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Recently, Infor held its second innovation conference with industry analysts at its New York City headquarters. Infor’s products include the major categories of ERP, human capital management and financial performance management applications. Behind the marketing aspects of its use of “innovation” is a business strategy for retaining existing customers, migrating a sizable percentage of those customers to the cloud and gaining new customers. (Because of the relative size of the installed base, renewals and migrating customers to the cloud are likely to be more important to Infor’s future revenues than adding new customers.) I think it’s useful to assess the content of the event in the context of the company’s business strategy.

To echo what I wrote last year, the company’s aim is to accelerate revenue growth by offering companies a lower and more predictable cost of ownership than its rivals in the business software market as well as innovation that improves productivity and organizational effectiveness. Infor is trying to innovate by focusing on improving the user experience and lowering its customers’ costs through its software design and architecture. One of the most important aspects of Infor’s approach to innovation is rethinking how users work with its software by simplifying and streamlining user interfaces, adding collaboration–in-context capabilities and providing a modern user experience (UX) akin to what people have grown accustomed to in their personal software. After two decades of development, the bulk of the core features and functions of most business software, especially ERP, have become commodities, which is why UX is increasingly important in vendor selection.

Infor adopted its current strategy because the software markets it serves are mature and offer limited growth using the traditional on-premises, perpetual licensing model. Our benchmark research finds that companies are keeping their ERP systems longer than they did a decade ago – on average 6.4 years vs. 5.1 years.vr_Office_of_Finance_01_ERP_replacement Migrating existing customers to cloud services will enable Infor to increase annual revenues from them. It can charge more than it currently bills for maintenance and still offer existing customers an all-in cost that is at or below their  total cost of ownership for the on-premises software. A software-as-a-service (SaaS) approach eliminates the need for customers to operate and maintain the software, and it minimizes the need for third-party consultants and systems integrators to set up, update and modify the application. A significant portion of Infor’s installed base is entities in verticals such as higher education and government that traditionally have underinvested in IT equipment and staff. They are likely to find a SaaS offering an attractive option because of improved performance and even responsiveness to user issues. Infor also will benefit if its SaaS customers buy additional capabilities, adding “edge” application services such as expense management or planning.

Meanwhile, almost everything that Infor – or for that matter any vendor – does to make its software an attractive option for a multitenant environment has the potential to lower the cost of ownership for an on-premises customer. For example, eliminating the need for customization is a prerequisite for any multitenant SaaS offering, but it also reduces the cost of buying and maintaining software that will be deployed on-premises or in a private cloud. Infor’s ION architecture simplifies application and data integration for cloud and on-premises customers.

To achieve superior cost-effectiveness for all customers and make it suitable for use in a multitenant cloud environment, Infor has redesigned its software to be more configurable and reduce the expense of integrating and customizing it. One component of this is building in richer functionality for narrowly segmented micro-verticals so that buyers do not have to pay a consultant to create customizations to provide these necessary capabilities. To lower the total cost of ownership, it has been building multitenant cloud versions of its software (currently there are 33 business-specific offerings) and 15 CloudSuites that automate industry-specific core processes from end to end. Another contributing factor to a lower cost of ownership is Infor’s use of less expensive open source infrastructure and third-party commodity services, which provides savings that can be passed on to the customer.

Innovation in general and a focus on the user experience are essential to the success of Infor’s strategy because they improve the company’s ability to sustain high customer renewal rates and provide a differentiated offering that can enable it to gain market share in adding net new customers. Of course, “user experience” is a bit of a buzz word. When applied to business computing it covers the totality of the effects of an individual’s interactions with the software. Assessing some aspects of the UX are quantifiable (for instance, the number of clicks and screens required to execute a task), while others such as the user’s alertness, attitudes and emotions when using the software are far more subjective and (thus far) usually difficult to quantify. Because the totality of the user experience depends on a variety of elements, many of which are not quantifiable, and – even with the same individual – can vary widely according to context and circumstances, this remains an inherently fuzzy term. Yet, to paraphrase a Supreme Court justice writing of obscenity, we know a good personal user experience when we see it. User experience is not just a pretty face. Data availability, for example, is a constraint that defines the capabilities of any business application. Infor’s ION architecture is designed to facilitate data integration to broaden and deepen the scope of information that its systems can present to individuals as they perform business functions. The user experience in business software involves a more complex set of factors than in smartphone apps; it’s not just the graphic design. Having an information architecture that facilitates collecting and combining all or most of the data to present to a user in a business process can provide a differentiated UX.

