Driving ROI - Spend Analytics

Driving

ROI

The Business Case for a Proven Spend Analytics Solution

The Business Case for a Proven Spend Analytics Solution

Procurement professionals are in the spotlight to deliver more value at a much faster rate while navigating supply chain disruptions and maintaining a heightened focus on sustainability. To survive and thrive, procurement organizations need a spend analytics solution to streamline procurement workflows, reduce costs, and help track ESG initiatives.

Hobson & Company (H&C), a leading research firm focused on Return on Investment (ROI) studies, worked with SpendHQ, a leader in spend analytics solutions, to explore these challenges and learn how industry leaders are responding. H&C conducted independent research consisting of twelve in-depth interviews across SpendHQ’s customers and found that SpendHQ addressed specific customer challenges to deliver a quick and compelling ROI.

In three years, a representative SpendHQ customer can generate a:

660% ROI with Spend Intelligence

The impact of SpendHQ's Spend Intelligence solution is not only strategic but measureable.

Based on this analysis, an organization with $2B in total spend volume and $1B in average annual addressable spend would pay back the cost of SpendHQ in less than five months and generate an ROI of over 660% in three years.

Spend Analytics Challenges Customers interviewed for this study noted consistent challenges for procurement professionals trying to analyze and take action on their spend data effectively. Below is a list of some of the most universal concerns.

Inefficient Data Analysis Transforming data from multiple AP and expense systems involves merging, normalizing, and categorizing based on the right taxonomy and often enriching it. It’s not easy to gather and prepare this data one time, let alone on an ongoing basis.

Missed Savings Opportunities Maverick and unmanaged spend is not captured in procure-to-pay systems, and internal vendor compliance rates can be as low as 40-60%,1 leaving close to half of the projected savings on the table.

Difficulty Tracking Supplier Diversity Many customers face challenges measuring and reporting on their supplier diversity efforts. In addition, they need help tracking their progress and quantifying the benefits of diverse supplier partnerships.

Customer research identified seven benefits of the SpendHQ solution across three key business objectives:

Streamline Procurement Workflows Reduce Spend Strengthen ESG Impact

Streamline Procurement Workflows Reduce time spent collecting and analyzing disparate spend data Spend Intelligence has integrations with various suites and expense systems to make consolidating spend data easy. Our combination of procurement expertise and AI-enabled solutions helps organizations achieve at least 97% of spend data cleaned and classified into an appropriate, repeatable taxonomy.

“Prior to SpendHQ, anyone that needed the information had to either mine it themselves or get someone else to go mine it, and my 5-person analytics team would spend 25% of their time aggregating and analyzing data. Now we have one dedicated person that is spending bout 10-15% of their time, and anyone that needs the data, can log in directly and access it themselves.”

Clients interviewed reported:

80%

REDUCTION in time spent collecting and analyzing disparate spend data

- VP, Procurement

Reduce time spent reporting against diversity goals Clients interviewed reported:

30% REDUCTION in time spent reporting against diversity goals

Spend Intelligence’s ESG and Non-financial Insights module allows organizations to quickly and clearly see progress and benchmarking relative to corporate-level commitments on supplier diversity.

“It was a painful process for the diversity team to keep track of this prior to having SpendHQ and now it is much easier. The majority of their efforts are now around keeping track of the certificates and notifying supply chain of any new diverse suppliers.”

- Senior Sourcing Manager

3

Reduce Spend Identify more procurement opportunities with increased addressed spend Clients interviewed reported:

10%

INCREASE in addressed spend

Spend Intelligence’s Spend Profile module helps users make better decisions for the business by harnessing integrations and connectors to consolidate fragmented spend data. The platform uses the power of machine learning to normalize and categorize data for at-a-glance visibility into and analysis of the entire enterprise spend at the category level. Category managers can track spend across different, user-defined time frames, drill down into category and supplier details, and build comparison views across many dimensions to support better collaborative decision-making.

“SpendHQ has helped identify more opportunities for us. In 2022, we completed 110 projects, and in 2023, we are on track to complete 144 and anticipate continued growth year over year.”

- Strategic Sourcing Manager

Reduce savings leakage as increase spend with preferred suppliers Spend Intelligence’s Compliance module allows users to configure the definitions of spend under management, compliance, and savings KPIs to manage and track key metrics on their preferred supplier program more effectively.

