Emptoris, a provider of supply and contract management software, tomorrow will unveil upgrades to its spend analysis offering that for the first time provide self-service capabilities for analyzing procurement data residing across the enterprise as well as functionality for making on-the-fly business rule changes to correct misclassified transaction types.
In conjunction with the release of version 6.1 of its Spend Analysis software, Emptoris also unveiled new data extraction services to help customers expedite access to critical purchasing data locked inside various enterprise applications. Together, the software and service offerings extend the company's profile in the nascent spend analysis market, which, according to Forrester Research, is growing at about 11% compounded annually and will reach $100 million this year.
Spend analysis is considered critical for larger, decentralized companies that have either grown through acquisition or diversified into various and sundry businesses, and whose operations run on a panoply of ERP systems -- be they different instances of the same vendor's applications or multiple vendors' products. Software from companies in the space -- such as Emptoris, Ariba, and Zycus -- essentially extracts, cleanses (adds consistency and eliminates duplication), and classifies data residing in accounts payable and procurement applications, as well as other enterprise systems.
The enriched data is stored in a data cube that layers on top of existing enterprise applications. Users then deploy knowledge bases of business rules that can be applied and updated to more effectively track spending patterns and help modify behaviors. Rationalizing this data enables purchasing managers to more intelligently analyze their expenditures, identify cost-saving opportunities, comply with corporate policies, and/or eliminate maverick spending, analysts said.
ERP vendors offer basic spend-tracking modules or more generic business intelligence applications that usually require data warehouses to be built using vendor-specific or third-party data extraction and analysis tools. While these approaches may enable the depiction of spending trends in graphical form, they lack one critical ingredient: the cleansing and enrichment tools needed to really understand the data, noted Debbie Wilson, an analyst with Gartner Inc.
"The idea [of spend analysis software] is to deliver enhanced data in a more manageable form," she said in an interview with Managing Automation. "Put it in a data cube and let users play with it."
Emptoris's updated Spend Analysis software includes a number of new modules that are said to improve data extraction and transformation from all types of transaction systems. A new Spend Data Manager, for instance, leverages vendor and MRO Item Knowledge Bases to consolidate and classify spend by vendor and commodity. Feedback approval allows the system to re-classify spend automatically based on feedback from end users.
Importantly, the new Spend Data Manager allows customers to manage the spend data consolidation, classification, and enrichment process in house, the company said. This saves time in extracting and making sense of spend data stored in applications across the enterprise, and removes a business process obstacle: IT departments that are leery about allowing sensitive business data to be moved beyond their firewalls, Gartner's Wilson said. Emptoris or third parties, she said, handle this activity for customers.
Emptoris recommends a 64-bit, Intel Xeon-based server architecture with 16 gigabytes of RAM to run its software in large-scale deployments. Having enough horsepower is critical to spend analysis success, Wilson said. "There's been some talk of performance issues," she noted. "You need to be sure to have adequate host power underneath, whether [Emptoris] hosts or you do."
A new Real-time Spend Classifier, meanwhile, integrates with purchase order and requisition systems to properly classify spend at the point of entry, the company said. It connects via a Web service to enable users to see similar contracts from the same vendors, a capability that can help them spot incorrectly categorized transactions, according Emptoris CEO Avner Schneur. "Users can then point and click to move to the right classification -- and create a rule in the background to synchronize it," he said.
Emptoris's new data-extraction services includes query design, instant data auditing, and automation scripting to speed access to data from source applications, the company said.
Andrew Bartels, an analyst at Forrester Research, said that while a typical decimal point release such as 6.1 may not signify meaningful enhancements, this update reflects significant capabilities made with new algorithms and user feedback on what's working -- and not working -- with the software. "There are improvements in this version that are a meaningful step ahead for Emptoris," Bartels noted.
The software is of particular use to diversified manufacturers with distributed operations whose procurement activities are managed in separate silos through spreadsheets, Microsoft Access databases, and sneaker net, analysts said. By drilling down across the enterprise, corporate managers can learn where they are spending too much -- due to a lack of visibility and purchasing clout, for instance. "Say you have a plant in Tucson and one in Ottawa, Canada, and they are buying the same things but not combining purchases together to get a volume discount," Wilson suggested. "The supplier might be nice and offer this information, but, then again, [the supplier] might not take initiative to understand it and convey it."
Schneur pointed to a number of companies that are already using Emptoris's Spend Analysis software. One that he highlighted is an unidentified $4 billion chemicals company, which is using Emptoris in conjunction with a single global instance of SAP to gain deeper insights into its spending patterns. In doing so, the company was able to analyze $6 billion worth of spending comprising 3.7 million transactions in 33 currencies. Annual savings in the first year of usage was over $40 million, Schneur said. How did the company do this? "They did not go after low hanging fruit," he said. The company looked at purchased product in particular geographies and identified cost-savings opportunities where perhaps it was working with too many vendors By reducing the overall number of vendors and increasing commodity purchases through fewer partners, the company was able "to get better leverage in negotiating."
Another application of spend analysis is to ensure compliance with supplier diversity programs, noted Mickey North Rizza, an analyst with AMR Research. Using the software in this way, she said, "can help to see where there is the greatest spend and to capture the data" needed to meet program requirements.
Automating the back office remains a greenfield for many manufacturers, North Rizza noted. "If companies are looking behind the scenes for areas to focus [productivity initiatives] on ... understanding what you have [in inventory] and where you can get better deals is important," she said. "Spend analysis tools are the first step in that journey."
Available now, Spend Analysis version 6.1 is licensed as part of the Emptoris suite. Pricing varies based on the number of users, a company spokesman said in an e-mail exchange, noting that a typical configuration runs between $250,000 and $400,000. Spend Data Manager and Real-time Spend Classifier carry separate, undisclosed charges, he noted.
The new offerings come as the six-year-old, privately held company's business continues to expand both organically and through acquisition. The recently concluded third quarter was the strongest period in company history, Emptoris said. The company said it closed 50 transactions, which contributed to 86% revenue growth over the year-earlier period.
Despite the expansion of the analytical capabilities of ERP and BI tool vendors, Emptoris is well positioned to withstand a possible incursion, analysts said. "They have a depth of understanding and capabilities that are far superior," Gartner's Wilson noted, adding that established enterprise applications vendors usually wait for markets to mature before jumping in -- something the spend analysis space has not yet achieved. "[Emptoris's] tools offer a lot of innovation in spend analysis, and they are building out functionality at a nice pace."
Emptoris's challenge, like that of many companies toiling in emerging markets, is that customers tend to be exceedingly experimental and demand new automated ways to boost operational efficiencies, she said. "Do they follow every -- or many -- thoughts of customers exploring new places or do they try to have solid tools that a wide variety of customers can use?" Wilson offered. Achieving a balance is critical, she added, noting that the more Emptoris attempts to do, the more enterprise vendor attention it will attract, and the higher its development costs will go.