by Robert D. Kugel CFA |
2/22/2008 | Article ID: M08-06 | Article Type: VentanaMonitor
Summary
The electronic spreadsheet is an extraordinarily versatile tool, but it has numerous shortcomings. As it approaches its fourth decade of use, however, alternatives are appearing that help users overcome these negatives. Until recently, people have had to work around spreadsheet issues because there were few practical alternatives. Those using spreadsheets for planning, budgeting, forecasting and analysis must deal with the limitations and productivity issues that happen whenever they involve multiple participants, products, business units and scenarios (which is to say, all of the time). Initially, these spreadsheets are simple enough to create, but they quickly become unwieldy as the inevitable changes occur. Software does exist that can address these issues – multidimensional tools and applications, for example – but almost all of these products require IT departments to get involved and users to undergo extensive training. Quantrix, a relatively new company, offers what it calls a “multidimensional spreadsheet.” Like the traditional desktop spreadsheet, this one, also called Quantrix, allows individuals to create models quickly. Yet it allows them to work easily in multiple dimensions, enabling finance and business users who have basic computer and spreadsheet skills to achieve significant gains in productivity, agility and insight that the spreadsheet models they now use cannot provide. We believe that finance organizations in particular should use the company’s free evaluation offer to get a sense of how this tool can complement and extend their use of spreadsheets.
Assessment
Over the past several years Ventana Research has been at the forefront of pointing to solutions that address the inherent shortcomings of electronic spreadsheets. Spreadsheets are used worldwide every day by hundreds of millions of people in organizations of all sizes, shapes and industries for almost any conceivable task. Yet it is precisely this versatility that pushes their use out of their sweet spot (as an ad-hoc, individual productivity tool) into areas where they fall short because of inherent technological limitations.
There are at least three important technology shortcomings of stand-alone spreadsheets: They lack referential integrity, they lack data integrity, and when they are used as a database, they have a flat file structure. For many tasks that people do with spreadsheets, these limits are unimportant. Unfortunately, as our research study “21st Century Spreadsheets” reveals, for the most important tasks that people do involving spreadsheets, they usually have negative, even risky consequences.
Spreadsheets fall short – sometimes significantly so – when it comes to managing the analysis and reporting of multidimensional data sets. When users depart from simple “unit times rate” calculations or when they need to examine a set of results from more than one perspective, they encounter difficulties, and the shortcomings noted above grow proportionately with the number of dimensions. And much of what happens in business involves multiple dimensions. The most common of these include time, business units, product lines, types of expenses and scenarios. The problem with using spreadsheets for tasks that involve multidimensional data sets – such as planning and forecasting or after-the-fact reporting and analysis – is not in setting up these spreadsheet models; spreadsheets are relatively facile when it comes to prototyping. However, spreadsheets quickly become unwieldy when one wants to make changes to assumptions that drive a forecast or plan or one wants to quickly analyze results from multiple perspectives (usually referred to as “slicing and dicing” data). For example, in information collected from multiple business units to produce a periodic plan, some cost elements are specific to each business unit (for example, costs that differ from region to region) while others are the same for all (such as shared components from a single supplier).
Companies typically take one of two approaches to working with multidimensional forecasting and analysis. Some use multidimensional tools or business applications from vendors such as Business Objects (now part of SAP), Cognos (now IBM) and Hyperion (now Oracle). Others simply adapt to the limitations of spreadsheets, usually because the individuals that could use the more advanced software find those tools too difficult to use or believe that their cost is too high relative to the perceived value.
Quantrix is a multidimensional modeling and analysis software tool that we believe average business people can learn and use without extensive training. (Of course, as with anything else, users will get back the effort they put into developing their skills in using the software.) They can apply the Quantrix software to forecasting, planning, budgeting and modeling in ways that can dramatically improve their productivity, agility and insight over performing these sorts of tasks using a spreadsheet. (It is less prone to error, too.) For example, when month-by-month product prices or commodity costs change, it is possible to make these adjustments once and have that ripple through all aspects of a model. Or when creating multiple scenarios, it becomes possible to look at the results of a specific product in a specific region to compare the outcomes of different scenarios side-by-side without having to regenerate the model multiple times. Quantrix also separates the business logic from the data itself. That is, users write their formulas outside of the cells, which substantially reduces the number of formulas they need to create and which in turn reduces errors and the amount of time needed to check and audit the model. This approach also allows modelers to make changes to the data or add new dimensions without having to laboriously modify the model each time.
Market Impact
Quantrix is a relatively new, still small company that can grow significantly larger if many midsize and large corporations adopt its software. It is unlikely to displace spreadsheets, which are too versatile and deeply entrenched. We doubt also that it will make much of a dent in the business of traditional BI tool vendors such as Business Objects, Cognos and Hyperion because it is not aimed at the enterprise IT market. In essence, the company is trying to develop a new market for an individual, multidimensional productivity tool. To be sure, others have tried to do this in the past with limited success (including Lotus with Improv in the 1990s and more recently WhiteLight). One of the most difficult challenges Quantrix faces to significant adoption is that spreadsheet users – especially those with advanced skills – are oblivious to their productivity problems. Like anyone with hard-won skills, many of them are reluctant to take to the time to learn new tricks. Moreover, we find many people in finance are so used to working with the flat-file orientation of spreadsheets that they don’t “get” multidimensionality.
Recommendation
Ventana Research believes Quantrix is a useful, cost-effective tool that can make finance and line-of-business organizations more productive when it comes to any modeling, planning, budgeting or analytical task of moderate or high complexity. Using its free trial offer and online orientation and training, people can quickly determine the potential for the software in their daily work. We recommend that they take advantage of this risk-free offer and decide for themselves.
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