When Big is Really Small: The Dangers of Selecting a Cross-Industry Spend Solution
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Energy spend data is nothing like data from other industries – in fact, it’s much more complex. So how do cross-industry vendors like SAP/Ariba and IBM/Emptoris simultaneously cleanse data like yours and data on toothpaste, beef patties, and windshield wipers? In this SlideShare presentation, we’ll show you! (Hint: they cut a few corners).
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When Big is Really Small: The Dangers of Selecting a Cross-Industry Spend Solution
- 1. When Big is Really Small The Dangers of Selecting a Cross-Industry Spend Solution Power Advocate, Inc. Confidential 1
- 2. Today’s top energy executives recognize the huge value in effective third-party spend analysis… Millions in Cost Savings Operational Efficiencies Optimized SRM Power Advocate, Inc. Confidential 2
- 3. …but often overlook the most important criteria when considering vendors !! ! Power Advocate, Inc. Confidential 3
- 4. Many variables seem important; others actually are important Total Spend Analyzed Number of Features Number of Rules Integration w/ Transactional Platforms vs Integration w/ Strategic Platforms Speed of Data Cleansing Energy Spend Analyzed Usability for Energy Professionals Energy-Specific Rules Quality of Data Cleansing vs vs vs vs Most Important! Power Advocate, Inc. Confidential 4
- 5. And when executives prioritize the wrong variables, they end up with cross-industry solutions that pose meaningful risks Bad Data Inaccurate Reporting Millions in Lost Savings Total Spend Analyzed Number of Features Number of Rules Integration w/ Transactional Platforms Speed of Data Cleansing Power Advocate, Inc. Confidential 5
- 6. But what makes cross-industry vendors so risky? Well, it’s pretty simple… Power Advocate, Inc. Confidential 6
- 7. The things these companies buy… Power Advocate, Inc. Confidential 7
- 8. …are VERY different from the things these companies buy Power Advocate, Inc. Confidential 8
- 9. And… Different suppliers Different products Different services Different data Power Advocate, Inc. Confidential 9
- 10. Plus, data from some industries is more complex Complexity of Spend Data High Low Data Complexity High Commodities Engineered products Basic services Highly-Technical Services Specialized vendors Vendors providing many products & services Centralized purchasing Distributed purchasing Products purchased Services purchased Suppliers Organization Power Advocate, Inc. Confidential 10
- 11. Turns out, energy company data is especially complex Low Data Complexity High ComDpaletxai tCyo omf Sppleexnidt yData HigHihgh Power Advocate, Inc. Confidential 11
- 12. And we’re not talking about a small difference Vs. Power Advocate, Inc. Confidential 12
- 13. Accurately classifying cryptic, energy-specific items like this requires highly specialized rules and schemas… 7IN 26.00# 0.362W P-110 HC ERW R3 LTC-HYUNDAI-REG MIL(175 JT) Learn More (or read on…) Power Advocate, Inc. Confidential 13
- 14. …which cross-industry vendors cannot profitably develop Complexity of Spend Data High Low DDaattaa CCoommpplleexxiittyy High Energy Consumer Goods Airlines Automobiles Beverages Fast Food = Cross-Industry Vendors’ Profitability Threshold Power Advocate, Inc. Confidential 14
- 15. After all, items like this need to be decoded piece-by-piece, and even then – hundreds of permutations are possible 7IN 26.00# 0.362W P-110 HC ERW R3 LTC-HYUNDAI-REG MIL(175 JT) Material Group Shape Steel Wire Rod Tubing Piping Casing Alloy Ingot Manufacturer Hyundai Automobile Hyundai Railway Hyundai Steel Hyundai Ship Hyundai Plant Hyundai Electric Outside Diameter 12 Inches 7 Inches 5 Inches Thickness 0.250 Inches 0.362 Inches Power Advocate, Inc. Confidential 15
