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Oracle continues to enrich the capabilities of its Hyperion suite of applications that support the finance function, but I wonder if that will be enough to sustain its market share and new generation of expectations.VI_Financialmanagement At the recent Oracle OpenWorld these new features were on display, and spokespeople described how the company will be transitioning its software to cloud deployment. Our 2013 Financial Performance Management Value (FPM) Index rates Oracle Hyperion a Warm vendor in my analysis, ranking eighth out of nine vendors. Our Value Index is informed by more than a decade of analysis of technology suppliers and their products and how well they satisfy specific business and IT needs. We perform a detailed evaluation of product functionality and suitability-to-task as well as the effectiveness of vendor support for the buying process and customer assurance. Our assessment reflects two disparate sets of factors. On one hand, the Hyperion FPM suite offers a broad set of software that automates, streamlines and supports a range of finance department functions. It includes sophisticated analytical applications. Used to full effect, Hyperion can eliminate many manual steps and speed execution of routine work. It also can enhance accuracy, ensure tasks are completed on a timely basis, foster coordination between Finance and the rest of the organization and generate insights into corporate performance. For this, the software gets high marks.

Unfortunately, this FPM suite remains more difficult to deploy and maintain than other vendors’ suites, and its user experience is becoming dated. As well, social collaboration is increasingly important in business, especially to fit specific requirements of the finance function, as I recently noted. Oracle understands that it must address changing user experience requirements as the baby boomers retire and are replaced by people who have fundamentally different expectations of how software is supposed to work. While there was plenty of evidence at OpenWorld that Oracle is taking steps to remedy this at a corporate level, it’s up to individual units to implement changes to their software portfolio, and it’s not clear that this is a priority for the Hyperion group. But in other areas, Oracle is busy addressing gaps in its FPM offerings. It is adding mobile enablement to Hyperion Financial Management and Planning, starting with an executive approval application to ensure that necessary signoffs can occur anywhere to speed the completion of routine work. To address the growing popularity of its cloud-based rivals, Oracle’s long-awaited Planning and Budgeting Cloud Service should be available by the end of 2013, providing budgeting, planning, collaborative forecasting and reporting as services to companies. And the company is offering financial and management and reporting in the cloud to streamline production and delivery of reports.

Hyperion still has the strongest franchise in the finance function, the legacy of achieving early market dominance in software for vr_fcc_financial_close_and_automationconsolidation, reporting, planning and budgeting. It succeeded because it gave the finance department autonomy from IT with applications designed by people who understood their needs. Hyperion offers a rich set of capabilities to automate the extended close cycle – all of the activities that start with the preclosing functions and continue through completion of external reporting. Our recent benchmark research on the financial close found a correlation between the time it takes a company to close and the degree of automation that it applies to the process. On average, those with a high degree of automation are able to close their books in 5.7 days, compared to 9.1 days for those that apply little or no automation. Oracle’s Financial Close Suite of applications is designed to enable companies to execute their period-end close faster and more accurately while requiring fewer resources. This is important because managing their close well is an issue for more than half of companies. Our research found that 61 percent of corporations take more than six business days to complete their quarterly or semiannual close (the consensus best practice is closing within six business days). Rather than achieving a faster close, which 83 percent of companies said is important or very important, the research found that on average it takes a day longer for companies to close than it took them five years earlier. In conjunction with better process design, using software to automate manual processes, manage all phases of process execution and limit the use of desktop spreadsheets is an effective way to shorten a company’s close cycle. Oracle’s Financial Management Analytics allows finance executives to closely monitor this extended close cycle.

One recent addition to Oracle Hyperion’s Financial Close Suite is Tax Provision. Accurately calculating and reporting direct (income) taxes is a time-consuming, labor-intensive process for almost all midsize and larger companies. I’ve written about the importance of using technology to bring the tax function into mainstream finance. There are two necessary IT elements to managing this process. One is ensuring that all of the data needed for provisioning and any subsequent audit is readily available. An option here is a tax data warehouse for companies that have a large number of legal entities and/or operate in multiple tax jurisdictions. Hyperion doesn’t have this capability. However, for companies that have less complex requirements or just want to simplify and centralize the gathering of tax data, it provides the second necessary element: an environment that manages tax data collection, improves the accuracy of the data and the calculations (by substantially reducing the need for desktop spreadsheets and rekeying of data from source systems) and automates data movement through configurable wizards. Especially in the quarterly and year-end accounting closes, numerous adjustments may take place that can affect the tax provision or changes in tax calculations that can have an impact on reported results. A tax provision application can speed up the back-and-forth adjustments, helping to shorten the accounting close cycle. It also can enhance the effectiveness of the tax function because those professionals will have more time to spend on analysis and optimizing a company’s tax position rather than wrestling with spreadsheets.

