Information about a company's spending seems like some of its most basic data. But while corporations routinely track direct purchases–the material they buy to use in manufacturing–they haven't kept as close tabs on indirect spending, also known as operational spending. That covers everything from purchases of information technology and insurance to stationery and office furniture.
A few companies are offering software products that aggregate spending data from all of a corporation's financial systems and analyze it. The providers of such spending control software–or as it's referred to in the trade, purchasing analytics software–include Analytics
Inc., Zeborg Inc. and D&B (formerly known as Dun & Bradstreet Corp.).Analysts claim that tracking and controlling such spending can usually result in big savings. With good data on spending, "you can understand where the outliers are, the maverick or rogue spending," says John Van Decker, the program director for application-delivery strategies at research and consulting firm Meta Group Inc. "With the current economic situation, people realize they need to get more out of less."
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Once companies collect the spending data, they can use it to see if they would be better off consolidating your purchases with fewer suppliers or as "leverage" for better deals with current suppliers, Meta says. Ultimately, savings from spending cutbacks have a more direct impact on a company's bottom line than increases in sales, notes John Jensen, Analytics' president and CEO.
In this computer age, it may seem odd that financial systems cannot already dish up the kind of spending detail necessary. But Jensen says accounting systems focus on the purpose of a purchase, rather than the exact item that is purchased. And given the proliferation of financial systems, particularly in big global companies, and the differences in how the various systems treat expenditures, firms have a hard time coming up with consistent information, let alone a total amount. Jensen notes that one Analytics customer, an entertainment company, has 28 different systems worldwide.
Spending-control software gathers information from a wide range of systems, including accounts payable systems or general ledgers, ERP systems, procurement systems, credit card systems and payment systems "We pull all information together, eliminate double counts and categorize the spend," says Jensen.
Zeborg CEO Jeff Tognoni says a big part of Zeborg's work is getting a company's data into the right format so that the Web-based solution can compile it. Zeborg has a data model that adjusts to the company's structure, and then its rules engine takes the data from the company's financial systems and converts it into Zeborg's format. Tognoni emphasizes that gathering the data is only the first step. "It's to be used as the basis for running these spend reduction programs."
Purchasing Analytics Software
Analytics Inc.
Analytics' Web-based software, the Procurement Analysis Workbench, uses OLAP technology to extract and order spending data.
www.analytics-usa.com
D&B
D&B's software, D&B Supply Management System, uses D&B's proprietary D-U-N-S Numbers and the UN Standards Products and Services Code in its analysis of spending.
www.dnb.com
Zeborg Inc.
Its Web-based software, Zeborg ExpenseMap, uses business rules to extract spending data from various systems and turn organize it.
www.zeborg.com
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