In March 2004, Zycus released a vision document titled 'Spend Analysis 2.0'. The paper presented a succinct history and future outlook of the spend analysis market. Spend Data Management was identified as a key driver for the adoption and success of broader SRM initiatives. We also predicted that the flurry of M&As witnessed in FY 03-04 between niche Spend Data Management (SDM) service providers and Strategic Sourcing Vendors were going to face humungous challenges in delivery.

A year later Spend Analysis 3.0 examines how those M&As fared in the real world, highlights emerging best practices in Spend Data Management, and makes a definitive assessment of the future roadmap.

Key Findings
The much hyped M&A's (Ariba-Softface, Emptoris-Zeborg, Verticalnet-Tigris) possibly delivered less than anticipated value. ARIBA acquired Softface a Spend Data Management ‘software’ company, but migrated to a hosted option for data management, driven primarily by services. Emptoris acquired Zeborg (who offered Expensemap software), but they too adopted the hosted services model as well. They recently announced acquisition of Intigma possibly to bolster their off-shore data management capabilities. Verticalnet which had acquired Tigris, continues to offer spend analysis as a hosted service.

Software solutions in data management are usually less expensive than services over a 2-3 year time horizon. It is not clear why the vendors who acquired software companies moved into a managed services model. Anytime a service option is brought to the market, there are price pressures and delivery challenges. In our opinion these vendors reinforced their off-shore strategies recently, in an attempt to offset rising costs of Spend Data Management services.

Pure-play Spend Data Management software vendors such as Zycus, are recognized as category leaders, and ideally positioned to partner with the leading SRM vendors (such as SAP and Oracle) and stack players in DW and Analytics space to enable creation of the next generation Spend Data Warehouse. Several customer wins and proven deployments at customer sites such as GE, Dupont, 3M, Federal Govt. of USA, ADP etc. are testimony to the fact that software products for Spend Data Management (such as Zycus AUTOCLASS) are a reality and now ready to replace service offerings at most F-500 organizations. Recently Zycus AutoClass software got the "Powered by SAP NetWeaver" certification, and has the unique distinction of being the only product in its class to have such credentials.

Spend Analysis has moved beyond a one-off strategic sourcing kick-off activity and matured into a best practice for large organizations who need to track their spend management KPI's. To do this they need powerful analytics and a robust spend data store, that can be continually enriched with clean and classified spend data. This need has fueled the demand in large enterprises to build an infrastructure or leverage existing IT systems, to allow for repeatable and automated spend analysis. Automated data classification software has emerged as key to enabling automated spend analysis.
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