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Like many other industry observers I’ve heard overblown claims for information technology for decades. However, I’ve also observed that – eventually – reality catches up with vision. Finance and accounting departments are particularly resistant to change, yet because almost no corporations use adding machines or typewriters any more, it’s clear that transformative change can happen. Nonetheless, because users of business computing systems are inundated with “it’s better than ever” promotions by vendors, journalists and industry analysts, may have grown jaded and disbelieving. In the case of ERP systems that help run many organizations, that is too bad because we are finally at the point of a fundamental change in this business-critical software category.

ERP systems themselves have been undergoing transformation, enabled by the growing availability of technologies that can address the shortcomings of established systems and an increasing appetite for multitenant, cloud-based ERP systems. As I noted in my research agenda for the Office of Finance, the demographic shift taking place in the ranks of senior executives and managers – from the baby-boom generation to those who grew up with computer technology – will create demand for more capable software. ERP systems are evolving to deliver a better user experience, greater flexibility and agility, as well as an optimized mobile experience and lower total cost of ownership. The transformation has already started for some vendors and to some degree. The pace of change will increase over the next two years as new releases become available. However, I don’t expect companies to buy a brand-new ERP system just to acquire next-generation features. Our Office of Finance benchmark research finds that on average companies replace their ERP systems only every 6.4 years, mainly because of the cost and difficulty of implementing the software. Moreover, many of these capabilities will be available under maintenance contracts for on-premises systems and incorporated automatically in upgrades of cloud-based systems.

The new generation of ERP systems will be vr_office_of_finance_05_finance_should_take_strategic_roleable to support a more effective approach to managing the functions I call continuous accounting that will benefit finance and accounting departments. By eliminating batch data processing and by supporting analytic as well as transactional operations in a unified system, the next generation of ERP systems will enable companies to provide executives and managers with immediate information, alerts and guidance. It will enable departments to spread workloads more evenly across months and quarters, rather than having to wait until the end of the period. In so doing, many companies will be able to accelerate their close, as I have discussed. Continuous accounting can contribute to providing a strategic focus for the finance organization – a change that organizations will welcome. In our research on finance innovation, nine out of 10 participants said that it’s important or very important for finance departments to take a strategic role in running their company.

In many respects, today’s ERP systems are exactly what people don’t want any more. They are notoriously time-consuming and expensive to set up, maintain and modify. In our ERP research only 21 percent of larger companies said that implementing new capabilities in ERP systems is easy or very easy while one-third characterized it as difficult. For this and other reasons, the current generation of ERP software acts a barrier to innovation and improvement.

To be sure, more than any other type of enterprise software, ERP systems are a challenge because of the complexities of business organizations. This isn’t going to change. I’ve spent decades examining all sorts of businesses from multiple perspectives – from strategic, high-level business models to footnotes in financial statements and the execution of specific manufacturing and financial processes. To the uninitiated, everything about business appears simple until they get into the details. Then, even when you strip out inessential elements, it’s still complicated. ERP is complicated because the underlying business requirements are complicated. For example, in any organization there are competing demands and priorities at work when an ERP system is set up.

Although some aspects of ERP will always be complex and require experienced assistance to design and maintain, techniques for mass customization can make it easier to implement and change, thereby eliminating a significant portion of the cost of ownership. To be sure, software companies have tried to minimize deployment costs. For a couple of decades, ERP vendors have offered packages aimed at specific industries such as aerospace and pharmaceuticals. Those addressing midsize companies, which have tighter budgets than large ones, offer out-of-the-box configurations aimed at even more specific types of business, such as steel service centers, manufacturing job shops or brewers. For more generic businesses, today’s cloud-based ERP systems are one solution to the problem of costly updates and reconfiguration. However, this option still may not be attractive if an organization is in a business that has very specific customization requirements that more generic ERP systems cannot support well (for instance, process-manufacturing industries such as specialty chemicals manufacturing).

One positive development in the ERP category is the increasing attention vendors have been paying to the user experience in the design of screens and workflows. The dull, cluttered and difficult-to-navigate interfaces that have been the norm up to now were the result of inexperience in design and constrained computing resources. The next generation of ERP systems is being designed with decades of experience and far more powerful computing platforms and tools than the current ones. In the 1930s, Raymond Loewy and others revolutionized the design of everyday objects, from soda fountains to locomotives and automobiles so that form and function combined to produce a better product. Today, it’s even more important to apply basic concepts of industrial design and ergonomics to creating user interfaces. This goes beyond making old code bases pretty. Largely because of tablets and mobile computing platforms, people now work with multiple types of interfaces and use a wider range of methods and gestures to interact with their devices. The next generation of ERP software must incorporate these advances and ensure that the screens and their flows are optimized for the device. The emerging generation of finance executives and ERP users won’t put up with the inconveniences and awkwardness that their predecessors reconciled themselves to.

