Spend analysis solutions have long been critical enablers of procurement organizations. Over the last couple of years, however, the term analysis has gradually been replaced by analytics. In order to gather information on this transition, I reached out to Rosslyn Analytics, a company that has operated under the ‘analytics’ label since their founding in 2005, long before it was the prevailing term. I'd like to thank them for their help in putting this post together.
Let me begin by giving working definitions for both terms. According to BigDataCraft.com,
“Analysis is the examination process itself where analytics is the supporting technology and associated tools.”
Within the context of managing spend data, the above definitions place the division between analytics and analysis at the point where the technology’s capabilities end and human interpretation and application begin. In other words, it is not a question of whether analytics or analysis will best be able to accomplish the task at hand. The combination of both is required in order to meet data actionability expectations.
Since specific definitions can be given for both terms, we must consider why there has been a transition from analysis to analytics in spend management. The line between the two has not always been as clear as it is now. The natural maturation process and increased competition have driven improvement in spend solutions as well as the professionals who use them. In fact, advancements on both fronts have contributed to procurement’s ability to differentiate between analytics and analysis and select the most appropriate term for each context.
Analytics: Improvement in Technology
More automation: In the past, the implementation and maintenance of spend solutions were highly labor intensive, resulting in solutions that were web-accessible but involved little to no automation under the hood. The time required to process data took long enough that refreshes were only feasible on a quarterly basis. With improved automation, cleansing and categorization can be completed faster and refreshes can easily be done on a monthly rather than quarterly basis, and are sometimes done even more frequently than that. Some solutions, such as Rosslyn Analytics’ cloud-based data analytics platform with an integrated spend analytics app, even allow companies to handle the entire process themselves in up to 90% less time than in the past.
Additional functionality: Beyond the technology to automate data cleansing and refreshes, spend analytics allows users to interact with their data in such a way that they get continuous improvement in data accuracy, completeness, and turnaround time. Individual users are empowered to add their own insights and layer data on top of data using one universal tool. Both the insights coming from users and third party data enrichment are captured in spend analytics, minimizing the need for manipulation in Excel and enabling other internal users to gain direct access.
Analysis: Advancements in Talent
More strategic conclusions: As spend solutions are capable of taking the data further before users interact with it, the same is true of the conclusions that can be drawn by those users in an equal allotment of time. Analysis is a manual process, and it needs to be. This should not be misinterpreted as tactical; nothing could be further from the truth. Only humans can internalize all of the relevant market forces and internal information needs and combine them with spend data. The competitive advantage resulting from that interpretation is made possible because procurement does not need to cleanse or manipulate data before they can start their analysis.
Higher expectations for internal application: Far from being analysis, spend work in the past amounted to little more than procurement professionals filtering data and exporting it for use early in a strategic sourcing project. Today procurement makes more advanced use of spend solutions, including risk monitoring and compliance tracking. In addition, regular users extend beyond procurement. Finance, accounts payable, and operations teams that have access to a spend solution can apply analytics capabilities in vastly diverse ways.
The combination of progress made in technology and talent has not only differentiated analytics and analysis, it has allowed both technology and people to earn the terms they bear. What we used to know as spend analysis technology was little more than spend display, and what we used to refer to as analysis work was more like advanced cleansing.
Making sure that enabling technologies are doing as much heavy lifting and enrichment as possible frees up procurement professionals to do the strategic work required to create value and competitive advantage for the organizations and colleagues they support.