Robert Kugel's Analyst Perspectives

Wall Street has many leading indicators to work with, some serious – such as housing starts and the purchasing managers’ index – and some done a bit tongue-in-cheek. One of the latter is the Super Bowl Indicator, which says that if a team from the original National Football League wins the game, the market will be up for the year, but if an old American Football League team wins it, the market will be down. The amazing thing is that so far this heuristic has an accuracy rate better than 75%! On the other hand, over time some venerable weather vanes become unreliable. For example, the “hem line theory” (that stocks rise and fall with the direction of this aspect of women’s fashion) lost its (ahem) legs, partly because fashion these days is much more anarchic.

SAP is in the process of acquiring certain financial disclosure management software assets from cundus, a German provider of BI and performance management software. SAP will be buying cundus’ Financial Statement Factory and informationCollector, which together manage the collaborative creation and editing of financial and management reports using both structured and unstructured information. SAP expects to complete the deal by the end of 2010.

One of the prominent salesforce.com partners on display at the recent Dreamforce in San Francisco was FinancialForce.com. It’s one of a growing list of providers of in-the-cloud accounting and finance packages built on the Force.com platform. Like other of these accounting vendors (such as Compiere, Intacct, Netsuite and - to some extent and eventually– Workday), it aims principally at companies that have outgrown entry-level accounting software such as Intuit’s QuickBooks. (I covered the emerging use of cloud-based applications for finance departments here.) However, there are key differences. One major difference is that FinancialForce offers customers the choice between buying accounting functionality as a complete package or doing so à la carte. This approach derives from its strategy of going after two types of customers.

Vishal Sikka raised an important point about the software business during his remarks at the SAP Global Influencer Summit that my colleague just assessed (See: “SAP Elevates Technology Strategy for Enterprise Software and Solutions“). He contrasted the business strategy of consolidation that other companies are pursuing with his view of SAP’s strategy of innovation. In one sense, this assertion is an attempt to disparage Oracle’s and to some extent IBM’s approach to constructing an IT business portfolio, even though SAP itself has been a consolidator in recent years. (Business Objects and Sybase, for example, are significant components of SAP’s product universe and go-forward strategy.) However, I believe consolidation vs. innovation is an important point to consider as we enter the second decade of the 21st century because it points to the potential for a basic shift in the dynamics of the software business.

Years ago I was given a tour of a company’s factory by the CEO who was credited with engineering its recent turnaround. We were walking along a gallery one story above the shop floor when he pointed down to it and told me that when he first looked down on this scene he saw people dashing madly back and forth. Rather than taking that as a good sign of a busy factory, he said it was a clear indication to him of how inefficient the operation was and why the company was losing money. He immediately went about realigning the factory’s layout to smooth out physical flows and re-examined its manufacturing processes, and soon the business was profitable.

Ventana Research recently completed its 2010 Financial Performance Management Value Index of the major financial performance management suites. Financial performance management (FPM) is the process of addressing the often overlapping issues around people, process, information and information technology that affect how well finance organizations operate and support the activities of the rest of the organization. FPM deals with the full cycle of finance department activities including planning, forecasting, analysis, closing and reporting. As I noted in my earlier blog about this year’s FPM Value Index, one striking feature of this software category is its general maturity. Budgeting and planning, reporting, closing and statutory consolidation, as well as dashboards and scorecards, have been around for more than a decade, so the suites we examined are all feature-rich and with one notable exception have remarkably similar capabilities at this time. (The exception is automated preparation of XBRL-tagged financial documents for the United States Securities and Exchange Commission – the SEC). Consequently the Value Index scores were tightly clustered. SAP’s suite just edged out those of IBM and Infor in the rankings, though both of those earned the Hot Vendor rating.