Robert Kugel's Analyst Perspectives

I read a blog post by Ben Lamorte, VP of marketing and sales at Alight Planning who delivers business and financial planning applications, who askswhy financial reporting tools deliver no business value. This led me to think that there are more than a few ways to waste money buying software, but I want to focus on one of the most common ones: assuming that having a new application will automatically improve your business (or believing a vendor who tells you that it will).

Just buying a reporting system, for example, does not make your organization smarter, agile or more competitive. What matters of course is what goes into the reports and how quickly actionable information is available to the right people. To achieve this requires some thought, especially about how having the technology can help you make fundamental changes. It also means having a process in place that regularly reviews and rates the value of these reports and regularly canvasses users on their information needs.

Failing to implement and maintain reporting systems to derive value from them is an example of a larger issue companies face when they believe (or are persuaded) that just buying software will solve a problem. Sometimes, especially in larger organizations, the problem manifests itself when IT departments go through upgrade and vendor consolidation cycles without much forethought about – or input from business users – how the new software can be used to improve business effectiveness; they fail to consider that more informative and more timely intelligence enables managers to make better decisions more consistently, or that the software can support improved processes that are, for example, more customer-centric.

It’s the nature of business process automation to start out mimicking paper-based structures and steps and only later to fully utilize the advantages provided by automated, digital execution. Document management, for example, enables parallel processing of a task (such as a loan application) by any combination of individuals (where human review and judgment are necessary) or automation (where they are not) to achieve greater efficiency as well as greater effectiveness (in enhancing customer service by reducing cycle times). Unfortunately, this sort of fundamental innovation does not happen often. Most companies could achieve more by using their ERP systems more effectively, for example, but our research finds that few do. Inertia is one of the most powerful forces in business (as elsewhere in life). Great managers recognize, however, that “we’ve always done it this way” is the most costly phrase in running a business.

I suspect that this sort of inertia is probably the biggest reason why “financial reporting tools deliver no business value.” Too few people who work in finance roles understand what IT systems are capable of delivering. In many organizations, they find it too difficult to communicate their needs to those with the IT skills that can add value to business reporting. Although reporting systems today enable users to adapt them far more  than in the past, using them more effectively still requires some skill development (no, you don’t have to become a programmer) and an attitude that doesn’t accept the status quo. As a practical matter, acquiring the latter is more daunting, in my opinion.

But the situation is by no means hopeless. A good first step in figuring out how new technology can help is the magic-wand approach: Ask people in business and finance roles what they would do if they had a magic wand that could change some aspect of the work they do. Step two is determining whether making that change is practical and if so how to make it happen. The research we’ve done over the past decade convinces me that companies could be doing a lot more with the IT resources they have. For people in finance roles, it’s important to recognize that the biggest obstacle to improving their effectiveness is their own attitude to change. If you’re frustrated by the lack of value you get from reporting or other business software, there’s a good chance the problem is not the software but a lack of commitment to making it work in your environment.

Regards,

Robert Kugel – SVP Research