Driving high-performance procurement initiatives

1
Research Report
Driving high-performance procurement initiatives
Financial Savings Management
Spend Analysis
esourcing
Contract Management
Supplier Management
Procure- To-Pay
2
Dear Colleague, Zycus is pleased to present
Driving High Performance Procurement Initiatives,
an exclusive research report on the tactics and
technology combinations that work best for
driving procurements spend and other business
performance management initiatives forward. We
often hear from our customers that winning
genuine acceptance, adoption and support from
internal customers and spend stakeholders is far
and away the greatest challenge for procurement
leaders looking to drive corporate performance
improvement using procurement and supply chain
levers. Our study which garnered a remarkable
participation rate of nearly 600 procurement
professionals provides valuable insight into
how leading procurement organizations gain
acceptance and support from complex corporate
populations. There are no easy answers in the
results, but we expect this report to help
procurement leaders focus their energies on the
most effective tactics and technology
investments. At Zycus, we are passionate about
ensuring maximum ROI for our customers
procurement performance initiatives. We offer
innovative product solutions that are easy to
learn and use and which promote process
automation and collaboration across enterprises.
We are driven by these principles, which led us
to pioneer the use of Artificial Intelligence for
Spend Analysis way back in 2001! Zycus
Procurement Performance solutions combine
state-of-the-art functionality, ease of use, and
superior responsiveness to customers to help
enterprise procurement organizations analyze,
plan and source using intuitive and objective
processes. The research contained in this report
focuses on what high-performing procurement
organizations do to win stakeholder compliance,
participation and procurement technology
adoption. We hope you find it useful and
instructive as you map your own journey to better
business performance. Aatish Dedhia CEO, Zycus
Inc.
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Introduction

• This exclusive procurement research report
  contains the results of an in-depth study
  conducted by Zycus
• that endeavors to identify which strategies and
  tactics work best when it comes to persuading
  people in complex corporate enterprises to
• Collaborate actively in strategic sourcing and
  spend management initiatives,
• Comply with strategic supply contracts,
• Provide consistent and constructive feedback on
  supplier performance and
• Adopt and actively use preferred spending
  processes and process automation technologies.
• Nearly 600 procurement professionals participated
  in the study. The report begins with a set of
  performance benchmarks for what modern
  corporations have achieved thus far by way of
  compliance to enterprise supply contracts and
  preferred procure-to-pay processes stakeholder
  participation and support for procurement-drive
  performance initiatives and adoption rates for
  various procurement automation technologies.
  Subsequent chapters zero in on the highest
  performers in each area to identify the
  strategies and tactics they are using to excel.

INSIDE this report Introduction executive
summary.............. 4-5 Study
benchmarks........................................
... 6-9 Compliance drives savings.................
......... 10-15 Contract compliance
....................................10-13 P2P
process compliance..............................14
-15 Getting to voluntary compliance
................16-21
Sourcing participation ...........................
....... 16-19 Supplier performance
participation..........20-21 Winning technology
adoption....................22-24 Summary
recommendations ...........................25 Stud
y demographics ...................................
......26 About Zycus..............................
.......................... 37
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Driving high-performance procurement initiatives
It is easy for an ambitious procurement leader to
decide that enterprise spend management driven
by procurement is a good thing for a
corporation. It is also relatively easy to
persuade top corporate executives to buy in to
the idea. After all, what corporate leader would
not jump at the chance to save millions
sometimes billions in unnecessary spending? and
consistently executed sourcing and procurement
Much less simple, however, is the challenge of
converting a complex corporate entity from a
culture of independent often undisciplined or
unscientific spend decision making to one in
which most people will,
processes is the correct and only way to
behave.
A common lament among procurement leaders is that
winning genuine acceptance, adoption, and support
from spend stakeholders is far and away their
greatest challenge. In this context, the term
spend stakeholder includes PL owners, department
budget owners, the hundreds sometimes thousands
of day-to-day spend decision makers, suppliers,
and even personnel within their own procurement
organizations. With this in mind, Zycus, a global
leader in procurement technology solutions, has
recently fielded a broad study aimed at defining
which tactics and strategies are most effective
for persuading people in complex corporate
enterprises to collaborate actively in strategic
sourcing and spend management initiatives, comply
with strategic

• Spend each corporate dollar as carefully as they
  would their own.

• Be fully cognizant of the methods and techniques
  that lead consistently to the best sourcing and
  procurement decisions,

• Be equipped, ready, and willing to use the tools
  that generate the best procurement decisions, and

• Sincerely believe that collaborating to promote

corporate profitability through disciplined
spending
supply contracts, participate in supplier
performance
Page 4 2011 Zycus Inc. All rights reserved
5
management endeavors, and adopt and use preferred
procurement processes and technologies.

• Procurement technology adoption, use, and
  utilization rates (percent of total available
  functionality being used routinely).

The study itself was devised upon the assumptions
that good benchmark indicators of
corporate-cultural penetration for spend
management would include
Nearly 600 procurement and supply management
professionals representing an estimated 370
billion or more worth of collective spending
power participated in the study. This research
report presents resulting benchmarks, in-depth
analysis, and recommendations for procurement
leaders and their teams.

• Stakeholder compliance to both enterprise supply
  contracts and preferred procure-to-pay (P2P)
  processes,

• Active stakeholder participation in both
  strategic sourcing and supplier performance
  management processes, and
• Executive summary

• Companies achieving the highest internal
  compliance rates to enterprise supply contracts
  and preferred procure-to-pay (P2P) processes
  employ a combination of policy, persuasion
  (business case/communication), performance
  objectives, metrics, monitoring, compliance
  reporting, and ease-of-use tactics.

technology but failing to achieve high adoption,
use, and utilization of their solutions show
substantially (50-75) lower performance for
compliance and stakeholder engagement compared to
companies that obtain high adoption and use.

