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Business planning is a new software category. These applications enable senior executives to integrate all the plans of business units into a single, integrated view, which helps them have more accurate plans, do more insightful what-if planning, achieve greater agility in reacting to changing business and economic conditions, and execute plans in a more coordinated fashion than was possible. Business planning vr_Value_Of_Integrated_Planning_01_integrated_planning_drives_accuracysoftware is intended for CEOs and COOs, who are not well served by current capabilities. Business planning software enables executives and managers to understand both the operational and the financial consequences of their actions, but it emphasizes the things that the various parts of the business focus on: units sold, sales calls made, the number and types of employees required, customers serviced and so on. Lines of business already do this but in a fragmented fashion using desktop spreadsheets circulated within silos via email. Business planning software provides a platform to support modeling in individual business units, individual planning processes and visualization of the impacts of changes in what-if scenarios. It offers a central data repository for all plans; our benchmark research shows the advantage of this approach: Companies that directly link individual business unit data to an integrated plan get more accurate results. To be specific, 22 percent of those with such links have very accurate budgets compared to just a handful with less direct links and none that employ summarized data.

Business planning software is structured to enable rapid creation of an integrated company plan, workflows to manage the periodic updates to an integrated plan, analytics to support planning, and review and reporting functionality to support collaboration on plans and to communicate results. Because business planning requires collaboration, applications must have built-in social collaboration capabilities in context. Integrating individual business unit plans also promotes better coordination across a corporation. Companies in our research that plan using summarized business data much more often reported a lack of coordination than those that directly link their plan details: 27 percent of those that summarize data experience a lack of coordination in reacting to changing business conditions, compared to just 7 percent of those with direct links. To facilitate planning among today’s dispersed organizations, mobile capabilities supporting plan creation and review are essential.

Planning is not the same as budgeting, as I’ve noted. It has different vr_ibp_integrated_planning_enables_coordinationobjectives. Planning is the process of determining what it will take to achieve business goals. Budgeting is about maintaining control of finances so a company doesn’t fail. Planning must be open-ended. Planners must think multiple steps ahead to consider a range of possible outcomes and how to respond to them. Budgeting, in contrast, is a process of narrowing down. It is about getting to a fixed agreement on what financial resources will be available and how they will be allocated. Business plans must constantly change to adapt to conditions and look forward at least five or six quarters. Budgets change only infrequently and almost always are confined to a single fiscal year. Budgeting mainly serves the needs of the CFO and the finance organization. Business planning serves the needs of the CEO, COO and senior operating executives as well as the CFO. Thus budgeting and planning are fundamentally different, but they must be connected. You can’t budget effectively without a plan, and you can’t plan effectively unless you consider fiscal constraints. At the same time, the two shouldn’t be homogenized, which is the way almost all companies do planning and budgeting today.

To this point technology has mainly constrained the planning and budgeting processes. The process of collecting information to create a budget, performing calculations and basic analyses and creating reports was highly labor-intensive in the days of paper spreadsheets and adding machines, so simplification was required. Electronic spreadsheets enabled companies to do more detailed budgets, but only up to a point. Both approaches required the actual business plans (such as “Here’s what we plan to sell at the following prices” or “Here are the people we need to staff this department by function”) to be subsumed into the budget. This homogenized approach, which I call “budgetingandplanning,” prevents the kind of practical business planning that is useful to senior executives.  It erects a barrier to adapting quickly to changing conditions. On the other hand, business planning software enables decision-makers to measure the impacts of the trade-offs they’re considering and rapidly calculate the impact of different courses of action from both operational and financial perspectives in the context of their key performance metrics.

To be productive, planning must be a structured dialogue, structured in the sense that it involves hard numbers. Measurement is necessary to set objectives and assess performance. A back-and-forth discussion  helps planners agree upon objectives with which to measure success. If getting to the hard numbers at each stage of the discussion takes too long, the conversation becomes stilted and may have to be cut short because of deadlines to make decisions. If running a set of corporate-wide what-if scenarios takes hours or days, there will be no time for dialogue. In that case business planning defaults to individual silos, and the budget becomes the single integrated corporate plan. Even if response times can be cut to five to 10 minutes, that’s still too slow. The conversation must be unbroken.

Today’s business planning software can run even complex scenarios in seconds or less, enabling companies to change the way they plan and review. Using in-memory processing it can deliver answers fast enough to support a structured dialogue. Big data analytics can be used to quickly deliver insights and guidance to inform planning and review conversations. At long last business planning technology is able to facilitate a business-focused approach to planning. By providing better insight and visibility into potential outcomes, executives and managers can make more informed choices about their courses of action. The software is available to enable a more effective business process, but the question is how quickly senior executives will take advantage of it.


