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Ventana Research recently awarded Workday a 2016 Technology Innovation Award for its newly released application, Workday Planning, because it simplifies and streamlines the budgeting and planning processes while facilitating collaboration, deepening visibility into spending and enabling tight fiscal control. These capabilities can help a variety of user organizations in several ways.

While I’ve long stressed the importance of ventanaresearch_technologyinnovationawards_winner2016_whitepaying more attention to business planning and less to budgeting, that doesn’t apply to every organization. By “business planning” I mean a process of capturing the most important “things” in business plans that drive results, such as production volumes, material yield, labor hours, sales pipeline conversion ratios, capacity utilization and so forth, while deriving the financial implications (revenues and expenses) to create a financial budget from those plans. However, this approach isn’t applicable to most government, higher education and nonprofit organizations. For them, the financial budget is usually of paramount importance. In addition, companies that have relatively stable and predictable revenues (such as regulated utilities) may have a preference for a traditional planning and budgeting process focused on controlling costs.

Especially if expenses related to head count consume a substantial share of their operating costs, organizations using Workday for their financial management and human capital management (HCM) requirements are likely to find its software an attractive option, especially if the organization is using desktop spreadsheets to manage its planning processes. Our next-generation business planning benchmark research finds that 82 percent of government, education and nonprofit organizations use spreadsheets for budgeting (compared to 66% of all other corporations). A dedicated application such as Workday Planning can improve financial control and visibility while streamlining planning, budgeting, reporting and reviewing.

Almost all government, higher education and nonprofit organizations operate in a way that puts a priority on controlling expenditures. This is because, either by statute or contract, money spent on a department or purpose cannot exceed the amount set in the budget. These types of organizations employ fund accounting, a system for recording and tracking resources whose use has been limited by law or by a donor, grant authority, governing agency or other individuals or organizations. This approach contrasts to almost all for-profit businesses, for which no such restriction exists and executives can alter spending at their discretion to address business needs and conditions.

Most government, higher education and nonprofit entities have little need for sophisticated business modeling, which is valuable when dealing with uncertain revenue flows and costs associated with them. For these organizations, fiscal control, visibility into how monies are being spent and ease of budgeting and administration are key concerns in managing their finances. Software designed for this purpose can add considerable value to the process by reducing the effort required to establish budgeted amounts, monitor outlays by individual budget, and enhance visibility into spending and trends while providing targeted alerts when necessary to address issues.

Our next-generation business planning research reveals that 82 percent of government, education and nonprofit organizations use spreadsheets for budgeting. Compared to spreadsheets, Workday Planning can provide a better budgeting experience because it is an integral part of Workday’s financial management and human resources applications. This eliminates the cost and bother of maintaining links between a budgeting system, the general ledger and HCM systems. Because Planning is part of a single system it uses the same data as financial management and HCM, updates to actual results are immediate and effortless, as are changes to head count. And because planning data uses this same database, periodic reports and dashboards will show accurate and up-to-date information about actual and committed spending as well as spending trends. Another reason why companies replace spreadsheets with a dedicated application is that the latter enables them to look forward. Our research finds that 55 percent of companies that use a dedicated planning application are able to explore all the implications of various scenarios, compared to 40 percent that use spreadsheets.

vr_ngbp_06_dedicated_applications_help_users_look_ahead_updatedAdditionally, Workday’s software has a strong set of collaboration-in-context features that facilitate rapid exchanges to sharpen the plans and speed their completion. Rather than exchanging spreadsheets, commentary and documents through a disjointed series of emails, instant messages or comments inserted in a spreadsheet cell, individuals can communicate with a group of relevant individuals. They can refer to specific budget or income statement items as well as related documents in a persistent conversation thread that can be easily referenced at any point in the future.

Workday also can significantly improve visibility into spending and fiscal control. Expenditures are immediately charged against specific budgets. Combined with planning data covering the remaining fiscal period, the software can provide an alert when outlays are running ahead of plan. Organizations with a disciplined purchase order system can also monitor committed spending against a budget. In such a case, those approving a purchase can immediately determine not only if funds are available and but also whether outlays for this particular purpose are in line with the budget and whether spending alterations must be made in future periods. Government, higher education and nonprofit entities often are people-intensive, so having head-count plans and related costs as part of the same system that holds compensation and head-count data (both actual and anticipated) ensures that budgets are always synchronized with up-to-date actual amounts and projections about head count, salary and benefits.

I strongly recommend that government, higher education and nonprofit organizations that use fund accounting and are currently using Workday for both financial management and HR evaluate Workday Planning to manage planning and budgeting, especially if they are currently using spreadsheets. Organizations of this type that are currently evaluating systems that combine financial management and HCM software should take into account Workday’s planning and budgeting capabilities in making their vendor selection. Similarly, I recommend that corporations using Workday Financial Management and HCM that prefer traditional budgeting and are currently using desktop spreadsheets to manage the process should evaluate Workday Planning as a replacement.

Regards,

Robert Kugel

Senior Vice President Research

Follow Me on Twitter @rdkugelVR and

Connect with me on LinkedIn.

