Companies usually have no trouble spending money. But managing what amounts to widely dispersed and often invisible spending presents a challenge to any CFO. At even the best managed companies, ad hoc spending can run rampant.

Technology promises a solution, although even the need defies easy categorization. You’ll find it labeled spend management, procurement management, e-procurement, e-sourcing, contract lifecycle management (CLM), supplier performance management, supplier network management, or, best yet, accounts payable-electronic invoice presentment and payment (AP-EIPP). And the tools often are buried within large, more cumbersome products, like ERP systems.

Both Gartner, with its Magic Quadrant for Sourcing Application Suites, 2008, and Forrester Research, with its Predictions 2009: ePurchasing Market, have tackled this subject.

The Forrester report estimates that the market segment will grow at 3 percent in 2009 to $3.5 billion. It attributes the modest growth to the global recession and weak credit market conditions, which tend to pull down demand for licensed software products in general.

The report identifies Emptoris and Ariba as the market leaders, while enterprise suite vendors like Oracle and SAP begin to make inroads into the market, encroaching on the smaller players. Forrester seems more bullish on e-sourcing SaaS vendors.

Automated spend management should be required for the finance department in every company. It provides significant benefits that result in real, hard-dollar savings by allowing companies to:

• Aggregate buys to get best volume discounts;

• Efficiently handle multiple suppliers;

• Provide information and analysis to negotiate better deals;

• Reduce the associated paperwork and processing;

• Achieve accurate insight into spending patterns.

Ultimately, it gives the CFO clear visibility into spending — who is spending, how much, with which vendors, and at what price.

As Forrester notes, there is a simpler way to handle the spend management problem through SaaS and the cloud. Ketera Technologies, for example, has set up what amounts to an online catalog combined with a variety of SaaS applications. A company can then direct all its spending through Ketera, either buying at prices Ketera has arranged from its broad selection of vendors or at previously negotiated prices with its own preferred vendors. A fully hosted SaaS solution, Ketera targets larger companies, those often attracted to SAP’s procurement components or Ariba.

Smaller companies may prefer Expense Watch, a SaaS spend management company focused on the SMB market. It provides applications for expense reporting, purchasing, and AP invoice management. It automates the spend process, applies controls, and enables visibility into company spending — what’s been paid, and the purchases, invoices, and expense reports waiting to be approved or paid.

Many vendors offer spend management in some form. SpendMatters, a blog, focuses entirely on spend management. With the advent of the cloud and SaaS, no company should be without some form of spend management. ###