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Summary
Our research shows that most midsize companies (those with 100 to 9,999 employees) fall short when it comes to planning, budgeting and forecasting. Ventana Research believes that in part this reflects their dependence on desktop spreadsheets for the handling of these processes. We expect that forward-looking finance organizations in midsize companies will adopt on-demand software to manage planning and budgeting because it gives them the tools they need to increase the business value of planning without having to invest in software and hardware or allocate staff for the operation and maintenance of on-premise hardware and software. Adaptive Planning offers on-demand versions of its Express and Enterprise planning and budgeting software, as well as the option of on-premises licensing. We believe Adaptive Planning’s software can be an attractive choice for midsize companies that want to transition from spreadsheet budgeting but do not want to invest in more IT hardware and software.

Assessment
Adaptive Planning recently unveiled release 5.0 of its on-demand (sometimes referred to as software as a service or SaaS) budgeting, planning, forecasting and dashboard application, also named Adaptive Planning. The application is aimed at midsize companies that typically use desktop spreadsheets to manage these functions. While desktop spreadsheets foster individual productivity and make possible ad hoc modeling and analysis, they are problematic when used for repetitive collaborative functions such as budgeting, and in fact they are an obstacle keeping management from making the planning, budgeting and review cycle a more effective management tool. Our research shows that executives and managers want to improve the alignment of the budget with the company’s strategy, increase its accuracy and be able to do better “what-if” planning, but coping with the inherent failings of desktop spreadsheets wastes so much time that they are unable to focus on these improvements. Faced with time constraints, midsize companies often limit participation in the planning and budgeting process, limit iterations and are unable to make all but token changes to the formal plan as the year progresses.

Many midsize companies, however, cannot or do not want to invest in buying and maintaining a dedicated application. On-demand software requires no hardware or software installation or ongoing maintenance, making it well suited for midsize companies that typically have more limited resources than larger corporations. Although  [[Adaptive Planning requires more time, training and effort to set up than does spreadsheet-based budgeting, we assert that companies will realize an ample return on this investment by being more easily able to manage the effort and to make planning and budgeting an effective management tool.

The current release of Adaptive Planning adds to the usability and capabilities of the software. The new Modeled Sheets feature makes it easy to create and report on multidimensional models. This is important because business is about dimensions: products, market regions, organizational structure, time, currency and so on. Versions of a budget also are stored as dimensions,, so that it is easy to compare differences between all versions of a budget, such as aggressive and conservative versions, or the original and subsequent revisions. Desktop spreadsheets are limited in their ability to manage dimensions, which is one reason why they are inflexible budgeting tools. Modeled Sheets gives users the ability to manipulate dimensions while they plan, analyze and report without needing IT skills. The company also added a built-in allocations model to facilitate the process of allocating certain expenses (such as shared overhead items), and redesigned the interface to make it more like Excel to take advantage of the widespread familiarity of that software.

Adaptive Planning also is creating a best practices community for its users. Our benchmark research shows that most companies do not plan or budget well, often because their basic processes are relics of the paper-and-pencil era. We believe that making planning and budgeting not only more efficient but more effective requires rethinking process and business objectives as well as using the right tool. Having an ongoing community of peers can be helpful in enhancing the value of planning and budgeting. In July, the company will add online discussion groups and document repositories.

Market Impact
The most significant competitor of any dedicated planning and budgeting application remains the desktop spreadsheets most companies already rely on. Dedicated planning and budgeting applications were introduced decades ago, but it wasn’t until recently that software with this sophistication declined in price to the point where it met the total cost of ownership requirements of midsize companies. Partly for this reason, dedicated applications have not made significant market inroads; our research found that only about one-third of midsize companies use it. Adaptive Planning is up against a long list of vendors whose planning and budgeting software is aimed at midsize companies. Those that offer an on-demand solution include Host Analytics and NetSuite. Those that offer on-premises software include Alight, Business Objects – SAP, Clarity Systems, Infor and Whitebirch Software. Microsoft is slowly rolling out its PerformancePoint offering, which will deliver the benefits of Excel while eliminating some of the desktop problems but is yet to be validated in the office of finance. Oracle‘s Hyperion offers a hosted version of its planning software aimed at midsize companies; companies must purchase the software but it is implemented and managed by a third party).

Recommendation
We advise all midsize and large companies to replace desktop spreadsheet-based budgeting and planning with a process that uses dedicated software. In our judgment, companies that use dedicated applications are better able to transform a low-value exercise into a more effective process that can improve corporate performance and agility. Adaptive Planning has a product that meets the requirements of midsize companies that want to transform their planning process.