New Research Paper on Spend Management

Over the summer, an NC State research team was assembled which performed a thorough analysis of spend analysis best practices (see the full version of the research paper). A number of industry subject matter experts were consulted, including academics, spend management industry experts, consultants, and executives. Based on these views, a taxonomy of capabilities was developed around the core elements of a spend management program, which include the following:

• DataCleansing(Acquisition,Cleansing,Preparation,andDatabasePopulation)
• Analytics
• ContractManagement
• TechnologyManagement
• CustomerService

A capability assessment was defined for each category based on user input that provided guidelines for assessing the level of maturity (Basic, Typical, or Advanced) of different providers in each of these five areas, with a scoring mechanism determined. This scorecard was used as the basis for assessing the capabilities of each provider.

The spend management landscape includes a number of different providers of spend management services. It quickly became apparent that a significant variance in capabilities claimed in marketing materials did not always align with demonstrated experience of these same providers.

The population of firms sampled for this study included the following:

Group Purchasing Organizations* (4) – labeled as GPO1, GPO2, GPO3, and GPO4 – these providers covered some but not all of the capabilities in the study.

Distributors (3) – labeled as D1, D2, D3, and D4 – two of these distributors did not provide significant spend management capabilities, but for the most part outsourced capabilities to a third party.

Specialized Software Providers (4) – labeled as SS1, SS2, SS3, and SS4 – these are companies that focused on different aspects of spend management capabilities, including data acquisition, cleansing, preparation, and database upload. They also provided different forms of services for contract management, spend analytics, technology and customer service. These firms were either operating as “software as a service” providers or providers with specialized assets.

* At the time of publication the following Specialized Software Providers gave permission to publish results with their name: SS2 – DataPros for Healthcare.

Other Software Providers (3) – these organizations provide benchmarking and database support that allows providers to compare their current pricing and spend patterns to other healthcare companies. They possessed limited capabilities in data cleansing.

ERP Providers (2) – these organizations supported large ERP platforms used in healthcare, and provided varying levels of support around spend management.

All of these organizations claim to provide spend management support services in one form or another. Because of the diversity of actual services provided, there was a need for a rigorous scoring system that would provide a means to identify each firms’ true capabilities.

Identifying capabilities was not as easy as it might sound. Moreover, while many providers had marketing materials or generic demonstrations on their websites alleging certain capabilities around data cleansing, spend analysis, contract management, and services, further research by our team revealed that these capabilities could not be effectively validated. Validation of capabilities was performed through several means. First, we conducted interviews with healthcare executives, software providers, and subject matter experts familiar with provider capabilities. Second, we reviewed recent studies conducted by the DoD on data quality in the industry, and reviewed other publications and industry presentations at recent healthcare supply chain conferences that we attended. Finally, we contacted each of the providers and emphasized to them that this study was forthcoming, and that we would welcome the opportunity to review their stated capabilities through client references, demonstrations, or other mechanisms.

Unfortunately, our repeated requests for interviews often went unanswered, suggesting that these providers were indeed reluctant to provide validation of their spend management solutions. It also became apparent through the validation process that many of the capabilities alleged in marketing materials did not meet even the “Basic” level of performance identified in our scoring mechanism In fact, it was not even apparent that there a single customer existed who had successfully implemented some of these services! As such, we provided a lower score to providers that refused an interview or who were unable to ascertain actual capabilities based on a demonstration or client references or testimonials.

The full version of the paper can be downloaded for further details.