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The developed world has an embarrassment of riches when it comes to information technology. Individuals walk around with far more computing power and data storage in their pockets than was required to send men to the moon. People routinely hold on their laps what would have been considered a supercomputer a generation ago. There is a wealth of information available on the Web. And the costs of these information assets are a tiny fraction of what they were decades ago. Consumer products have been at the forefront in utilizing information technology capabilities. The list of innovations is staggering. The “smart” phone is positively brilliant. Games are now a far bigger business than motion pictures.

VR Logo Bug Square BufferYet few business users are tapping the full potential of today’s systems. Most organizations have been slow to integrate IT innovation into their core processes. Companies have made considerable investments in information technology, but their business methods have been slow to adapt to the resources available. For instance, software for incentive compensation software and for planning and budgeting has made it possible to improve these processes, but most companies manage compensation, budget and plan in much the same way they did decades ago. To be sure, it’s much easier for individuals to adopt new tools for themselves than it is to align groups and executives in corporations to change proven approaches – even mediocre ones. But it’s also the case that business software must make it easier for individuals to realize more of the potential of information technology. And this part of the evolution of business software is only beginning. This is the context in which I took note of two emerging capabilities of IBM’s business software. One is its Concert user experience software and the other its emerging application (not yet officially named) designed to make advanced analytics more consumable. These are two important capabilities IBM highlighted at its recent Insight user group meeting and Big Data and Analytics analyst summit.

Integrating processes and data across a business has long been a challenge for IT departments. Some decades ago the issue of “islands of automation” emerged as companies implemented stand-alone business applications one by one to perform some function but then realized that it would be handy if these could share data and manage processes from start to finish. Initial progress toward this goal was made in the form of applications such as ERP that offer integrated functionality and enterprise data stores, although these often were difficult to implement and complex to maintain. Lately, software vendors have been refocusing to provide users with ways of facilitating end-to-end process management and making data more accessible.

IBM Concert is such an attempt. Announced in November 2013, it is a user interface IBM designed to be the central touch point across multiple applications and data stores. (It’s possible to link Concert to other vendors’ software, but it’s unlikely that a company would buy it on its own to link other applications.) It’s meant to replace menu-driven interactions between the user and the system with “I want to do this process” and a “day in the life” approach to organizing how individuals access applications and data. IBM Concert is an example of how we are only now beginning to achieve the longstanding objective of having IT systems conform to the user’s needs rather than the opposite. On a single screen Concert organizes personal task lists and presents metrics, conditions and dashboard elements configured to an individual’s preferences so the user can easily monitor conditions and enable more management by exception. Users can organize the data they need to support a given process right in front of them rather than having to go to some other application to fetch that data.

IBM Concert also has a social component that provides the ability for users to collaborate in context. Social applications generally have improved organizations’ connectedness. They offer greater immediacy than “copy all” email, greater inclusiveness than chat software and better communication in a mobile and geographically dispersed workforce. Initially, social applications took a broadcast approach similar to an unfiltered Twitter feed but as I pointed out at the time, that wasn’t a useful approach. As anyone who has used Twitter during an event can attest, the volume of messages quickly exceeds one’s ability to pick out the important ones. Moreover, not everyone wants to share information broadly, especially, for example, finance departments. Concert by contrast “understands” the area in which the individual is working and connects him or her to the conversations of others who are part of the group that needs to collaborate on that specific task. Users also apply hashtags to add a specific context to the message.

I think that Concert has the potential to become the nexus of business people’s computing environments and a sidekick that helps them stay organized and informed, get alerts, collaborate, find answers and explore their workday world.

Both at Vision and again at the Big Data and Analytics analyst summit, IBM previewed Project Catalyst Insight which is a not-yet-named application that is a significant advancement from its SPSS Analytic Catalyst software. Making big data and analytics more useful and consumable by the white-collar workforce (and even some of the blue collars) would be provide a major boost to organizational performance. By itself, a mass of data is not especially useful, and there are significant challenges to teasing out insights from large data sets, especially when that requires sophisticated analytical techniques. Another as-yet-unnamed application from IBM is designed to make big data and analytics more consumable and more useful. Typically large volumes of data are now accessible mainly to those with Ph.D.s in statistics or otherwise highly trained. The main objective of this project is to package advanced analytics routines for use, after limited training, by ordinary business analysts working in any department in any industry.