“SpendHQ brings awareness to spend from suppliers that are not under contract, and they are not as well known or as well managed as our contracted suppliers, so we can take appropriate steps to either enter into a contract with them or try to steer the spend to contracted suppliers.”

Clients interviewed reported:

5%

INCREASE in use of preferred suppliers

- Senior Sourcing Manager

Negotiate better pricing

Clients interviewed reported:

5%

REDUCTION in price

Spend Intelligence’s Suppliers module improves visibility to the supply base to identify opportunities for savings. In addition, it identifies new suppliers with surging spend for potential targeted negotiations.

“We had a lot of duplicate contracts with the same vendors in place. I can now go into SpendHQ, pull data, and find the duplicate spend amounts in order to consolidate contracts for better pricing.

As an example, I found 2 different contracts with the same expert advice vendor, but one division was paying $1500/call and the other division as paying $1075/call. I was able to renegotiate and get both divisions under the favorable pricing.”

- Manager of Procurement

Reduce Spend (cont’d) Realize savings with extended payment terms Spend Intelligence’s Supplier module allows users to easily view their spend and net payment terms by supplier for easier identification of contract and renegotiation opportunities.

“We had a major initiative around payment terms, and SpendHQ was useful in that process to easily identify suppliers that we had immediate terms, 30-day terms or 45day terms, and we could extend the payment terms to net 120 to improve use of working capital. We were tracking days payable outstanding (DPO) numbers to measure our progress on this.”

Clients interviewed reported:

1 day INCREASE in days payable outstanding (DPO)

- Manager, Procurement Capability Development

Strengthen ESG Impact Protect revenue with improved supplier diversity reporting Clients interviewed reported:

0.1% revenue protection

Spend Intelligence’s ESG and Non-financial Insights module empowers strategic planning by allowing users to access, monitor and easily report on total spend with diverse suppliers in aggregate, at the category/subcategory level, by region, or through other filters.

“We had a goal to hit $100m in spend with diverse suppliers and SpendHQ helped us hit that goal ahead of schedule (in 6-9 months) and are now working on what the new goal should be.”

- IT Procurement Manager

Sources: 1. https://www.pairsoft.com/blog/top-5-ways-to-reduce-unmanaged-spend/

Key Findings Research Results

The value of a validated spend analytics solution is immediate and demonstrable. A sample organization with the below profile can realize significant financial benefits from an investment in SpendHQ's solutions: $2B in total annual spend volume $1B in average annual addressable spend

For this typical organization, an annual investment of $116,000 generates a positive return in less than 5 months and a 3-year ROI of over 660%, with annual benefits exceeding $453K.

3 yr. Investment vs. Return $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0

Benefits by Business Objective Streamline Procurement Workflows 2% Strengthen ESG Impact 20%

Reduce Spend 78%

About SpendHQ SpendHQ is the leading best-in-class provider of enterprise Spend Intelligence and Procurement Performance Management solutions. These products fill a critical strategic management gap in the solution landscape, by producing actionable spend insights that drive new initiatives, goals, and clear measurement of Procurement’s overall value to the business. Backed by nearly 20 years of procurement expertise, SpendHQ’s solutions give businesses the rapid, accurate spend intelligence and performance optimization needed to drive better financial and non-financial outcomes, advance procurement maturity, and demonstrate impact with data. www.spendhq.com.

About Hobson & Company Hobson & Company helps technology vendors and purchasers uncover, quantify and validate the key sources of value driving the adoption of new and emerging technologies. Our focus on robust validation has helped many technology purchasers more objectively evaluate the underlying business case of a new technology, while better understanding which vendors best deliver against the key value drivers. Our well researched, yet easy-to-use ROI and TCO tools have also helped many technology companies better position and justify their unique value proposition. For additional information, please visit www.hobsonco.com.

Disclaimer: The return-on-investment (ROI) and other financial calculations expressed in this research paper are based on data provided by SpendHQ customers and various assumptions and provide estimates only. The actual ROI realized by customers may vary from the estimates provided.

SpendHQ offers this tool to assist clients with evaluating their solutions; however, SpendHQ and Hobson & Company (the firm that created the tool) are not responsible for the accuracy of any estimates.

No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or any retrieval system, without the written permission of the copyright holder. © Hobson & Company, 2023. All rights reserved. All other marks are the property of their respective owners.