To achieve a differentiated user experience, Infor’s Hook & Loop internal design studio has been working for several years to overhaul the design and organization of the screens in Infor’s applications to improve the mental ergonomics of working with business software. Among the more obvious changes have been the reduction of clutter, better graphics and easier navigation. In general, improving the user experience builds on decades of research to better understand how people work with software and therefore how to lay out screens and page flows to make interactions more pleasing and efficient.

vr_Office_of_Finance_16_next-generation_technologiesAnother element of the user experience is how individuals are able to collaborate. Because business is an inherently collaborative process, collaboration capabilities are important to the productivity of business software. Infor’s Ming.le collaboration platform is designed to deliver collaboration in context; that is, the software must be “aware” of what an individual is doing and can provide ready access to the specific colleagues whom the user may need to contact at that moment. This approach is superior to instant messaging and email because the work product is easily incorporated in the discussion. For example, if there is an issue with an invoice, the underlying data about it is viewable and searchable. The discussions around the invoice are saved so that if later some other issue arises about that invoice, the original discussions are readily available to anyone who has permission to see them. That noted, initially Infor may find it difficult to convince finance departments of its utility. In our research only 16 percent of participants said that collaboration features in software will affect performance. This may be because in their initial marketing of collaboration features vendors focused on Twitter-style feeds or a Facebook-style approach that broadcasts widely. As I’ve noted, this style is inappropriate for many parts of a business, especially finance and accounting. However, I expect that as companies use collaboration in context it come to be viewed as an indispensable capability.

The evolution of the user experience is under way, and we believe it will be an increasingly important source of competitive advantage and product differentiation in business applications over the next five years. Smartphones and other mobile devices have opened the eyes of many people to the possibility of being delighted by software, even in accounting and shop floor applications. The next generation of UX will promote the longstanding objective of having software that readily adapts to how individuals work rather than forcing individuals to adapt to the limitations of information technology.

I’ve been covering Infor’s transformation from its inception. The company has made significant progress in creating software that is more efficient to operate, supports better visibility and insight into how a business is performing, is easier to manage and has a lower cost of ownership. It is also setting the bar for improving the business software user experience. That noted, Infor is still a work in progress in a dynamic market with well-financed competitors, and its long-term success will depend on a steady stream of innovations in addressing the requirements of its targeted microverticals, affordability and the user experience.

Current Infor customers should look into whether it makes sense for their company to migrate its existing on-premises applications to the cloud to lower the total cost of ownership or improve software performance. Those considering purchase of ERP, HCM and performance management software should have Infor on their list of vendors to consider.

Regards,

Robert Kugel – SVP Research

Adaptive Insights held its annual user group meeting recently. A theme sounded in several keynote sessions was the importance of finance departments playing a more strategic role in their companies. Some participating customers described how they have evolved their planning process from being designed mainly to meet the needs of the finance department into a useful tool for managing the entire business. Their path took them from doing basic financial budgeting to planning focused on improving the company’s performance. This is one of the more important ways in which finance organizations can play a more strategic role in corporate management, an objective that more finance organizations are pursuing. Half of the companies participating in our Office of Finance benchmark research said that their finance organization has undertaken initiatives to enhance its strategic value to the company within the last 18 months.

We believe that presenting its software as an aid to make the planning process more strategically valuable is a product strategy that is essential for the long-term success of planning software vendors. It was a theme in Adaptive Insights’ recent release of its Adaptive Suite and revenue planning software.

vr_ibp_planning_software_provides_faster_answers_updatedCompanies do many kinds of planning, not just budgeting. They plan sales, they determine what and how they will produce products or deliver services. They plan the head count they’ll need and how to organize distribution and the supply chain. They also produce a budget, which itself is a financial plan. The planning process involves discussions about objectives and the resources and tactics that people need to achieve them. Our benchmark research finds that dedicated applications are more effective tools for planning than are desktop spreadsheets (which nevertheless are still the most widely used technology for planning). For example, dedicated planning software is more able to get to underlying causes behind variances immediately during a performance review meeting. Users can apply the information that’s in the application when reviewing results and adjusting goals and objectives to reflect changes that have taken place in the business. The research shows that organizations that use dedicated software more often can get to the underlying details of the difference between plans and actual results and therefore are more able to make fast decisions about what to do next. Spreadsheets are inherently less capable of drilling down into underlying details.

