When Big is Really Small: The Dangers of Selecting a Cross-Industry Spend Solution
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Transcript of When Big is Really Small: The Dangers of Selecting a Cross-Industry Spend Solution
Power Advocate, Inc. Confidential 11
When Big is Really Small
The Dangers of Selecting a Cross-Industry Spend Solution
Power Advocate, Inc. Confidential 22
Today’s top energy executives recognize the huge value in effective third-party spend analysis…
Millions inCost Savings
OperationalEfficiencies
OptimizedSRM
Power Advocate, Inc. Confidential 33
…but often overlook the most important criteria when considering vendors
!!!
Power Advocate, Inc. Confidential 44
Many variables seem important; others actually are important
Total Spend Analyzed
Speed of Data Cleansing
Number of Features
Number of Rules
Energy Spend Analyzed
Usability for Energy Professionals
Energy-Specific Rules
Quality of Data Cleansing
vs
vs
vs
vs
Most Important!
Integration w/ Transactional Platforms Integration w/ Strategic Platformsvs
Power Advocate, Inc. Confidential 55
And when executives prioritize the wrong variables, they end up with cross-industry solutions that pose meaningful risks
Millions inLost Savings
Bad Data
InaccurateReporting
Total Spend Analyzed
Speed of Data Cleansing
Number of Features
Number of Rules
Integration w/ Transactional Platforms
Power Advocate, Inc. Confidential 66
But what makes cross-industry vendors so risky?
Well, it’s pretty simple…
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The things these companies buy…
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…are VERY different from the things these companies buy
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Different suppliers
Different products
Different services
Different data
And…
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Complexity of Spend Data High
Plus, data from some industries is more complex
Commodities Engineered products
Specialized vendors Vendors providing many products & services
Centralized purchasing Distributed purchasing
Basic services Highly-Technical Services
Products purchased
Services purchased
Suppliers
Organization
Data ComplexityLow High
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Complexity of Spend Data HighData Complexity HighData ComplexityLow High
Turns out, energy company data is especially complex
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And we’re not talking about a small difference
Vs.
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7IN 26.00# 0.362W P-110 HC ERW R3 LTC-HYUNDAI-REG MIL(175 JT)
Accurately classifying cryptic, energy-specific items like thisrequires highly specialized rules and schemas…
Learn More (or read on…)
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…which cross-industry vendors cannot profitably develop
Energy
Consumer Goods
Automobiles
Airlines
Beverages
Fast Food
= Cross-Industry Vendors’ Profitability Threshold
Complexity of Spend Data High
Data ComplexityData ComplexityLow High
Power Advocate, Inc. Confidential 1515
After all, items like this need to be decoded piece-by-piece, and even then – hundreds of permutations are possible
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
7IN 26.00# 0.362W P-110 HC ERW R3 LTC-HYUNDAI-REG MIL(175 JT)
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Now imagine this 1 transaction…
…multiplied by millions
7IN 26.00# 0.362W P-110 HC ERW R3 LTC-HYUNDAI-REG MIL(175 JT)
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But if cross-industry vendors lack the assets and expertiseto tackle energy data, how do they sell to energy firms?
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They spend billions of dollars on sales & marketing…
2013 Sales & Marketing Spend:
$7.328 Billion2013 Sales & Marketing Spend:
$5.164 Billion
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…which they use to hold lavish parties and conferences…
SAP Sapphire Now 2014
Keynote Speakers
• Clayton ChristensenProfessor, Harvard Business School
• Brad RencherSVP / General Manager, Adobe
• Mark BarrenecheaPresident / CEO, OpenText
Oracle Open World 2014
Featured Artists
• Aerosmith
• Macklemore & Ryan Lewis
• Spacehog
• Capital Cities
• Empire of the Sun
Power Advocate, Inc. Confidential 2020
…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
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Ever heard this story before?
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Perhaps this version resonates more with you
Garbage In Garbage Out
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Curious to see an energy-specific interface that allows you to…
…with “exceptional”ease-of-use
…to a 98+% degreeof accuracy?
Create reportsin minutes…
- Gartner
Click Here (or read on…)
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Now let’s cover what happens when energy firms actually buy cross-industry spend solutions
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They’re left with shocking (real-life) examples like this:
HVAC Mechanical Construction Service
Cross-Industry Vendor Classification: Correct Classification:
Cooling Tower Maintenance✓
Line Item: Cooling Tower Maintenance
Price: $38,300,000
Supplier: Bunneys Inc.
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Cross-Industry Vendor Classification: Correct Classification:
Development Environment Software Real Estate✓
…and many, many (real-life) examples like this:
Line Item: Improvement Allowance
Price: $3,200,000
Supplier: Red Hat Software
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Chemicals
Not Chemicals
9%
91%
$51.5M
CHEMICALS, GENERAL
Cross-Industry Vendor Classification: Correct Classification:
…which combine to form (real-life) categories like this:
Production Chemicals $2,641,910
Painting and Coatings $1,487,143
Nitrogen Services $443,150
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 2828
Their analysts spend days fulfilling simple requests…
…and have no choice but to circulate incomplete reports
?
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Meanwhile, unactionable categories like this one…
Engineering SpendMisclassified Elsewhere
+$32.6 M
$58.9 MSpend Classifiedas “Engineering”
Portion that Wasn’tActually Engineering
-$11M
…cost them millions in lost savings every year
Power Advocate, Inc. Confidential 3030
But why listen to us?
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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
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And, our industry focus allows us to do thingsthat others simply can’t…
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(an investment that isn’t cost-effective for cross-industry vendors)
…like perfecting a rules engine that exclusively parses and classifies Power, Oil, and Gas data
50+ engineers, analysts, developers Millions of energy-specific rules
Power Advocate, Inc. Confidential 3434
Remember that line item example from earlier?
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
7IN 26.00# 0.362W P-110 HC ERW R3 LTC-HYUNDAI-REG MIL(175 JT)
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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 ✓
7IN 26.00# 0.362W P-110 HC ERW R3 LTC-HYUNDAI-REG MIL(175 JT)
Our rules deconstructed and classified it in seconds
Power Advocate, Inc. Confidential 3636
(cross-industry vendors often claim the whole process can be automated, but to achieve 98+% accuracy, human expertise is required)
Raw Spend Data Rules Engine Expert Analyst Cleansed Data
And just to be sure, our energy experts verify all classifications
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Best of all, our industry focus allows us to conduct analyses that no one else can – like precise, per-unit benchmarking
$0
$400
$800
$1,200
$1,600
$2,000
PS1 PS2 PS3 PS4 PS5 PS6 PS7 PS8 PS9 PS10 PS11 PS12 PS13
Pump Station $/HP
6 pumps5 pumps4 pumps
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“Experience in analyzing spend in your industry”
What to Look For in a Spend Analysis Solution
“To succeed at spend intelligence, it would help if you were to hook up…a solution provider that has familiarity with your industry”
Steps to Success for All Enterprises
Still not convinced an energy-specific solution is the route to success? Let’s hear from some industry experts:
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So what does all this mean for YOU?
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It means you can expect things from us…
…that you could never get from a cross-industry vendor…
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…like no more time wasted on “data janitor work”…
…and no more anxiety over inaccurate reporting
Clean DataAnalyze
✓
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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 4343
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