• Companies winning the highest technology adoption
  and use rates employ a combination of compulsory
  tactics policy, usage monitoring, reporting,
  workflow management along with ease of use (as
  a key solution- selection criteria), training,
  and ongoing mentoring.

• Contract Management, Spend Analysis, and
  eProcurement technology solutions appear to be
  the most powerful enablers of procurement
  compliance tactics. Adopting a single solution
  extensively can engender compliance rates that
  exceed the industry average by some 25-33 points
  while extensively adopting an integrated set of
  solutions pushes the positive performance gap
  closer to 40 points.

• While procurement technology adoption and use
  plays a big role in winning corporate cultural
  acceptance for procurement-led performance
  initiatives, few believe their organizations come
  close to fully utilizing the technology already
  available to them.

• Procurement organizations that win high levels of
  stakeholder participation in strategic sourcing
  and supplier performance management activities
  achieve compliance rates that are three to four
  times greater than those that neglect to engage
  internal stakeholders.

Of note is the importance of seeing each of the
three areas compliance, participation, and
technology adoption and use not as discrete
objectives, but as three legs of the same stool.
The compliance leg is the key to achieving
substantial and sustainable cost savings. The
participation leg is the key to achieving
spontaneous, voluntary compliance. And the
procurement technology adoption and use leg
serves as the prime mover behind the tactics and
strategies that high performers say are most
effective for creating a lasting corporate
cultural transformation around the disciplines of
spend management and other procurement-led
corporate performance initiatives.

• Effective tactics for winning stakeholder
  engagement include persuasion (business case),
  clear and effective communication, obvious
  incorporation of stakeholder input into decision
  making, ease of participation, and consistent
  execution of standard, transparent, fact- driven
  processes. Top three technology enablers for
  these tactics are Spend Analysis, eSourcing, and
  Supplier Performance Management.

? Organizations implementing procurement
automation
Page 5 2011 Zycus Inc. All rights reserved
6
Study benchmarks
Insofar as most corporations measure
procurements spend management success in terms
of cost savings, this metric was used to
segregate the study population into five
performance classes. The first part of this paper
shows the cultural-acceptance benchmarks for
spend management across all five of the
cost-savings performance classes.
population while numbers shown to the right in
the charts represent weighted average percentages
or scores broken out by cost-savings performance
tier.
Figures indicated as best-in-class and shown in
greater detail on pages 6 and 7 are for companies
falling into the top cost-savings performance
class with 30 or more accumulated cost savings
or spend reductions attributable to spend
management. Subsequent sections of the paper
delve more deeply into three areas compliance,
participation, and technology adoption to
discern the approaches and tactics that appear to
be yielding the best results among leading
procurement organizations.
Two of the series shown on this page and the next
represent percentage estimates while the
remainder are estimated scores given on a 0-10
scale (with 10 being highest). Numbers shown to
the left represent weighted average percentages
or scores for the total study
41
Contract compliance by cost savings performance
tier
80
70 60 50
64
61
Weighted average contract compliance for total
survey population
6
40 30 20
33
lt5 5-10 11-20 21-30 30 Savings
attributable to spend management as a of total
spending
6.1
P2P process compliance scores by cost
savings performance tier
7.3
6.6
6.2
Weighted average procure-to-pay (P2P) process
compliance score (0-to-10 scale) for total survey
population
5.8
5.5
Savings attributable to spend management as a
of total spending
7
s t u d y
b e n c h m a r k s
5.7
Stakeholder sourcing participation scores by cost
savings performance tier
7.8
6.4
Weighted average stakeholder sourcing
participation score (0-to-10 scale) for total
survey population
5.9
5.
4.2
Savings attributable to spend management as a
of total spending
5.8
Stakeholder SPM participation scores
by cost savings performance tier
7.8
7.2
Weighted average stakeholder supplier performance
management (SPM) participation score (0-to-10
scale) for total survey population
6.0
5.
4.6
Savings attributable to spend management as a
of total spending
5.8
Technology adoption use scores by cost savings
performance tier
7.0
6
6.2
Weighted average procurement technology adoption
and use score (0-to-10 scale) for total survey
population
5.
4.
Savings attributable to spend management as a
of total spending
37
Technology utilization by cost savings
performance tier
80
70 60 50
Average procurement technology utilization
percentage (as of total available
functionality) for total survey population
54
4
5
40 30 20
38
25 lt5 5-10 11-20 21-30 30 Savings
attributable to spend management as a of total
spending
8
s t u d y
b e n c h m a r k s
A broad reading of the study benchmarks suggests,
for example, that a 10 billion company, with 4
billion in annual spending and 1.2 billion in
realized cost savings from spend management (30)
has typically succeeded at moving the meter on
various cultural change indicators
as shown on this page and the next. Try marking
your own organizational assessments on the same
meters. If you are beating the benchmarks, keep
doing what you are doing! If your company is
relatively new to procurement-led spend
management (less than 12 or 18
Contract compliance (estimated on a 0-100
scale) 40 50 60
P2P process compliance (estimated on a rating
scale with 10 being highest)
5
4 6
3 7
70 80 90
30 20 10
8
2
9
1
10
0
100
0
Weighted average percentage for top
Weighted average score reported by top
cost-savings performance class
7.3
64 cost-savings performance class
Stakeholder sourcing participation (estimated on
a rating scale with 10 being highest)
Stakeholder SPM participation (estimated on a
rating scale with 10 being highest)
5
5
4 6
4 6
3 7
3 7
8
2
8
2
9
1
9
1
10
0
10
0
Weighted average score reported by top
cost-savings performance class
Weighted average score reported by top
cost-savings performance class
7.2
7.8
Technology adoption use (estimated on a rating
scale with 10 being highest)
Technology utilization (estimated on a 0-100
scale) 40 50 60
5
4 6
3 7
70 80 90
30 20 10
8
2
9
1
10
0
100
0
Weighted average percentage for top
Weighted average score reported by top
cost-savings performance class
7.0
54 cost-savings performance class
9
s t u d y
b e n c h m a r k s
months into a transformation), treat these
benchmarks as a roadmap for what must be
accomplished if you intend to build a sustainable
spend management culture that continues to
deliver high savings percentages over time. If,
alternatively, your enterprise is several years
into a
spend management transformation but not moving
up the cost-savings curve as steadily as desired
the benchmarks may help to identify weak spots
that can be addressed using the tactics and
technologies outlined in the remainder of this
report.
Spend analysis adoption use (estimated on a
rating scale with 10 being highest)
Contract mgmnt adoption use (estimated on a
rating scale with 10 being highest)
5
5
4 6
4 6
3 7
3 7
8
2
8
2
9
1
9
1
10
0
10
0
Weighted average score reported by top
cost-savings performance class
Weighted average score reported by top
cost-savings performance class
7.3
7.3
eSourcing adoption use (estimated on a rating
scale with 10 being highest)
eProcurement adoption use (estimated on a
rating scale with 10 being highest)
5
5
4 6
4 6
3 7
3 7
8
2
8
2
9
1
9
1
10
0
10
0
Weighted average score reported by top
cost-savings performance class
Weighted average score reported by top
cost-savings performance class
6.6
6.6
SPM adoption use (estimated on a rating scale
with 10 being highest)
EIPP adoption use (estimated on a rating scale
with 10 being highest)
5
5
4 6
4 6
3 7
3 7
8
2
8
2
9
1
9
1
10
0
10
0
Weighted average score reported by top
cost-savings performance class
Weighted average score reported by top
cost-savings performance class
6.7
6.9
10
Compliance drives savings
Metrics make compliant cultures
Stakeholder compliance be it compulsory or
voluntary bridges the rather large gap between
the cost savings that get encoded into strategic
supply contracts and spending processes and the
cost savings that actually materialize on a
companys profit line.
dual role of minimizing costs of doing business
with preferred suppliers and driving contract
compliance and performance.
As the study benchmark figures show, companies
falling into the top or best-in-class performance
tier for cost savings attributable to spend
management (with accumulated spend reductions of
30 or greater) report contract compliance rates
that are, on average, two times greater than
companies falling into the bottom (lt5) cost
savings tier. The implication doubling contract
compliance may be associated, over time, with a
six-fold increase in percentage cost savings
realized from spend management activities.
Stakeholder compliance comes in three essential
forms