Big data has always been with us; it is just a question how much “big” is. Today the term refers to data sets so large and complex that organizations have difficulty processing them using standard database management systems and applications. Technology for handling big data has crossed a threshold, becoming more capable and cost-effective. Companies can now to tap into much larger amounts of structured and unstructured data. Big data has potential – and potential pitfalls – for improving a company’s performance, as I have noted. Big data is of little use unless organizations have the ability to use analytics to achieve insights not available through more conventional techniques. The ability to sift through large quantities of business-related data rapidly could set in motion fundamental changes in how executives and managers run their business. Properly deployed, big data can support a more forward-looking and agile management style even in very large enterprises. It will allow more flexible forms of business organization. It can give finance organizations greater scope to play a more strategic role in corporate management by changing the focus of business reviews from backward-looking assessments of what just happened to emphasis on what to do next.

vr_NG_Finance_Analytics_14_innovative_companies_adapt_betterThe challenge for many companies is that big data and advanced analytics are not readily consumable. Our research on finance analytics finds that fewer than one-third (29%) of companies use big data to support their finance analytics, even though this technology can handle the flood of data into today’s businesses and can help produce more useful analytics and advanced techniques. Although analytics is essential to finance departments, their focus remains on the basics. Fewer than half (44% each) use the proven newer techniques of predictive analytics and leading indicators. Nearly three out of four (73%) do not assess relevant economic or market data and trends, and fewer than half assess customer and product profitability; any of these could make analyses more relevant to the overall success of the company. The ability of finance organizations to master analytical techniques – especially advanced ones – ought to be a priority for senior executives because our research shows a correlation between competence in utilizing big data and analytics and the ability to adapt quickly to changing business and economic conditions.

IBM SPSS Analytic Catalyst Insight is designed to make it easier for business users who are not trained statisticians to create predictive analytical models just by answering a few preliminary questions about what they want to accomplish using the data. The new incarnation with IBM Project Catalyst Insight aims to simplify the process even further to bring it into the reach of a wider set of business users. It does so by packaging a range of standard routines that would be applied to data sets and providing even more guidance to analysts and even some business managers that know what they want to know but have a limited grasp of the analytical techniques necessary to find meaning in a mass of data. If IBM can create an application that enables more business users to utilize predictive analytics and other advanced analytical techniques, it would represent a big step forward in making big data a useful tool for many more functional areas than it is today.

Both IBM Concert and the new business analytics tool called Project Catalyst Insight “to be officially named later” reflect IBM’s strategy of achieving product differentiation in a rapidly evolving software market. The first decades of packaged business applications were characterized by a race to create new categories and load them with distinguishing features and functions. In the next decade competitive advantage will fall to software vendors that – in addition to features and functions – can provide business people with a user experience that is easily molded to how they naturally work. IBM Concert is a useful first step that is likely to be further refined. The new analytical environment derived from IBM SPSS Modeler and SPSS Analytic Catalyst Insight looks and sounds like a good idea, and it will be interesting to see how it develops when it is generally available.


Robert Kugel – SVP Research

Longview Solutions has a longstanding presence in the financial performance management (FPM) software market and was rated a VI_FPM_Hot_VendorHot vendor in our most recent FPM Value Index. Several years ago it began offering a tax provision and planning application. I think it’s worthwhile to focus on the tax category because it’s less well known than others in finance and is an engine of growth for Longview. We expect larger corporations increasingly to adopt software to manage direct (income) taxes to improve the quality and efficiency of what today in most companies is an inefficient, spreadsheet-driven process.

Longview’s tax offering consists of four main components. Its Tax Data Platform can be the central repository of a corporation’s tax information. I’ve commented on the need to maintain tax data separate from the data that’s used for financial reporting, managerial accounting and performance management. One reason is that tax accounting must be aligned with legal entities, not corporate organizational structures, because direct taxes are levied on legal entities, not corporate divisions or reporting hierarchies. A second is that tax data must be held in an “as was” state, without regard to subsequent corporate actions such as acquisitions and divestitures or management reorganizations. Longview’s Tax Data Collection software consolidates book and tax data from disparate source systems; it is designed to automate and streamline the movement of data and eliminate time-consuming manual work. It can do consolidations in different, parallel paths if dissimilar methods of consolidating tax-related data are required by the statutes of individual taxing authorities. The Tax Provision/Reporting component performs global tax accounting and reporting. And Tax Planning supports a company’s analysis and planning of its taxes.

Software vendors are taking two different approaches to dedicated tax management software. One mostly focuses on the needs of the finance department: It automates and simplifies incorporation of already calculated tax data into the financial consolidation and close process. This is useful for companies that operate in up to a handful of tax jurisdictions and have relatively simple legal entity structures. The other approach addresses the needs of the tax department as well as the rest of the finance organization. Longview’s tax offering falls into the latter category because it provides the functionality and data-handling capabilities that tax departments need to streamline their operations, enhance their ability to manage tax expenses and improve senior executives’ understanding of tax exposures and strategies to deal with them.

