Ivalua publishes the results of its 1st Trending in Procurement survey
The 1st survey on the Total Value of Ownership of Spend Management Solutions
Over 140 procurement professionals participated in the 1st edition of Trending in Procurement survey. Our thanks go out to all of them!
For its first edition, Trending in Procurement focused on the much discussed Total Value of Ownership of the Spend Management Solutions (SMS). Measuring Information Systems returns is a difficult task indeed. And Spend Management Solutions are no exception to the rule!
Yet, being able to calculate the value of a SMS is an important issue for the Procurement Departments. It serves:
- To demonstrate their achievements for Finance Departments;
- To measure their participation in the economic performance of the company;
- To ‘scientifically’ prove “gains” and “profits” related to the implementation of a SMS and present a ROI of their SMS purchasing decision (as for any other investment ).
Confined to a Total Cost of Ownership approach (TCO), the Procurements Departments have gradually adopted the Total Value of Ownership (TVO) concept to assess the ROI of purchases. TVO approach enables the inclusion of qualitative gains into a ROI calculation as well as financial gains that go beyond cost reductions.
Assessing ROI of SMS simply followed this trend and Procurement Departments now use the concept of TVO to estimate the net created value following the implementation of SMS.
The TVO of SMS can be calculated with the equation: value created / costs involved
However, the process becomes more complex when considering the definition of “costs involved” and “value created”!
- What are the true costs associated with a SMS? Is the cost of acquisition the only impactful one?
- Which qualitative benefits are taken into account? What elements fall within the definition of value created?
- Which conditions are critical for achieving the gains of a SMS implementation?
“We must demonstrate the ROI of our Spend Management Solution on both a financial and a qualitative basis. There will always be benefits that we cannot financially assess, but anyway the ROI of the SMS must be a mix of quantitative and qualitative elements” states Sylvie Noel – Director of Purchasing – Covéa
The first edition of Ivalua Trending in Procurement aims to answer these questions and provides a clear vision of “how companies apply the concept of TVO to the purchase of Spend Management Solutions”.