• Contract people buy preferred, lowest-cost
  products or services, according to contract, from
  preferred suppliers,

• Performance the company consistently realizes
  all benefits captured into contracts, be they
  rebates, volume price discounts, payment terms,
  supplier performance requirements, and so forth,
  and

What gets measured gets done Tactics identified
as most effective for driving contract compliance
point strongly to procurement technology adoption
as the bedrock for driving a corporate culture
in the direction of spend management as
lifestyle versus spend management as

• Process people adopt and use preferred, lowest-
  cost buying and payment processes that serve the

Contract compliance by cost savings performance
tier
short-term annoyance.
80 70
For example, among companies achieving contract
compliance rates of 70 or greater, some 60 cite
monitor and report among their top three most
effective tactics. However, simply favoring this
tactic is no guarantee it will deliver results.
The ability to execute the tactic well is tied
64
61
60 50 40
6
33
30 20
lt5 5-10 11-20 21-30 30 Savings
attributable to spend management as a of total
spending
Page 10 2011 Zycus Inc. All rights reserved
11
Top performers top 5 tactics
contract compliance
of firms geting 70-plus contract compliance
who cite the tactic among their most effective
60 Monitor report
49 Communicate benefits business case
42 Compel with performance objectives metrics
27 Compel with policy
26 Make on- contract the easiest way to spend
How contract management (CM) techonology adoption
use affects contract compliance rates among
to technology adoption, which enables metrics
such as off-contract spending, contract
utilization, and contract performance (to terms)
to be tracked easily, consistently, and
accurately right down to specific departments and
individual spenders.
100
companies favoring tactics specified
80
Compel with
Monitor and report
75 avg with high CM adoption use versus...
74 avg with 60 high CM adoption use
versus...
performance
Indeed, for all companies that favor the monitor
and report tactic for driving contract
compliance, the study data show a dramatic
44-point difference in reported contract
compliance rates between companies with high
adoption and use of contract management (CM)
technology and companies with low adoption and
use. A similar relationship emerges when the same
test is applied to the third-place compel with
performance objectives and metrics tactic (see
charts to the right on this page plus a more
detailed graphic on the next page for additional
comparisons).
objectives
and metrics
40
30 with low
29 with low
20
0
Contract management (CM) technology adoption
use vs. contract compliance 5 20 61
Overall, among procurement technology strategies
evaluated in the study, the adoption and regular
use of contract management (CM) solutions emerges
as a clear
High
tier also report high adoption and use of
contract management technology. That compares to
just 5 of companies falling into the lowest
compliance performance tier, a difference of some
56 percentage points.
80
adoption and use
60
40
Facts matter The second-most popular tactic for
promoting contract compliance among companies
achieving high performance is to communicate the
benefits and business case around spend
management. First and foremost, this speaks to a
need for good salesmanship and consistent
internal marketing around spend management
concepts and
20
Med
Low
0
HIGH
LOW MED
Performance tier for contract compliance
12
Tactics technology
Contract compliance, weighted avg reported by
study participants using specified combination of
95
100
tactics technology
79
78
80
76
75
74
70
High technology
66
adoption use
60
vector
Low technology
40
adoption use
37
vector
30
30
29
24
23
N/A
19
20
0 Monitor and report tactic
Spend Analysis
eProcure- ment
Contract Manage- ment
Contract Manage- ment eProcure- ment
Contract Manage- ment Spend Analysis
Contract Manage- ment Spend Analysis eProcure-
ment
Study findings shown in this graphic illustrate
how effective tactics for
Compel w/objectives metrics tactic
Compel w/policy tactic
driving contract compliance rely in turn on
implementing various procurement technology
solutions AND driving high adoption and use of
them. Companies that extensively adopt two or
more integrated solutions report contract
compliance rates that beat the study weighted
average (41) by some 35-37 percentage points and
either double or triple the compliance rates
being achieved by companies that invest in the
technology but fall down on adoption.
Zero participants report attempting this
combination of tactics technology in the
absence of high technology adoption.
successes. But making and marketing a strong
business case for contract compliance comes down
to having detailed and persuasive facts.
enterprise supply contracts.
Because good business cases are so heavily
reliant on believable data, it is no surprise
that spend analysis technology figures
prominently in the contract compliance picture as
well. According to the study, some 49 of
companies with the highest contract compliance
rates also report high adoption and use rates
for spend analysis technology compared to just
11 among companies with the lowest contract
compliance. Companies that emphasize creating and
communicating strong business cases while also
achieving high spend analysis adoption and use
report a weighted average contract compliance
rate of 77, according to the study. That is 36
percentage points above the overall study average
for contract compliance and 41 points above the
rate reported by
Building a business case upon verifiable facts
enables a procurement organization to go to spend
stakeholders and say things like

