by Robert D. Kugel CFA |
10/27/2008 | Article ID: M08-39 | Article Type: VentanaMonitor
Summary
Many small and midsize businesses (SMBs) have struggled to implement company-wide performance management that extends across finance and operations. While they need as much as larger companies do a disciplined process for understanding, optimizing and aligning their actions and decisions, typically they have been hampered by limited IT resources. Our research shows that most SMBs rely on desktop spreadsheets for planning, performing recurring analyses, reporting, creating scorecards, budgeting and other finance-related activities. While spreadsheets can be an excellent tool for many business and finance activities, they are inherently unsuited to repetitive, collaborative company-wide tasks such as these. Until recently SMBs were in a bind because many couldn’t afford to purchase or operate dedicated performance management software packages. Today, however, they have the option of using on-demand solutions from providers of software as a service (SaaS). One supplier we advise SMBs (as well as smaller divisions of large corporations) to investigate is Host Analytics. It offers a full suite of performance management software and the option to select (and pay for) only the capabilities your company wants instead of buying it all upfront and then working through the implementation.
Assessment
The Host Analytics Corporate Performance Management (CPM) suite offers an integrated set of applications for scorecards, planning, budgeting, forecasting and consolidation. By combining a central data repository with workflow and other process management features, the CPM suite enables companies to eliminate reliance on stand-alone spreadsheets to run these core performance management processes. As a result, companies can budget and forecast faster, which saves time and makes it easier for individuals to work collaboratively. This capability in turn can increase the agility of budgeting and forecasting and make these processes more responsive to shifting needs and external conditions. Host Analytics’ sales forecasting component enables companies to keep this information up-to-date for planning and budgeting purposes as well as make it more accessible wherever it is needed, such as to people in Sales and Finance. Our research shows that people can pull together a financial consolidation considerably faster when they use a dedicated application rather than a spreadsheet. If your company takes more than five days past the end of the month or quarter to close the books and report results (or if doing so consumes most of the finance department’s time), you should automate the process.
While spreadsheets are great for doing ad-hoc analysis, they become increasingly inefficient and ineffective when used for recurring business and financial analysis. They are inefficient because they demand too much time from those preparing them – time those people could spend on more productive work. Spreadsheets are also notoriously error-prone (especially when reused). Checking for errors and then correcting them delays distribution of the information, which can diminish the effectiveness of the analysis.
Because Host Analytics CPM stores all of the needed information in a central database, companies can produce consistent reports covering a range of financial and management information requirements, and they can automate the process of pulling together dispersed information into reports and making them available to anyone in the company. Host Analytics also offers a scorecard through which individuals can see how well they are doing relative to their strategies and related key performance indicators.
Host Analytics also offers three options for purchasing its service, so companies can pay only for what they need. The basic Team Edition includes planning and budgeting. The Standard Edition adds scorecarding capabilities and a flexible online analytical processing (OLAP) reporting tool. To those features the Enterprise Edition adds revenue planning, customer forecasting and product forecasting, which can be used for integrated business planning. It also offers statutory financial consolidation capabilities. Because it is an on-demand service accessed over the Internet, the CPM suite can be a practical alternative to buying and installing software on your company’s premises. On-demand limits the up-front investment and may provide savings in the total cost of ownership. Because the software is available on the Web, users can access it at any time from anywhere. This feature can be especially useful for companies with multiple locations or a mobile workforce. On-demand vendors typically offer infrastructure capabilities that reduce the hassles of ownership such as automatic upgrades, automated backup and disaster recovery.
Market Impact
Ventana Research expects adoption of on-demand performance management software to continue to grow over the next several years. Host Analytics competes directly with companies such as Adaptive Planning, which also sells a on-demand performance management suite, and those that offer on-premises products for SMBs such as Alight Planning and Prophix. In cases where a smaller division of a large company may be looking for its own solution, Host Analytics could be competing with vendors that aim at larger companies such as Cognos, an IBM company, Oracle Hyperion and Business Objects, an SAP company. Some larger midsize companies may also consider Microsoft’s PerformancePoint, but we expect only a small portion of the market to choose to deploy PerformancePoint in the next several years due to its lack of direct channel availability and its technology complexities. In fact, we expect Host Analytics’ main competition to be reluctance to change and the inertial tendency of companies to continue in the way they have been operating with older systems or spreadsheets. Regardless of the many flaws of spreadsheets, most SMBs remain wedded to them. We believe companies increasingly will recognize the inherent faults of spreadsheets for performance management analysis, budgeting and so on, but this evolution will be slow in the near term.
Recommendation
Ventana Research advises SMBs to consider replacing spreadsheets for planning, budgeting, forecasting, review and reporting with an on-demand performance management application. In our judgment, desktop spreadsheets obstruct companies’ progress toward achieving their full potential because they waste time and cannot provide the kinds of insight people need to manage performance effectively. In the quest to supplant spreadsheets and provide a dedicated set of capabilities for business, one of the vendors we recommend for consideration is Host Analytics. Ventana Research believes that performance management is a set of dedicated business and management processes that requires the investment of resources, time and technology to achieve optimal performance.
Related Research Notes:
Planning for Price Volatility
Traditional Budgets and Plans Fall Short When Prices Change Rapidly
Make Sales Forecasting and Demand Planning More Effective
Addressing Accuracy, Collaboration and Strategic Alignment for Improvement
Quality Time for Planning and Budgeting
Companies Need To Focus on What Matters Most
Make Faster Closing a Reality
Providing Actionable Information Sooner Can Improve Performance
When CFOs Should Consider SaaS
Increasing options are attracting finance organizations
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