Oracle has added important new capabilities to its FPM suite since acquiring Hyperion. Expanding the suite has helped the company sustain its franchise in the face of determined competition from large to smaller sized software vendors such as IBMInfor and SAP, as well as smaller ones including Adaptive PlanningAnaplanHost AnalyticsLongview and Tagetik. The generational change that’s under way in corporations poses a serious competitive threat to Oracle. For finance professionals, word of mouth and brand loyalty count far more than “enchanted boxes” or “undulations”: That’s how Hyperion came to dominate the market. But times change, and Oracle is vulnerable because of the time and cost of deployment, ease of use and maintenance and user experience of its FPM suite. These were reflected in our 2013 Financial Performance Management Value Index. This year’s OpenWorld demonstrated that Oracle can pivot – albeit slowly – to address a rapidly evolving applications software market. With Hyperion it needs to focus more on addressing core competitive issues if it expects to sustain a leading market position.

Regards,

Robert Kugel – SVP Research

Back-office operations in commercial and investment banks are among those critical functions that are underappreciated until they stop working well. This includes transaction reconciliations and the related exceptions management. Reconciliations are necessary to achieve a reasonable assurance of complete and accurate record of trading activity. The process is especially challenging now, partly because of today’s high and growing volumes in the wide range of asset classes in which all larger financial institutions trade. Reconciliation is a necessary accounting function that has to be completed before external financial statements can be published.

I recently received an update on SunGard’s IntelliMatch Solution Suite, an application for handling reconciliation, exception management, financial governance and archiving processes that is used mainly by large financial institutions. While the software’s basic function is to manage reconciliations, two aspects of IntelliMatch – financial governance and trending and analytics for rules optimization – are worth noting because of their potential to increase the effectiveness and efficiency of a financial institution’s back-office operations.

Ideally, every entry in a financial institution’s transaction system will match up with its trading partners’ data and be internally consistent as well. In practice, this never happens because people make mistakes or omit information. To achieve the appropriate financial governance capabilities in a high-volume setting, reconciliation software must quickly and automatically identify where there are issues. When it finds these, IntelliMatch supports the follow-on actions by providing workflows and supplemental information users need to make the right decisions as well as preserve narratives and commentary about those decisions. Workflows automate the chain of reviews, approvals and attestations needed to complete the process. SunGard has added an option for a lightweight visual workflow management system so that non-IT people can easily configure (and reconfigure) these workflows to meet the dynamic requirements of the markets without having to wait for the IT department to do it. Although the bulk of reconciliation work is still done at the end of a period in batches, some financial institutions are using the process as a way to promote greater transparency of transactions, which can be used as a higher-level control to manage risk more effectively. Another benefit of the governance process is being able to speed up the end-of-period, post-close activities. SunGard expects its largest customers to be able to reduce this process from four to eight weeks to two to three weeks. 

Analytics are important capabilities of IntelliMatch, and SunGard is adding to the suite on an ongoing basis. With any application designed to collect data, there is considerable value for users to be able to analyze what’s there. General ledgers, for example, became more useful when business intelligence and analytics were added to provide dashboards and scorecards that help improve performance management. In the case of IntelliMatch, being able to look at, for example, the matching logic used in the reconciliation process can help determine if there are better methods or useful tweaks that can be applied to achieve a faster, higher-quality process. These sorts of analytics can be used to create alerts, assess individual and business unit performance faster and more accurately, improve the accuracy of plans and forecasts and, ultimately, fathom even complex trends in business flows.

One of the drawbacks of being underappreciated is that it seems to take a long time for back-office operations to get the kind of tools they need to improve performance, reduce costs and provide better information to executives. Over the decades, only a few senior executives have used their back offices strategically (for example, Citicorp’s John Reed and, with Peter Cohen, Sandy Weill) to build their business. Money saved in operations (in this case, by eliminating swaths of hidden costs) flows directly to the bottom line, rather than having to be shared with highly compensated bankers. And tighter governance will continue to pay dividends. Banks should regularly examine how to reduce the full life-cycle cost of processing transactions. IntelliMatch should be on their list of tools to consider when they do that.

Regards,

Robert D. Kugel – SVP Research

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