• In the spend categories we have placed under
  management so far, we have documented an X
  correlation between high contract compliance and
  savings realized, or

• These are the specific amounts of money that
  departments X, Y, and Z were able to reallocate
  in their budgets due to savings realized from
  high compliance to

13
c o m p l i a n c e
d r i v e s
s a v i n g s
eSourcing (ES) technology adoption use vs.
contract compliance 7
Spend analysis (SA) technology adoption use vs.
contract compliance 11
100
100
18 40
High ES tech adoption and use
21 49
High SA tech adoption and use
80
80
60
60
40
40
Med
Med
20
20
Low
0
Low
0
LOW MED HIGH Performance tier for contract
compliance
LOW MED HIGH Performance tier for contract
compliance
Supplier performance (SPM) technology adoption
use vs. contract compliance 8
companies where spend analysis technology is
present but poorly adopted.
The imperative to measure compliance may also be
at work here as in the absence of more direct
compliance monitoring and reporting capabilities
many companies will follow category spending
data as a proxy for contract compliance (the
logic if category spend is declining, then
contract compliance must be occurring).
100
17 45
High SPM tech adoption and use
80
60
40
Two other technology categories showing notable
positive relationships to contract compliance are
eSourcing and Supplier Performance Management
(SPM). This appears to be a function of the ways
in which these solutions promote direct
stakeholder participation in strategic sourcing
and supplier performance management activities
and will be discussed in greater detail starting
on page 16 of this report.
Med
20
Low
0
LOW MED HIGH Performance tier for contract
compliance
Meanwhile, adoption and use of eProcurement
technology which can be used to drive spend
decision-making to contracted suppliers, items,
and services and to monitor individual/departmenta
l spending activities relative to contracts
emerges from the study as another technology
enabler for driving contract compliance. As shown
in the figure on page 12, companies that monitor
and report contract compliance in conjunction
with
well adopted spend analysis and contract
management solutions, show contract compliance
rates in the vicinity of 75. Adding a well
adopted eProcurement solution to the mix adds a
few more percentage points (78 compliance) while
adding a policy imperative to the mix can drive
the figure well above 90.
14
c o m p l i a n c e
d r i v e s
s a v i n g s
Of note is that the study also tested
eProcurement adoption and use alone in
conjunction with the number-five tactic among
high performers of making on-contract the
easiest way to spend. The logic Well-managed
eProcurement systems with heavy emphasis on
supplier and spend- category enablement for
eProcurement (one-stop shopping) plus intuitive
user interfaces that mimic consumer online-
buying experiences might naturally attract high
usership while also enabling spend activities and
decision making to be monitored at very detailed
levels and driven in directions desired by the
enterprise.
weighted average score of 5.5 on the same scale.
There is also a fairly high percentage (24) of
survey participants who opted out of this
question, suggesting that many companies have not
yet reached a point of establishing preferred,
low-cost P2P processes much less paying close
attention to compliance.
This may reflect a notion that efficiency savings
from adoption of low-cost processes are generally
nonrepeatable and relatively small in comparison
to savings generated from such spend management
activities as demand aggregation, strategic
competitive sourcing, and demand or consumption
management. It may also be a function of the fact
that most companies already limit procurement and
supplier payment methods, to a certain extent,
through routine financial controls (PO-invoice,
procurement card, check request, expense report).
But while the study finds a somewhat positive
relationship between the tactic, the technology
and compliance results, the impact is much less
notable than the monitoring, metrics, and
business-case routes. This suggests that many
companies may still have a way to go on
eProcurement execution before they will be in a
position to treat easiest way to spend as a
primary driver of contract compliance.
With that said, there is a hint in the survey
data that compliance to preferred P2P processes
may become more important as companies move up
the spend-management maturity curve. For
instance, while the difference in weighted P2P
compliance scores from savings-tier one to tier
two is just three tenths of a point, the
difference between tiers four and five
accelerates to seven tenths. Insofar as the study
derives much of its data from peoples
perceptions and a relatively simple scoring
technique, that difference may be too small to be
noteworthy. But it makes sense that maturing
procurement groups those that have exhausted
many of their easier opportunities to save
through competitive sourcing would need to cast
a wider net, focusing more on efficient, cost
effective processes. What is more, controlling
the process controls the information that comes
out of it, enabling better views
Surprising, also, for a relatively weak
relationship between technology adoption and
contract compliance is the technology category
for electronic invoicing and payment (EIPP).
While one might hypothesize that locking down the
payment process would boost contract compliance,
survey results are less clear. On the one hand,
some 41 of high performers on the contract
compliance metric also report high adoption and
use of EIPP technology. On the other hand, some
20 of the lowest performers on contract
compliance also report high adoption and use of
EIPP technology, suggesting the two are less
likely to go hand-in- hand.
P2P process compliance As an indicator of
cost-savings performance, the study finds
stakeholder compliance to preferred
procure-to-pay (P2P) processes to be somewhat
less important than contract compliance. While
companies falling into the highest cost savings
tier report relatively high preferred P2P process
compliance (scored at a weighted average of 7.3
on a 0-10 scale), companies falling into the
lowest cost savings tier are not all that far
behind, reporting P2P process compliance at a
P2P process compliance scores by cost
savings performance tier
7.3
6.6
6.2
5.8
5.5
Savings attributable to spend management as a
of total spending
15
Top performers top 5 tactics
process compliance
of companies scoring 7 or higher (0-10 scale)
that cite the tactic among their most effective
45 Monitor report
38 Compel with policy
31 Make preferred P2P process the easiest way to
spend
30 Compel using automation and workflow
technology
26 Compel with performance objectives metrics
Communicate benefits business case
into spending. Early on in a spend-management
transformation, a company may be able to generate
actionable views of spending by patching together
data from a wide variety of procure-to-pay work
streams (or by simply ignoring certain streams
where the patch work proves too difficult). But
uncovering more esoteric cost-savings
opportunities as time goes on requires more
timely, accurate, granular, and complete views
into spending. Those views are much easier to
generate when all or most spending flows through
a very small set of well- defined processes that
are designed with the idea in mind of