It’s also clear that ERP systems will be faster in the future, as redesigning the software’s underlying data structure and utilizing technology such as in-memory processing will eliminate nearly all batch routines. Faster systems enable shorter cycle times, which promote corporate agility because up-to-date information is available sooner. Another important change that is already under way is the ability to do analytics in real time or near real time on data held in an ERP system. The business intelligence (BI) software category was invented two decades ago to enable companies to get useful information from newly implemented ERP software. While BI addressed this shortcoming, it also added to the cost and complexity of a company’s IT operations.

Another focus of new ERP systems will be collaboration. In-context collaboration provides an important set of capabilities that can improve performance. Rather than following a general broadcast model, social collaboration capabilities in ERP and other business applications understand that individuals belong to multiple groups. For example, people in a company typically have a general role (“I’m in Finance”) and one or more task-specific ones (“I’m the director of financial planning and analysis”). Some relationships are persistent while others begin and end with a project. Issues that arise may be open to all or confined to specific groups, subsets of groups or a private dialogue. Queries or comments may be general, specific or anywhere in between. Some conversations, especially in finance and tax departments, must be tightly controlled. Software that understands the context of the work performed and automates the process of managing the who, what and when of communications will support more effective collaboration, faster completion of tasks, greater situational awareness within the organization and as a result better decision-making. Over the past three years, ERP vendors have been introducing more in-context collaboration capabilities in their software.

Mobile enablement is already an important capability of some ERP systems. However, it’s important that ERP vendors focus on those elements where mobility is important and optimize the user experience for the task and platform. Unlike CRM and sales force automation systems, where sales and service information must be accessible anytime and anywhere, mobility’s importance in ERP depends on who uses it and why. Certain tasks such as data entry are not well suited to mobile devices, while routine reviews and approvals are. These must be simple to configure and deploy as well as use.

vr_erpi_01_implementing_new_capabilities_in_erpMore generally I am convinced that the worst aspect of today’s ERP systems is that they inhibit change in corporations. The lack of adaptability in these systems has infused a “set it and forget it” mindset that inhibits companies from making necessary changes in processes and stifles innovation. The inability to make changes easily to an ERP system inhibits improvements in corporate functions that run on ERP. This is ironic, since one of the factors driving corporations to buy the first ERP systems in the 1990s was their desire to do business process re-engineering, a business strategy of the time. More useful is developing a culture of continuous process improvement, one of the pillars of continuous accounting, in the finance organization. Making ERP more easily configurable by business users supports continuous process improvement efforts.

As the business software market, including ERP, increasingly moves to the cloud, a major challenge facing software vendors is designing their applications for maximum configurability. By this I don’t mean offering the ability to select modules from a menu, but enabling only moderately trained line-of-business users to make granular adjustments to process flow and data structures in a multitenant setting. This lack of flexibility is an important barrier inhibiting adoption of cloud-based ERP. Although user organizations that are more able to adapt to an as-is version of an ERP system are more likely to take the cloud-based option, this covers only some of the potential market. The cloud ERP vendors that offer greater flexibility in allowing individual customers to modify their implementation to suit their specific needs will have a competitive advantage. Multitenant cloud ERP vendors already have had to pay attention to configurability, and on-premises ERP vendors also would benefit from enhancing the configurability of their systems.

Today’s corporations have been willing to put up with the deficiencies in their ERP systems because everyone was in the same boat. That won’t be the case much longer. The cost and complexity of ERP systems has meant that IT departments, not business users, have had the fullest involvement in managing them. This, too, will change. Business users and finance departments in particular will need to be involved in periodic assessments of how well their ERP system supports their responsibilities and objectives. Finance executives in particular should begin this process now by understanding how the application of new technologies can drive fundamental changes in the way they manage their department. Vendors that offer ERP systems that are much easier to configure, use and update, support in-context collaboration and mobility and provide timely, reliable analysis and reporting will survive. Those that excel in these areas will win market share.


