Is it Benchmarking, Business Intelligence, or Just Balderdash?
January 2009
As we begin the New Year, I would like to wish you a happy and prosperous 2009 from everyone at Volt Consulting Managed Service Programs. As is the tradition at the inception of a New Year, we at Volt Consulting are engaged in many forward-looking initiatives that will address the business issues that this New Year may hold in store. Increasing emphasis is being placed on business analytics to better predict future workforce needs. This has led to many recent, spurious claims which have cluttered the marketplace. I suspect readers may be wondering “what are services procurement solutions really doing by way of business place analytics, and how effective are they at bolstering your organization’s bottom line?” This is the subject of my first message of 2009. Please enjoy!
The case could be made that most benchmarking and reporting features offered by contemporary solution providers are adequate at best. That is not to say that they are without value; however, the truth is the information and insights they yield are for the most part rudimentary. Yet the technology already exists to supercharge the value of “world class” business intelligence benefits in ways that can help to catapult a company ahead of its competition. One of the major impediments to companies achieving this advantage is that companies take providers’ claims about benchmarking at face value and don’t question whether more could be done in this regard. Let’s examine what separates basic benchmarking and reporting from the true Business Intelligence (BI) offered by the Volt Consulting MSP solution.
Everyone agrees that visibility into services procurement spend is among the top reasons companies seek a solution for their programs. Eliminating rogue activity and gaining control over legitimate spend is achieved through automation of the procurement process. Additional savings and efficiencies are yielded by leveraging improved visibility through benchmarking results, which most providers claim can be done by leveraging their benchmarking and reporting capabilities. This approach is not new. A fact companies may be interested to learn though, is that all benchmarking and reporting features are not created the same.
There are several points that warrant clarification regarding benchmarking and reporting. The first point that should be explored is how benchmarking is construed. If a company engages a solution to replace a loosely coordinated series of disparate, ad-hoc procurement protocols with a centralized application, they are understandably pleased with the initial visibility the new program delivers. It can be very enlightening to procurement and management to see—with new clarity—where the money is being spent. Given that most providers tout their ability to generate regular spend reports enabled by the newfound visibility, a recent adopter generally touts how much their new solution saves quarter over quarter. This can lead to a false sense of success when not benchmarked against data that measures the company against the results of other companies.
While there is definite value in the more common singular level of reporting and benchmarking, it is essential to understand that in this common scenario, the client company is benchmarking its progress against its own previous performance. Much like a sprinter who measures her most recent race time against her own historic times, this kind of benchmarking and reporting shows a company how much it has improved (or deteriorated) against its prior performance. However, unless the sprinter measures her times against those of other runners, she has no real idea of her ability to compete against others on the track. Similarly, a company may be pleased to learn that its services procurement spend has been reduced by 14% over the last year. But if the rates being charged by suppliers are still 20% above existing market rates, the 14% reduction, while valuable, does not represent ‘best in class’ savings. It is easy to understand that there is far more value to benchmark against the market at large than it is to benchmark against prior internal performance.
One of Volt Consulting's major differentiators is clearly enunciated by this previous point and is illustrated by the fact that our company maintains the only multi-source, global data warehouse in the procurement services industry. Collecting data from all Volt Consulting programs and other widely accepted sources of market information enables our BI experts to show clients where their results measure up against a much broader background. The work of cleansing the data—making sure that accurate comparisons are being made among data collected from different organizations with different nomenclature—is difficult and time consuming. It is this daunting process that transforms raw data into actionable business intelligence. This explains why other providers of BI avoid diving this deeply into analytics. It is labor intensive and requires a dedicated team of experts and professionals to not only cleanse the data, but to assemble and analyze the data, resulting in meaningful conclusions. As Volt Consulting clients can attest, the potency of the results far outweighs the investment of time and effort put into delivering the content.
The second issue to consider with respect to the difference between benchmarking, reporting, and BI is that cost savings are not always the sole driver of a company’s decision to engage a solution provider. Most procurement officers will confirm that supplier performance is a huge concern. Most HR functionaries would agree that worker quality and workforce planning are among their most important concerns.
While there are some service providers that perform benchmarking based on supplier performance and candidate/contractor quality, it bears repeating that the reported results are merely measured against internal program data. While this can be effective in helping procurement and HR to elicit improvements in performance relative to their own program, it does not provide them with any idea of how well the same supplier may be performing for another company. Using the data warehouse to aggregate supplier performance and candidate/contractor quality data from across all programs, Volt Consulting determines how close a client’s suppliers (and the candidates/contractors they provide) come to approaching best in class.
As a final point, it is important to understand that data is information, not intelligence. Any chess player will tell you that besting the competition requires that you not consider the opponent’s next move, but rather their next five moves! Certainly, you can learn a great deal about your current position from reviewing the information around you. However, to determine where you need to be five steps from now requires foresight borne of intelligence. Intelligence entails more than simply reporting on what is happening. Intelligence gets at the far more important reasons why things are happening. Regression analyses performed as part of Volt Consulting's BI offering highlight the factors responsible for driving costs and quality upwards or downwards. Identifying the forces that effect cost and quality enables Volt Consulting's team of analysts to deliver a roadmap of specific, measurable actions necessary to fully optimize a client’s program. Business Intelligence is at the forefront of the future of service supply chain management and Volt Consulting MSP continues to invest heavily to remain the BI leader in the market.
Sincerely,
Larry D. Kaylor