consistently capturing and classifying spend data.
Among high performers on the P2P process
compliance metric, the tactics voted most
effective (shown on this page) look very similar
to those for contract compliance and suggest a
heavy technology-adoption component. Insofar as
eProcurement technology typically embodies a
companys preferred low-cost P2P process for
controlling distributed purchasing activity and
enables direct monitoring of individual and
departmental spending activity and usership, a
high correlation is to be expected between
eProcurement adoption and use and preferred P2P
process compliance. Indeed, 69 of companies with
the highest scores for P2P process compliance
also report high eProcurement technology adoption
and use. That compares to 0 of companies with
the lowest P2P process compliance scores.
eProcurement (EP) technology adoption use vs.
P2P process compliance 0
Adoption and use of electronic invoice
presentment and payment (EIPP) technology also
seems to have a greater impact here as 42 of
high performers on the P2P process compliance
metric also report high adoption and use of EIPP
technology compared to just 7 of low performers
(a six fold difference).
100
24 69
High EP tech adoption and use
80
60
Suppliers play a bigger role here as well,
according to the study. For example, 44 of
companies reporting high P2P process compliance
also report high supplier adoption of their EIPP
technology and 37 report high supplier adoption
of their eProcurement technology, supporting the
idea that the more a P2P process can be made to
behave as a one-stop shop for spend stakeholders,
the greater the adoption and use of the process
(and/or solution) will be over time.
40
Med
20
Low
0
LOW MED HIGH Performance tier for P2P process
compliance
16
Getting to voluntary compliance
Participation fosters acceptance
While a combination of policies, performance
objectives, metrics, monitoring and reporting
plus high adoption of supporting procurement
technology makes a powerful formula for obtaining
compliance to spend management contracts and
preferred processes, they are not the end game
when it comes to achieving a corporate culture
change that truly embraces and buys in to
enterprise spend management. Indeed, few
procurement leaders will tell you they wish to
spend the rest of their careers policing peoples
behavior.
The key to getting there is encouraging active
stakeholder participation in strategic sourcing
and spend management processes and stakeholder
ownership of spend management decision making.
Going all the way back to the early days of
enterprise spend management in the 1980s and 90s,
the popular wisdom has always been that when
spend stakeholders participate actively and
enthusiastically in the drafting of
requirements, evaluation and selection of
suppliers, design of processes that make their
work easier, and ongoing measurement and
management of supplier performance they are
more likely to voluntarily abide by the decisions
made. They are also more likely to champion spend
management causes to others in their
organizations and to carry the disciplines over
into other areas of spending.
On the contrary, what they really want is to
embed best spend management processes and
practices into their enterprises and move on to
more important, value-adding and corporate
performance-enhancing work such as supporting
innovation and new product introduction, managing
supply chain risk, improving working capital
performance, and optimizing flows of goods and
services throughout global supply networks.
The study data certainly support this thinking as
companies falling into the top performance tier
for cost savings attributable to spend management
(30 or greater) score cross-functional
participation in spend management activities at
nearly eight on a 0-10 scale compared to around 4
for companies falling into the lowest cost-
savings performance tier.
Stakeholder sourcing participation scores by cost
savings performance tier
7.8
6.4
5.9
5.
In the meantime, companies reporting the highest
participation rates in cross-functional strategic
sourcing processes also report contract
compliance rates that are 3.1 times greater than
companies with the
4.2
Savings attributable to spend management as a
of total spending
17
g e t t i n g
t o v o l u n t a r y
c o m p l i a n c e
Contract compliance....
weakest cross-functional participation. And
companies that win high participation rates in
supplier performance management (SPM) endeavors
report contract compliance rates that are 3.6
times higher than companies with poor SPM
participation rates.
3.1x
3.6x
80
75
The implication is that spend management
organizations who win active and enthusiastic
stakeholder participation in spend management
decision making and supplier performance
management have an opportunity to spend much less
time and resources on compulsory management of
stakeholder compliance. For example, an
exceptions- only monitoring and alert system
might replace more burdensome, detailed and
frequent tracking of individual spending
behaviors without losses to compliance or
realized cost savings.
72
70
70
65
60
50
50
47
39
40
With that said, however, the study finds that
winning strong and consistent stakeholder
participation remains a challenge for many
enterprises with nearly half of study
participants grading participation at 5 or lower
on a 0-10 rating scale.
32
30
23
21
20
0-2 3-4 5-6 7-8 9-10 By cross-functional
participation score (0-to-10 scale)
0-2 3-4 5-6 7-8 9-10 By supplier
performance managmenent (SPM) participation score
Effective tactics The tactic voted most effective
by companies that do well with promoting
stakeholder participation in strategic sourcing
is to communicate benefits and business case.
Once again, the ability to make a powerful
business case for spend management in specific
spend categories one that can convince
influential spend stakeholders to volunteer their
time and brainpower for strategic sourcing
Spend analysis (SA) technology adoption use
vs. sourcing participation 6 21 62
which leads back to such technology enablers as
spend analysis.
High SA tech
80
Some 62 of companies with high scores for cross-
functional sourcing participation also show high
scores for spend analysis technology adoption and
use. That compares to just 21 for companies with
middle-of-the- road stakeholder participation
rates and a mere 6 for companies reporting the
lowest cross-functional participation scores.
and use
60
40
Med
20
Low
0
LOW MED HIGH Performance tier for sourcing
participation
Similarly strong relationships between technology
adoption and cross-functional participation show
up
18
Top performers top 5 tactics
sourcing participation of companies scoring
7 or higher (0-10 scale)
that cite the tactic among their most effective
41 Communicate benefits business case
39 Communicate clearly and effectively
throughout process
37 Ensure peoples opinions count heavily in
process
37 Make it easy for people to participate
36 Base decisions on facts (vs. intuition or
opinions)
for both the eSourcing and Supplier Performance
Management (SPM) solution sets. Companies
achieving the highest rates of cross functional
participation and collaboration in sourcing
activities are nearly three times more likely
than those achieving intermediate participation
rates and 6.8 times more likely than
those achieving the lowest rates to also have
high adoption rates for eSourcing technology.

