Executive Research: Capability Development - PIU's new measure of spend analysis maturity

The PIU has been developing a new industry benchmark study to complement its research on spend analysis. The new capability development model corrects a previous lack of research by providing a base point from which to understand how managers can best maximise their return on investment in spend analysis systems. Organisations perform differently in terms of their ability to extract maximum value from spend analysis.

This relative difference is influenced by a combination of factors, including the relative maturity of the procurement function. Procurement organisations lose between 5% and 10% in unrealised savings due to flaws within their procurement models, as well as a combination of other factors, such as buyer skills, complexity of source data and resource constraints within the organisation.

It is important to understand these success indicators as they provide a mechanism to benchmark and identify opportunity areas to progress upwards on thematurity curvetowards optimised and sophisticated analytics. The capability levels are:

• Early Adopter - These organisations have recently adopted spend analysis and are more likely to use basic and less complex metrics to understand the value of spend under management.
• Developing - These organisations have a relatively higher percentage of spend under management compared to early adopters and show signs of an ability to categorise data.
• Advanced - These organisations have the ability to extract spend from more robust purchase order systems, have higher drill-down abilities and an overall better quality of data than early adopters and developing organisations.
• Sophisticated - This is the highest level which shows organisations having the ability to consistently perform above average - and more importantly show signs of ability to use spend analysis to drive procurement strategy.

The research gathered a range of benchmark results and one particular insight was that organisations take on average 39 months of time and effort to reach sophisticated analytics. The research is part of a wider trilogy on spend analysis:part onefocused on user experience while the final part will focus on vendor ability and core competence analysis, taking a 360-degree approach.