Robert Kugel's Analyst Perspectives

The 2023 Ventana Research Buyers Guide for Business Planning research enables me to provide observations about how the market has advanced.  

The purpose of business planning is not simply to create a plan — it is to make better decisions. Planning and budgeting software should make the process faster, more agile, less burdensome and more intelligent so that managers can make better decisions more consistently. Since the early 2000s, Ventana Research has advocated using a dedicated application to increase the business value of planning and budgeting. In 2008, we first articulated a new vision of using a planning software platform to improve the business value of corporate budgeting. This approach allows business units to plan the way that best serves their needs while enabling the financial planning and analysis (FP&A) group to integrate their plans to construct a unified operating plan and budget. This idea has since been widely embraced by software vendors and increasingly adopted by organizations. Our Value Index methodology assesses the ability of specific applications to achieve this vision.  

Organizations do a lot of planning. Some of this planning is formal, but in practice, much of it is informal and almost always in business silos. People plan sales and how to produce products and deliver services. They plan for the headcount they will need and how to organize distribution and their supply chain. They also produce a budget, which is a financial plan. When business managers are asked to prepare a budget, they first create a business plan, often informally, and then translate that into financial terms.   

Although planning and budgeting are similar and connected, they have different aims. Budgeting sets limits while planning seeks opportunities. Planning is about determining the best path to success while budgeting imposes financial controls to prevent an organization from failing, though not failing is not the same as succeeding. Planning is about the things that departments do and the things they need to do them. Budgeting summarizes the monetary consequences of a plan in income statements, pro forma balance sheets and cash flow projections. Successful organizations understand that planning for success while respecting financial objectives and constraints is more productive and strategic than just budgeting. Planning software enables organizations to do both faster and more effectively than using stand-alone spreadsheets, which still remains the most popular software for planning and budgeting.  

The enduring popularity of the stand-alone spreadsheet is understandable because it is a familiar tool that is easy to use for creating financial models and collecting data. Spreadsheets are the tool of choice for personal productivity, but their essential design makes them the wrong choice for supporting a repetitive, collaborative, enterprise-wide process. Moreover, a spreadsheet is a two-dimensional grid, adequate for accounting, but inherently flawed in modeling and reporting because business is inherently multidimensional.    

Many organizations are in a planning rut, the result of inertia, the power of vested interests and the perceived risk of change. Although the annual budget provokes grumbling, there is little impetus for change, especially from the top. For those in FP&A who manage the budgeting process, it is easy to lose sight of an objective when a job is wrapped up in a complex business process, especially if the individual in charge of that job is spending a considerable amount of time handling its mechanics and dealing with the inefficiencies of spreadsheets. Technology allows organizations to streamline and redefine the process so that those doing the planning and budgeting can concentrate on its essential purpose.  

Planning should be a structured dialog between executives and managers about objectives and the resources and tactics that people need to achieve them, not just a financial plan. Dialog is considered “structured” when it is grounded in measurable objectives rather than vague goals. For example, “Our objective is to grow sales by 8%,” not “We plan to increase sales.”   

In practice, planning is an inconsistent, fragmented and siloed process. Mostly, this stems from using legacy technologies. Stand-alone spreadsheet-based planning reinforces silos because they compartmentalize plans. Each department plans their part of the business differently because they have different needs. Creating an integrated or connected business plan with spreadsheets is difficult because, while spreadsheets can handle the financial aspects of planning an organization, they are not good at simultaneously handling monetary elements and “things” like headcount, hours, or supplies or materials needed to fulfill sales orders or contracts.   

For years, people have been talking about finance transformation; that is, the remaking of the finance department into an organization that functions as a strategic asset to the corporation. Such a department is strategic because it provides greater visibility and insight into how the company and each of its business units is performing and how to optimize that performance going forward. Its focus is on what happens next and not merely on what just happened. It does not only explain past results but uses that context to provide insight into choices among next-step options and their ramifications. A strategic finance organization has the capability to provide data-driven advice to executives. Building technology competence does not just benefit planning and budgeting; it raises the performance of every facet of the department.   

Technology is essential to making planning and budgeting more strategic, more productive, and more consequential to an organization’s success. Planning software increases the business value of planning and budgeting because it serves the needs of the senior leadership team, business managers and the office of finance, thereby increasing an organization’s agility.   

This research evaluates the following vendors that offer products that address key elements of business planning as we define it: Anaplan, Board, IBM, Infor, insightsoftware, OneStream Software, Oracle, Planful, Prophix Software, SAP, Vena Solutions Wolters Kluwer and Workday.  

You can find more details on our site as well as in the Buyers Guide Market Report. 

Regards,

Robert Kugel