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Host Analytics has introduced AirliftXL, a new feature of its cloud-based financial performance management (FPM) suite that enables its software to translate users’ spreadsheets into the Host Analytics format. I find it significant in three respects. First, it can substantially reduce the time and resources it takes for a company to go live in adopting the Host Analytics suite, lowering the cost of implementation and accelerating time to value. Second, it enables Host Analytics users who have the appropriate permissions to create and modify models and templates that they use in planning, budgeting, consolidation and reporting. This can enhance the value of the system by making it easier to maintain. Third, it can make it far easier to routinely collect and connect planning and analytical models used by all departments and business users as it has outlined in its planning cloud offering. Although it has limitations in its initial release, AirliftXL gives corporations a workable alternative to stand-alone spreadsheets and has the potential to substantially increase productivity and effectiveness of an organization in the full range of budgeting, planning, consolidation and reporting functions.
AirliftXL addresses a fundamental issue that diminishes the productivity of companies, especially finance departments. I’ve noted in the past that desktop spreadsheets are indispensable tools for individual tasks and ad-hoc analysis and reporting, but they are poorly suited to repetitive collaborative enterprise-wide functions such as planning, budgeting, consolidation and reporting. Spreadsheets are seductive because so many people are well trained in using them that they can translate their ideas into even complex models, do analysis and create reports. However, the productivity that spreadsheets afford in authoring is more than offset when they are used over time. Desktop spreadsheets have fundamental technological shortcomings that make them unwieldy for any repetitive, collaborative task. After more than a few people become involved and a file is used and reused, cracks begin to appear. Very quickly, a large percentage of the time spent with the file is devoted to maintaining and updating them, as our spreadsheet research has shown with up to 18.1 hours per month in maintenance that I have analyzed. Spreadsheets are notoriously error-prone. In addition to monetary losses, some of which have been spectactular, there is a drag on productivity as users try to locate the source of errors and discrepancies that routinely occur in spreadsheets and then fix those mistakes.
AirliftXL enables ordinary users to create spreadsheet models and reports in Microsoft Excel and then quickly convert these to the Host Analytics enterprise system. Those that “own” a model, analysis, report or process can control these in Host Analytics. This speeds the process of setting up Host Analytics because there’s no need for someone to “translate” the company’s current set of spreadsheet models, analyses and reports. This cuts the time (and therefore the cost) of setting up the new system.
It also means that whenever changes need to be made, those responsible can make the changes themselves. Allocations and analytical models used in planning and consolidations can become part of a company’s system almost immediately. These alterations can be effected by “exporting” the Host Analytics object to a spreadsheet, modifying it and uploading back to the system. As well, users can create new models, analytics and reports in Excel and import them into the Host Analytics system. There’s no need for resident expertise or consulting time to make such changes. AirliftXL provides an organization with the best of both worlds: first, the up-front productivity that comes from enabling the author, a subject-matter expert, to quickly translate his or her ideas into a spreadsheet and, second, the ongoing productivity that is achieved when the plan, analytic model or report is kept in a centralized, easily accessible and controlled environment. These same authors can update and expand their analytical models or reports. Host Analytics can render models back into an Excel spreadsheet and the owner – not a consultant or trained IT person – can make the necessary changes and then upload them back into the system. This is an important capability because change is a constant in businesses and these changes must be reflected in financial performance management systems.
Organizations have hundreds, sometimes thousands, of spreadsheets circulating that support a multitude of processes and users in every department and business unit. AirliftXL can help incorporate them into a controlled enterprise software environment. Information that today is kept in one part of an organization can be viewed and used by others. Budgets and integrated business plans can quickly incorporate the most up-to-date information. Complex models now held in spreadsheets can be more controllable, consistent and safely accessible to a wider group of users. Creating links across individual spreadsheets (say, sales forecasts prepared by the sales organization and a company income statement forecast prepared by Finance) is straightforward, although linking to external data sources (say from a spreadsheet to a relational data store) is a little trickier. As well, Excel’s built-in financial, statistical and logical functions are all maintained in Host Analytics.
AirliftXL has the potential to be an important differentiator for the company. IBM Cognos has had something like this in Cognos Insight but from my analysis it is not as easy to use as the Host Analytics feature. Some corporations have finance IT professionals with deep subject-matter expertise as well as IT systems skills, but even their presence does not address the root cause of the misuse of spreadsheets. Most people who understand the needs of the business lack the IT skills necessary to use their company’s systems. They default to using spreadsheets because it is more expedient than trying to transfer their knowledge to someone who understands IT systems.
While AirliftXL is an important first step in taming the spreadsheet problem, it has limitations. For one, it’s not possible at this point to create a dynamic model such as an integrated income statement, balance sheet and statement of cash flows. This is a snap in a two-dimensional spreadsheet grid but much harder when working with a relational or multidimensional database. Moreover, there’s no guarantee that the spreadsheets imported into Host Analytics will be free of formulaic errors or even if it is well constructed. Thus, companies will need to put quality control processes in place, especially if a spreadsheet can have a material impact on the accuracy of financial statements or could defeat controls for fraud. It also would be handy if some vendor would create a product that could automate the digestion of masses of spreadsheets floating around companies as described in this patent for extracting semantics from data.
