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May 8, 2015 in Business Analytics, Business Collaboration, Business Performance Management (BPM), Cloud Computing, Customer Performance Management (CPM), Financial Performance Management (FPM), Human Capital, Social Media | Tags: Accounting, UX | by Ventana Research | Leave a comment
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. 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.
Another 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.
Robert Kugel – SVP Research
February 25, 2015 in Big Data, Business Analytics, Business Performance Management (BPM), Cloud Computing, Customer Performance Management (CPM), Financial Performance Management (FPM), Operational Performance Management (OPM), Sales Performance Management (SPM), Social Media, Workforce Performance Management (WPM) | Tags: big data, Budgeting, capital spending, CFO, Controller, demand, Financial Performance Management, financial reporting, Forecasting, FPM, in-memory, Integrated Business Planning, marketing, Planning, predictive analytics, Reporting, S&OP, sales, sales forecast, spreadsheet, strategic, Supply chain, workforce | by Ventana Research | Leave a comment
Ventana Research recently released the results of our Next-Generation Business Planning benchmark research. Business planning encompasses all of the forward-looking activities in which companies routinely engage. The research examined 11 of the most common types of enterprise planning: capital, demand, marketing, project, sales and operations, strategic, supply chain and workforce planning, as well as sales forecasting and corporate and IT budgeting. We also aggregated the results to draw general conclusions.
Planning is the process of creating a detailed formulation of a program of action designed to achieve objectives. People and businesses plan to determine how to succeed in achieving those objectives. Planning also serves to structure the discussion about those objectives and the resources and tactics needed to achieve them. A well-managed planning process should be structured in that it sets measurable objectives and quantifies resources required to achieve them. Budgeting is a type of planning but somewhat different in that is financially focused and is done to impose controls that prevent a company from overspending and therefore failing financially. So while planning and budgeting are similar (and budgeting involves planning), they have different aims. Unlike budgeting, planning emphasizes the things that the various parts of the business focus on, such as units sold, sales calls made, the number and types of employees required or customers served.
Integrating the various business planning activities across a company benefits the senior leadership team, as I have written by enabling them to understand both the operational and the financial consequences of their actions. There are multiple planning efforts under way at any time in a company. These plans typically are stand-alone efforts only indirectly linked to others. To be most effective, however, an individual business unit plan requires direct inputs from other planning efforts. A decade ago I coined the term “integrated business planning” to emphasize the need to use technology to better coordinate the multiple planning efforts of the individual parts of the company. There are good reasons to do this, one of which is accuracy. Our new research reveals that to be accurate, most (77%) planning processes depend to some degree on having access to accurate and timely data from other parts of the organization. For this reason, integrating the various planning processes produces business benefits: In our research two-thirds of companies in which plans are directly linked said that their planning process works well or very well. This compares favorably to 40 percent in those that copy planning data from individual plans to an integrated plan (such as the company budget) and just 25 percent of those that have little or no connection between plans.
Technology has been a major barrier preventing companies from integrating their planning efforts. Until relatively recently, joining the individual detailed plans of various departments and functions into an overall view was difficult because the available software, data and network capabilities were not sufficient to make it feasible and attractive to take this approach. To be sure, over the past decades there has been steady progress in making enterprise systems more accessible to ordinary users. But while dedicated planning software has become easier to use, evidently it’s still not easy enough. The research reveals that across the spectrum of corporate planning activities, three-fourths of organizations use spreadsheets to manage the process. We expect this to change over the next several years as the evolution in information technologies makes dedicated planning software a more compelling choice. One factor will be enhanced ease of use, which will be evident in at least two respects. Software vendors are recognizing that a better user experience can differentiate their product in a market where features and functions are a commodity. Ease of use also will extend to analytics and reporting, making it easier for business users to harness the power of advanced analytics and providing self-service reporting, including support for mobile devices. The other factor will be the ability to make the planning process far more interactive by utilizing in-memory processing to speed calculations. When even complex planning models with large data sets can be run in seconds or less, senior executives and managers will be able to quickly assess the impact of alternative courses of action in terms of their impact on key operating metrics, not just revenue and income. Having the means to engage in a structured conversation with direct reports will help executives be more effective in implementing strategy and managing their organization.
Technology is not the only barrier to better planning. The research demonstrates the importance of management in the process, correlating how well a planning process is managed with its accuracy. The large majority (80%) of companies that manage a planning process well or very well wind up with a plan that is accurate or very accurate. By contrast, just one-fourth of companies that do an adequate job achieve that degree of accuracy and almost none (5%) of those that do it poorly have accurate or very accurate results. Additionally, managing a planning process well requires clear communications. More than three-fourths (76%) of companies in which strategy and objectives related to plans are communicated very well have a process that works very well, while more than half (53%) with poor executive communication wind up with a planning process that performs poorly. And collaboration is essential to a well-functioning planning process. Most (85%) companies that collaborate effectively or very effectively said that their planning process is managed well, while just 11 percent of companies that collaborate only somewhat effectively expressed that opinion.
Collaboration is essential because the process of planning in corporations ought to get everyone onto the same page to ensure that activities are coordinated. Companies have multiple objectives for their planning processes. Chief among these is accuracy. But since things don’t always go to plan, companies need to have agility in responding to changes in a timely and coordinated fashion. In a small business, planning can be informal because of the ease of communications between all members and the ease with which plans can be modified in response to changing conditions In larger organizations the planning process becomes increasingly difficult because communications become compartmentalized locally and diffused across the entire enterprise. Setting and to a greater degree changing the company’s course requires coordination to ensure that the actions of one part of the organization complement (or at least don’t impede) the actions of others. Coordination enables understanding of the impact of policies and actions in one part of the company on the rest. Yet only 14 percent of companies are able to accurately measure that impact, and fewer than half (47%) have even a general idea. Integrated business planning address that issue.
In most organizations budgeting and operational planning efforts are only loosely connected. In contrast, next-generation business planning closely integrates unit-level operational plans with financial planning. At the corporate level, it shifts the emphasis from financial budgeting to planning and to performance reviews that integrate operational and financial measures. It uses available information technology to help companies plan faster with less effort while achieving greater accuracy and agility.
For companies to improve competitiveness, their business planning must acquire four characteristics. First, planning must focus on performance, measuring results against both business and financial objectives. Second, it must help executives and managers quickly and intelligently assess all relevant contingencies and trade-offs to support their decisions. Third, it must enable each individual business planning group to work in one central system; this simplifies the integration of their plans into a single view of the company and makes it easy for planners in one part of the business to see what others are projecting. Fourth, it must be efficient in its use of people’s time. Success in business stems more from doing than planning. Efficient use of time enables agility, especially in larger organizations.
Today’s business planning doesn’t completely lack these features, but in practice it falls short – often considerably. Senior executives ought to demand more from the considerable amount of time their organization devotes to creating, reviewing and revising plans. They should have easy access to the full range of plans in their company. They must be able to engage in a structured dialog with direct reports about business plans, contingency plans and business unit performance. Information technology alone will not improve the effectiveness of business planning, but it can facilitate their efforts to realize more value from their planning.
Robert Kugel – SVP Research