Longview’s tax software can replace desktop spreadsheets, which are the most common tool used for direct tax provisioning and planning in companies of all sizes. Spreadsheets are the wrong choice for managing taxes because they are so time-consuming. Tax vr_fcc_tax_insightdepartments use them to make often complex tax calculations, manage tax data and direct tax processes – these are tasks that dedicated software can handle easily but spreadsheets cannot. They are not well equipped to do these tasks quickly and accurately on a consistent basis. Consequently, facing looming deadlines, tax departments have little if any time left over to analyze and plan tax exposure and tax expense options more broadly and more intelligently. Spreadsheets also do not provide sufficient transparency or forward visibility in a timely fashion in the way that a dedicated system can. Spreadsheets make it difficult for companies to manage their tax risk exposure in a consistent fashion across all business units. They do not give executives sufficient insight into their risk exposure options. Our research on the financial close finds that a majority (53%) of finance executives believe that having better understanding of and deeper insight into their company’s tax positions would enable them to reduce their tax expense.

There are several other reasons why desktop spreadsheets are the wrong choice for handling taxes strategically. One is that tax laws and regulations are so fiendishly complex. For example, some countries have industry-specific statutory reporting requirements (for example, for insurance companies and other financial services). Tax calculations for subsidiaries in one country may not apply to those required for a regional headquarters or the parent company. There may be multiple tax rates applicable to a given legal entity and multiple bases or methods on which to apply each tax rate. Moreover, because book accounting for taxes and actual tax calculations almost always differ in multiple ways, it’s necessary to record and track these differences. Since rules, rates and assumptions will vary from year to year, it becomes necessary to adjust these differences. Desktop spreadsheets lack the dimensionality, data integrity and referential integrity necessary to be able to manage this level of detail easily. Dedicated tax management systems are designed to do it.

One reason why tax departments lag in adopting new tools is that until recently the technology necessary for managing the full range of requirements in direct tax analysis, provisioning and compliance was not mature enough for the organizations that needed it the most. Until recently, corporations that operate in multiple, worldwide jurisdictions with even modestly complex legal entity structures overtaxed the ability of IT systems to support them. However, using dedicated software for direct tax management enhances the efficiency of the tax department, enabling it to become more strategic and contribute to improving the company’s results.

Adopting a more strategic approach to managing direct taxes is an emerging trend in finance organizations, but it’s still at an early stage. Tax compliance is usually the main (and overwhelming) focus of tax departments. Most do this essential work reasonably well, but compliance is a tactical issue. To elevate tax management to a strategic level, tax and finance executives must have greater visibility into tax data and how operational decisions affect tax exposures. For example, finance and tax executives may construct a tax-optimized approach to transfer pricing, but their strategy may not be implemented if the company’s incentive compensation system is not aligned to this strategy. Operating managers in high-tax jurisdictions will try to maximize revenues because that’s what they’re rewarded for, even if it results in higher taxes than are necessary. Using spreadsheets is a significant barrier to tax departments taking a more strategic role in their company. When direct taxes are managed using desktop spreadsheets, there rarely is time for organizations to do much more than basic compliance. There’s usually not time to discover the fundamental disconnects between tax strategy and reality or other, similarly strategic activities such as analyzing and assessing the tax implications of long-term corporate plans.

vr_fcc_tax_effectivenessIndeed, one sign of the tax function’s lack of strategic impact is its invisibility. There is a general lack of understanding of how the tax department functions, even within the finance department. For example, our research discovered that nearly two-thirds of finance executives (and, specifically, 60% of CFOs and controllers) do not know how long it takes their tax department to calculate tax liabilities.

Another reason is the relatively low status of tax departments in their company, which we can gauge through the distribution of titles and relatively low compensation for the highly credentialed individuals in these departments. Those that work in tax also tend to be tight-lipped and reluctant to reveal that their processes are time-consuming and difficult to manage, lest they be viewed as less than competent. The tax department’s invisibility contributes to a lack of focus on direct taxation by senior management, which also diminishes an understanding at that level of the potential benefits of investing in technology. Companies that are most likely to want to improve how they manage their direct taxes appear to be the ones where a senior finance department executive has spent time in tax and therefore has a firsthand appreciation for the challenges.

I’ve commented on the need to make tax more strategic. An increasing number of companies are finding that investing in dedicated software to improve the performance of their tax department is worthwhile. It gives them a deeper understanding of how best to manage what is usually one of their biggest expenses and enables them to make more optimal decisions about taxes. I recommend that all larger companies look into the benefits they can achieve by making their tax department more strategic and that they investigate dedicated software such as Longview’s that can enable them to have such a strategic tax function.


Robert Kugel – SVP Research

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