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Planview recently announced general availability of Planview Enterprise 11. The new release enhances the user experience through a comprehensive redesign of the interface to promote ease of use. The changes are intended to facilitate an integrated approach to long-range planning of capital projects and major corporate initiatives across departments. There’s an important difference between strategic and long-range planning, and this difference is the reason why long-range planning benefits from software specifically designed to support that process. Strategic planning involves the formal conceptualization of a corporation’s strategy and its individual supporting elements such as product, sales, pricing and financial strategy. The strategic planning process is aimed at solidifying ideas and concepts into words to ensure understanding and agreement by the senior leadership team. Strategic planning naturally is done at the highest echelons of an organization. For that reason, it involves a relatively small group of senior executives and deals more in concepts and less in specific numbers. Long-range planning is the next step. It’s the formal quantification of the strategic plan and how that strategy is expected to play out. Translating the company’s strategic plan into numbers should be an iterative process of dialogue between those who set the strategy and those responsible for carrying it out. Being able to get quick answers to these what-if questions makes for a more productive, accurate and fact-based dialog.
One of the key findings of our recently completed benchmark research on long-range planning is the importance of integrating capital projects and major corporate initiatives as discrete elements in a company’s long-range plan. This research, which was conducted with The Financial Executives Research Foundation (FERF) and Planview, shows that companies that explicitly include projects and initiatives have a long-range planning process that is better aligned with strategy. Yet we found that only 26 percent of companies fully integrate projects and initiatives in their long-range plans.
Improving the planning processes in corporations has been central to my research agenda for the past decade. In part this is because it’s one of the core business processes that can benefit most from using more appropriate technology. Capital projects and major corporate initiatives are an important component of the long-range planning process, but many companies find it challenging to incorporate them as discrete items in their long-range planning and review processes because they use spreadsheets, which are not well suited for the task. The benchmark research shows that a majority (52%) of companies use desktop spreadsheets to manage their long-range planning process. Spreadsheets are not a good choice for this type of planning because they have substantial limitations in handling any collaborative, repetitive enterprise-wide activity, especially ones that involve planning and analysis of multiple business units, regions, products and customers. Their shortcomings are especially evident when users try to integrate even moderately complex and discrete business elements such as capital projects and other initiatives into an overall long-range plan. Companies that use dedicated planning applications twice as often said the data they use for long-range planning is up to date (32% vs. 16%). The research also shows a strong correlation between the timeliness of the data used in analyzing and managing long-range planning and the ability of a company to make good investment decisions that we find as issues of stale data in organizations today from where 19 to 72 percent have challenges today.
Planview Enterprise makes it easier for companies to incorporate the details of investments and initiatives in the long-range planning process. Asset-intensive companies and those that continually invest in offering new products or services will find having this ability useful for planning, analyzing and managing these capital investment and major corporate initiatives. In contrast to ongoing, repetitive aspects of a business, an initiative has a distinct beginning and an end that is reached after the completion of multiple steps. These steps almost always require resources such as people’s time, money and the use of other corporate assets. Planning, analyzing and reviewing the financial aspects of projects or initiatives are difficult because the aspects are subject to change, especially in the time dimension. For instance, a delay in the delivery of a piece of machinery, approval of a building permit or some other discrete element often will delay some or all of the rest of the project’s activities. When that happens, businesses – and especially finance departments – need to be able to calculate the financial impact of that delay on the project (costs will be lower in some months and higher in others) as well as its consequences for expected downstream revenues and expenses related to that capital project or initiative (incoming cash and some costs will be delayed, while some outlays, such as interest and guaranteed payments, will not).
