Predicting predictions...
David Rae
3 Comments
2010 may still seem like a long way away, but already the predictions and forecasts are beginning to come in. Perhaps it's because it's budget time that people tend to start looking forward rather than back.
Spend analysis company Rosslyn Analytics is the latest company to have dusted down its crystal ball to produce five predictions for 2010.
It believes that data extraction tools will surge in popularity as companies look to leverage their existing investments in ERP systems. This is a solid argument - there are many organisations that have already pulled out of expensive ERP consolidation projects, so the ability to extract information from a sea of meaningless data cost effectively is a compelling argument.
There followed other, pretty lack-lustre predictions - including that proof of a tangible return on investment will be demanded by those investing in spend analysis solutions (one would certainly hope so...)
But the final prediction, that predictive analytics will become the must-have tool for finance and procurement professionals grabbed my attention. Apart from the fact that Rosslyn finds itself in the rather odd position of predicting predictions, the power of predictive markets shouldn't be under estimated or ignored.
"Advanced analytics are helpful, but it's not enough in today's economic environment. Organisations need predictive modelling tools in order to proactively manage costs, supplier relations and corporate risk, all of which affects our bottom line," the company says.
The Procurement Leaders Network launched its own predictive markets product earlier this year, you can check it out here.
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Reader Comments (3)
1) What topics are worth predicting in the procurement world? Purchase volumes and prices come to mind, but do procurement staffs really need to accurately predict these data? My experience in the travel procurement world is generally "No". Buyers are equipped to negotiate a wide range of products and associated volumes, regardless of the prevailing price.
Most travel suppliers do not contract for specific volumes, at least not to the extent of putting penalty clauses in place if volumes are not met. This tells me that using predicted prices and volumes may be nice, but not necessary, to know.
2) How confident can one be of any of these predictions? It's quite easy to make predictions, but much harder to be right, especially as the time horizon gets longer. In order to accurately predict volumes and prices even a few months out, wouldn't one need to forecast pretty much the entire economic activity for the buyer's firm? And to do that, wouldn't one need to forecast the economic environment for the firm's industry?
At some point you have to wonder about the juice-to-squeeze ratio. How much effort (and cost) is needed to make reasonably accurate - and valuable - predictions about future volumes and prices?
I'm all in favor of analyzing data, but from a (travel) procurement perspective, I'd rather analyze historical data and leave the predictions to the economists and commodity traders.
Scott Gillespie,
Author
Gillespie's Guide to Travel Procurement
http://gillespie411.wordpress.com
I am not sure whether it would in line with above prediction but it certainly gives present spend analysis market in right perspective.
I found this report from purchasing.com site