Driving high-performance procurement initiatives

1. ResearchReport Drivinghigh-performanceprocurementinitiatives FinancialSavingsManagement SpendAnalysis esourcing ContractManagement SupplierManagement Procure-To-Pay

2. DearColleague, ZycusispleasedtopresentDrivingHighPerformanceProcurementInitiatives,anexclusiveresearchreportonthetacticsandtechnologycombinationsthatworkbestfordrivingprocurement’sspendandotherbusinessperformancemanagementinitiativesforward. Weoftenhearfromourcustomersthatwinninggenuineacceptance,adoptionandsupportfrominternalcustomersandspendstakeholdersisfarandawaythegreatestchallengeforprocurementleaderslookingtodrivecorporateperformanceimprovementusingprocurementandsupplychainlevers.Ourstudy—whichgarneredaremarkableparticipationrateofnearly600procurementprofessionals—providesvaluableinsightintohowleadingprocurementorganizationsgainacceptanceandsupportfromcomplexcorporatepopulations.Therearenoeasyanswersintheresults,butweexpectthisreportto helpprocurementleadersfocustheirenergiesonthemosteffectivetacticsandtechnologyinvestments. AtZycus,wearepassionateaboutensuringmaximumROIforourcustomers’procurementperformanceinitiatives.Weofferinnovativeproductsolutionsthatareeasytolearnanduseandwhichpromoteprocessautomationandcollaborationacrossenterprises.Wearedrivenbytheseprinciples,whichledustopioneertheuseofArtificialIntelligenceforSpendAnalysiswaybackin2001! ZycusProcurementPerformancesolutionscombinestate-of-the-artfunctionality,easeofuse,andsuperiorresponsivenesstocustomerstohelpenterpriseprocurementorganizationsanalyze,planandsourceusingintuitiveandobjectiveprocesses. Theresearchcontainedinthisreportfocusesonwhathigh-performingprocurementorganizationsdotowinstakeholdercompliance,participationandprocurementtechnologyadoption.Wehopeyoufinditusefulandinstructiveasyoumapyourownjourneytobetterbusinessperformance. AatishDedhiaCEO,ZycusInc.

3. Introduction • Thisexclusiveprocurementresearchreportcontainstheresultsofanin-depthstudy—conductedbyZycus • —thatendeavorstoidentifywhichstrategiesandtacticsworkbestwhenitcomestopersuadingpeopleincomplexcorporateenterprisesto: • Collaborateactivelyinstrategicsourcingandspendmanagementinitiatives, • Complywithstrategicsupplycontracts, • Provideconsistentandconstructivefeedbackonsupplierperformanceand • Adoptandactivelyusepreferredspendingprocessesandprocessautomationtechnologies. • Nearly600procurementprofessionalsparticipatedinthestudy.Thereportbeginswithasetofperformancebenchmarksforwhatmoderncorporationshaveachievedthusfarbywayof:compliancetoenterprisesupplycontractsandpreferredprocure-to-payprocesses;stakeholderparticipationandsupportforprocurement-driveperformanceinitiatives;and adoptionratesforvariousprocurementautomationtechnologies.Subsequentchapterszeroinonthehighestperformersineachareatoidentifythestrategiesandtacticstheyareusingtoexcel. INSIDEthisreport Introduction&executivesummary..............4-5 Studybenchmarks...........................................6-9 Compliancedrivessavings..........................10-15 Contractcompliance....................................10-13 P2Pprocesscompliance..............................14-15 Gettingtovoluntarycompliance................16-21 Sourcingparticipation..................................16-19 Supplierperformanceparticipation..........20-21 Winningtechnologyadoption....................22-24 Summaryrecommendations...........................25 Studydemographics.........................................26 AboutZycus........................................................37

4. Drivinghigh-performanceprocurementinitiatives Itiseasyforanambitiousprocurementleadertodecidethatenterprisespendmanagement—drivenbyprocurement—isagoodthingforacorporation.Itisalsorelativelyeasytopersuadetopcorporateexecutivestobuyintotheidea.Afterall,whatcorporateleaderwouldnotjumpatthechancetosavemillions—sometimesbillions—inunnecessaryspending? andconsistentlyexecutedsourcingandprocurement Muchlesssimple,however,isthechallengeofconvertingacomplexcorporateentityfromacultureofindependent—oftenundisciplinedorunscientific—spenddecisionmakingtooneinwhichmostpeoplewill, processesisthecorrect—andonly—waytobehave. Acommonlamentamongprocurementleadersisthatwinninggenuineacceptance,adoption,andsupportfromspendstakeholdersisfarandawaytheirgreatestchallenge.Inthiscontext,thetermspendstakeholderincludesP+Lowners,departmentbudgetowners,thehundreds—sometimesthousands—ofday-to-dayspenddecisionmakers,suppliers,andevenpersonnelwithintheirownprocurementorganizations.With thisinmind,Zycus,agloballeaderinprocurementtechnologysolutions,hasrecentlyfieldedabroadstudyaimedatdefiningwhichtacticsandstrategiesaremosteffectiveforpersuadingpeopleincomplexcorporateenterprisestocollaborateactivelyinstrategicsourcingandspendmanagementinitiatives,complywithstrategic • Spendeachcorporatedollarascarefullyastheywouldtheirown. • Befullycognizantofthemethodsandtechniquesthatleadconsistentlytothebestsourcingandprocurementdecisions, • Beequipped,ready,andwillingtousethetoolsthatgeneratethebestprocurementdecisions,and • Sincerelybelievethatcollaboratingtopromote corporateprofitabilitythroughdisciplinedspending supplycontracts,participateinsupplierperformance Page4|©2011ZycusInc.Allrightsreserved

5. managementendeavors,andadoptandusepreferredprocurementprocessesandtechnologies.managementendeavors,andadoptandusepreferredprocurementprocessesandtechnologies. • Procurementtechnologyadoption,use,andutilizationrates(percentoftotalavailablefunctionalitybeingusedroutinely). Thestudyitselfwasdevisedupontheassumptionsthatgoodbenchmarkindicatorsofcorporate-culturalpenetrationforspendmanagementwouldinclude: Nearly600procurementandsupplymanagementprofessionals—representinganestimated$370billionormoreworthofcollectivespendingpower—participatedinthestudy.Thisresearchreportpresentsresultingbenchmarks,in-depthanalysis,andrecommendationsforprocurementleadersandtheirteams. • Stakeholdercompliancetobothenterprisesupplycontractsandpreferredprocure-to-pay(P2P)processes, • Activestakeholderparticipationinbothstrategicsourcingandsupplierperformancemanagementprocesses,and • Executivesummary • Companiesachievingthehighestinternalcomplianceratestoenterprisesupplycontractsandpreferredprocure-to-pay(P2P)processesemployacombinationofpolicy,persuasion(businesscase/communication),performanceobjectives,metrics,monitoring,compliancereporting,andease-of-usetactics. technologybutfailingtoachievehighadoption,use,andutilizationoftheirsolutionsshowsubstantially(50-75%)lowerperformanceforcomplianceandstakeholderengagementcomparedtocompaniesthatobtainhighadoptionanduse. • Companieswinningthehighesttechnologyadoptionanduseratesemployacombinationofcompulsorytactics—policy,usagemonitoring,reporting,workflowmanagement—alongwitheaseofuse(asakeysolution-selectioncriteria),training,andongoingmentoring. • ContractManagement,SpendAnalysis,andeProcurementtechnologysolutionsappeartobethemostpowerfulenablersofprocurementcompliancetactics.Adoptingasinglesolutionextensivelycanengendercomplianceratesthatexceedtheindustryaveragebysome25-33pointswhileextensivelyadoptinganintegratedsetofsolutionspushesthepositiveperformancegapcloserto40points. • Whileprocurementtechnologyadoptionanduseplaysabigroleinwinningcorporateculturalacceptanceforprocurement-ledperformanceinitiatives,fewbelievetheirorganizationscomeclosetofullyutilizingthetechnologyalreadyavailabletothem. • Procurementorganizationsthatwinhighlevelsofstakeholderparticipationinstrategicsourcingandsupplierperformancemanagementactivitiesachievecomplianceratesthatarethreetofourtimesgreaterthanthosethatneglecttoengageinternalstakeholders. Ofnoteistheimportanceofseeingeachofthethreeareas—compliance,participation,andtechnologyadoptionanduse—notasdiscreteobjectives,butasthreelegsofthesamestool.Thecompliancelegisthekeytoachievingsubstantialandsustainablecostsavings.Theparticipationlegisthekeytoachievingspontaneous,voluntarycompliance.Andtheprocurementtechnologyadoptionanduselegservesastheprimemoverbehindthetacticsandstrategiesthathighperformerssay aremosteffectiveforcreatingalastingcorporateculturaltransformationaroundthedisciplinesofspendmanagementandotherprocurement-ledcorporateperformanceinitiatives. • Effectivetacticsforwinningstakeholderengagementinclude:persuasion(businesscase),clearandeffectivecommunication,obviousincorporationofstakeholderinputintodecisionmaking,easeofparticipation,andconsistentexecutionofstandard,transparent,fact-drivenprocesses.Topthreetechnologyenablersforthesetacticsare:SpendAnalysis,eSourcing,andSupplierPerformanceManagement. Organizationsimplementingprocurementautomation Page5|©2011ZycusInc.Allrightsreserved

6. Studybenchmarks Insofarasmostcorporationsmeasureprocurement’sspendmanagementsuccessintermsofcostsavings,thismetricwasusedtosegregatethestudypopulationintofiveperformanceclasses.Thefirstpartofthispapershowsthecultural-acceptancebenchmarksforspendmanagementacrossallfiveofthecost-savingsperformanceclasses. populationwhilenumbersshowntotherightinthechartsrepresentweightedaveragepercentagesorscoresbrokenoutbycost-savingsperformancetier. Figuresindicatedas‘best-in-class’andshowningreaterdetailonpages6and7areforcompaniesfallingintothetopcost-savingsperformanceclasswith30%ormore accumulatedcostsavingsorspendreductionsattributabletospendmanagement.Subsequentsectionsofthe paperdelvemoredeeplyintothreeareas—compliance,participation,andtechnologyadoption—todiscerntheapproachesandtacticsthatappeartobeyieldingthebestresultsamongleadingprocurementorganizations. Twooftheseriesshownonthispageandthenextrepresentpercentageestimateswhiletheremainderareestimatedscoresgivenona0-10scale(with10being highest).Numbersshowntotheleftrepresentweightedaveragepercentagesorscoresforthetotalstudy 41% Contractcompliancebycostsavingsperformancetier 80% 70% 60% 50% 64% 61 Weightedaveragecontractcompliancefortotalsurveypopulation 6% 40% 30% 20% 33% <5%5-10%11-20%21-30%30%+ Savingsattributabletospendmanagementasa%oftotalspending 6.1 P2Pprocesscompliancescoresbycost savingsperformancetier 7.3 6.6 6.2 Weightedaverageprocure-to-pay(P2P)processcompliancescore(0-to-10scale)fortotalsurveypopulation 5.8 5.5 Savingsattributabletospendmanagementasa%oftotalspending

7. study benchmarks 5.7 Stakeholdersourcingparticipationscoresbycostsavingsperformancetier 7.8 6.4 5.9 Weightedaveragestakeholdersourcingparticipationscore (0-to-10scale)fortotalsurveypopulation 5. 4.2 Savingsattributabletospendmanagementasa%oftotalspending 5.8 StakeholderSPMparticipationscores bycostsavingsperformancetier 7.8 7.2 Weightedaveragestakeholdersupplierperformancemanagement(SPM)participationscore (0-to-10scale)fortotalsurveypopulation 6.0 5. 4.6 Savingsattributabletospendmanagementasa%oftotalspending 5.8 Technologyadoption&usescoresbycostsavingsperformancetier 7.0 6 6.2 Weightedaverageprocurementtechnologyadoptionandusescore (0-to-10scale)fortotalsurveypopulation 5. 4. Savingsattributabletospendmanagementasa%oftotalspending 37% Technologyutilizationbycostsavingsperformancetier 80% 70% 60% 50% Averageprocurementtechnologyutilizationpercentage(as%oftotalavailablefunctionality)fortotalsurveypopulation 4% 54% 5% 40% 30% 20% 38 25 <5%5-10%11-20%21-30%30%+ Savingsattributabletospendmanagementasa%oftotalspending

8. study benchmarks Abroadreadingofthestudybenchmarkssuggests,forexample,thata$10billioncompany,with$4billioninannualspendingand$1.2billioninrealizedcostsavingsfromspendmanagement(30%)hastypicallysucceededatmovingthemeteronvariousculturalchangeindicators asshownonthispageandthenext.Trymarkingyourownorganizationalassessmentsonthesamemeters.Ifyouarebeatingthebenchmarks,keepdoingwhatyouaredoing!Ifyourcompanyisrelativelynewto procurement-ledspendmanagement(lessthan12or18 Contractcompliance (estimatedona0-100%scale) 40%50%60% P2Pprocesscompliance (estimatedonaratingscalewith10beinghighest) 5 46 37 70% 80% 90% 30% 20% 10% 8 2 9 1 10 0 100% 0% Weightedaveragepercentagefortop Weightedaveragescorereportedbytopcost-savingsperformanceclass 7.3 64%cost-savingsperformanceclass Stakeholdersourcingparticipation (estimatedonaratingscalewith10beinghighest) StakeholderSPMparticipation (estimatedonaratingscalewith10beinghighest) 5 5 46 46 37 37 8 8 2 2 9 9 1 1 10 10 0 0 Weightedaveragescorereportedbytopcost-savingsperformanceclass Weightedaveragescorereportedbytopcost-savingsperformanceclass 7.2 7.8 Technologyutilization (estimatedona0-100%scale) 40%50%60% Technologyadoption&use (estimatedonaratingscalewith10beinghighest) 5 46 37 70% 80% 90% 30% 20% 10% 8 2 9 1 10 0 100% 0% Weightedaveragepercentagefortop Weightedaveragescorereportedbytopcost-savingsperformanceclass 7.0 54%cost-savingsperformanceclass

9. study benchmarks monthsintoatransformation),treatthesebenchmarksasaroadmapforwhatmustbeaccomplishedifyouintendtobuildasustainablespendmanagementculturethatcontinuestodeliverhighsavingspercentagesovertime.If,alternatively,yourenterpriseisseveralyearsintoa spendmanagementtransformation—butnotmovingupthecost-savingscurveassteadilyasdesired—the benchmarksmayhelptoidentifyweakspotsthatcanbeaddressedusingthetacticsandtechnologiesoutlinedintheremainderofthisreport. Spendanalysisadoption&use (estimatedonaratingscalewith10beinghighest) Contractmgmntadoption&use (estimatedonaratingscalewith10beinghighest) 5 5 46 46 37 37 8 8 2 2 9 9 1 1 10 10 0 0 Weightedaveragescorereportedbytopcost-savingsperformanceclass Weightedaveragescorereportedbytopcost-savingsperformanceclass 7.3 7.3 eSourcingadoption&use (estimatedonaratingscalewith10beinghighest) eProcurementadoption&use (estimatedonaratingscalewith10beinghighest) 5 5 46 46 37 37 8 8 2 2 9 9 1 1 10 10 0 0 Weightedaveragescorereportedbytopcost-savingsperformanceclass Weightedaveragescorereportedbytopcost-savingsperformanceclass 6.6 6.6 SPMadoption&use (estimatedonaratingscalewith10beinghighest) EIPPadoption&use (estimatedonaratingscalewith10beinghighest) 5 5 46 46 37 37 8 8 2 2 9 9 1 1 10 10 0 0 Weightedaveragescorereportedbytopcost-savingsperformanceclass Weightedaveragescorereportedbytopcost-savingsperformanceclass 6.7 6.9

10. Compliancedrivessavings Metricsmakecompliantcultures Stakeholdercompliance—beitcompulsoryorvoluntary—bridgestheratherlargegapbetweenthecostsavingsthatgetencodedintostrategicsupplycontractsandspendingprocessesandthecostsavingsthatactuallymaterializeonacompany’sprofitline. dualroleofminimizingcostsofdoingbusinesswithpreferredsuppliersanddrivingcontractcomplianceandperformance. Asthestudybenchmarkfiguresshow,companiesfallingintothetoporbest-in-classperformancetierforcostsavingsattributabletospendmanagement(with accumulatedspendreductionsof30%orgreater)reportcontractcomplianceratesthatare,onaverage,twotimesgreaterthancompaniesfallingintothebottom(<5%)costsavingstier.Theimplication:doublingcontractcompliancemaybeassociated,overtime,withasix-foldincreaseinpercentagecostsavingsrealizedfromspendmanagementactivities. Stakeholdercompliancecomesinthreeessentialforms: • Contract—peoplebuypreferred,lowest-costproductsorservices,accordingtocontract,frompreferredsuppliers, • Performance—thecompanyconsistentlyrealizesallbenefitscapturedintocontracts,betheyrebates,volumepricediscounts,paymentterms,supplierperformancerequirements,andsoforth,and Whatgetsmeasuredgetsdone Tacticsidentifiedasmosteffectivefordrivingcontract compliancepointstronglytoprocurementtechnologyadoptionasthebedrockfordrivingacorporateculturein thedirectionof‘spendmanagementaslifestyle’versus‘spendmanagementas • Process—peopleadoptandusepreferred,lowest-costbuyingandpaymentprocessesthatservethe Contractcompliancebycostsavingsperformancetier short-termannoyance.’ 80% 70% Forexample,amongcompaniesachievingcontractcomplianceratesof70%orgreater,some60%cite‘monitorandreport’amongtheirtopthreemosteffectivetactics.However,simplyfavoringthistacticisnoguaranteeitwilldeliverresults.Theabilitytoexecutethetacticwellistied 64% 61 60% 50% 40% 6% 33% 30% 20% <5%5-10%11-20%21-30%30%+ Savingsattributabletospendmanagementasa%oftotalspending Page10|©2011ZycusInc.Allrightsreserved

11. Topperformers’top5tactics :contractcompliance| %offirmsgeting70%-pluscontractcompliance whocitethetacticamongtheirmosteffective 60% Monitor&report 49% Communicatebenefits&business case 42% Compelwithperformanceobjectives&metrics 27% Compelwithpolicy 26% Makeon-contracttheeasiestwaytospend Howcontractmanagement(CM)techonologyadoption&useaffectscontractcomplianceratesamong totechnologyadoption,whichenablesmetricssuchasoff-contractspending,contractutilization,andcontractperformance(toterms)tobetrackedeasily,consistently,andaccuratelyrightdowntospecificdepartmentsandindividualspenders. 100% companiesfavoringtacticsspecified: 80% Compelwith Monitorandreport 75% avgwith highCMadoption &useversus... 74% avgwith 60%highCM adoption &useversus... performance Indeed,forallcompaniesthatfavorthe‘monitorandreport’tacticfordrivingcontractcompliance,thestudydatashowadramatic44-pointdifferenceinreportedcontractcomplianceratesbetweencompanieswithhighadoptionanduseofcontractmanagement(CM)technologyandcompanieswithlowadoptionanduse.A similarrelationshipemergeswhenthesametestisappliedtothethird-place‘compelwithperformanceobjectivesand metrics’tactic(seechartstotherightonthispageplus amoredetailedgraphiconthenextpageforadditionalcomparisons). objectives andmetrics 40% 30% withlow 29% withlow 20% 0% Contractmanagement(CM)technologyadoption&usevs.contractcompliance 5% 20%61% Overall,amongprocurementtechnologystrategiesevaluatedinthestudy,theadoptionandregularuseofcontractmanagement(CM)solutionsemergesasaclear High tieralsoreporthighadoptionanduseofcontractmanagementtechnology.Thatcomparestojust5%ofcompaniesfallingintothelowestcomplianceperformancetier,adifferenceofsome56percentagepoints. 80% adoptionanduse 60% 40% Factsmatter Thesecond-mostpopulartacticforpromotingcontract complianceamongcompaniesachievinghighperformanceisto‘communicatethebenefitsandbusinesscase’aroundspendmanagement.Firstandforemost,thisspeaksto aneedforgoodsalesmanshipandconsistentinternal marketingaroundspendmanagementconceptsand 20% Med Low 0% HIGH LOWMED Performancetierforcontractcompliance

12. Tactics+technology Contractcompliance,weightedavg%reportedby studyparticipantsusingspecifiedcombinationof 95% 100% tactics&technology 79% 78% 80% 76% 75% 74% 70% Hightechnology 66% adoption&use 60% vector Lowtechnology adoption&use 37% 40% vector 30% 30% 29% 24% 23% *N/A 19% 20% 0% Monitorandreporttactic +SpendAnalysis +eProcure-ment +ContractManage-ment +ContractManage-ment +SpendAnalysis +ContractManage-ment +eProcure-ment +ContractManage-ment +SpendAnalysis +eProcure- ment Studyfindingsshowninthisgraphicillustratehoweffectivetacticsfor +Compelw/objectives &metricstactic +Compelw/policytactic drivingcontractcompliancerely—inturn—onimplementingvariousprocurementtechnologysolutionsANDdrivinghighadoptionanduseofthem.Companiesthatextensivelyadopttwoormoreintegratedsolutionsreportcontractcomplianceratesthatbeatthestudyweightedaverage(41%)bysome35-37percentagepointsandeitherdoubleortriplethecomplianceratesbeingachievedbycompaniesthatinvestinthetechnologybutfalldownonadoption. *Zeroparticipantsreportattemptingthiscombinationoftactics&technologyintheabsenceofhightechnologyadoption. successes.Butmakingandmarketingastrongbusinesscaseforcontractcompliancecomesdowntohavingdetailedandpersuasivefacts. enterprisesupplycontracts.’ Becausegoodbusinesscasesaresoheavilyrelianton believabledata,itisnosurprisethatspendanalysistechnologyfiguresprominentlyinthecontractcompliancepictureaswell.Accordingtothestudy,some49%ofcompanieswiththehighestcontractcomplianceratesalsoreporthighadoptionanduseratesforspendanalysistechnologycomparedtojust11%amongcompanies withthelowestcontractcompliance.Companiesthatemphasizecreatingandcommunicatingstrongbusinesscaseswhilealsoachievinghighspendanalysisadoptionandusereportaweightedaveragecontractcompliancerateof77%,accordingtothestudy.Thatis36percentagepointsabovetheoverallstudyaverageforcontractcomplianceand41pointsabovetheratereportedby Buildingabusinesscaseuponverifiablefactsenablesaprocurementorganizationtogotospendstakeholdersandsaythingslike: • ‘Inthespendcategorieswehaveplacedundermanagementsofar,wehavedocumentedanXcorrelationbetweenhighcontractcomplianceandsavingsrealized,’or • ‘ThesearethespecificamountsofmoneythatdepartmentsX,Y,andZwereabletoreallocateintheirbudgetsduetosavingsrealizedfromhighcomplianceto

13. compliance drives savings eSourcing(ES)technology adoption&usevs.contractcompliance 7% Spendanalysis(SA)technologyadoption&usevs.contractcompliance 11% 100% 100% 18%40% HighEStech adoptionanduse 21%49% HighSAtech adoptionanduse 80% 80% 60% 60% 40% 40% Med Med 20% 20% Low 0% Low 0% LOWMEDHIGH Performancetierforcontractcompliance LOWMEDHIGH Performancetierforcontractcompliance Supplierperformance(SPM)technologyadoption&usevs.contractcompliance 8% companieswherespendanalysistechnologyispresentbutpoorlyadopted. 100% Theimperativetomeasurecompliancemayalsobeatworkhereas—intheabsenceofmoredirectcompliancemonitoringandreportingcapabilities—manycompanieswillfollowcategoryspendingdataasaproxyforcontractcompliance(thelogic:‘ifcategoryspendisdeclining,thencontractcompliancemustbeoccurring’). 17%45% HighSPMtech adoptionanduse 80% 60% 40% TwoothertechnologycategoriesshowingnotablepositiverelationshipstocontractcomplianceareeSourcingandSupplierPerformanceManagement(SPM).Thisappearstobeafunctionofthewaysinwhichthesesolutionspromotedirectstakeholderparticipationinstrategicsourcingandsupplierperformancemanagementactivitiesandwill bediscussedingreaterdetailstartingonpage16ofthisreport. Med 20% Low 0% LOWMEDHIGH Performancetierforcontractcompliance Meanwhile,adoptionanduseofeProcurementtechnology —whichcanbeusedtodrivespenddecision-makingtocontractedsuppliers,items,andservicesandtomonitorindividual/departmentalspendingactivitiesrelative tocontracts—emergesfromthestudyasanothertechnologyenablerfordrivingcontractcompliance.Asshowninthefigureonpage12,companiesthat‘monitorandreport’contractcomplianceinconjunctionwith welladoptedspendanalysisandcontractmanagementsolutions,showcontractcomplianceratesinthevicinityof75%.AddingawelladoptedeProcurementsolutiontothemixaddsafewmorepercentagepoints(78%compliance)whileaddingapolicyimperativetothemixcandrivethefigurewellabove90%.

14. compliance drives savings weightedaveragescoreof5.5onthesamescale.Thereisalsoafairlyhighpercentage(24%)ofsurveyparticipantswhooptedoutofthisquestion,suggestingthatmanycompanieshavenotyetreachedapointof establishingpreferred,low-costP2Pprocessesmuchlesspayingcloseattentiontocompliance. OfnoteisthatthestudyalsotestedeProcurementadoptionandusealoneinconjunctionwiththenumber-fivetacticamonghighperformersof‘makingon-contracttheeasiestwaytospend.’Thelogic:Well-managedeProcurementsystemswithheavyemphasisonsupplierandspend-categoryenablementforeProcurement(one-stopshopping)plusintuitiveuserinterfacesthatmimicconsumeronline- buyingexperiencesmightnaturallyattracthighusershipwhilealsoenablingspendactivitiesanddecisionmakingtobemonitoredatverydetailedlevelsanddrivenindirectionsdesiredbytheenterprise. Thismayreflectanotionthatefficiencysavingsfromadoptionoflow-costprocessesaregenerallynonrepeatable andrelativelysmallincomparisontosavingsgeneratedfromsuchspendmanagementactivitiesasdemandaggregation,strategiccompetitivesourcing,anddemandorconsumptionmanagement.Itmayalsobeafunctionofthefactthatmostcompaniesalreadylimitprocurementandsupplierpaymentmethods,toacertainextent,throughroutinefinancialcontrols(PO-invoice,procurementcard,checkrequest,expensereport). Butwhilethestudyfindsasomewhatpositiverelationshipbetweenthetactic,thetechnologyandcomplianceresults,theimpactismuchlessnotablethanthemonitoring,metrics,andbusiness-caseroutes.ThissuggeststhatmanycompaniesmaystillhaveawaytogooneProcurementexecutionbeforetheywillbeinapositiontotreat‘easiestwaytospend’asaprimarydriverofcontractcompliance. Withthatsaid,thereisahintinthesurveydatathatcompliancetopreferredP2Pprocessesmaybecomemoreimportantascompaniesmoveupthespend-managementmaturitycurve.Forinstance,whilethedifferenceinweightedP2Pcompliancescoresfromsavings-tierone totiertwoisjustthreetenthsofapoint,thedifferencebetweentiersfourandfiveacceleratestoseventenths.Insofarasthestudyderivesmuchofitsdatafrompeoples’perceptionsandarelativelysimplescoringtechnique,that differencemaybetoosmalltobenoteworthy.Butitmakessensethatmaturingprocurementgroups—thosethathaveexhaustedmanyoftheireasieropportunitiestosavethroughcompetitivesourcing—wouldneedtocastawidernet,focusingmoreonefficient,costeffectiveprocesses.Whatismore,controllingtheprocesscontrolstheinformationthatcomesoutofit,enablingbetterviews Surprising,also,forarelativelyweakrelationshipbetweentechnologyadoptionandcontractcomplianceisthetechnologycategoryforelectronicinvoicingandpayment(EIPP).Whileonemighthypothesizethatlockingdownthepaymentprocesswouldboostcontractcompliance,surveyresultsarelessclear.Ontheonehand,some41%ofhighperformersonthecontractcompliancemetricalsoreporthighadoptionanduseofEIPPtechnology.Ontheotherhand,some20%ofthelowestperformersoncontractcompliancealsoreporthighadoptionanduseofEIPPtechnology,suggestingthetwoarelesslikelytogohand-in-hand. P2Pprocesscompliance Asanindicatorofcost-savings performance,thestudyfindsstakeholdercompliancetopreferredprocure-to-pay(P2P)processestobesomewhatlessimportantthancontractcompliance.WhilecompaniesfallingintothehighestcostsavingstierreportrelativelyhighpreferredP2Pprocesscompliance(scoredataweightedaverageof7.3ona0-10scale),companiesfallingintothelowest costsavingstierarenotallthatfarbehind,reportingP2Pprocesscomplianceata P2Pprocesscompliancescoresbycost savingsperformancetier 7.3 6.6 6.2 5.8 5.5 Savingsattributabletospendmanagementasa%oftotalspending

15. Topperformers’top5tactics :processcompliance| %ofcompaniesscoring7orhigher(0-10scale)thatcitethetacticamongtheirmosteffective 45% Monitor&report 38% Compelwithpolicy 31% MakepreferredP2Pprocesstheeasiestwaytospend 30% Compelusingautomationandworkflowtechnology 26% Compelwithperformanceobjectives&metrics Communicatebenefits&businesscase intospending.Earlyoninaspend-managementtransformation,acompanymaybeabletogenerateactionableviewsofspendingbypatchingtogetherdatafromawidevarietyofprocure-to-payworkstreams (orbysimplyignoringcertainstreamswherethepatchworkprovestoodifficult).Butuncoveringmoreesotericcost-savingsopportunitiesastimegoesonrequiresmoretimely,accurate,granular,andcompleteviewsintospending.Thoseviewsaremucheasiertogeneratewhen allormostspendingflowsthroughaverysmallsetofwell-definedprocessesthataredesignedwiththeideainmindofconsistentlycapturingandclassifyingspenddata. AmonghighperformersontheP2Pprocesscompliancemetric,thetacticsvotedmosteffective(shownonthispage)lookverysimilartothoseforcontractcomplianceandsuggestaheavytechnology-adoptioncomponent.InsofaraseProcurementtechnologytypicallyembodiesacompany’spreferredlow-costP2Pprocessforcontrollingdistributedpurchasingactivityandenablesdirectmonitoringofindividualanddepartmentalspendingactivityandusership,ahighcorrelationistobeexpected betweeneProcurementadoptionanduseandpreferredP2Pprocesscompliance.Indeed,69%ofcompanies withthehighestscoresforP2PprocesscompliancealsoreporthigheProcurementtechnologyadoptionanduse.Thatcomparesto0%ofcompanieswiththelowestP2Pprocesscompliancescores. eProcurement(EP)technologyadoption& usevs.P2Pprocesscompliance 0% Adoptionanduseofelectronicinvoicepresentmentandpayment(EIPP)technologyalsoseemstohaveagreaterimpacthereas42%ofhighperformersonthe P2PprocesscompliancemetricalsoreporthighadoptionanduseofEIPPtechnologycomparedtojust7%oflowperformers(asixfolddifference). 100% 24%69% HighEPtech adoptionanduse 80% 60% Suppliersplayabiggerrolehereaswell,accordingtothestudy.Forexample,44%ofcompaniesreportinghighP2Pprocesscompliancealsoreporthighsupplieradoption oftheirEIPPtechnologyand37%reporthighsupplieradoptionoftheireProcurementtechnology,supportingtheideathatthemoreaP2Pprocesscanbemadetobehaveasaone-stopshopforspendstakeholders,thegreatertheadoptionanduseoftheprocess(and/orsolution)willbeovertime. 40% Med 20% Low 0% LOWMEDHIGH PerformancetierforP2Pprocesscompliance

16. Gettingtovoluntarycompliance Participationfostersacceptance Whileacombinationofpolicies,performanceobjectives,metrics,monitoringandreportingplushighadoptionofsupportingprocurementtechnologymakesapowerfulformulaforobtainingcompliancetospendmanagementcontractsandpreferredprocesses,theyarenottheend gamewhenitcomestoachievingacorporateculturechangethattrulyembracesandbuysintoenterprisespendmanagement.Indeed,fewprocurementleaderswilltellyoutheywishtospendtherestoftheircareerspolicingpeoples’behavior. Thekeytogettingthereisencouragingactivestakeholderparticipationinstrategicsourcingandspendmanagementprocessesandstakeholderownershipofspendmanagementdecisionmaking.Goingallthewaybacktotheearlydaysofenterprisespendmanagementinthe1980sand90s,thepopularwisdomhasalwaysbeenthat—whenspendstakeholdersparticipateactivelyandenthusiasticallyinthedraftingofrequirements,evaluationandselectionofsuppliers,designofprocessesthatmaketheirworkeasier,andongoingmeasurement andmanagementofsupplierperformance—theyaremorelikelytovoluntarilyabidebythedecisionsmade.Theyarealsomorelikelytochampionspendmanagementcausestoothersintheirorganizationsandtocarrythedisciplinesoverintootherareasofspending. Onthecontrary,whattheyreallywantistoembedbestspendmanagementprocessesandpracticesintotheirenterprisesandmoveontomoreimportant,value-addingandcorporateperformance-enhancingworksuchassupportinginnovationandnewproductintroduction,managingsupplychainrisk,improvingworkingcapitalperformance,andoptimizingflowsofgoodsandservicesthroughoutglobalsupplynetworks. Thestudydatacertainlysupportthisthinkingascompaniesfallingintothetopperformancetierforcostsavingsattributabletospendmanagement(30% orgreater)scorecross-functional participationinspendmanagementactivitiesatnearlyeightona0-10scalecomparedtoaround4forcompaniesfallingintothelowestcost-savingsperformancetier. Stakeholdersourcingparticipationscoresbycostsavingsperformancetier 7.8 6.4 5.9 5. Inthemeantime,companiesreportingthehighestparticipationratesincross-functionalstrategicsourcingprocessesalsoreportcontractcomplianceratesthatare3.1timesgreaterthancompanieswiththe 4.2 Savingsattributabletospendmanagementasa%oftotalspending

17. getting tovoluntary compliance Contractcompliance.... weakestcross-functionalparticipation.Andcompaniesthatwinhighparticipationratesinsupplierperformancemanagement(SPM)endeavorsreportcontractcomplianceratesthatare3.6timeshigherthancompanieswithpoorSPMparticipationrates. 3.1x 3.6x 80% 75% Theimplicationisthatspendmanagementorganizationswhowinactiveandenthusiasticstakeholderparticipation inspendmanagementdecisionmakingandsupplierperformancemanagementhaveanopportunitytospendmuchlesstimeandresourcesoncompulsorymanagementofstakeholdercompliance.Forexample,anexceptions-onlymonitoringandalertsystemmightreplacemoreburdensome,detailedandfrequenttrackingofindividualspendingbehaviorswithoutlossestocomplianceorrealizedcostsavings. 72% 70% 70% 65% 60% 50% 50% 47% 39% 40% Withthatsaid,however,thestudyfindsthatwinningstrongandconsistentstakeholderparticipationremainsachallengeformanyenterpriseswithnearlyhalfofstudyparticipantsgradingparticipationat5orlowerona0-10ratingscale. 32% 30% 23% 21% 20% 0-23-45-67-89-10 Bycross-functionalparticipationscore(0-to-10scale) 0-23-45-67-89-10 Bysupplierperformancemanagmenent(SPM)participationscore Effectivetactics Thetacticvotedmosteffectivebycompaniesthatdo wellwithpromotingstakeholderparticipationinstrategicsourcingisto‘communicatebenefitsandbusinesscase.’Onceagain,theabilitytomakeapowerfulbusinesscaseforspendmanagementinspecificspendcategories—onethatcanconvinceinfluentialspendstakeholdersto volunteertheirtimeandbrainpowerforstrategicsourcing Spendanalysis(SA)technologyadoption&usevs.sourcingparticipation 6% 21%62% whichleadsbacktosuchtechnologyenablersasspendanalysis. HighSAtech 80% Some62%ofcompanieswithhighscoresforcross-functionalsourcingparticipationalsoshowhighscoresforspendanalysistechnologyadoptionanduse.Thatcomparestojust21%forcompanieswithmiddle-of-the-roadstakeholderparticipationratesandamere6% forcompaniesreportingthelowestcross-functionalparticipationscores. anduse 60% 40% Med 20% Low 0% LOWMEDHIGH Performancetierforsourcingparticipation Similarlystrongrelationshipsbetweentechnologyadoptionandcross-functionalparticipationshowup

18. Topperformers’top5tactics :sourcingparticipation|%ofcompaniesscoring7orhigher(0-10scale) thatcitethetacticamongtheirmosteffective 41% Communicatebenefits&businesscase 39% Communicateclearlyandeffectivelythroughoutprocess 37% Ensurepeoples’opinionscountheavilyinprocess 37% Makeiteasyforpeopletoparticipate 36% Basedecisionsonfacts(vs.intuition oropinions) forboththeeSourcingandSupplierPerformanceManagement(SPM)solutionsets.Companiesachievingthehighestratesofcrossfunctionalparticipationandcollaborationinsourcingactivitiesarenearlythreetimesmorelikelythanthoseachievingintermediateparticipationratesand6.8timesmorelikelythanthose achievingthelowestratestoalsohavehighadoptionratesforeSourcingtechnology. • Conductingeventresultsanalysisandfinaldecisionmakinginhighlytransparent,consistentandstructuredways. Meanwhile,agreatwayto‘ensurepeople’sopinionscountheavilyinastrategicsourcingprocess’(thethirdmostpopulartacticforpromotingparticipationamonghighperformers)istogivestakeholdersastructuredmeansforregisteringtheiropinions,forreviewingothers’opinions,andunderstandingclearlyhowasourcingteam’scollectivesetofopinionsinfluencesasourcingevent’soutcome. Thisislikelyafunctionofthefactthat—whileoftenmisjudgedasadevicefocusedsolelyondrivingdownsupplierpricing—fullyfunctionaleSourcingtechnologyisdesignedindirectsupportofthemosteffectivetacticsdeterminedinthestudyforpromotingstakeholderparticipationinstrategicsourcingprocesses. WhenaneSourcingtooliswebbased—allowingaccess eSourcing(ES)technology adoption&usevs.sourcingparticipation 8% Forexample,thesecond-mostpopulartacticforwinningstakeholderparticipationisto‘communicateclearlyandeffectivelythroughoutthesourcingprocess.’WhilethiscanbedonewithouteSourcing,thetechnologyisverymuchintendedtocreatevirtual,collaborativeworkspacesforsuchactivitiesas, 100% 19%54% HighEStech adoptionanduse 80% 60% • Requirementsdefinitionandapproval, • 40% • Requestingandgatheringofinformationandproposalsfromsuppliers, Med 20% • Communicatingtiming,rules,andotherparametersaroundsourcingeventstoallstakeholders, Low 0% LOWMEDHIGH Performancetierforsourcingparticipation • Askingandansweringquestions,and

19. Tactics+technology Sourcingparticipation,weightedavgscore(1-to-10 scale)reportedbystudyparticipantsusingspecified 10 combinationoftactics&technology 8.5 8.6 8.3 8.0 Hightechnology 8 7.6 adoption&use 7.3 vector 6 Lowtechnology adoption&use 4.6 4.6 4.5 4.4 vector 4.0 4 3.0 2 0 Communicatebenefits&businesscasetactic +SpendAnalysis +eSourcing +SupplierPerformance +SupplierPerformanceManagement +SpendAnalysis +eSourcing Basesourcingdecisionsonfacts(vs.intuitionoropinions)tactic +eSourcing Ensurepeoples’opinionscountheavilyinprocesstactic +eSourcing +SupplierPerformanceManagement Studyresultsshowninthisgraphicillustratehowpopulartacticsforpromotingspendstakeholderparticipation insourcingprocessesaremademoreeffectivewhencompaniesimplementsupportingprocurementtechnologysolutionsANDdrivehighadoptionanduseofthosesolutions.Companiesthat extensivelyadoptseveralintegratedsolutionsscorestakeholderparticipationatnearlytripletheparticipationlevelsreportedbycompaniesthatinvestinsupportingtechnologysolutionsbutfailtodrivewidespreadadoptionanduseofthem. Management fromanywhereatanytime—itfreesthestrategicsourcingprocessfrombothtimeandplaceconstraints,enablinggreaterteamrecruitmentandparticipationpossibilities.eSourcingalsoenablesmorepeople toparticipateinmorediscreteways,forexample,contributingtoandreviewingonlythespecificportionsofsuppliers’proposalsthataremostrelevanttotheirjobs. Takentogether,suchfeatures‘makeiteasyforpeopletoparticipate’inasourcingprocess(thefourthmost populartacticcitedbyleadersinwinningcross-functionalparticipationinsourcingprocesses). benefitsandbusinesscase’aroundstrategicsourcing—incombinationwithhighadoptionanduseofeSourcing—scorecross-functionalparticipation,onaverage,threepointshigherthancompanieswitheSourcingthatispoorlyadopted.But,whereeSourcingadoptionreallyseemstodifferentiateiswiththetacticof‘basingsourcingdecisionsonfacts’.Inthatcase,thedifferenceincross-functionalparticipationscoresbetweenthehighestandlowestadoptersofeSourcingtechnologyisnearlyfourpoints. Whileitisinterestingtoseewhatcompaniesleadingoncross-functionalparticipationinsourcingconsidertobetheirmosteffectivetactics,itisalsointerestingtoseethetacticstheyconsidertobeleasteffective:training,carefulselectionofpeopleforsourcingteams,closeadherencetoprojectmanagementdisciplines,andminimizationoftime Butsimplydeployingtechnologyinconjunctionwithtacticsisclearlyinsufficientforobtainingresults.Asthegraphiconthispageillustrates,drivingtechnologyadoptionanduseisamust.Forexample,companiesfavoringthenumber-onetacticof‘communicating

20. Topperformers’top5tactics :SPMparticipation|thatcitethetacticamongtheirthreemosteffective %ofcompaniesscoring7orhigher(0-10scale) 39%37% 37% Communicatebenefits&businesscase 33% Employastandard,transparentandconsistentlyexecutedprocess 32% Ensurethatpeoples’input/opinionscountindecisionmaking Makeiteasyforpeopletoparticipate Communicate/ensure thatpeopleunderstandhowtheirinputaffectsdecisions,actions,and otheroutcomes HowSupplierPerformanceManagement StakeholderscareaboutperformanceIfeSourcingadoptioncanhelptopromotecorporateculturaladoptionofspendmanagementdisciplines,SupplierPerformanceManagement(SPM)technologyadoptionmaydoanevenbetterjob.Thestudyfinds51%ofcompanieswinninghighstakeholderparticipation intheirsupplierperformancemanagementendeavorsalsoreportinghighadoptionanduseofSPMtechnologycomparedtojust2%amongthelowestperformersand16%ofintermediateperformersontheparticipationmetricforsupplierperformancemanagement. (SPM)technologyadoption&useaffectsstakeholderparticipationscores 10 (0-10scale)amongcompaniesfavoring tacticsspecified: 8 Communicate, 7.9 withhighSPM techadoption &useversus... Makeiteasyforpeopletoparticipate ensurepeople 7.5 withhighSPM techadoption &useversus... understandhow theirinput 6 affects decisions, actions&other outcomes 4 4.2 withlow 3.8 withlow Topperformers’mosteffectivetacticsforpromotingstakeholderparticipationinsupplierperformancemanagementactivitiesareshownonthispage.ThestudydatasuggestthatintroducingSPMtechnologytothemixmakeseachofthesetacticsmoreeffectivetovaryingdegreeswiththemostnotableimpactshowingupinhowthetechnologyenablesprocurementto‘communicateandensurethatpeopleunderstandhowtheirinputaffectsdecisions,actionsandotheroutcomes’.Asthefigure onthispageshows,companiesfavoringthetacticandalsoreportinghighadoptionanduseofSPMtechnologyscorestakeholderparticipationatnearly8ona0-10scale comparedtoascoreoflessthan4forlowSPMtechnologyadopters. 2 0 requiredtoparticipateinstrategicsourcingactivities. Theimplicationinthesefindings:Aslongasspendstakeholdersbelievethesourcingprocessisvalid,haveclearvisibilityintohowtheprocessisbeingexecuted,trusttheprocesstogeneratepositiveoutcomesfortheir organizations,andfeeltheirinputistakenseriously,they willbequitehappytocontributetheirtimetocollaborateactivelywithprocurement. ImportantwaysinwhichSPMtechnologysupportsthetacticofconnectingstakeholderinputtorealactionsand Page20|©2011ZycusInc.Allrightsreserved

21. participation fosters acceptance Web-basedsolutionsallowpeopletoparticipateontheirownschedulesandmakeiteasytorequestinputononlythesupplierperformancefactorsthataredirectlyrelevanttospecificstakeholders. • Creatinghighlyvisiblerelationshipsbetweenquantitative(objective)andqualitative(subjective)datainputs, decisionsinclude: • Enablingsystematicblendingofquantitativeandqualitativedatainputs, • Enablingconsistent,systematicsettingandmovementofsupplierperformancebenchmarks, • Enablingsupplierperformancemetricstobecustomizedataspendcategorylevelbutalsorolleduptoconsistentsupplierrankingsthatcanbeappliedinsourcingdecisionmaking,and • Enablinggenerationofbalancedsupplierscorecardswithweightingforvariouskeyperformanceindicators, • Enablingidentification,ongoingmanagement,andcommunicationaroundsupplierdevelopment • effortsaimedatdiagnosingandcorrectingsupplierperformanceproblemsandalsodrivingcontinuousperformanceimprovement. • Givingsuppliersaroleinselfevaluatingandrespondingtostakeholders’input,and • Creatingclearconnectionsbetweensupplierperformancedataandtheactionsthatresult(performanceimprovementanddevelopmentwork,forexample). FormanyofthesamereasonsdiscussedaroundeSourcing,SPMtechnologyalsoappearstohaveastrongimpacton‘makingiteasyforpeopletoparticipate’insupplierperformancemanagementprocesses.Web-basedsolutionsallowpeopletoparticipateontheirownschedulesandmakeiteasytorequestinputononlythesupplierperformancefactorsthataredirectlyrelevanttospecificstakeholders.So,forexample,anofficemanagermightbeaskedtoevaluateanofficesuppliesprovider onthingslikesupplierresponsiveness,leadtime,on-time deliveryandorderaccuracy,whileanaccountspayablestakeholdermightbeaskedtoevaluateonlyoninvoice accuracy,andaspendcategorymanagermightbeaskedtoevaluateonperformancetopricingterms,andsoforth. Supplierperformance(SPM)technologyadoption&usevs.SPMparticipation 2% 100% 16%51% HighSPMtech adoptionanduse 80% 60% 40% Med Employinga‘standard,transparentandconsistentlyexecutedprocess’forsupplierperformancemanagementisanothertacticvotedmosteffectivebytopperformersontheSPMparticipationmetric.SupplierPerformanceManagement(SPM)technologyenablesthetacticby, 20% Low 0% LOWMEDHIGH PerformancetierforSPMparticipation

22. Winningtechnologyadoption Biggerchallenges,lessconsensus Muchprocurementtechnologyhasbeencreatedinthepasttwodecadeswiththeintentionofenablingvariousaspectsofenterprisespendandotherformsofcorporateperformancemanagement.Andwhilethetechnologycontinuestogainsophisticationandhaspotentialto somewhereinthevicinityof58%ofavailabletechnologyfunctionalityatthistime.Companiesatthelowendofthecost-savingsscaleclaimtobeusinganaverageof25%-27%ofavailabletechnologyfortypicalandpowerusersalike,whilecompaniesatthehighendofthecost-savings scaleplacetechnologyutilizationinarangeof 54%-57%,dependingontypeofuser.Thereappearstobeaslightdivergencebetweentypicalandpower PercentoftotalavailableSMtechnologybeingusedroutinelybytypicalusersandpowerusers 80% 70% 60% 50% 40% 30% 20% Savingsattributabletospendmanagementasa%oftotalspending Ofcourse,utilizationoftechnologybegins deliverenormousbenefitstocorporations,thereisevidenceinthestudythatitmayhavebeguntooutruntheorganizationsforwhichitisintended.Forexample,whenaskedtoestimatethepercentageoftotalavailabletechnologyfunctionalitybeingusedroutinelybytypicalusersintheirorganizations,theweightedaverageresponsegeneratedacrosstheentirestudypopulationisjust37%. withadoptionanduse.Andwhilethestudyfindsthatprocurementtechnologyadoptionhasbigrolestoplayin drivingbothstakeholderparticipationandcompliancetospendmanagementinitiatives,thereareotherreasonstofocusonpromotingtechnologyadoption,notleastthe deliveryofROIonacorporation’stechnologyinvestments,butalsointermsof, • Identifyingperformanceimprovementopportunities, Meanwhile,peopleconsideredtobe‘powerusers’ofprocurementtechnologyarethoughttobeusing • Improvingproductivity,

23. Techadoptionscoresbysavingstier topthree,only36%ofleadersonthetechnologyadoptionmetricdothesame. • Automatingnonvalue-addingwork, • Managingandbiddingmorespendcategories, Perhapsonesurveyparticipantputshisfingeronthechallengewhenhewritesinthat:“Youneedmorethanthreetowork.”Otherspointoutthattechnologyadoptioncanbeverymuchafunctionofinternalculturaldiversity.Forexample,engineers,whoaretypicallymoretechsavvymaybemorelikelythanothertypesofprofessionalstoadopttechnology.“Ourissueisinthecorporateculturesareverydifferentthroughoutourorganizationandtechnologyadoptionisbasedoninternalorganizationalexpectations,”remarksonestudyparticipant. • Makingefficientmarketsthatincludemoresuppliers,expandsourcingorganizations’geographicreach,andsoforth. Overall,thestudypopulationscoresprocurementtechnologyadoptionanduseatjustshyof6ona0-10scale,whilecompaniesinthelowestsavingsperformancetierscoretechnologyadoptionandusebetween4and 5,andcompaniesinthetopsavingstierscoreitat7(withspendanalysisandcontractmanagementscoringsomewhathigherandallotherprocurementtechnologysolutionsscoringsomewhatlower). Ifthereisathreadrunningthroughthetopfivetacticsfortechnologyadoptionanduse,itisaboutbalance.Ontheonehand,itisaboutcompellingadoptionandgivingmanagersclearvisibilityintotechnologyusershipandabilitiestopromptusershipwhereitmaybelacking.Ontheotherhand,winningadoptionanduseappearsto beaboutimplementingsolutionsthatareintuitiveandeasytolearnanduse,andsupportingthosechoiceswithappropriatetrainingandongoingmentoringandmarketing. Butwhatarethekeydriversoftechnologyadoptionanduseinbusinessenterprises? Ofalltheculturalchangeareaslookedatinthestudy,thisoneshowstheleastconsensusamongleadersaroundwhichtacticsarethemosteffective.So,forexample,‘monitorandreportusagestatistics’isthemostpopulartactic,butwhere60%oftopperformersonthecontractcompliancemetricchosethesametacticasoneoftheir Thesecondmostpopulartactic—‘offerstrongworkflow

24. Topperformers’top5tactics :technologyadoption|thatcitethetacticamongtheirmosteffective %ofcompaniesscoring7orhigher(0-10scale) 36% Monitor&reportusagestatistics 32% Offerstrongworkflow/managementcapabilities 31% Selecteasy/intuitivesolutions 28% Compelwithpolicy 23% Offerextensivetraining managementcapabilities’—istheequivalentofsaying ‘lookforsolutionsthatgiveusthepowertokeepprocessesmovingforwardandtocontrolhowandwhen peopleenterintoandparticipateinspendmanagementprocesses.’ Ofnoteisthatthenumberthreetacticof‘selectingeasy/intuitivesolutions’—selectedby31%ofthetopperformersfortechnologyadoption—isnottobeconfusedwiththemuchlowerrankedtacticof ‘emphasizingsimplefunctionality’,selectedbyjust7%oftopperformers. Twoothertacticscameveryclosetomakingthetopfive.Thefirstis‘cultivatepowerusers/mentors’whocandrive usershipbothbyexampleandreal-timeassistanceforpeoplewhoaremorereluctantorstrugglingtolearnnewsystems. Thedistinctionisimportant,astheleadersaresayingthatfunctionalityshouldnotbesacrificedwiththehopeofgainingadoption.Rather,thesearchforappropriatesolutionsshouldsimultaneouslyemphasizestate-of-the-artfunctionalityandintuitive,easy-to-learnuserinterfaces. Thesecondis‘ensurestrongcorrelationbetweentechnologyandprocesses.’Inotherwords,selectsolutionsthathavebeendevelopedwithdirectinputfromrealpeopleexecutingrealbusinessprocessesand/orwhichcanbeeasilyconfiguredtoautomateexistingworkprocesses(ratherthanaskingprocessestochangedramatically). Forcingtechnologyadoptionanduseasamatterofpolicycomesasasurpriseamongthetopfivemosteffectivetactics,butspeakstothedifficultyofwinningtechnologyadoption,especiallyinorganizationswheretechnologyselectionshaveproventobepoorfits. Asonestudyparticipantdescribesit:“Forsometechnologyelements,wehave100%usage/compliancethroughedict,butthefunctionalityispoor.Whatwereallywantisforexistingand newsystemstobeeasytouse,employappropriatebusinessprocesses,anddelivermeasurableresults.” Technologyadoption&usescoresbycostsavingsperformancetier 7.0 6 6.2 5. 4. Savingsattributabletospendmanagementasa%oftotalspending

25. Recommendations Ifstakeholderbuy-inandsupportisaproblemforyourprocurementorganization(oryouarejuststartingoutwithspendmanagement),itisdefinitelytimetocreateandimplementsystematicstrategiesfordrivingstakeholderparticipation,compliance,technologyadoption,use,andutilization.SummaryrecommendationstocomeoutoftheZycusstudyinclude: Monitorandreport.Thisisatop-fivetacticinthreeofthefiveculturaltransformationareaslookedatinthestudy.Lookfortechnologysolutionsthatpresentstrongcapabilitiesforcreatingcrediblecomplianceand technology-adoptionmetricsthatcanbeusedinemployeeperformancemanagementsystemsandreportedpubliclyatappropriatemanagementlevels. Promoteandmeasureparticipation.Unlessyouwanttospendthenextseveraldecadescloselymonitoringandfrequentlyreportingonspend managementcompliance,besuretopromoteparticipation inspendmanagementactivitiesatleastasassiduously asyoufocusoncompellingcompliance.Overtime,acorporateculturethatparticipatesroutinelyinspendmanagementdecisionmakingandsupplierperformancemanagementwillnotneedtobemeasuredcloselyforcompliance. Implementpolicies.‘Compelwithpolicy’showsupasatop-fivetacticamongtopperformersinthreeofthefiveculturaltransformationareastestedinthestudy.Whileitmaybetemptingtoavoidtheworkofobtaininggovernancechanges,thosewhoaresucceedingwithstakeholderbuy-inclearlyseethisasastepworthtakingandonethatgoeshand-in-handwiththe‘monitorandreport’tactic(withoutwhich,policycaneasilybeseenasa‘toothlesstiger’). Investinsolutions—SpendAnalysis,SPM,eSourcing,eProcurementandContractManagement —thatdirectlysupportkeytacticsoutlinedinthispaper.Inselectingsolutions,emphasize:abilitytomonitorbehaviorsandgeneratemetrics;qualityandvalidityofinformationoutputs;easeoflearninganduse;state-of-the-artfunctionality;configurabilitytoexistingworkprocesses;accessibility(fromanywhere,anytime);powerfulworkflowmanagement,andabilitytoenablediscretestakeholderparticipation.Createspecificstrategiesfordrivingtechnologyadoption,useandfunctionalutilization.Useacombinationofpolicy,usagemetrics,easeofuse,usefulnesstoexistingwork managementprocesses,andadequatetrainingtoproducedesiredresults. Marketandsell.Communicatingbenefitsandbusinesscaseshowsupasatop-fivetacticinfourofthefiveculturaltransformationareaslookedatinthestudy.Doingthiswellinvolvesusingrigorousspendanalyticsincombinationwithcrediblecomplianceandothersuccessmetricssuchascostsavingstoformulate,sell,andcontinuallymarketthebenefitsofprocurement-ledspendmanagementtocorporatepopulations. Integrate.Thestudyshowsclearlythatcompaniesachievingthemostsignificantresultsforspend-managementculturaltransformationusemultipletacticsandsolutionsinconcertwithoneanother.Integratedtechnologysuiteswherefunctionalsolutionsaredesignedtoworktogether,handoffinformationeasily,andminimizedatapermutations,offerthebestopportunitiesforgeneratingaccurate,consistent,credibleperformanceobjectives,metrics,andactionablevisibilityintoenterprisespendingbehaviors. Emphasizeease.Theword‘easy’appearsamongtopperformers’mosteffectivetacticsinallfiveoftheculturaltransformationareaslookedatinthestudy.Makesurethecompliantwayistheeasiestway.Usetechnologytomakeparticipationeasy,andselecttechnologythatisfullyfunctionalbuteasytolearnanduse. Emphasizeconsistentexecutionofwelldesigned,highlytransparent,andfact-drivendecisionmakingprocessesforallthingsspendmanagement.Thisisespeciallyimportantforenterprisesthatpreferlessheavyhandedapproachestospendmanagementculturaltransformation,emphasizingvoluntaryversuscompulsoryshiftingofbehaviors.

26. Studydemographics Thestudyquestionnairewasdeployedonlinethroughavarietyofchannels;therewasanincentivetoparticipate,andparticipantswereaskedtoselfqualifyforthestudyonthebasisofbeingactivelyworkingintheprocurementandsupplymanagementprofessions.Datapresentedinthispaperarebasedoncompletedstudies;however,participantsweregivenanoptionto optoutofquestionsthatwerenotdirectlyapplicabletotheirorganizations,sosamplesizesvaryfordifferentdatapointspresented.Demographicbreakdownsfortotalsurveysampleareshownonthispage. Enterprisesizebyannualrevenue Don’tknoworprivate:9% >$2billion:44% <$500mil:21% $500milto $1bil:14% $1-2billion:12% Spendmanagementmaturityassessment1-5scale 38% 29% Enterprisemandateforspendmanagement? 40% N/A:8% No:22% 30% 20% 16% 10% 11% Globalbest-in-class Geography Yes:70% 6% 0% Juststarting Jobtitle Other:5% Exec/VP/CPO:9% Other:2% EMEA:9% Agent/buyer:23% Director:21% NorthAmerica:89% Manager/spendcategorymanager:42%

27. AboutZycus AtZycusweare100%dedicatedtopositioningprocurementattheheartofbusinessperformance.Formorethanadecadewehavebeentheworld’smosttrustedleaderinSpendAnalysis.Withourspiritofinnovationandapassionto helpprocurementcreateevengreaterbusinessadvantages,wehaveevolvedourportfoliotoafullsuiteofProcurementPerformanceSolutions—SpendAnalysis,e-Sourcing,ContractManagement,SupplierManagement,andFinancialSavingsManagement.BehindeveryZycussolutionstandsanorganizationthatpossessesdeep,detailedprocurementexpertiseandasharpfocusonbeingresponsivetocustomers.Wearealarge—600+andgrowing—companywithaphysicalpresenceinvirtuallyeverymajorregionoftheglobe.Weseeeachcustomerasapartnerininnovationand noclientistoosmalltodeserveourattention.Withmorethan200solutiondeploymentsamongGlobal1000clients,wesearchtheworldcontinuallyforprocurementpracticesproventodrivecompetitivebusinessperformance.Weincorporatethesepracticesintoeasy-to-usesolutionsthatgiveprocurementteamsthepowertogetmovingquickly—fromanypointofdeparture—andtocontinueinnovatingandpushingbusinessandprocurementperformanceto newheights. London +447506676769 Chicago +18476863990 LosAngeles +17142749691 Princeton +16097995664 Frankfurt +4969274015251 WashingtonDC +15403417676 Paris +33139358023 Dallas +19726181234 Atlanta +17068701480 Mumbai +912266407676 NORTHAMERICA 103CarnegieCenter Suite117 Princeton,NJ08540 Tel:+16097995664 Fax:+16097996047 ASIAPACIFIC ZycusInfotechPvt.Ltd. PlotNo.GJ—07,Seepz++,SeepzSEZAndheri(East),MumbaiIndia400072 Tel:+912266407676 Fax:+912226850580 EUROPE EPJBusinessCenter,Suite#418 MainzerLandstrasse,27-31 60329FrankfurtamMain,GermanyTel:+49(0)69274015251 Fax:+49(0)69274015111

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