To Enterprise 11 Planview has added an in-memory processing capability that can make planning and review sessions more interactive by speeding up responses to queries and what-if scenario planning. A numbers-driven dialogue about investment choices is more useful when it takes only a couple of seconds to see the impact of, for example, a proposed schedule alteration, different expected profit margins or an increase in interest or exchange rates. The new version supports the requirements of users in different roles and departments. It has enhanced project and product roadmapping that helps the transition from a manual approach to an enterprise system. Time tracking is facilitated by a new mobile time-sheet capability supported on iPhone, Android and BlackBerry 10 devices. As well, Planview has been offering Enterprise in a software-as-a-service (SaaS) configuration. The redesign is aimed at improving the performance and usability of the software in a Web-based environment. In the past, Planview appealed to larger organizations with significant project management requirements. One of the objectives in the Enterprise 11 redesign, especially when used in a cloud environment, is to make the application more accessible by smaller organizations or ones that need to manage a limited set of projects and initiatives.
Enterprise 11 provides companies with an alternative to spreadsheets. Spreadsheets are not adept at combining project or initiative resource details (number of people and specific materials required, for example) with the cost details (cost per hour or cost per unit, respectively) and it can be impossible to get back to this underlying detail when spreadsheets are rolled up into a financial plan. Spreadsheets also are especially lacking in handling the time dimension or even moderately complex dependences that exist in almost any project. Consider, for instance, a factory expansion where the plumbing and wiring work can only begin after machine X is installed, or a national roll-out of product Y will begin only after market trials in multiple cities are completed and a messaging strategy is selected. A delay in the delivery of the machine or ambiguities in the results of the city trials will automatically stretch out the timeline. It’s difficult enough to create a project cost model in a desktop spreadsheet and integrate this into a spreadsheet detailing the long-range plan. It’s even more difficult to reflect actual amounts, compare these to the plan, make changes to the plan over time, assess the impact on the company’s financial statements and cash flow from changes made to the plan and decide how best to effect those changes. Having software that automatically recalculates costs based on schedule changes enables executives and managers to quickly understand the implications and assess the impact of different responses to a change in the schedule.
If we continue the factory expansion example, does it make sense to spend more to expedite the delivery of equipment and materials to accelerate the availability of a capital asset, or should the company just live with the delay? Planview Enterprise helps find a quick and accurate answer to that question. Having accurate data available when assessing capital spending projects and initiatives has an impact on how well a company makes these investments. Our research shows that 90 percent of companies that have accurate information make good investment choices compared to two-thirds (66%) that work with somewhat accurate data and just 30 percent that work with somewhat or mainly inaccurate data. The cumulative impact of consistently making choices about good capital spending and corporate initiatives is likely to be a significant factor in a company’s long-term profitability and competitiveness.
Planview Enterprise also helps companies assess their investment options, especially organizations that have ongoing needs to choose between substantial capital spending programs, funding new product development projects or doing both. Being able to model each investment as a discrete unit, to change assumptions about how, when and under what conditions they will be performed and to alter when and under what circumstances to fund these investments gives executives a more complete understanding of their options. Having a clearer picture should enable them to make better decisions about these investments more consistently. Moreover, since Planview is able to automate the collection of data about the actual execution of the investments, senior executives will be able to track their performance faster, more accurately and with much less effort. Having this level of accountability is likely to promote more consistently better investment decisions.
Larger organizations are likely to find a switch from spreadsheets to Planview Enterprise to be beneficial because they have more people and more ongoing investments. Our research shows that in 67 percent of companies in which more than 20 people are involved in long-range planning, spreadsheets make it more difficult to manage the process, and they also make it harder in 41 percent that fewer people engaged in the process. The research gives all companies a reason to rethink their use of spreadsheets because they were consistently rated lower than other alternatives for executing a wide spectrum of analytical and process management tasks associated with long-range planning.
Competence in long-range planning is vital to the success of any business. Being able to select the best alternatives for capital projects and major corporate initiatives promotes long-term competitiveness and the ability to achieve necessary returns to sustain a company’s financial health. Being able to examine the ongoing performance of these investments and make necessary adjustments to ongoing plans gives a company needed flexibility and agility in today’s turbulent economic and financial environment. Especially for corporations that now use spreadsheets to manage their long-range planning, I recommend they look at Planview Enterprise as an alternative to support a more effective long-range planning process.
