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Anaplan, a provider of cloud-based business planning software for sales, operations, and finance and administration departments, recently implemented its new Winter ’14 Release for customers. This release builds on my colleagues analysis on their innovation in business modeling and planning in 2013. Anaplan’s primary objective is to give companies a workable alternative to spreadsheets for business planning. It is a field in which opportunity exists. Our benchmark research on this topic finds that a majority of companies continue to use spreadsheets for their planning activities. Almost all (83%) operations departments use spreadsheets for their plans, as do 60 percent of sales and marketing units. Yet the same research shows that satisfaction with spreadsheets as a planning tool is considerably lower than satisfaction with dedicated planning applications. But despite general agreement in companies that the planning process is broken and spreadsheets are a problem, companies seem reluctant to break the bad habit of using spreadsheets. This conclusion suggests that either switching to dedicated software hasn’t been easy enough or that the results of doing it have not been compelling enough to motivate change. Anaplan intends to address both of these issues.
Anaplan designed its software to support business planning integrated across an enterprise in a practical way that’s an attractive alternative to spreadsheets. Its HyperBlock architecture is a hybrid of relational, vertical and OLAP databases with in-memory data storage and calculation. To translate that technology-speak into a plain concept, it’s easier than ever for those trained in spreadsheet modeling to transport their skills to a dedicated planning application. Anaplan simplifies the process of creating a planning environment that can be used by sales and marketing, finance, operations – any part of a company. Individual business units can create their plans without IT involvement. Customer companies don’t have to move all plans at once to Anaplan, but when they do, integrating all of the plans into a unified company view is straightforward.
The bulk of the changes in the Winter Release are aimed at refining and improving the user experience and facilitating model creation and updates. One of the most obvious changes is in the individual user interface, which opens up with “model tiles” representing each of the plans each individual has in his or her portfolio. It’s fairly typical for individuals to participate in multiple planning activities. Our benchmark research on business planning finds that, on average, employees participate in five sets of plans. Each of these may have multiple versions, and some may have subsidiary plans to a main plan. Some plans may be current while others are no longer used and are archived. The new interface makes it easier to organize this collection, making the most important plans readily accessible. This enhancement and others that will follow reflect Anaplan’s intent to incorporate ergonomics in the design of its software.
Choosing a model opens a dashboard relevant to the specific role of the user and the plan he or she has selected. Organizations can configure the layout of the dashboard, which provides high-level summarized information and different ways of navigating into and around the details in the plan. Navigation is now role-based to enable users to zero in on only those models and dashboards relevant to their function or role. Anaplan can be configured to drill down to specific items or transactions if necessary. Doing this in a multidimensional model is not always straightforward. An Excel add-in is a must for any planning application because it provides a familiar user interface that enhances productivity while eliminating the disadvantages of desktop spreadsheet, since the individual is working with a formal application and an advanced database environment. Anaplan’s Winter Release simplifies installation of the add-in. All of these enhancements go beyond a simple “consumerization” of business software – layering a snappy gloss onto software that remain tedious to use – to provide a more satisfying working environment.
Another notable addition in the Winter Release is “intelligent mapping,” a useful way for one person to create templates of components used in a model (say, all of the costs of adding a store, doing a marketing campaign or performing heavy maintenance on capital equipment) that others can use. Since organizations tend to handle most processes in much the same way, the operational and financial aspects of those processes are likely to be modeled in almost exactly the same ways. Being able to quickly copy a useful exemplar and easily customize it to an individual’s specific needs saves time. Moreover, making it simple to achieve consistency can improve the effectiveness of planning. Using intelligent mapping needn’t be the product of a conscious effort to create a template, either. An equally likely use is when someone looks at a plan created by another business unit and sees some component in that plan that’s useful to his or her model. Intelligent mapping makes it easy to copy and modify it to suit the need.
Effective collaborative planning is a structured dialog. Structured because it involves hard numbers and a dialog because it involves a back-and-forth exchange between executives and managers to mediate between the results desired and what’s feasible. Toward that end, Anaplan has added a capability in its models it calls a “hold,” which fixes one or more values in the model while the rest are adjusted. This simplifies the process of setting month-by-month, line-by-line objectives because it enables executives to impose selective constraints (minimum or maximum values such as sales by a product line or advertising expense) while adjusting assumptions quickly to assess whether the resulting changes are realistic. Fixing and releasing holds iteratively simplifies and shortens the process of assessing specific details to achieve a plan that is workable and agreeable.