• Conducting event results analysis and final
  decision making in highly transparent, consistent
  and structured ways.

Meanwhile, a great way to ensure peoples
opinions count heavily in a strategic sourcing
process (the third most popular tactic for
promoting participation among high performers) is
to give stakeholders a structured means for
registering their opinions, for reviewing others
opinions, and understanding clearly how a
sourcing teams collective set of opinions
influences a sourcing events outcome.
This is likely a function of the fact that
while often misjudged as a device focused solely
on driving down supplier pricing fully
functional eSourcing technology is designed in
direct support of the most effective tactics
determined in the study for promoting stakeholder
participation in strategic sourcing processes.
When an eSourcing tool is web based allowing
access
eSourcing (ES) technology adoption use vs.
sourcing participation 8
For example, the second-most popular tactic for
winning stakeholder participation is to
communicate clearly and effectively throughout
the sourcing process. While this can be done
without eSourcing, the technology is very much
intended to create virtual, collaborative
workspaces for such activities as,
100
19 54
High ES tech adoption and use
80
60

• Requirements definition and approval,
• 40

• Requesting and gathering of information and
  proposals from suppliers,

Med
20

• Communicating timing, rules, and other parameters
  around sourcing events to all stakeholders,

Low
0
LOW MED HIGH Performance tier for sourcing
participation

• Asking and answering questions, and

19
Tactics technology
Sourcing participation, weighted avg score
(1-to-10
scale) reported by study participants using
specified
10
combination of tactics technology
8.5
8.6
8.3
8.0
High technology
8
7.6
7.3
adoption use
vector
6
Low technology
adoption use
4.6
4.6
4.5
4.4
vector
4.0
4
3.0 2
0 Communicate benefits business case tactic
Spend Analysis eSourcing Supplier Performance
Supplier Performance Management
eSourcing
Spend Analysis
Ensure peoples opinions count heavily in process
tactic eSourcing Supplier Performance Management
Base sourcing decisions on facts (vs. intuition
or opinions) tactic eSourcing
Study results shown in this graphic illustrate
how popular tactics for promoting spend
stakeholder participation in sourcing processes
are made more effective when companies implement
supporting procurement technology solutions AND
drive high adoption and use of those solutions.
Companies that extensively adopt several
integrated solutions score stakeholder
participation at nearly triple the participation
levels reported by companies that invest in
supporting technology solutions but fail to drive
widespread adoption and use of them.
Management
from anywhere at any time it frees the
strategic sourcing process from both time and
place constraints, enabling greater team
recruitment and participation possibilities.
eSourcing also enables more people to participate
in more discrete ways, for example, contributing
to and reviewing only the specific portions of
suppliers proposals that are most relevant to
their jobs. Taken together, such features make
it easy for people to participate in a sourcing
process (the fourth most popular tactic cited by
leaders in winning cross-functional participation
in sourcing processes).
benefits and business case around strategic
sourcing in combination with high adoption and
use of eSourcing score cross-functional
participation, on average, three points higher
than companies with eSourcing that is poorly
adopted. But, where eSourcing adoption really
seems to differentiate is with the tactic of
basing sourcing decisions on facts. In that
case, the difference in cross- functional
participation scores between the highest and
lowest adopters of eSourcing technology is nearly
four points.
While it is interesting to see what companies
leading on cross-functional participation in
sourcing consider to be their most effective
tactics, it is also interesting to see the
tactics they consider to be least effective
training, careful selection of people for
sourcing teams, close adherence to project
management disciplines, and minimization of time
But simply deploying technology in conjunction
with tactics is clearly insufficient for
obtaining results. As the graphic on this page
illustrates, driving technology adoption and use
is a must. For example, companies favoring the
number-one tactic of communicating
20
Top performers top 5 tactics
of companies scoring 7 or higher (0-10 scale)
SPM participation that cite the tactic among
their three most effective
39 37
37 Communicate benefits business case
33 Employ a standard, transparent and
consistently executed process
32 Ensure that peoples input/ opinions count
in decision making
Make it easy for people to participate
Communicate/ ensure that people understand how
their input affects decisions, actions, and other
outcomes
How Supplier Performance Management
Stakeholders care about performance If eSourcing
adoption can help to promote corporate cultural
adoption of spend management disciplines,
Supplier Performance Management (SPM) technology
adoption may do an even better job. The study
finds 51 of companies winning high stakeholder
participation in their supplier performance
management endeavors also reporting high adoption
and use of SPM technology compared to just 2
among the lowest performers and 16 of
intermediate performers on the participation
metric for supplier performance management.
(SPM) technology adoption use affects
stakeholder participation scores
10
(0-10 scale) among companies favoring
tactics specified
8
Communicate,
7.9 with high SPM tech adoption use versus...
Make it easy for people to participate
7.5 with high SPM tech adoption use versus...
ensure people
understand how
their input
6
affects decisions,
actions other
outcomes
4
4.2 with low
3.8 with low
Top performers most effective tactics for
promoting stakeholder participation in supplier
performance management activities are shown on
this page. The study data suggest that
introducing SPM technology to the mix makes each
of these tactics more effective to varying
degrees with the most notable impact showing up
in how the technology enables procurement to
communicate and ensure that people understand
how their input affects decisions, actions and
other outcomes. As the figure on this page
shows, companies favoring the tactic and also
reporting high adoption and use of SPM technology
score stakeholder participation at nearly 8 on a
0-10 scale compared to a score of less than 4 for
low SPM technology adopters.
2
0
required to participate in strategic sourcing
activities.
The implication in these findings As long as
spend stakeholders believe the sourcing process
is valid, have clear visibility into how the
process is being executed, trust the process to
generate positive outcomes for their
organizations, and feel their input is taken
seriously, they will be quite happy to contribute
their time to collaborate actively with
procurement.
Important ways in which SPM technology supports
the tactic of connecting stakeholder input to
real actions and
Page 20 2011 Zycus Inc. All rights reserved
21
p a r t i c i p a t i o n
f o s t e r s
a c c e p t a n c e
Web-based solutions allow people to participate
on their own schedules and make it easy to
request input on only the supplier performance
factors that are directly relevant to specific
stakeholders.

