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October 16, 2013 in Business Analytics, Business Performance Management (BPM), Financial Performance Management (FPM), Social Media | Tags: Accounting, Analytics, benchmark, Budgeting, Business Analytics, Business Intelligence, CFO, Chief Financial Officer, CIO, close, closing, Cloud Computing, Compliance, Consolidation, Controller, data, driver-based, ERP, Finance Financial Applications Financial Close, Financial Performance Management, financial reporting, Forecasting, FPM, GAAP, Hyperion, IFRS, in-memory, Integrated Business Planning, mobile, modeling, multinational Oracle, Oracle, Planning, Price optimization, process management, Profitability, report, Reporting, SEC Software, spreadsheet, strategy, Tax, tax department, tax optimization, tax planning, XBRL | by Robert Kugel | Leave a comment
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. 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 consolidation, 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 IBM, Infor and SAP, as well as smaller ones including Adaptive Planning, Anaplan, Host Analytics, Longview 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.
Robert Kugel – SVP Research
November 30, 2012 in Business Analytics, Business Collaboration, Business Performance Management (BPM), Cloud Computing, Customer Performance Management (CPM), Financial Performance Management (FPM), Information Management (IM), Operational Performance Management (OPM), Sales Performance Management (SPM), Social Media, Supply Chain Performance Management (SCPM), Workforce Performance Management (WPM) | Tags: big data, CEO, CFO, cloud, Cloud Computing, complex event processing, customer, ERP, in-memory, mobile, PaaS, SaaS, Social Media | by Robert Kugel | 2 comments
I recently started a series of blog posts on what CEOs (and for that matter, all senior corporate executives) need to know about IT. The first covered the high-level issues. As I noted there, it’s not necessary for a CEO of a company to be able to write Java code or master the intricacies of an ERP or sales compensation application. However, CEOs must grasp the basics of IT just as they must understand basic corporate finance, the production process and – at least at a high level – the technologies that support that process. This installment is about four supporting technologies that will be drive considerable change in business computing over the next five years. Each of these subjects is worthy of a chapter-length discussion or even a book; what follows is the “elevator pitch” version.
The cloud is a general term for computing capability that is not physically located on a company’s premises and that is purchased as a service, typically for a monthly charge. The name comes from the use of a cloud shape to represent the Internet in network diagrams. The two types of cloud computing that businesses typically purchase are software as a service (SaaS) and platform as a service (PaaS). The former typically allows a company to access application software and a database. Companies can use PaaS as a means to create a custom application without having to invest in and manage the underlying hardware and software or provisioning the hosting capabilities needed to run and manage the application on their premises.
Cloud computing is a hot topic because it has been reshaping – and will continue to reshape – information technology and how business uses it. The cloud gives users more options for how, where and when to engage technology and information. It is transforming how users interact with computing devices – the so-called consumerization of business computing. It is altering the economics of selling and consuming computing power, applications, intellectual property and information. In so doing, it’s enabling new business models, new products, improved business processes and making a greater range of business relationships practical. And, as such, it’s making some existing business models and methods obsolete.
Unfortunately for executives, too little of the discussion of cloud computing to date has focused on business value and promoting better understanding of where cloud computing is – and is not – the right choice. Instead, the discussion has been dominated by marketing agendas and techies debating the finer points of technology, which only promotes confusion. Our benchmark research into business data in the cloud confirms that companies achieve cost savings and process efficiency by adopting cloud computing, and that these are major reasons why companies use this technology. Moreover, for many midsize and smaller companies, applications in the cloud can provide more sophisticated computing capabilities than they could afford in an on-premises deployment. Two notable examples are ERP systems and internal call centers as an alternative to outsourcing this important function.
Cloud computing is not about to replace traditional on-premises deployments, which still can be the best approach. But cloud computing creates opportunities and threats that CEOs and all senior executives need to understand so they are able to make the right decisions for their companies.
Big data is a term that begs the question, “How big is big?” The answer is: any data set so large and complex that it’s difficult or impossible to process it with existing tools in a reasonable amount of time. There are three dimensions to big: volume (the number of bytes), velocity (the speed with which data must be moved) and variety (the number of types of data). Big data has become an issue because businesses are generating an accelerating amount of usable information, and even more useful information exists outside of a company’s walls than within it. At the same time, data processing systems no longer limit organizations to using mainly (or only) structured data; that is, the type that exists in formal databases. Advanced techniques make it possible to mine social media to gauge sentiment or parse audio files to rapidly uncover unhappy customers. Industrial data from sensors in machinery and at every point along a supply chain gives organizations greater insight into ways to improve efficiency and respond faster to changing environmental and business conditions. Our big data benchmark research found the top benefit for the technology, cited by three-fourths of organizations (74%), is to allowing companies to retain and analyze more data. Big data can be an important resource for companies, but it’s equally important to recognize the importance of good data management practices. Failure to institute appropriate practices simply results in “big garbage in, big garbage out.”
In-memory databases and processing use main memory rather than hard drives for data storage, which enables much faster response times. In-memory computing can make analytical applications much more interactive in working with very large data sets, which in turn enables analysts in every part of the business to work faster and smarter. According to our benchmark research in-memory technology is fast becoming mainstream. It is already being used in one-third of organizations and another 17 percent plan to deploy it within 18 months. In-memory is also at the heart of complex event processing (CEP), which can be used by sales, marketing and customer service to identify and make sense of information collected in disparate systems in order to enhance market responsiveness. In financial services, CEP already supports sophisticated algorithmic trading strategies and risk management. Executives also can benefit from in-memory computing, because it can transform a monthly budget review into a much more collaborative, interactive and forward-looking activity. Instead of focusing mainly on past events, organizations can make changes to forecasts, examine the impact of alternative future actions and immediately see how the changes affect revenues, expenses, cash flow and the balance sheet. Most companies don’t do that already because with systems that use disk storage, it can take minutes, hours, days or even weeks to get answers back from even a straightforward business question.
Mobile devices have grown in importance since the introduction of the first Compaq Portable PC in 1983. Mobile devices like smartphones and tablets have become pervasive in business computing. According to our recent business technology innovation benchmark it is the third most important area for technology innovation after analytics and collaboration. Today, people walk around with powerful computing devices in the form of tablets and smartphones, which enables more people to interact with business computing systems anytime and anywhere. They eliminate the barriers to smoother operations that exist when people have to get back to their desks to get information, execute a process, pass along information or make a decision. Mobile computing is especially important for front-office workers in areas such as sales and field service, because these individuals are often mobile, out of the office and beyond the firewall. It’s also valuable for executives, because these individuals often manage by walking around. Being able to summon up data or charts in the middle of a conversation and perform analyses makes any discussion and decision-making more fact-based and rigorous.
CEOs and senior executives must have a basic understanding of these four core technologies and how they will affect each part of their businesses. Everyone running a company must find the time to better understand and manage the information technology dimension of their business. Over the past 60-odd years, IT has grown in its importance to the daily functioning of a business, and increasingly has become a means of competitive differentiation. IT is a major element (and in some companies the major component) of capital spending. Technology continues to advance, bringing threats and opportunities. CEOs must stay on top of how IT can serve their businesses.
Robert Kugel – SVP Research