Despite these reservations Host Analytics’ AirliftXL provides an important capability that can cut costs of deploying and maintaining its software and increase its value to a company. This advancement builds on top of its recent rating as a Hot Vendor in the 2013 Value Index on Financial Performance Management. I recommend that corporations looking to change or upgrade all or some of their financial performance management suite consider Host Analytics and how AirliftXL helps transition the use of spreadsheets to a dedicated application approach.
Robert Kugel – SVP Research
Tidemark announced the release of the Fall 2013 version of its eponymous cloud-based application that my colleague assessed earlier in 2013. This new release adds capabilities for labor planning and expense management as well profitability modeling and analysis. These two areas of planning and analysis are common to all businesses. The new release adds features that enhance the software’s ability to do sales forecasting, initiative planning and IT department planning. The company continues to refine its modeling capabilities to make it easier for people engaged in the planning process to translate their expectations and concerns into a quantified view of the future. For example, users now can build models using natural-language modeling. The objective is to eliminate the need for help from business analysts or experts trained in the use of a tool and immersed the details of the IT plumbing, such as the metadata used for specific general ledger accounts or operational data.
The Tidemark product fits into our business planning software category. It enables rapid creation and frequent updating of company plans by connecting the individual plans of business units in a unified view. It has workflows to manage periodic updates to an integrated plan and analytics to support the planning and review phases of the process. It offers engaging visualization and reporting functionality that enhances understanding and insight in developing plans as well as communicating results. It has built-in social collaboration capabilities in context because business planning requires collaboration.
Direct integration of individual business unit plans is a key capability of business planning software because it promotes coordination across a corporation. Companies in our research that plan using summarized business data much more often reported a lack of coordination than those that directly link their plan details: 27 percent of those that summarize data experience a lack of coordination in reacting to changing business conditions, compared to just 7 percent of those with direct links. As well, to facilitate planning among today’s dispersed organizations, Tidemark’s mobile capabilities support sharing plan creation and review on such devices.
One distinctive aspect of dedicated business planning is that it handles the operational and financial aspects of a plan in parallel. Traditionally, a budget-focused planning process conflates the two to produce a financial plan. Financial planning (budgeting) and operational planning have fundamentally different objectives, but they must be connected. Budgeting is about financial control; it’s about not failing. Planning aims at finding the best way to succeed. You can’t budget effectively without a plan, and you can’t plan effectively unless you consider fiscal constraints. But the two shouldn’t be homogenized, which is the way almost all companies do planning and budgeting today. Business planning software enables executives and managers to understand both the operational and the financial consequences of their actions, but it 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.
The business planning category has emerged in response to the growing sophistication of users, especially as baby boomers are replaced by generations of workers who have more demanding expectations of how software should work. Complementing this trend are improved technologies, which already are having an impact on how companies do business planning and forecasting. The cumulative effect of a decade of advances have brought traditional processes to a turning point that will profoundly change how businesses look to the future and decide their courses of action. Tidemark was founded to produce technology to help organizations increase insight, accountability and agility by addressing the shortcomings of using budgeting as a management tool, especially when it is performed using desktop spreadsheets.
The user experience figures heavily in Tidemark’s design. It enable individuals to configure the applications to work the way they want them to in the context of the business, adapting processes, data collection and information presentations to meet the specific requirements of an organization. User interfaces follow this pattern. Collaboration, for example, is set up to understand which individuals the user will interact with in a particular context. As the user moves from task to task, that list will change. This capability is consistent with what I expect to become the norm in social collaboration in enterprise applications.
Tidemark’s competitive strategy is to push as much as possible of the planning process out to individual business users. The objective is to collect all relevant information in a context that helps a business unit plan and execute better while giving executives an integrated view of the individual plans. Devolving the modeling process and automating data movements and aggregations allows those in the financial planning and analysis (FP&A) function to devote more time and thought to the analytical aspects of their work, something I call “putting the A back in FP&A.” To do this, Tidemark aims to
facilitate the process of translating managers’ thoughts and expectations into models that enhance the value of the forward-looking information they can provide senior executives. This approach also promotes greater accountability because the outcome is the business unit’s plan, not allowing users to think of it as the finance department’s budget. Tidemark also places configuration and modeling into the hands of the users. Different parts of the business plan in different ways, and this differs between businesses. Moreover, as business and economic conditions change, the planning process must adapt in ways that suit the needs of those doing the planning.
Tidemark’s main competitor today is the status quo. Companies continue to use their budgeting process as a proxy for integrated business planning, which is only indirectly supported by individual business unit plans. This market is dominated by desktop spreadsheets and range of mostly legacy financial performance management (FPM) software, which includes dedicated planning applications from large vendors as well as smaller ones along with cloud-based vendors. Tidemark is changing the conversation from a finance-centric approach to one that support planning operations and finance in parallel – in short, business planning.
Companies that are dissatisfied with their current approach to business planning and are looking to improve what our research finds in a third to almost half of organizations as important like accuracy, insight, speed and alignment of their business planning should consider business planning. When they do, they should consider the kind of software that will enable them to support a better process. We recommend that they include Tidemark in their evaluation.
Robert Kugel – SVP Research