It’s an understatement to say that the global economic recession has heightened focus of cost cutting and elevated the importance of spend management within most every organization. Yet, I have become increasingly troubled by the advice executives I speak say they are getting from vendors, analysts, or even their own IT departments when they ask how to resolve these challenges: “install software.” I am even more concerned with the recommended focus for these software investments: “get the best Total Cost of Ownership (TCO).”

There is much to be said for the process efficiencies and improvements enabled by software. And any smart shopper would want to secure needed technology at the lowest cost. Yet, blind faith in the power of enterprise software and a myopic focus on TCO is a dangerous concoction that can lead you further from your intended business result.

In fact, if I’ve learned anything from my decades of examining and supporting spend management strategies it is this: You will not achieve your savings targets and transformational goals with technology alone.

To be fair, I may have contributed to today’s prevailing technology myopia throughout my career as an analyst and, more recently, as a marketeer. And I certainly helped make TCO top of mind in my role as Software as as Service (SaaS) evangelist. Yet, as a reformed technophile, I’m here to testify that success in any business improvement initiative - whether meeting an aggressive supply cost savings target or streamlining your accounts payables process - requires the right combination of strategy planning, skills, and technology.

My experience shows that, when it comes to Spend Management, companies too often mistake the selection and implementation of technology as their objective. They focus on things like TCO and ROI. And, while those are important measures, they do not necessarily guarantee you will achieve your broader business objectives. In fact, you could easily secure the best TCO on your technology investment and still not move the needle on achieving measurable improvements in the business.

I was reminded of this recently when speaking with a prospect at a large U.S. company that had set out to cut supply costs by $80 million within 12 months. The company’s procurement group was convinced by consultants and their IT department that the solution to this goal was to deploy a Source-to-Settle software suite. IT indicated that many of these functionalities were included as part of their master ERP system license agreement. And the discussion quickly digressed to whether “free” software from their existing ERP vendor would have a lower TCO than a similar SaaS offering from a spend management specialist.

In my opinion, they were focusing on the wrong thing. While getting the most value for your IT investment is important, it won’t guarantee that you’ll meet your business objective. Instead, the right approach is to start by assessing any investment — whether in technology or people or consultants — by how well it can help you achieve your business objectives within your stated time frame.

In the case of spend management, the objective should to develop a savings enablement or spend transformation program that, while could be partly enabled by technology, is focused on achieving business results. For the above example, we recommended the following approach to achieve their savings goals:

• Devise a strategic plan to attack the categories where you can negotiate the best value agreements, enable them quickly, and drive compliance to ensure you realize your savings goals.
• Select and deploy the right solution footprint to improve controls and standardize efficient processes and compliance.
• Enable supplier content, transaction, and financial settlement to ensure sufficient spend coverage.
• Provide sufficient training and change management to ensure stakeholders both adopt and understand the value they get from the process.

This same value enablement methodology should be applied to any improvement program that is important to your business — from securing an managing an agile contingent workforce to improving cash flow.

In short, driving improvements in your business should be considered in the same vein as driving improvements in you personal life. Getting something at the lowest total cost is a noble goal, but it should not be confused with the intended objective. Whether you’re buying a treadmill to shed pounds and improve your cardio performance or buying a Source-to-Settle solution to keep your business lean and fit., your first order of business should be on solving problems and producing a measurable and beneficial result.