you discuss with your peers and our partners. More info: