Join us for this sponsored panel discussion featuring Peter Buettgen, Managing Director at BearingPoint; Debbie Wilson, Procurement Automation Expert and Cool Tools for Purchasing Editor; Sandip Maiti, Director of Marketing at Zycus and Anurag Dixit, Product Marketing Manager at Zycus.
Forward: Zycus, a Spend Data Management company that specializes in global spend analysis tools and master data rationalization, is gaining traction in the marketplace. Why are companies turning to this niche supplier when so many enterprise solutions providers offer their own spend analysis tools?
Debbie: Zycus has won a number of new customers recently. Tell me about some of those successes.
Sandip: We recently landed an opportunity through our partner, BearingPoint, to help an oil and gas company analyze billions of dollars of spend. This company is taking an interesting approach, going through its spend data, leveraging one commodity segment at a time.
Debbie: Peter, why did BearingPoint choose to partner with Zycus for spend analytics?
Peter: BearingPoint chose to work with Zycus, among other tools, to allow us to be effective in meeting client-specific demands. Every client situation and objective is different, and it is important to us to have the flexibility to meet different needs. Zycus' flexible tool and committed staff has helped us meet our goals.
Debbie: What specifically makes the Zycus tool flexible?
Peter: It's a powerful data consolidation and cleansing tool, and it's also a learning tool. It can handle a wide variety of data in terms of the quality of the information available. That capability is absolutely critical to a successful spend analysis initiative.
Debbie: Thank you, Peter. Sandip, tell me about some of your other new clients.
Sandip: We recently landed a very large master data rationalization project with a Fortune-200 ranked forest products company. We've been working on it for the last four months. This customer is migrating multiple instances of SAP to a single instance.
One of this company's goals for the project is to create a single master data file, so that it has one unified, enterprise-wide view of its inventory. It’s a very challenging project because we must not only extract attributes from the company’s data for classification, but we must also identify duplicate items present in various legacy item masters.
So far, we have identified over 30% of this customer’s material master items as duplicates. Just think what that means: because of its poor data quality, this company has probably carried much more inventory than it needs, and it certainly has not been able to fully leverage demand across its various plants. Zycus has identified hard, bottom-line savings that this company will be able to realize very quickly.
Anurag: Good quality data is the key to any materials management process. That’s why companies that migrate to a single ERP (Enterprise Resource Planning) system typically dedicate at least 10-15% of the cost of the project to building high quality, consolidated material masters.
Sandip: The third success story we’d like to share with you is our recent work with the GSA. This U.S. agency runs the largest eProcurement portal in the world with about four million catalog items. Despite its size, the transaction volume has been low, because users haven’t been able to find what they want to purchase. Unisys, our partner, brought us into the project to facilitate both search and spend analysis by classifying and coding all the catalog items to the UNSPSC (Universal Standard Products & Services Classification Code) schema.
Debbie: How will classifying catalog data to the UNSPSC help end users find things?
Sandip: Let’s say someone does a keyword search through the system to find a coffee table. They’ll probably get lots of results for coffee and lot of results for tables, instead of what they need. The UNSPSC will give users the ability to search by category.
Debbie: The GSA is certainly big enough to force its suppliers to classify their catalog items to UNSPSC.
Anurag: The problem with relying on suppliers to code their catalogs items for you is that you can’t control it properly. They won’t all use the same version of UNSPSC, and their approaches won’t be consistent.
For example, let’s say that you ask your suppliers to code a desktop computer. One will call it ‘IT hardware,’ while the other will code it as a 'desktop computer.' When you take an automated approach yourself instead, you can ensure consistency.
Debbie: Why shouldn’t companies rely on the reporting capabilities of their enterprise solutions to analyze their spend?
Anurag: Unfortunately, in most large global organizations, there is no single system of record for purchasing. That means that data is spread across multiple systems in multiple formats, data structures, and languages. While you can create a single database of all that information, that is not the same thing as creating a consolidated, unified view of your spend data. Without a consolidated, unified view, your spend analysis won’t make any sense. It’s garbage in, garbage out.
Sandip: Even if all your data exists in one system, you are still likely to have problems. That’s because it’s virtually impossible to have all your purchase transactions classified both properly and in enough detail. In an attempt to address this problem, many companies turn to a very simple classification system with only a handful of codes. When they try to analyze the resulting spend data, what they end up with is too general and full of errors to be useful.
Debbie: UNSPSC goes well beyond a handful of codes, right?
Sandip: That's right. We once had a very large company tell us that they were using UNSPSC. They had chosen to work with just 50 of the codes, which I found unbelievable. The beauty of UNSPSC is that it gives you 20,000 codes. It is both wide and deep. Until and unless you use the entire code set, you’ll never have granular visibility. No matter how fancy your reporting tools and data warehouse are, all you’ll get is general information.
However, when companies try to implement something more detailed, like the UNSPSC, their users frequently foil their attempts. Users will classify their transactions ‘miscellaneous’ or enter in whatever code is at the top of the list, just to get through the process quickly.
Debbie: Then how can you successfully implement UNSPSC coding?
Sandip: Nobody wants to talk about the problem of implementing granular, accurate data classification, because human beings can't solve it. Are the 50,000 end users of our largest customer going to carefully go through the entire code set and choose the right one every time they create a requisition? It just won’t happen. If an enterprise wants to analyze its spend data at a granular level, then it needs an automated tool for classification. The reporting capabilities of an enterprise solution cannot solve that problem.
Debbie: Some companies tell me that they cannot justify a spend analysis on their catalog-based spend, because it does not represent a significant enough portion of their overall spend. Do you run into that barrier as well?
Anurag: Yes. In most companies, only a small percentage of the total spend goes through catalogs. That's why many want to analyze their non-catalog spend, including spot buys and maverick purchases. Quite often, that’s where the opportunities for Strategic Sourcing lie.
Peter: We have seen clients not only want to understand their spend on a real-time basis across their organizations, but also have real-time benchmarks that help them prioritize their opportunities and measure their progress.
Sandip: The question isn’t whether analyzing your catalog spend is worthwhile, but whether analyzing your total spend makes sense. If you don’t analyze your total spend, then you won’t know what parts to source, or even what types of catalogs to include in your eProcurement system.
Debbie: That makes sense.
Sandip: We are working with a very large pharmaceutical company that is migrating its spend to an Ariba system. They’ve really just started, so many of their prospective users are still buying off-catalog or creating free-text requisitions. With our tool, this company knows each month what percent of its spend is going off-catalog, and it knows what was bought, so it can track its progress and identify new opportunities for cost reductions.
Debbie: What is unique about your solution?
Anurag: Zycus is the only spend analysis vendor that offers a 100% automated, behind-the-firewall solution. It includes not only a reporting interface, but also the ability to normalize supplier names and classify spend data into a single taxonomy of choice. It has a very intuitive analytics interface that purchasing people can use. Its canned reports are relevant to spend analysis and sourcing. With a Zycus solution, customers can generate a spend analysis on demand.
Peter: The analytics are not been completely automated in our implementations with Zycus.
Anurag: While that is true, we have another customer who we cannot name that has set up its Zycus solution to run without any manual intervention whatsoever.
Sandip: The Zycus solution is a generation ahead of any other one on the market. Our software has been proven out at General Electric over the last year. You should check them out sometime, and find out how they are leveraging our solution.
Debbie: I'll have to do that! Can Zycus help companies classify data on a real-time basis?
Anurag: Absolutely. A very large multinational manufacturing conglomerate has integrated the Zycus Spend Data Management product for Spend Analysis with its Oracle iProcure system to automatically classify requisitions as users prepare them. Another of our customers is doing the same thing with its Ariba system. We create a seamless interface with the existing eProcurement system, so our powerful classification engine remains hidden, while presenting real-time commodity class code assignments to users.
Sandip: It’s amazing how much garbage exists in the historical eProcurement data of large companies. We see requisitions with phone numbers entered as class codes. People can type virtually anything into the class code field in most eProcurement systems and get away with it.
Our real-time functionality not only enables spend analysis, but also spend compliance. You can route all the purchase orders of a certain commodity code to a commodity manager or buyer. You can direct requisitioners to the relevant contract for the item they’re buying. You can reject a requisition before the transaction is finalized. But in order to get to this point, you must use the full 8-digit UNSPSC code, so it's clear to both your eProcurement system and your users which contracts are relevant to their purchases.
Debbie: Can you give me an example of how that works?
Sandip: Sure. It doesn’t do me much good to leverage UNSPSC to find my PC contract if the lowest level my company’s classification system goes to is IT Hardware. There may be 1000 different IT hardware contracts at a large company at any point in time, and no one can expect a user to sort through all those to find the right one. That’s why I believe that granular UNSPSC coding will open up an amazing number of possibilities for extracting ROI from existing eProcurement investments.
Anurag: Zycus has something really unique here. Our AI (artificial intelligence) technology is good at crunching data. As a result, it takes 5 seconds or less to process a single query, even when there are thousands of people using the system simultaneously. That response time is much quicker than most other AI tools. You wouldn’t want your users to have to go take a walk before they can complete a requisition.
Debbie: How much savings can a company expect to achieve through your solution?
Anurag: Our customers can generally expect to save at least 4-7% of their spend by granularly classifying their data with Zycus. The Zycus Spend Analysis solution further enables those customers to track and measure their savings.
Debbie: Many Strategic Sourcing solutions providers including Emptoris, Frictionless, Ariba, and even SAP now claim to offer spend analysis capabilities. Why should someone choose your tool over the embedded tools offered in these other solutions?
Sandip: The spend analysis tools these companies offer are reporting/analytic tools that do not solve the problem of granular UNSPSC coding. As we discussed earlier, without an automated coding solution, the insight you get from such spend analysis tools is minimal.