Robert Kugel – SVP Research

Oracle continues to enrich the capabilities of its Hyperion suite of applications that support the finance function, but I wonder if that will be enough to sustain its market share and new generation of expectations.VI_Financialmanagement At the recent Oracle OpenWorld these new features were on display, and spokespeople described how the company will be transitioning its software to cloud deployment. Our 2013 Financial Performance Management Value (FPM) Index rates Oracle Hyperion a Warm vendor in my analysis, ranking eighth out of nine vendors. Our Value Index is informed by more than a decade of analysis of technology suppliers and their products and how well they satisfy specific business and IT needs. We perform a detailed evaluation of product functionality and suitability-to-task as well as the effectiveness of vendor support for the buying process and customer assurance. Our assessment reflects two disparate sets of factors. On one hand, the Hyperion FPM suite offers a broad set of software that automates, streamlines and supports a range of finance department functions. It includes sophisticated analytical applications. Used to full effect, Hyperion can eliminate many manual steps and speed execution of routine work. It also can enhance accuracy, ensure tasks are completed on a timely basis, foster coordination between Finance and the rest of the organization and generate insights into corporate performance. For this, the software gets high marks.

Unfortunately, this FPM suite remains more difficult to deploy and maintain than other vendors’ suites, and its user experience is becoming dated. As well, social collaboration is increasingly important in business, especially to fit specific requirements of the finance function, as I recently noted. Oracle understands that it must address changing user experience requirements as the baby boomers retire and are replaced by people who have fundamentally different expectations of how software is supposed to work. While there was plenty of evidence at OpenWorld that Oracle is taking steps to remedy this at a corporate level, it’s up to individual units to implement changes to their software portfolio, and it’s not clear that this is a priority for the Hyperion group. But in other areas, Oracle is busy addressing gaps in its FPM offerings. It is adding mobile enablement to Hyperion Financial Management and Planning, starting with an executive approval application to ensure that necessary signoffs can occur anywhere to speed the completion of routine work. To address the growing popularity of its cloud-based rivals, Oracle’s long-awaited Planning and Budgeting Cloud Service should be available by the end of 2013, providing budgeting, planning, collaborative forecasting and reporting as services to companies. And the company is offering financial and management and reporting in the cloud to streamline production and delivery of reports.

Hyperion still has the strongest franchise in the finance function, the legacy of achieving early market dominance in software for vr_fcc_financial_close_and_automationconsolidation, reporting, planning and budgeting. It succeeded because it gave the finance department autonomy from IT with applications designed by people who understood their needs. Hyperion offers a rich set of capabilities to automate the extended close cycle – all of the activities that start with the preclosing functions and continue through completion of external reporting. Our recent benchmark research on the financial close found a correlation between the time it takes a company to close and the degree of automation that it applies to the process. On average, those with a high degree of automation are able to close their books in 5.7 days, compared to 9.1 days for those that apply little or no automation. Oracle’s Financial Close Suite of applications is designed to enable companies to execute their period-end close faster and more accurately while requiring fewer resources. This is important because managing their close well is an issue for more than half of companies. Our research found that 61 percent of corporations take more than six business days to complete their quarterly or semiannual close (the consensus best practice is closing within six business days). Rather than achieving a faster close, which 83 percent of companies said is important or very important, the research found that on average it takes a day longer for companies to close than it took them five years earlier. In conjunction with better process design, using software to automate manual processes, manage all phases of process execution and limit the use of desktop spreadsheets is an effective way to shorten a company’s close cycle. Oracle’s Financial Management Analytics allows finance executives to closely monitor this extended close cycle.

One recent addition to Oracle Hyperion’s Financial Close Suite is Tax Provision. Accurately calculating and reporting direct (income) taxes is a time-consuming, labor-intensive process for almost all midsize and larger companies. I’ve written about the importance of using technology to bring the tax function into mainstream finance. There are two necessary IT elements to managing this process. One is ensuring that all of the data needed for provisioning and any subsequent audit is readily available. An option here is a tax data warehouse for companies that have a large number of legal entities and/or operate in multiple tax jurisdictions. Hyperion doesn’t have this capability. However, for companies that have less complex requirements or just want to simplify and centralize the gathering of tax data, it provides the second necessary element: an environment that manages tax data collection, improves the accuracy of the data and the calculations (by substantially reducing the need for desktop spreadsheets and rekeying of data from source systems) and automates data movement through configurable wizards. Especially in the quarterly and year-end accounting closes, numerous adjustments may take place that can affect the tax provision or changes in tax calculations that can have an impact on reported results. A tax provision application can speed up the back-and-forth adjustments, helping to shorten the accounting close cycle. It also can enhance the effectiveness of the tax function because those professionals will have more time to spend on analysis and optimizing a company’s tax position rather than wrestling with spreadsheets.

Oracle has added important new capabilities to its FPM suite since acquiring Hyperion. Expanding the suite has helped the company sustain its franchise in the face of determined competition from large to smaller sized software vendors such as IBMInfor and SAP, as well as smaller ones including Adaptive PlanningAnaplanHost AnalyticsLongview and Tagetik. The generational change that’s under way in corporations poses a serious competitive threat to Oracle. For finance professionals, word of mouth and brand loyalty count far more than “enchanted boxes” or “undulations”: That’s how Hyperion came to dominate the market. But times change, and Oracle is vulnerable because of the time and cost of deployment, ease of use and maintenance and user experience of its FPM suite. These were reflected in our 2013 Financial Performance Management Value Index. This year’s OpenWorld demonstrated that Oracle can pivot – albeit slowly – to address a rapidly evolving applications software market. With Hyperion it needs to focus more on addressing core competitive issues if it expects to sustain a leading market position.


Robert Kugel – SVP Research

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