Adaptive Insights has a suite of planning, analysis, reporting and consolidation applications that mirror the evolution of the business planning category. I coined the term “integrated business planning” more than a decade ago to describe an approach to planning that brings together financially focused budgeting and forecasting activities with various stand-alone functional planning efforts. The objectives of this approach are to provide senior executives with a comprehensive view of future expectations for their business; to set a baseline for performance measurement; to assess performance relative to these baseline objectives; and to periodically adjust objectives and resources in a coordinated, strategic fashion as conditions evolve. Integrating the business planning activities of the various functional groups within a company is best accomplished by providing a single planning environment in which each group can plan its part of the business the way it prefers, compare its actuals to plan using preferred analytical methods and easily report and communicate results within the group. Each planning process can be loosely coupled in that the cadence, items, measures, dimensions and other planning elements fit the needs of that specific part of the business. At the same time, because all planning takes place in a single environment, it’s easy to bring together the necessary information from each of the individual business unit plans to create a consolidated, forward-looking view of the company. It’s also easy to provide control and consistency across planning units by ensuring, for example, that all plans use the same projected benefits costs, commodity prices, exchange rates and other elements that will affect all parts of the organization. Our benchmark research on next-generation business planning finds that companies that integrate their planning by directly linking plans get better results: Two-thirds that have direct links said they have a planning process that works well or very well compared to 40 percent that copy and paste information and just one-fourth that have little or no connection between plans. Well-executed planning is the best way to get everyone onto the same page to ensure that the company is organized in executing the plan. Setting and to a greater degree changing the company’s course require coordination. It enables understanding of thevr_NGBP_02_integrated_planning_works_better impact of the policies and actions in one part of the company on the rest of the company. Information technology has the potential to make business planning more useful, and to help improve a company’s performance and increase its competitiveness.

From a financial management standpoint, it’s essential to be able to project pro-forma balance sheets and cash flows. When all operational planning is feeding the core business model, the future state of a company’s balance sheet and cash flow can be more realistic than when it is only loosely connected. Moreover, it’s possible to quickly and accurately compare the impacts of various operating scenarios on the company’s finances, assess the impacts of various financing alternatives and project how different capital market conditions will affect the company’s overall financing costs across multiple operating scenarios. All of this is possible using spreadsheets, but doing so is far more time-consuming (and therefore impractical) and potentially much less accurate.

Another reason why a dedicated planning application a better planning environment than desktop spreadsheets is that it facilitates the separation of planning into things and the financial aspect of those things: a unit-times-rate structure. While financial planning focuses on money, the rest of the business plans mainly in terms of things: units produced, head count at various pay grades, tons of raw materials and production yields, to name just a few. Having the ability to model units and currency amounts separately makes it far easier to measure performance in ways that are meaningful to each part of the business. In its most simplistic form, it helps planners determine immediately and unambiguously whether variance between the plan and actual results was driven by units, a price or cost variance or both.

Our research on enterprise use of spreadsheets shows that companies that use spreadsheets for forecasting, planning and budgeting usually spend much more time in analyzing and reporting results than users of more appropriate tools do. Dedicated software automates this process, enabling finance departments and other functional units to spend less time on repetitive tasks while providing accurate and consistent information to executives and managers. Adaptive Insights recently added to its suite Office Connect, which facilitates creating and updating reports in Microsoft’s Excel, Word and PowerPoint vr_NGBP_09_spreadsheets_dominant_in_planning_softwareapplications, enabling departments to operate more efficiently and speed the availability of performance reports. For example, using the software, standard monthly tables and charts can be instantly updated each month to speed the production of spreadsheets, narrative reports or presentation decks for monthly board meetings.

I have long advocated the use of dedicated planning applications rather than desktop spreadsheets for handling planning processes. The inherent technology limitations of spreadsheets make them a poor choice because they consume time needlessly and prevent organizations from being able to forecast, plan, analyze and replan effectively. Yet spreadsheets remain the leading technology used for planning. Our recent planning research finds that, across 11 different types of business planning, on average seven out of 10 companies use spreadsheets. I recommend that all midsize and large companies consider replacing spreadsheets with a dedicated planning application that provides a unified environment for planning across the entire enterprise. Midsize companies and midsize divisions of large enterprises should consider Adaptive Insights for this role.

Regards,

Robert Kugel – SVP Research

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