Robert Kugel's Analyst Perspectives

IBM Planning Analytics with Watson is a comprehensive, cloud-based business planning application that supports what Ventana Research calls integrated business planning. We coined this term in 2007 to describe a high-participation approach to business planning that integrates strategy, operations and finance. Our Next Generation Business Planning Benchmark Research demonstrated the value of IBP: Organizations that link planning processes get better results. Sixty-six percent of organizations that have an integrated method say it works well or very well, compared to only 25% that have little or no connection between plans.

While the annual budget focuses on financial planning, IBP gives executives and managers operational tools to manage business planning in a more holistic, robust way than just budgeting. It can be the foundation for building a more predictive finance organization, and for implementing AI-based methods for planning as well as predictive and prescriptive analytics.

A platform is essential for IBP because it makes it possible for all participants in every planning unit to have access to the same data. This ensures consistency while making it possible to automate the movement of data from authoritative sources, such as ERP, warehouse management, human capital management and customer resource management systems. Users can be assured they are working with timely and accurate data while minimizing workloads.

A platform structure facilitates the use of external data that can improve forecast accuracy and is essential for the creation and management of artificial intelligence models. Integrated business planning is supported by a platform that enables organizations to plan, budget, report and analyze faster and more accurately. It uses technology to connect financial planning and budgeting with the parts of the organization that plan sales, supply chain, workforce, marketing and IT activities. Technology is essential because it enables each business unit to plan the way that best suits their specific needs while streamlining the integration of these individual plans into an overall picture. It enables organizations to collaborate more consistently and effectively in planning processes. Our Business Planning Benchmark Research found that 85% of organizations that collaborate effectively have a planning process that is managed well, compared to just 11% that do not. Software makes it possible to substantially cut planning cycle times by reducing the individual business unit’s planning workload, and increasingly by applying AI to assist individuals in creating statistically valid plans. I expect that by 2025, one-fourth of financial planning and analysis groups will implement IBP.

IBM was categorized as an Exemplary Vendor, ranking first overall in our Business Planning Value Index evaluation, and highlighted in our Market Perspective on the products and customer experience provided. At the heart of IBM Planning Analytics is the ability to enable financial planning and analysis groups to quickly create forecasts, budgets and financial plans that are easily updated to provide senior executives with a full set of projected income statements, balance sheet and cash flow statements to ensure financial control. Beyond these basics, it facilitates the use of scenario testing so individuals, using their personal sandbox, can compare the impact of different detailed scenarios and test underlying assumptions to better understand potential outcomes and risks. Over the past three years, organizations have been challenged by episodes of highly uncertain economic and market conditions and have found that what-if planning is essential so executives can quickly understand the impact of different decisions under alternative scenarios. In this environment, being able to rapidly pivot and address changing conditions enhances competitiveness, so FP&A groups no longer have the luxury of responding to a question with, “I’ll get back to you with that answer.”

The software enables users to apply constraint-based planning. This allows organizations to consider how best to utilize resources in a given set of conditions to achieve a desired result, such as designing sales incentives to achieve the mix of products and services that can maximize profitability or market share in a specific category or geography.

People working in accounting and finance live in spreadsheets, so Planning Analytics allows them to use Excel as their interface. But the technology also addresses desktop spreadsheets’ shortcomings with a database that meets the multidimensional requirements of business planning. Planning Analytics almost instantaneously automates the consolidation of all of the plans of an organization’s various business units, uses workflows to reduce administrative workloads, supports collaboration in the process and simplifies as well as automates reporting and analytics that are an essential ingredient in business planning and budgeting. Interactive dashboards allow self-service exploration of trends and the ability to drill down into data.

As the product’s name suggests, IBM’s technology is firmly rooted in analytics and increasingly in the use of AI for forecasting and predictive analytics. All vendors of software aimed at the office of finance continue to differentiate offerings by the capabilities and accuracy of AI functionality. Over the remainder of the decade, it will be the most consequential technology for business computing. Ventana Research asserts that by 2025, almost all vendors of software designed for finance organizations will have incorporated some AI capabilities to reduce workloads and improve performance. The technology can improve the effectiveness of planning and forecasting by marrying financial and operational planning, including sales and constrained-demand forecasting. It also can reduce the impact of bias in such projections, increasing accuracy and supporting better business decisions by assessing operational and financial options in tandem.

Instead of playing a relatively narrow role in orchestrating the organizational budget and periodic analyses and reforecasts, FP&A groups should redefine their mission to support the rest of the organization in making business planning more effective, providing more insight into performance. To facilitate the planning process, support high participation and shorten planning and budgeting cycles, FP&A must design and implement streamlined processes that reduce the time required to create and update plans and budgets. They must also enable a structured dialog about plans and budgets as well as facilitating analysis and reporting of results. To make this sort of process transformation practical, they need a planning platform. I recommend that organizations using stand-alone spreadsheets for business planning or that are looking to replace existing, on-premises planning software assess IBM Planning Analytics.

Regards,

Robert Kugel