For analysts that create or support planning models, the Winter Release adds a floating formula editor. This is a small but important element because it improves the productivity of modelers – typically a constrained resource in most companies.
The new release further advances Anaplan’s strategic objective to provide corporations with a tool that reduces the amount of effort needed for collaborative planning in any part of the business and enhance the value of this planning by better aligning business unit objectives with market opportunities. Our planning research finds that companies have many plans but, other than the annual budget, very little of it connected and coordinated. Anaplan focuses on collaborative business planning as a way to differentiate its offering from budgeting tools – a mature market with entrenched competitors. Its objective is supported by the underlying architecture of the software, which is designed to lower the barriers to switching from spreadsheet planning and budgeting as well as generating greater business value from a company’s planning processes.
Having said all this, I have to add that making it easier not to use spreadsheets is necessary but insufficient to alter corporate behavior. Companies need a business incentive to change. Anaplan’s use of in-memory technology provides that incentive because it adds considerable value to the planning process. Since the software can process even complex models with large data sets in seconds, in-memory computing can change the nature of planning, budgeting, forecasting and reviews. For example, the technology enables organizations to run more simulations during a planning or review session to understand trade-offs and the consequences of specific events. It can change the focus of reviews from what just happened to what to do next. Rather than relying on intuition or simplistic scenarios to make that decision, in-memory systems support structured, numbers-driven conversations to develop the details of a plan. This is the breakthrough to any planning or budgeting process that in-memory processing provides and a good reason for businesses to make the leap to more capable software.
Anaplan’s product doesn’t do everything. For example, companies that want all of the rigor that goes with a formal sales and operations planning effort should focus on applications dedicated to this process. And Anaplan doesn’t have all of the features that dedicated project planning software can provide. That noted, I recommend that companies that are looking for a dedicated application for general business planning and financial budgeting consider Anaplan. This is especially true if their objective is to have a planning environment usable by all parts of the business that can serve as the integration point for all business planning. We have found their customers have made significant progress to improving the modeling and planning which is why it received the 2013 Ventana Research Leadership Award. If you have not taken a look at Anaplan it is well worth your time.
Robert Kugel – SVP Research
Convergence is the Microsoft Dynamics business software user group’s meeting. Dynamics’ core applications are mainly in the accounting and ERP category, descendants of products Microsoft acquired: Great Plains (now GP), Solomon (SL), Navision (NAV) and Damgaard’s Axapta (AX), to which Microsoft has added its own CRM application. It has been more than a decade since the acquisitions of Great Plains (which itself had already purchased Solomon Software), and Navision, Damgaard and the software applications family has evolved steadily if slowly since then. More recently, Microsoft has added cloud services that simplify and improve the connection between remote users and the on-premises core systems, as well as integration with Office365.
Despite being one of the top five ERP software vendors with sales of about $1 billion, Microsoft faces several business and competitive challenges. It is selling into a fully saturated market for accounting and ERP software designed for midsize companies and divisions of larger corporations that have their own systems. Functional innovation in the core applications is difficult in this mature category where the essential functions long ago became commodities. Moreover, from small businesses on up, most companies already have financial systems in place and usually are reluctant to change them until it’s absolutely necessary.
The strategic issue confronting Microsoft and other accounting ERP software vendors is how to differentiate beyond core functionality in order to win sales, keep customers on maintenance and – even better – capture additional share of wallet through incremental sales of complementary software and services. Adding to the difficulty is the seismic shift taking place in the accounting ERP software market as companies increasingly choose to deploy this software in the cloud, where companies such as FinancialForce, Intacct, NetSuite, Plex and Workday, among others, are growing rapidly. Our research shows that more than half of companies are using cloud computing, and more intend to. An important segment of the ERP market is companies outgrowing entry-level accounting packages or replacing on-premises software. The costs of an on-premises system for a midsize business can be daunting, so the cloud can offer more functional and useful systems that are easier to manage and less risky to commit to.
To address its strategic challenge, Microsoft insists that it’s not just selling ERP software – its marketing message is that it is providing tools to run businesses better. So while ERP is the core technology for record-keeping and process management, the theme throughout the Convergence user conference was using the full range of available software to enable companies to grow their business, manage more intelligently and perform more efficiently. Microsoft CRM, the Web-based sales, marketing and social application that is a core part of Dynamics, was front and center in the opening day keynote. Since most people are trained and comfortable in Microsoft Excel and Word, Microsoft has been increasing integration of the Dynamics business applications with its Office suite and in particular its Web-based Office 365. The integration of Office 365 into the suite has made it possible for Microsoft to improve productivity by melding Excel spreadsheets into processes to give users the efficiency and convenience of working with a familiar tool while providing sufficient controls to ensure accuracy and auditability. For instance, it’s now possible for an accountant to create a list of journal entries in a spreadsheet and use that spreadsheet to automate the process of posting them into the system.
