IBM Cognos Express for Integrated Planning in Midsize Companies
April 23, 2010

I have been advocating that companies adopt Integrated Business Planning (IBP) as a way of improving their planning and budgeting processes in every part of the business. Integrating planning should be a priority for companies right now. Corporations will need to manage their way carefully through the emerging global expansion to maintain profitability and handle risk effectively and yet, at the same time, seize business opportunities. Traditional planning can leave a company a half-step behind; integrated business planning enables your company to stay one step ahead. Having the right software to support IBP is a key requirement because using desktop spreadsheets (the most common software used for planning) makes it too difficult to perform planning, analysis and reporting in an integrated fashion. Midsize and even some larger companies rely heavily on desktop spreadsheets because they think that this is all they can afford or because they think they do not have the IT staff to support dedicated software. That may have been true in the past but today I recommend midsize companies (those with between 100 and 999 employees) and even some larger ones look into is IBM Cognos Express.

Companies do a lot of planning but very little of it is truly integrated. Ventana Research finds that individuals at the executive or management levels on average participate in 4 or 5 plans. The one most consistently take part in is the budget. For this reason it serves as the de-facto integrated plan. However, budgeting is not the same as planning. Budgeting is necessary for financial control but it falls short. You budget so that you don't fail, but you plan to succeed. Both are essential but I assert planning is a better way.

Integrated business planning software requires seven basic sets of capabilities. First, the system must be the central repository where all planning data is kept to facilitate rapid integration of all plans. Second, people must be able to assemble plans for their part of the business in a way that reflects the business needs of their part of the business. Budgeting is finance-focused; it plans in currency terms. Those outside of the finance department are more likely to think in terms of things: units of output, tons of raw materials, number of full-time equivalents in specific grades and so on. Third, companies need the ability to instantly translate those "things" into monetary terms in a consistent and controlled fashion. You may want the HR department to set pay and benefit assumptions and have everyone use them. This ensures that at as these assumptions change, all plans are updated consistently. The same applies to commodity prices or exchange rates. Fourth, people preparing plans need access to historical information and tools for analyzing that information as well as market trend data to help them plan more accurately. Fifth, executives and senior managers must be able to challenge assumptions and see the impact of changes right away. They need the ability to do more extensive detailed contingency planning than is feasible today using desktop spreadsheets. Sixth, they must be able to integrate actual data quickly to facilitate variance analysis. Seventh, they must have reporting tools built into the system that allow managers to create reports that present the data they need to see in the proper context. These tools ought to enable exception based reporting and give users the ability to drill down to low levels of detail to determine the exact cause of a variance. Such a tool can be used in review meeting to facilitate creating action plans to address such variances.

IBM Cognos Express offers all of these capabilities in a package designed to fit the needs of midsize and even some larger companies. It combines software for planning and budgeting, reporting, performing analysis as well as creating and managing dashboards and scorecards in a pre-configured package designed to be relatively easy to install and maintain. It offers an Excel interface that provides the best of both worlds. It has a familiar look that is easy and comfortable for users but unlike standalone desktop spreadsheets it is connected to a database to automate data consolidation and control as well as facilitate analysis and reporting. Pricing has been set with mid-size company's budgets in mind. The company also offers a 30-day free trial (although we always caution that such trials always involve a serious time commitment to get a real feel for the capabilities of the system). The offering is built on the TM1 64-bit server which means that people can do extensive, complex business modeling and contingency planning.

Over the past three years companies have found that their annual budgeting process has not served them well. The rapid, substantial changes in the economy and markets of all kinds rendered these budgets obsolete from the start. Now that the business outlook is improving, it's important that companies begin to integrate their planning activities to enhance forward-looking visibility, increase agility in responding to changes and improve the accuracy of their plans and budgets. You could try to do this using desktop spreadsheets but ultimately you will find that there simply isn't enough time to accomplish this.. Spreadsheets can do just about anything, but ultimately take too long to make them a practical tool. Or you could simplify your company-wide planning and budgeting effort to a level that spreadsheets in the time allotted However, it's unlikely that executives and managers in your business would be satisfied with the result because it won't have sufficient detail to be a useful management tool. Alternatively you can have it all - a planning and budgeting tool that looks and behaves just like a spreadsheet but which also addresses all of the problems posed by desktop spreadsheets. And one that already has reporting and analytic capabilities built in. I think you'll find that the money invested in a dedicated integrated planning tool such as IBM Cognos Express is well worthwhile because it will transform planning and budgeting into a much more effective management tool.

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Robert Kugel CFA - SVP of Research



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