Many Strategic Sourcing solution providers have entered into a marriage of convenience with traditional spend analysis service providers. These companies are still leveraging a services- or hybrid-based solution; they're not really selling an integrated spend analysis software tool.
Debbie: But there are several vendors out there that offer automated classification capabilities besides Zycus.
Anurag: Although that is correct, we don't consider these tools as competition. They classify information based on grammatical constructs or rules, which are slow and work only on high-quality data. They and their customers have to develop and refine many of the rules as they go, and it can take months to classify data accurately with a rules-based engine. That is the not what our customers want. They want spend analysis on demand.
Debbie: How is your solution different?
Anurag: Our classification engine leverages artificial intelligence instead of rules to classify data. This approach is much more effective for poor quality data: data that contains lots of abbreviations, acronyms, numbers, and even misspelled words. We are the only vendor that can handle the real-world data. More importantly, our technology is the only one that is language agnostic.
Debbie: Can you back those claims up?
Anurag: Certainly. When General Electric bought our software, they tested our solution against several others. We came out much farther ahead than the rest because our technology is so well suited for spend analysis. They were also impressed with our integration-ready APIs (application program interface), which enables our solution to plug and play with nearly any ERP or eProcurement system.
I have a very interesting example to share with you. One of our customers has operations in Quebec, Canada. The problem with this company's transaction data was that it was a mixture of French and English. A classification engine that runs on grammatical rules cannot classify this type of data.
Debbie: You speak very passionately about your solution!
Sandip: Absolutely, because any time our solution has gone for a head-to-head shootout with our competition, it has won.
Debbie: You obviously do a lot of work with consultants. Do you see them moving away from doing spend analysis?
Sandip: Yes. Consultants like BearingPoint, A.T. Kearney, and Accenture are the experts in sourcing. They’ve been doing spend analyses because that's an integral part of identifying appropriate sourcing opportunities for clients. Much of the time, these consultants outsource the data analysis to niche spend analysis service providers, which use hybrid tools.
We believe that spend analysis is not the consultants' core business. Many of the leaders tell us that they are more interested in moving up the value chain: focusing their internal resources on providing complex services such as product lifecycle sourcing.
We also believe that companies will continue to look towards consultants for Strategic Sourcing services. When consultants leverage Zycus' automated solutions, they uncover a wider range of savings opportunities than they can through other means, and they get this information quicker.
It is also possible that once companies understand the value of automated spend analysis, they will want to bring that capability in house. In fact, consultants will benefit if their clients do, because they’ll have better information to work with. It ends up being a real win-win for everyone.
Debbie: Why is it important for companies to tackle spend analysis and data rationalization now?
Peter: Our clients are realizing the tremendous level of cost savings that can be achieved through strategic sourcing, and they want to aggressively bring those dollars to their bottom lines. While realizing the magnitude of the opportunities, our clients also recognize that traditional approaches to gathering spend information do not provide them with enough information to be effective. They're becoming keenly aware of the lack of data and the information issues, and they want to address those concerns immediately.
Clients aren't looking for a one-time fix to this problem, but for a more holistic solution. They want to get real-time spend data to their category managers, so these folks can manage their commodities and services effectively. This creates an interesting opportunity for Zycus, which not only consolidates and cleans data up for a one-time report, but also provides ongoing support for spend analytics across the entire organization.
Sandip: Many companies are frustrated with their eProcurement systems because they’ve made this huge investment in a solution, but they have not solved the critical data problem. It can take them years to get more than 10-30% of their spend through the solution if they don't. These companies need to save money now!
Furthermore, spend analysis not only helps companies drive spend through an eProcurement system, but through any system. A good spend analysis process enables companies to effectively source and manage spend categories in whatever systems make sense, whether that is their ERP, an eProcurement application, or both.
Anurag: People have been trying to analyze their spend for years. First they tried cleaning their supplier data, but that could not take them beyond negotiating discounts based on their total turnover with a supplier. They know that they need to analyze their spend at a granular level, to identify low- and mid-level sourcing buckets, but they just don’t know how to do it.
They can invest in a one-time, service-based spend analysis, which may cost them in the millions of dollars and take months, but what’s the point of spending all that money and time if you cannot measure and track the actual savings on a continuous basis? That's why companies are now open to investing in a global spend analysis infrastructure. Establishing an in-house spend analysis capability is an incredibly effective way to drive procurement ROI.
Zycus is a leading provider of Spend Data Management solutions. Zycus' software solutions combine cutting edge AI technology and domain expertise to discover, enrich and manage enterprise spend and master data for global spend visibility, better analysis and greater compliance. Zycus increases e-Procurement, Strategic Sourcing and Product Lifecycle Management (PLM) effectiveness, and complements existing enterprise applications to deliver increased ROI.
For media enquiries, contact:
Anurag Dixit
Director – Marketing, Spend Analysis Solutions
Zycus Inc.
Ph. +1 888 451 0145;
Email: anurag@zycus.com |
Back
