Robert Kugel's Analyst Perspectives

The idea of devising and using maturity assessments to improve business performance has been a staple of management, functional and strategic consultants for decades. It’s based on two unassailable principles. One is the general assertion that companies differ in their ability to do anything along a range from nonexistent to advanced. The second is that at any time it’s possible for a knowledgeable individual to construct a scale of competence for some business function from least to most mature based on the important characteristics about how an organization designs and executes that function. Using maturity scales is a handy way for executives and managers to size up where they lie on a continuum of capabilities and an easy way to define the steps necessary for improvement. Maturity assessments have the advantage of being straightforward, but there’s the danger that they can be overly simplistic.

SAP has inaugurated a new series of business applications it calls Enterprise Performance Management (EPM) OnDemand as a cloud-based subscription service. The applications are part of SAP’s EPM version 10 suite, which it introduced last year. It’s a first step in what is likely to be a portfolio of general-purpose, lightweight and relatively low-cost apps designed to be used on mobile devices. Using HANA on the back end, the applications can deliver high performance in accessing masses of business data and deliver actionable information to executives and managers. The three on-demand apps in EPM are for expense management, profit-and-loss (P&L) analysis and capital project management. They also just released its SAP Business Planning and Consolidation that has a mobile version on the Apple iPad that is part of its recently announced EPM UnWired. The move is another indication of SAP’s emphasis on cloud computing, which my colleague Mark Smith covered earlier this year.

There weren’t any headlines (or even many tweets) about Oracle Fusion Financials emanating from this year’s Oracle OpenWorld (#OOW12) conference. Maybe that’s by design, because it’s not in Oracle’s best interest to kick up a lot of dust about ERP migration. The financial applications software market is mature, and market share leaders such as Oracle have less interest in getting customers to upgrade than they did a decade ago. For a software vendor with a large installed base, cashing rich maintenance checks is more profitable than selling new software, and arguably is as dependable a source of revenue as software-as-a-service (SaaS) contracts. Companies, and especially CFOs and controllers, see replacing ERP systems akin to a root canal procedure: expensive and painful and best put off as long as possible. In North America (and to a much more limited extent in Europe) a major upgrade of a company’s current ERP software usually means it’s time to evaluate alternatives. For the incumbent, any time there’s a major upgrade there’s the potential to lose a customer.

Unless you have some combination of a very strong credit rating, a high income-to-debt payment ratio and a relatively low loan-to-value ratio, it’s not especially easy to refinance a mortgage these days. That’s a shame, because there are plenty of people who have stayed current in meeting their credit obligations and whose mortgages are comfortably below current market value who could benefit from today’s record low interest rates. One major reason they can’t refinance is the collapse of non-agency mortgage-backed securities (MBS) – that is, those not backed by government agencies such Federal National Mortgage Association, or Fannie Mae – in the wake of the 2008 financial crisis. The crisis, in turn, was caused largely by the collapse in value of mortgage-backed securities. To be sure, a significant portion of the drop in the issuance of non-agency paper is the lack of demand these days for the risky and even fraudulent sub-prime mortgages that were a root cause of the financial collapse. Yet there would be a bigger market for MBSes (and therefore more money available for refinancing) and less need for U.S. government guarantees if there were greater transparency in the quality of the underlying assets of mortgage-backed securities. Technology exists today that would address the transparency issue relatively easily and inexpensively. In particular, eXtensible Business Reporting Language (XBRL) can provide an efficient and relatively inexpensive means of collecting needed information from a large number of disparate parties without requiring them to standardize or modify their systems.

Salesforce.com’s recent Dreamforce user conference got me wondering about how far the market for cloud-based software has come. To answer that question, I looked to our own research. For the past several years Ventana Research has routinely asked participants in its benchmark research what preference, if any, they have for deploying software they use to support the activity we are benchmarking. The choices we offer are on-premises, software as a service (SaaS – that is, in the cloud), hosted on a vendor’s servers) or no preference. I examined the responses from 1,110 participants in five benchmark research undetakings that cut across lines of business and IT areas to determine what, if any, patterns I could find in the responses.

Two key themes that emerged from Larry Ellison’s Sunday night keynote at this year’s Oracle OpenWorld were faster processing speed and cheaper storage. An underlying purpose to these themes was to assert the importance of Oracle’s strategic vertical integration of hardware and software with the acquisitions of Sun. I try to view technology keynotes like this from the perspective of a practical business user. Advancements such of these are important because enhancing the performance and cost-effectiveness of IT infrastructure can drive substantially improved business capabilities. As I’ve noted in the past, the ability to rapidly process large amounts of data provides business users with significant new capabilities in areas such as complex event processing, social media analytics and the ability to analyze unstructured or semi-structured data. In planning, it has the potential to change how companies perform a wide range of analytics-driven processes, especially in areas such as planning, budgeting and forecasting. It makes it feasible to more fully explore the impact of different courses of action, because rather than having to wait hours or days for answers to questions that start with “What happens if we…” the answers come back in seconds. Review and planning sessions can focus more on what’s next rather than rehashing history.