- 16. Now imagine this 1 transaction… 7IN 26.00# 0.362W P-110 HC ERW R3 LTC-HYUNDAI-REG MIL(175 JT) …multiplied by millions Power Advocate, Inc. Confidential 16
- 17. But if cross-industry vendors lack the assets and expertise to tackle energy data, how do they sell to energy firms? Power Advocate, Inc. Confidential 17
- 18. They spend billions of dollars on sales & marketing… 2013 Sales & Marketing Spend: $7.328 Billion 2013 Sales & Marketing Spend: $5.164 Billion Power Advocate, Inc. Confidential 18
- 19. …which they use to hold lavish parties and conferences… SAP Sapphire Now 2014 Keynote Speakers • Clayton Christensen Professor, Harvard Business School • Brad Rencher SVP / General Manager, Adobe • Mark Barrenechea President / CEO, OpenText Oracle Open World 2014 Featured Artists • Aerosmith • Macklemore & Ryan Lewis • Spacehog • Capital Cities • Empire of the Sun Power Advocate, Inc. Confidential 19
- 20. …and to showcase features that mask the quality of the data they deliver and detract from the user experience “Poor” Ease-of-Use - Gartner “Adequate” Ease-of-Use - Gartner Power Advocate, Inc. Confidential 20
- 21. Ever heard this story before? Power Advocate, Inc. Confidential 21
- 22. Perhaps this version resonates more with you Garbage In Garbage Out Power Advocate, Inc. Confidential 22
- 23. Curious to see an energy-specific interface that allows you to… …with “exceptional” ease-of-use …to a 98+% degree of accuracy? Create reports in minutes… - Gartner Click Here (or read on…) Power Advocate, Inc. Confidential 23
- 24. Now let’s cover what happens when energy firms actually buy cross-industry spend solutions Power Advocate, Inc. Confidential 24
- 25. They’re left with shocking (real-life) examples like this: Line Item: Cooling Tower Maintenance Supplier: Bunneys Inc. Price: $38,300,000 Cross-Industry Vendor Classification: Correct Classification: HVAC Mechanical Construction Service Cooling Tower Maintenance ✓ Power Advocate, Inc. Confidential 25
- 26. …and many, many (real-life) examples like this: Line Item: Improvement Allowance Supplier: Red Hat Software Price: $3,200,000 Cross-Industry Vendor Classification: Correct Classification: ✓ Development Environment Software Real Estate Power Advocate, Inc. Confidential 26
- 27. …which combine to form (real-life) categories like this: Cross-Industry Vendor Classification: Correct Classification: Chemicals Production Chemicals $2,641,910 Painting and Coatings $1,487,143 Nitrogen Services $443,150 Not Chemicals 9% 91% CHEMICALS, GENERAL $51.5M Pumps $10,088,197 Motors $9,037,047 Electric Submersible Pumping (ESP) Lift Services $3,704,851 Variable Frequency Drives $3,165,546 Pump Seals $3,034,483 Drill Bits $2,691,688 Valves $2,641,910 Separators $1,487,143 Wire and Cable $1,390,791 Casing and Tubing Services $882,221 Coil Tubing services $822,310 Motor Maintenance $708,009 Power Advocate, Inc. Confidential 27
- 28. Their analysts spend days fulfilling simple requests… …and have no choice but to circulate incomplete reports ? Power Advocate, Inc. Confidential 28
- 29. Meanwhile, unactionable categories like this one… Portion that Wasn’t Actually Engineering Engineering Spend Misclassified Elsewhere Spend Classified as “Engineering” -$11M +$32.6 M $58.9 M …cost them millions in lost savings every year Power Advocate, Inc. Confidential 29
- 30. But why listen to us? Power Advocate, Inc. Confidential 30
- 31. Well, because when it comes to energy spend… $1.7+ Trillion Energy Spend Cleansed $320 Billion Energy Spend Cleansed “Largest” Cross-Industry Vendor in the World …we’re the big kids on the block Power Advocate, Inc. Confidential 31
- 32. And, our industry focus allows us to do things that others simply can’t… Power Advocate, Inc. Confidential 32