• Creating highly visible relationships between
  quantitative (objective) and qualitative
  (subjective) data inputs,

decisions include

• Enabling systematic blending of quantitative and
  qualitative data inputs,

• Enabling consistent, systematic setting and
  movement of supplier performance benchmarks,

• Enabling supplier performance metrics to be
  customized at a spend category level but also
  rolled up to consistent supplier rankings that
  can be applied in sourcing decision making, and

• Enabling generation of balanced supplier
  scorecards with weighting for various key
  performance indicators,

• Enabling identification, ongoing management, and
  communication around supplier development
• efforts aimed at diagnosing and correcting
  supplier performance problems and also driving
  continuous performance improvement.

• Giving suppliers a role in self evaluating and
  responding to stakeholders input, and

• Creating clear connections between supplier
  performance data and the actions that result
  (performance improvement and development work,
  for example).

For many of the same reasons discussed around
eSourcing, SPM technology also appears to have a
strong impact on making it easy for people to
participate in supplier performance management
processes. Web- based solutions allow people to
participate on their own schedules and make it
easy to request input on only the supplier
performance factors that are directly relevant to
specific stakeholders. So, for example, an office
manager might be asked to evaluate an office
supplies provider on things like supplier
responsiveness, leadtime, on-time delivery and
order accuracy, while an accounts payable
stakeholder might be asked to evaluate only on
invoice accuracy, and a spend category manager
might be asked to evaluate on performance to
pricing terms, and so forth.
Supplier performance (SPM) technology adoption
use vs. SPM participation 2
100
16 51
High SPM tech adoption and use
80
60
40
Med
Employing a standard, transparent and
consistently executed process for supplier
performance management is another tactic voted
most effective by top performers on the SPM
participation metric. Supplier Performance
Management (SPM) technology enables the tactic by,
20
Low
0
LOW MED HIGH Performance tier for SPM
participation
22
Winning technology adoption
Bigger challenges, less consensus
Much procurement technology has been created in
the past two decades with the intention of
enabling various aspects of enterprise spend and
other forms of corporate performance management.
And while the technology continues to gain
sophistication and has potential to
somewhere in the vicinity of 58 of available
technology functionality at this time. Companies
at the low end of the cost-savings scale claim to
be using an average of 25 - 27 of available
technology for typical and power users alike,
while companies at the high end of the
cost-savings scale place technology utilization
in a range of
54 - 57, depending on type of user. There
appears to be a slight divergence between typical
and power
Percent of total available SM technology being
used routinely by typical users and power users
80 70
60 50 40 30 20
users in the early stages
of spend management
transformation, but the
gap closes as companies
gain maturity and move
progressively up the cost
lt5 5-10 11-20 21-30 30 savings performance scale.
Savings attributable to spend management as a
of total spending
Of course, utilization of technology begins
deliver enormous benefits to corporations, there
is evidence in the study that it may have begun
to outrun the organizations for which it is
intended. For example, when asked to estimate the
percentage of total available technology
functionality being used routinely by typical
users in their organizations, the weighted
average response generated across the entire
study population is just 37.
with adoption and use. And while the study finds
that procurement technology adoption has big
roles to play in driving both stakeholder
participation and compliance to spend management
initiatives, there are other reasons to focus on
promoting technology adoption, not least
the delivery of ROI on a corporations technology
investments, but also in terms of,

• Identifying performance improvement opportunities,

Meanwhile, people considered to be power users
of procurement technology are thought to be using