Robert Kugel – SVP Research
I recently attended Vision 2013, IBM’s annual conference for users of its financial governance, risk management and sales performance management software. These three groups have little in common operationally, but they share software infrastructure needs and basic supporting software components such as reporting and analytics. Moreover, while some other major vendors’ user group meetings concentrate on IT departments, Vision focuses on business users and their needs, which is a welcome difference. For me, there were three noteworthy features related to the finance portion of the program. First, IBM continues to advance its financial performance management (FPM) suite and emphasizes its Cognos TM1 platform to support a range of finance department tasks. Second, the user-led sessions illustrated improvements that finance departments can make to their core processes today, ones that improve the quality of these processes and go a long way toward enabling Finance to play a more strategic role in the company it serves. Third, the Cognos Disclosure Management product has better performance and useful new features to support the management of a full range of internal and external disclosure documents, including the extended close, which I have discussed.
It’s customary for companies to produce a slew of press releases to coincide with big conferences or user group events. Thus it’s interesting that IBM made no such announcements in this case: Product releases either happened months ago or are scheduled for later this year. This was probably incidental, but the lack of hoopla also reflects a good read of the audience attending this event (which tends to be skeptical, especially of anything that smacks of sales and marketing bombast) as well as recognition that the market is still catching up with FPM suite capabilities that have been available for years. From a user or potential user’s perspective, what’s old is still new.
Our Financial Performance Management Value Index evaluates suites of financial performance software rather than individual components for which IBM was rated Hot in 2012. There is a long-running debate on whether companies should buy suites of software or individual components. I advise companies to take the suite approach unless components fall short of business requirements because a suite can be – this isn’t guaranteed – less expensive to buy and maintain. It also may facilitate training and operations if there is a common interface and a single sign-on capability. A core element of IBM’s FPM product strategy is to emphasize its unified architecture to support a range of core finance department activities. This point was rarely stated explicitly at the conference probably because people working in non-IT roles are more focused on the benefits that come with this approach. IBM’s architecture facilitates the integration of specific finance functions such as planning, budgeting, forecasting, statutory consolidation and creation of disclosure documents as well as providing complementary capabilities such as performance management (including scorecards and dashboards and reporting) and analytics.
In particular, Cognos TM1 is enterprise planning software that helps manage the full planning cycle: business modeling, strategic and long-range planning, target setting, operational planning, budgeting and reviewing, along with the reporting and analytic functionality needed at each step. TM1 serves both midsize and larger companies. For the former, Cognos Express offers an integrated platform with standardized reporting, ad-hoc analysis and planning with an in-memory analytic server that utilizes a Microsoft Excel interface. Express is designed for smaller organizations with very limited IT capabilities. The in-memory architecture facilitates all planning and forward-looking activities. It enables organizations to quickly run even complex detailed models against large data sets. Having the ability to rapidly iterate scenarios with specific assumptions (as opposed to simplistic base, upside and downside cases) enables senior executives as well as line managers to have more forward visibility and anticipate the consequences of specific business scenarios and the impact of potential responses to different scenarios.
Software that utilizes in-memory processing has the capability to change the design of planning to create models to work as easily with the things used in running a business (units of materials or parts, hours of labor or purchase orders processed, to name just three) as well as the financial and accounting aspects. In-memory systems could become the tipping point in how companies plan and budget in the future. When weekly or monthly operational reviews are able to focus more on assessing future operational alternatives and their financial consequences and less on historical accounting data, it will enable a fundamental shift in corporate management. The planning-budgeting-review-reforecast cycle will become more useful for those running a company in adapting to the changing currents of markets and economic conditions. The emphasis will shift to achieving business success from focusing on budget conformity.
