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Spend Analytics vs Contract Management Systems: Both Please!

I have been interviewing a number of CPO’s on the subject of procurement analytics and predictive analytics.  In this discussion, an issue that frequently comes up is the debate over spend analytics and contract management systems. For organizations in the early stages of procurement transformation, which ones are more critical.  And how important are systems to driving change?

One executive I met with stated it very succinctly:  “Systems help build the level of credibility – through fact-based analysis – which allows the organization to the rigor and analysis you bring to the game.”

But which one is more important – understanding your level of spending, or where your contracts lie?  the answer:  both.

“I think obviously you need to figure out what your roadmap is for spend analytics and contract management. I think both of them are key in the evolution.  Spend points you in the direction of where there is fragmentation and where you want to drive supplier consolidation. But understanding what contracts you have out there, provides the details around the service descriptions, and what is contained in those relationships with suppliers.  The spend analytics gives you the idea on WHERE the opportunities are – and while contract management gives you a list on where to prioritize your efforts in the short term, and make your team more efficient.   It is much more efficient to work collaboratively within a tool that allows you to engage your clients from a stakeholder management perspective. And it also lends itself to an efficiency component around workflow management, and a risk management component on top of that,  and eventually leads to a standard process that people throughout the organization come to agree on.

Once you can put your contracts into the system, you start to also drive standard processes around monetary approval of spending.  This is a big challenge for many organizations….who is going to release and approve agreements?   Establishing certain protocols around data privacy concerns for specific agreements and certain types of engagements can be complicated.

But spend analytics and contract management are the tools I like to lead with…ideally deploying them together.  Spend gives you the direction on WHERE, and contract management systems tells you HOW.”