Robert Kugel

Senior Vice President Research

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Workiva offers Wdesk, a cloud-based productivity application for handling composite documents. I use the term “composite document” to refer to those in which text is created and edited collaboratively by multiple contributors and which incorporates tabular and numerical data from multiple sources in a controlled process. Composite documents often have formats defined by law, regulation or contract and must be created at periodic intervals. To comply with the requirement by the United States Securities and Exchange Commission (SEC) that companies “tag” their financial filings using eXtensible Business Reporting Language (XBRL), many companies acquired software to automate the creation and tagging of these composite documents.

Workiva began as WebFilings and initially offered software to streamline the SEC document submission process. In 2013 it released Wdesk to address the larger market for composite document creation. The software has uses beyond SEC filings. They include a variety of documents or presentations for external or internal purposes that corporations routinely produce, including board presentations, management reports, audit management, disclosure documents and other regulatory or compliance filings. Using such software, companies (and especially finance departments) can cut preparation time, complete documents sooner and substantially reduce errors in them.

Software products for handling composite documents like Wdesk have capabilities similar to those of document management applications except that they are designed to be easily used by business people with limited or no involvement by technical specialists and at much lower cost of ownership. This is especially true for cloud-based software. As is the case in using document management software, the text portion of the composite document is produced and reviewed by many people in multiple departments for various purposes in a defined workflow that includes approvals. To facilitate reviews, Wdesk enables approvers to read, comment on and accept a document or any component of it on a mobile device. In the process of creating the document multiple versions are created and the software ensures that people work only with the current version. Permissions for creating, editing and approving the document can be granular (such as limited to a specific paragraph or table or even a single data point). Especially for internal documents (such as Sarbanes-Oxley Act attestations) Wdesk can connect substantiating documents directly to specific parts of a document.

vr_fcc_data_quality_significance_updatedThe sections and basic form of a composite document may be highly structured, in which case the software automatically maintains this structure and all formatting. The format includes the order of the sections, the section headings, specific wording in boilerplate sections, paragraph styles and even the typeface, to name the most common requirements. If the document is a periodic filing, it must be consistent from one period to the next, keeping the format and structure of each individual section exactly the same. Wdesk also ensures that text and numbers that are reused across multiple documents and presentations are consistent.

In addition to consistency, another major advantage of using Wdesk to automate the document creation process is that it can significantly reduce the incidence of errors while reducing the time devoted to checking the document for them. For example, numbers referenced in the commentary must agree with those in the tables. These numbers often change over the course of the drafting period, sometimes frequently and on occasion late in the process when deadlines are short. A composite document application will always contain the most accurate and up-to-date numbers. This is important because in our benchmark research on the financial close research three out of five participants said that the consistency and quality of data in company reports is a significant or very significant problem.

As the numbers (such as financial and operational results) referenced in a table change, the numbers in the narrative associated with those numbers, as well as any associated percentage, change citations. For example, in the statement “advertising expense was $X, up Y%,” the numbers X and Y will always be in agreement with each other and any table containing them. Automation can also help because some types of regulatory documents and filings have particular requirements that must be enforced. For example, when financial data is presented in a shortened form (in thousands or millions of currency units, for example), the rounding often must adhere to a specific convention.

Using a software application designed to automate and support the process of creating filing documents can reduce the amount of time and effort necessary to produce the final result. It does so by establishing a repository of record for the text and data, automating the compilation of the document including the tabular data and individual text sections, using workflow to manage the process, and applying controls and audit features.

Using such software enables corporations to achieve substantially greater efficiency as well as tighter and more consistent control over this process. Process management capabilities can cut the administrative workload for people who “own” the filing document and reduce the possibility of delayed handoffs and missed deadlines. Document management features enable administrators to track the progress of the individual components, automate reminders to individuals as deadlines approach and generate alerts if they miss start or completion times. In contrast, when regulatory filings and similar composite documents are assembled using personal productivity software and orchestrated through email attachments and notifications, the process needlessly occupies the time and attention of highly trained, well-compensated people who have to spend hours performing dull, repetitive tasks that require their skills. Automation on the other hand leaves only the essential work to be done, allowing expert individuals to focus only on that and have more time to concentrate on their real jobs.

Using software to automate and control the creation of composite documents for external or internal users can substantially cut the risks of errors and missed deadlines. This software can be used broadly to address multiple regulatory and legal requirements in the finance, legal, internal audit and other departments. I recommend that companies – especially their finance and legal departments – that create composite documents automate their production and investigate whether Wdesk will address their requirements.


Robert Kugel

Senior Vice President Research

Follow Me on Twitter and

Connect with me on LinkedIn.

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