Resource library Guide · Addressable spend

Addressable spend: key challenges and enabling technology

Mithra Apr 14, 2025 5 min read

In an ideal world, an organization's managed spend would equal its addressable spend. In practice, studies put the gap at about 20% for mature procurement organizations, and up to 50% for the laggards.

Before the gap, a quick refresher on the three definitions that matter.

Total spend

Every internal and external purchase relevant to procurement, including salaries, taxes and the rest.

Addressable spend

The portion procurement can influence and control, such as direct and indirect spend with third-party suppliers.

Managed spend

The portion of addressable spend actually managed through contracts and negotiation by the procurement team.

Total spend all purchases · internal + external Addressable spend what procurement can influence   Managed spend The gap, 20% to 50%
The gap is the opportunity. Managed spend should reach the edge of addressable spend. The shortfall between them 20% for leaders, up to 50% for laggards is where hidden savings and unmanaged risk both live.
0–0

of addressable spend goes unmanaged and in some organizations, total spend itself is still a mystery.

Six root causes of the gap

Researching the key drivers across multiple industries, we find six weighted contributors. The top three visibility, data quality and resources, are both the highest-impact and the easiest for procurement to act on directly.

1
Limited visibilityToo many data sources and pockets of spend across the organization
Highest impact
2
Poor data qualityAnd a lack of standardization across procurement processes
Highest impact
3
Limited resources & skillsToo few people, and gaps in the skill set, to do the work
Highest impact
4
Insufficient tools & systemsThat don't satisfy real procurement requirements
5
Limited IT budgetFor development and maintenance, against the dynamics of the business
6
Organizational structureThat limits procurement's influence in the first place

Collect all spend data, internal and external, then cleanse and classify it effectively with limited resources, and procurement can shift its energy to executing in the areas that generate real value.

Threats, and opportunities

The gap between total, addressable and managed spend isn't just lost or hidden opportunity, it's risk, especially around securing supply and meeting corporate compliance commitments. Both were sharpened by the COVID-19 pandemic and remain a concern across every industry.

IMPACT OF POOR SPEND VISIBILITY Hidden addressable spend Managed spend Addressable spend Non-addressable spend Visible Low business value Hidden Most risks & opportunities
The visibility iceberg. Managed spend is the small piece above the surface. The hidden bulk below, hidden addressable spend, then non-addressable spend, is where most of the risk and opportunity sits, exactly what poor visibility leaves untouched.
Increasing visibility doesn't only surface hidden opportunities, it's a proactive way to mitigate obvious, high-impact risk.

Depending on maturity and support, that visibility generates a healthy pipeline of projects and initiatives, so procurement keeps delivering constant value back to the business.

How Mithra helps

We've lived these challenges firsthand, which is why we built a solution tailored to procurement. It scans every area of your spend, across every source, in hours, with no IT effort, so you can identify savings and mitigate key risks fast.

Hours
To scan all spend across every source with no IT effort
0×
Faster than the traditional manual approach
1/10
Of the resources you would normally need

What to take from it

1

Close the gap that matters

Focus first on visibility, data quality and resources, the top three causes carry the most impact and are the most within reach.

2

Visibility is risk management too

Seeing all your spend protects supply and compliance, not just savings, a lesson the pandemic made permanent.

3

Technology removes the resource excuse

Scanning all spend in hours, at a tenth of the effort, turns a multi-quarter project into a starting point.

Want to see how much of your addressable spend is actually managed? Let us scan a sample and show you the gap. For the deep dive on the data side, read our follow-up on data harmonization.

Find the gap in your spend.

We'll scan a sample of your spend across every source and show you how much of your addressable spend is genuinely managed and where the rest is hiding.

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