• Improving productivity,

23
Tech adoption scores by savings tier
Total study lt5 5-10 11-20 21-30 30-plus
population savings savings savings savings savings
Spend analysis 5.9 4.3 5.9 5.9 6.8 7.3
eSourcing 5.2 4.4 5.0 5.5 6.1 6.6
eAuction 3.7 3.0 3.5 3.8 4.6 5.5
Contract mgmnt 5.9 4.2 5.4 6.0 7.1 7.3
eProcurement 5.6 4.1 5.2 5.9 6.7 6.6
EIPP 5.6 4.8 4.9 5.6 6.5 6.9
SPM 5.5 4.2 5.4 5.9 6.9 6.7
SIM 5.3 3.7 5.0 5.6 6.7 6.4
Overall 5.8 4.6 5.6 6.2 6.9 7.0
top three, only 36 of leaders on the technology
adoption metric do the same.

• Automating nonvalue-adding work,

• Managing and bidding more spend categories,

Perhaps one survey participant puts his finger on
the challenge when he writes in that You need
more than three to work. Others point out that
technology adoption can be very much a function
of internal cultural diversity. For example,
engineers, who are typically more tech savvy may
be more likely than other types of professionals
to adopt technology. Our issue is in the
corporate cultures are very different throughout
our organization and technology adoption is based
on internal organizational expectations, remarks
one study participant.

• Making efficient markets that include more
  suppliers, expand sourcing organizations
  geographic reach, and so forth.

Overall, the study population scores procurement
technology adoption and use at just shy of 6 on a
0-10 scale, while companies in the lowest savings
performance tier score technology adoption and
use between 4 and 5, and companies in the top
savings tier score it at 7 (with spend analysis
and contract management scoring somewhat higher
and all other procurement technology solutions
scoring somewhat lower).
If there is a thread running through the top five
tactics for technology adoption and use, it is
about balance. On the one hand, it is about
compelling adoption and giving managers clear
visibility into technology usership and abilities
to prompt usership where it may be lacking. On
the other hand, winning adoption and use appears
to be about implementing solutions that are
intuitive and easy to learn and use, and
supporting those choices with appropriate
training and ongoing mentoring and marketing.
But what are the key drivers of technology
adoption and use in business enterprises?
Of all the cultural change areas looked at in the
study, this one shows the least consensus among
leaders around which tactics are the most
effective. So, for example, monitor and report
usage statistics is the most popular tactic, but
where 60 of top performers on the contract
compliance metric chose the same tactic as one of
their
The second most popular tactic offer strong
workflow
24
Top performers top 5 tactics
of companies scoring 7 or higher (0-10 scale)
technology adoption that cite the tactic
among their most effective
36 Monitor report usage statistics
32 Offer strong workflow/ management
capabilities
31 Select easy/ intuitive solutions
28 Compel with policy
23 Offer extensive training
management capabilities is the equivalent of
saying look for solutions that give us the power
to keep processes moving forward and to control
how and when people enter into and participate in
spend management processes.
Of note is that the number three tactic of
selecting easy/intuitive solutions selected
by 31 of the top performers for technology
adoption is not to be confused with the much
lower ranked tactic of emphasizing simple
functionality, selected by just 7 of top
performers.
Two other tactics came very close to making the
top five. The first is cultivate power
users/mentors who can drive usership both by
example and real-time assistance for people who
are more reluctant or struggling to learn new
systems.
The distinction is important, as the leaders are
saying that functionality should not be
sacrificed with the hope of gaining adoption.
Rather, the search for appropriate solutions
should simultaneously emphasize state-of- the-art
functionality and intuitive, easy-to-learn user
interfaces.
The second is ensure strong correlation between
technology and processes. In other words,
select solutions that have been developed with
direct input from real people executing real
business processes and/ or which can be easily
configured to automate existing work processes
(rather than asking processes to change
dramatically).
Forcing technology adoption and use as a matter
of policy comes as a surprise among the top five
most effective tactics, but speaks to the
difficulty of winning technology adoption,
especially in organizations where technology
selections have proven to be poor fits.
As one study participant describes it For some
technology elements, we have 100
usage/compliance through edict, but the
functionality is poor. What we really want is for
existing and new systems to be easy to use,
employ appropriate business processes, and
deliver measurable results.
Technology adoption use scores by cost savings
performance tier
7.0
6
6.2
5.
4.
Savings attributable to spend management as a
of total spending
25
Recommendations
If stakeholder buy-in and support is a problem
for your procurement organization (or you are
just starting out with spend management), it is
definitely time to create and implement
systematic strategies for driving stakeholder
participation, compliance, technology adoption,
use, and utilization. Summary recommendations to
come out of the Zycus study include
Monitor and report. This is a top-five tactic in
three of the five cultural transformation areas
looked at in the study. Look for technology
solutions that present strong capabilities for
creating credible compliance and technology-adopti
on metrics that can be used in employee
performance management systems and reported
publicly at appropriate management levels.
Promote and measure participation. Unless you
want to spend the next several decades closely
monitoring and frequently reporting on
spend management compliance, be sure to promote
participation in spend management activities at
least as assiduously as you focus on compelling
compliance. Over time, a corporate culture that
participates routinely in spend management
decision making and supplier performance
management will not need to be measured closely
for compliance.
Implement policies. Compel with policy shows
up as a top-five tactic among top performers in
three of the five cultural transformation areas
tested in the study. While it may be tempting to
avoid the work of obtaining governance changes,
those who are succeeding with stakeholder buy-in
clearly see this as a step worth taking and one
that goes hand-in-hand with the monitor and
report tactic (without which, policy can easily
be seen as a toothless tiger).

• Invest in solutions Spend Analysis, SPM,
  eSourcing, eProcurement and Contract Management
• that directly support key tactics outlined in
  this paper. I