Here is a cool fact, procurement spending is the largest expense for all product-centric businesses with 40-55% of all expenses being expenses related to spend management. There is a huge disconnect when it comes to choosing the best spend management software and many companies run legacy tools and software and expect cutting edge returns.

In this article, we will define spend management, what is spend management’s current challenges, and then discuss what is being offered under the ISM umbrella in SAP: Intelligent spend management.

What is Spend Management?

Spend Management is the management of business expenditure in all categories and sources. The main objective in a strategic spend management approach is to be able to look at your spending in a way where you can drive your strategic business objectives from one point of access. These areas are undermanaged, and the main reason is a lack of a strong set of tools that enable real-time reporting into these categories.

– Indirect purchasing: This comprises all the spend activities not related directly to the manufacturing of your products. This is a critical spend activity in your organization and an example: maintenance, IT service costs.

– Direct purchasing: The component that is responsible for collecting spending that is mandatory to the production of your product. An example of direct purchasing is the battery for your EV vehicle.

– Contingent workers: This includes expenses related to the management of your external labor. This can be external consultants, marketing agencies, electricians, and casual laborers.

– Travel Expenses: Are travel-related expenses on behalf of the company. An example of travel expenses is travel activities such as events, conferences, and sales pitches for your product or solution.

Challenges with current Spend Management practices:

1. Technology: current spend management practices involve the usage of multiple solutions, tools, and non-integrated systems to manage spending. This brings an unnecessary and complicated workflow, data duplication, poor quality of data, and discrepancy that makes it very difficult to view what is important to derive accurate data and facilitate decision making.
2. Paper-heavy: They are slow and open the door for errors, more importantly, they make actual reporting and analysis almost impossible.
3. Workflows: Many organizations are plagued by complicated and unnecessary approval workflows that overcomplicated the spend management process. Many of these workflows are activated on small purchases that add an extra layer of mundane tasks on managers.

What is Intelligent Spend Management in SAP?

SAP has bundled together their most important cloud offerings under the ISM umbrella, and also changed their go-to-market approach to improving the market demand and the new value expectation of procurement from executives around the new demands for spend management, and they are centralized around managing indirect procurement, direct procurement, collaborating behind the standard firewalls of the company and extending the relationships to suppliers, managing the external workforce, and managing travel-related expenses.

These are the ISM solutions provided by SAP

1. SAP Ariba to manage procurement.
2. Fieldglass to manage the contingent workforce.
3. Concur to manage travel expenses.
4. S4/HANA procurement.
5. Business Network.

Advantages of going with SAP ISM:

• SAP ISM applications are getting a more integrated UI look and feel. SAP has been always criticized for its lack of standardized look and feel across its applications, and now the gap is getting smaller as SAP’s applications do look more similar. The look is now more Fiori looking, but any experienced user would be able to tell that they are using separate applications.

• Leverage real-time data-driven insights to get a detailed view of spending across all categories.

• A more enhanced procurement function with S4/HANA to support it as its backbone.

• Simplify, streamline, and automate the business process.