Another potential advantage of a suite is that it can simplify data management. (But keep in mind here that other data management strategies can achieve the same aim, and in practice organizations can do a poor job of managing data even with the best system architecture.) In the future, it probably won’t matter where a finance department collects its data, keeps its applications and stores its reports. For the moment, though, there is value in having a single system dedicated to the needs of the department to ensure data accessibility, consistency, timeliness and accuracy. A unified architecture also facilitates the creation and maintenance of a unified data set to keep everyone working off the same numbers that are more accurate, consistent and contemporaneous. In addition, IBM’s recent acquisition of Star Analytics has made Essbase data sources, such as those used by Oracle Hyperion, readily available to FPM users. Our research finds that data issues are a common impediment to the execution of business functions. For example, as the chart illustrates, just one-third (31%) of participants in our long-range planning research said the data they work with is adequate.
User-led sessions at Vision 2013 focused on the nuts and bolts of achieving success in deploying FPM software. These demonstrations are a main reason why people attend user conferences. Here the sessions underscored the disparity in maturity we find in how companies approach financial performance management. They often pointed out the data and IT infrastructure challenges most face when attempting a transformative change in a finance organization. The takeaway of most of these success stories was the need to change management of some core process. For this reason, to summarize the lessons learned from the presentations, the first key to success typically is executive buy-in coupled with repeated communication of the objectives. Promoting accountability is often an important motivation for FPM initiatives, and that requires accurate and consistent data to ensure buy-in. Although plenty of companies are proving the value of software in managing more effectively, we had enough conversations with those in the trenches to confirm that in areas like planning and budgeting, analytics and scorecarding, maturity levels are still low.
Today’s FPM suites are designed to require as little IT involvement as possible, a feature that all vendors emphasize. One session at the conference, however, served as a reminder that for most larger companies these systems are never “hands free.” Even well-designed software can be configured improperly or require modification as use evolves. For example, unless TM1 is properly configured, senior executives reviewing corporate plans as a deadline approaches could experience frustration because the numerous last-minute adjustments to individual plans can bog down a system’s performance. The circumstances and fixes for these sorts of issues differ between software packages and companies. However, a universal best practice companies must follow is having an ongoing dialog between Finance and IT to address issues as they arise, as well as an emphasis in IT organizations on uncovering these sorts of problems and addressing them quickly.
Turning to a specific product, I see Cognos Disclosure Management (CDM) as a welcome upgrade to Cognos FSR. Both products are designed to automate and streamline the process of composing and editing disclosure documents such as the Form 10-K annual report filed with the U.S. Securities and Exchange Commission (SEC) as well as tagging the documents using eXtensible Business Reporting Language (XBRL). I have been enthusiastic about this product category from the start because it facilitates the production of external disclosures, eliminates the need for people to handle repetitive mechanical tasks and promotes accuracy. It allows organizations to focus more on what goes into the disclosure by cutting the effort required to assemble the multiple components. (In general, however, our anecdotal sampling indicates that XBRL tagging is universally viewed as a compliance requirement without benefit to the company.) CDM makes it easier for public companies to handle the tagging process internally rather than having a third party provide this service. My conversations with users confirm that this approach gives them more time to complete their disclosure documents, provides greater flexibility in managing the process (especially in incorporating last-minute changes) and gives the CFO much greater control over decisions about which XBRL tags to use. The revamped CDM is able to handle more users, which is increasingly important as companies use it for more extensive reporting and disclosure activities such as internal reports (for example, board books) and external compliance filings that require the integration of text and numbers.
Well-designed and smoothly run user group meetings are a useful and efficient way for people who have made considerable investments in software to see what others have accomplished and to network with their peers to understand how best to implement change. The software is a consistent topic, of course, but for attendees the people, process and project management elements are equally important. Our benchmark research shows that a majority of finance departments have scope (often considerable) in which to improve the quality of, and the efficiency with which they execute, core processes and support the strategic objectives of their company. Software by itself is only one element, but it can be either enabler or impediment in efforts to improve finance department performance.
Robert Kugel – SVP Research