One consistent theme across the Dynamics family now is a roadmap with more frequent releases. Along with this, Microsoft is promising to make upgrades far easier to implement. Cloud ERP vendors stress the ease of their upgrades because they do all of that work. With almost all of the essential functionality already in place in the four core ERP packages that comprise Dynamics, product enhancements usually come down to nice-to-have features. For instance, the latest release of GP adds capabilities that simplify bank account reconciliations, allow companies to make adjustments to already closed ledgers based on subsequent auditor recommendations, to manage vendor IDs and to maintain multiple types of fixed-asset ID numbers so that those for, say, computer equipment are visibly different from ID numbers for plants and equipment or vehicles. They’re hardly earth-shaking but highly appreciated by those who do the work. However, one new capability that was noteworthy is the ability for a company to do a one-click backup to store its accounting ERP data in the cloud-based Azure storage infrastructure. Online backup addresses a key disaster vulnerability for on-premises systems because in practice the backups are rarely stored in a physically separate location. Moreover, not all companies are backing up their data daily so a one-click routine makes it simple enough for anyone to do.
Microsoft also plans to include a new applications and service framework (currently called Project Siena) in the upcoming release 3 of AX to make it easier for business users to create relatively simple mobile apps without having to do any coding. This is likely the blueprint for all future releases of Dynamics; it facilitates the creation of smartphone and tablet apps that coordinate and monitor a relatively short set of steps to, for instance, push or pull a limited set of data to and from individuals. If, as Microsoft claims, it will require only Excel and PowerPoint skills to quickly create useful mobile applications, that could be an important product differentiator.
Microsoft’s market position will continue to be challenged by the cloud ERP vendors as these companies build their installed bases on the advantages of subscription-based services over on-premises deployment as well as other functional advantages. For example, in addition to full and easy integration with Salesforce, FinancialForce has a set of professional services automation (PSA) components (such as integrating project management, and time and cost tracking with billing), making it an attractive option to the large number of midsize professional services companies, as I recently noted. Workday, which my colleague Stephan Millard reviewed, is especially appealing as an ERP system for industries that must manage large workforces.
It’s clear that cloud software vendors in this market have been growing faster than on-premises ones. In 2013, Dynamics revenues increased 10 percent, according to Microsoft, while NetSuite’s revenues were up 34 percent and Workday’s doubled. Still, Microsoft’s gain was greater than its most comparable rivals, Sage Software, which reported a 4 percent rise on the top line, and Infor, which had flat sales.
Microsoft has no direct sales channel for Dynamics, and its resellers have been slow to adopt the cloud. But market forces are likely to change this, so in the longer term, Microsoft may evolve into a hybrid cloud ERP vendor, offering customers multiple options on how to deploy its software. For companies of all sizes, deploying software in the cloud offers potential advantages, chiefly lower costs and increased efficiency. To begin addressing the need to have more of a cloud presence, the upcoming release of Dynamics AX will make it easier for resellers to deploy the software as a single-tenant instance using a Windows Azure-hosted service. It’s likely that the other Dynamics applications will follow shortly. The single-tenant approaches addresses many but not all of the issues in on-premises vs. multitenant cloud-based systems. For instance, companies do not have to invest in hardware, are able to scale computing capacity as needed and do not have to hire staff to manage and maintain IT assets. Yet the direct cost of ownership may be higher than for multitenant because that deployment method can offer economies of scale relative to a private cloud. Still, customers will have more options as to how the application is configured, and for some a private cloud may be the better one.
Like all user group meetings, this year’s Convergence had many success stories. These demonstrated intelligent use of enterprise software enabling midsize companies to be more competitive with larger rivals that have more resources while improving efficiency by automating more business processes that are now done manually. Companies that are confronting the limits of their aging accounting and ERP systems must think past the limits of their current system and understand what’s possible today. Midsize companies have more choices – and more affordable choices – than ever in choosing an ERP vendor. They should consider Microsoft Dynamics in selecting new software.
Robert Kugel – SVP Research