- 33. …like perfecting a rules engine that exclusively parses and classifies Power, Oil, and Gas data 50+ engineers, analysts, developers Millions of energy-specific rules (an investment that isn’t cost-effective for cross-industry vendors) Power Advocate, Inc. Confidential 33
- 34. Remember that line item example from earlier? 7IN 26.00# 0.362W P-110 HC ERW R3 LTC-HYUNDAI-REG MIL(175 JT) Material Group Shape Steel Wire Rod Tubing Piping Casing Alloy Ingot Manufacturer Hyundai Automobile Hyundai Railway Hyundai Steel Hyundai Ship Hyundai Plant Hyundai Electric Outside Diameter 12 Inches 7 Inches 5 Inches Thickness 0.250 Inches 0.362 Inches Power Advocate, Inc. Confidential 34
- 35. Our rules deconstructed and classified it in seconds 7IN 26.00# 0.362W P-110 HC ERW R3 LTC-HYUNDAI-REG MIL(175 JT) Material Group Shape Steel Wire Rod Tubing Piping Casing Alloy Ingot Manufacturer Hyundai Automobile Hyundai Railway Hyundai Steel Hyundai Ship Hyundai Plant Hyundai Electric Outside Diameter 12 Inches 7 Inches 5 Inches Thickness 0.250 Inches 0.362 Inches OCTG Casing ✓ Power Advocate, Inc. Confidential 35
- 36. And just to be sure, our energy experts verify all classifications Raw Spend Data Rules Engine Expert Analyst Cleansed Data (cross-industry vendors often claim the whole process can be automated, but to achieve 98+% accuracy, human expertise is required) Power Advocate, Inc. Confidential 36
- 37. Best of all, our industry focus allows us to conduct analyses that no one else can – like precise, per-unit benchmarking $2,000 $1,600 $1,200 $800 $400 $0 Pump Station $/HP 6 pumps 5 pumps 4 pumps PS1 PS2 PS3 PS4 PS5 PS6 PS7 PS8 PS9 PS10 PS11 PS12 PS13 Power Advocate, Inc. Confidential 37
- 38. Still not convinced an energy-specific solution is the route to success? Let’s hear from some industry experts: Steps to Success for All Enterprises “To succeed at spend intelligence, it would help if you were to hook up…a solution provider that has familiarity with your industry” What to Look For in a Spend Analysis Solution “Experience in analyzing spend in your industry” Power Advocate, Inc. Confidential 38
- 39. So what does all this mean for YOU? Power Advocate, Inc. Confidential 39
- 40. It means you can expect things from us… …that you could never get from a cross-industry vendor… Power Advocate, Inc. Confidential 40
- 41. …like no more time wasted on “data janitor work”… Clean Data Analyze …and no more anxiety over inaccurate reporting ✓ Power Advocate, Inc. Confidential 41
- 42. Plus, you’ll finally be able to manage all of your spend… “For every dollar of spend under management, Aberdeen has historically quantified 5% to 20% cost savings” …and save millions of dollars for your organization Power Advocate, Inc. Confidential 42
- 43. Ready to see what Best-in-Class Data can do for you? Complete All of your enterprise data… Accurate …classified to a 98+% degree of accuracy… Repeatable …kept up-to-date with regular refreshes Granular …organized in useable, natural buying groups… We’ll show you! Request a Demo Power Advocate, Inc. Confidential 43
Hinweis der Redaktion
- Other analyses: Companies are doing this for services and equipment Proppant per pound (per well, per basin) This is for one vendor – you could compare this same information for other vendors You could track this information over time – track progress, monitor variability by basin/activity/etc. The same analysis could be done in comparing different vendors. A means of prioritization. Know where to focus. You have limited bandwidth and need to pick and choose where to focus attention and where to place your chips. Objective is to make this as automated as possible – a part of your standard operating procedures and reviews, not 4 people in a conference room for three months to try and answer one question – no scale in doing this.