Robert Kugel's Analyst Perspectives

Artificial intelligence using machine learning has passed through the bright, shiny object stage and software vendors are well into the process of making the concept a reality in their offerings. Ventana Research defines AI as the use of technology to process information in much the way humans do, including improving accuracy in recommendations, actions and conclusions as more data is received. I like the alternative term “augmented intelligence” because it emphasizes that these systems enhance – rather than replace – the capabilities of the humans employing them, especially through improved decision-making and eliminating the need to perform repetitive work.

Organizations need to use external data in planning and budgeting, both data and third-party forecasts. This need also extends to external data in training artificial intelligence systems to assist in planning and for predictive analytics. Companies do not live in a vacuum and things occurring outside physical facilities have a direct impact on how an organization performs. Incorporating external data and third-party forecasts in any systemic fashion is really only practical if you’re using dedicated planning and budgeting software. And increasingly, planning and budgeting software will be incorporating AI capabilities. Watch this brief video presentation by Ventana Research SVP and Research Director Robert Kugel to uncover the benefits of organizations using external data. 

I first wrote about a new era of trade a few years ago to make the point that the period of optimizing supply chains for the lowest cost was over, and that companies needed to redesign them to achieve greater resiliency. That observation proved correct. Now we are hearing about “the end of globalization,” a hyperbolic phrase describing the effects of ongoing changes to the international political order that have been underway for more than a decade. These changes are forcing companies to make sometimes significant adjustments to sourcing and supply chain management. Globalization, which started in 1492, isn’t over, but managing international trade requires the ability to deal with shifts in strategic planning assumptions and agility in dealing with tactical events. Software will play an important role in enabling corporations to meet these ongoing challenges caused by a major reordering of global trade.

Ventana Research recently published the results of our Business Planning Value Index Research and I commented on its connection to our emphasis on using software to unify planning processes across an enterprise to improve performance. Since 2007, we have advocated what we call Integrated Business Planning (IBP): a high-participation, collaborative, action-oriented approach to planning and budgeting built on frequent, short planning sprints. Short planning cycles enable companies to achieve greater agility in responding to market or competitive changes.

I recently attended an analyst conference held by Unit4, an enterprise resource planning vendor focused on midsize organizations in people-centric industries. The conference was intended to communicate the company’s strategy, product updates and roadmap. The meeting took place shortly after announcement of the availability of Unit4 Industry Mesh and the acquisition of Compright, which does compensation planning as well as in the context of the broad technology shifts affecting ERP applications.

The use of artificial intelligence (AI) using machine learning (ML) will be the single most important trend in business software this decade because it can multiply the investment value of such applications and provide vendors an important source of differentiation to achieve a competitive advantage in what are today very mature software categories. I assert that by 2025, almost all Office of Finance software vendors will have incorporated some AI capabilities to reduce workloads and improve performance. However, software vendors will be challenged to apply innovations in this area quickly while ensuring that the AI capabilities function well enough in the real world to foster rapid adoption while avoiding user frustration. The failures of the Apple Newton and Microsoft’s Clippy office assistant stand out as examples of too-ambitious-too-soon attempts at infusing intelligent automation.

Ventana Research recently announced its 2022 Market Agenda for the Office of Finance, continuing the guidance we have offered since 2003 on the practical use of technology for the finance and accounting department. Our insights and best practices aim to enable organizations to operate with agility and resiliency, improving performance and delivering greater value as a strategic partner.

Pricing is an issue that almost every for-profit company confronts – and usually agonizes over. Chief financial officers must play a part in setting the strategic direction of pricing in their organization. They should not be involved in tactical pricing decisions because they are not close enough to markets and customers, but they should be part of the strategic design of pricing, especially as part of a profitability management effort, which I’ve discussed before.

Managing corporate income taxes is a challenge for chief financial officers. Tax codes are often complex, so tax accounting as well as the data required for tax provisions and tax compliance are different enough from statutory accounting to create significant workloads for the tax department. Today, the worldwide trend to higher taxes and growing tax code complexity is increasing the payoff for digitizing an organization’s tax function.

A looming challenge for companies in the developed world is price inflation, an issue periodically fretted over – but not experienced at a macroeconomic level in most developed economies – over the past four decades. Price inflation has been a frequent bugaboo that never emerged because of persistent disinflationary forces in the world economy over the past forty years. It remains to be seen to what extent recent price rises are persistent or transitory but “what if?” was the most important phrase organizations used in 2020. What if this time it really is different?