The annual Oracle OpenWorld user group meeting provides an opportunity to step back and take a longer view of business, industry and technology trends affecting the company. Last year, after listening to Larry Ellison’s and Mark Hurd’s vision for the future of IT, I wrote that Oracle had to continue shifting its focus to business applications because the accelerating shift to cloud computing would lead corporations to outsource their IT infrastructures, services and security to third parties. Eventually, this would substantially shrink the market for corporate IT departments, which has been Oracle’s strength. At this year’s conference the company demonstrated how it is applying its technology strengths to create a competitive advantage that it can apply to its broad business applications portfolio.

Adaptive Intelligent Applications is Oracle’s term for its new applications that marry third-party data with real-time analytics, machine- and behavioral learning. “Adaptive” means that the applications are able to mold themselves to how organizations actually behave rather than forcing users to adjust to how the software works. The objective is to embed in its business applications situational awareness that simplifies how individuals perform tasks and provides executives, employees and customers with recommendations tailored their specific needs in the immediate context. This approach utilizes a key advantage of cloud applications: Vendors are able to bring their expertise and economies of scale to bear in expanding the scope of their services to provide capabilities that, for cost or other practical reasons, most customers couldn’t duplicate on their own premises. The ability to significantly improve business performance in this manner is the primary reason why Ventana Research awarded Oracle’s Adaptive Intelligent Applications its 2016 Technology Innovation Award for untitledoverall business technology innovation. Intelligent Applications have the potential to reimagine business software generally, going beyond data capture and simple process automation to support more informed and intelligent decision-making.

Oracles’ Adaptive Intelligent Applications take advantage of the company’s Oracle Data Cloud, which contains more than five billion consumer and business profiles, each with a rich set of attributes. Companies can use this data and analytics to continuously adapt to understand the behaviors and needs of a specific organization’s users, customers and employees. For example, this data trove could be used by purchasing departments to negotiate better prices and terms, by finance organizations to prioritize payables if forecasted cash flows are tight, by HR departments to identify best-fit candidates faster and by supply chain managers to identify the best options in designing distribution networks.

In addition, this year’s OpenWorld keynotes fleshed out Oracle’s cloud infrastructure strategy, which is multifaceted:

  • It repurposes its database, tools and IT infrastructure strengths to address the new cloud-based information technology economy.
  • It continues to restructures its broad set of applications and functionality to operate well in a multitenant software-as-a-service (SaaS) environment.
  • It provides the ability to more easily integrate, enrich and extend these applications in the cloud, which can help Oracle retain existing application customers by providing a practical migration path to the cloud as well as differentiated services and applications.

Over the past few years Oracle has refined its cloud strategy in a way that builds on its technology strengths to adapt to an epochal shift in how companies consume business applications. IT departments won’t disappear, and for the time being they will remain a key source of revenue for Oracle. But in most organizations they will shrink considerably over the next decade as their “keep the lights on” workloads are reduced substantially. This will happen as the bulk of maintenance work shifts to the cloud application vendors and as line-of-business departments embrace more easily configured applications to take charge of the software that runs their business. Oracle’s cloud infrastructure strategy provides it a way to give existing and prospective customers the flexibility to adapt to the shift to the cloud in a way that best fits their circumstances and needs.

We are well into a fundamental restructuring of how organizations source and use information technology that generally comes under the heading of “the cloud.” Just as the shift to client/server computing a generation ago was more than just that computing structure (it coincided with broad adoption of relational databases and event-driven programming, for example), the cloud is better understood as a maturation of underlying technologies that significantly reduce the need for customizing applications, facilitate their implementation and make it easier to integrate them. In other words, the artisanal nature of IT that dominated the first half century of the Information Age is moving at an accelerated pace to an “off the rack” mode.

Technology also is creating opportunities for vr_office_of_finance_01_erp_replacement_updatedspecialization and economies of scale that alter the calculus of rent-vs.-buy decisions for buyers in a way that favors the former. The new model is making outsourcing of computing capabilities by renting services such as memory and processing power a more attractive alternative for most companies. It will continue to change spending patterns for information technology and create winners and losers. Internal IT, vendors that serve internal IT staffs and systems integrators will have smaller shares of IT spend. Although this will in part disadvantage Oracle, the company will likely increase its share of applications spend and offset some of the revenue lost from its existing database and tools business with outsourcing revenue.

That said, the transition to the cloud will not be abrupt because corporations have existing investments that they will replace only when the benefits are compelling. In some cases, this will take place very slowly: Our Office of Finance benchmark research finds that ERP and financial consolidation systems, for example, are replaced on average every six and seven years, respectively. And while attitudes are shifting in favor of the cloud, outside of the San Francisco Bay Area and technology hubs around the world, reservations about the cloud persist. For these reasons, technologies that facilitate managing hybrid cloud and on-premises computing environments will be popular because this approach allows organizations to choreograph their migration paths to the cloud in ways that suit their untitledneeds. Vendors that can offer companies flexibility in how they evolve their computing environments will have a market advantage.

In our research 46 percent of organizations said that they still favor on-premises deployment of ERP, 44 percent said that for financial consolidation and 43 percent for planning, but “no preference” is a growing trend. Personally, I would rather entrust my company’s critical systems to people whose only job is to ensure security, rather than those in an IT department who have less sharply focused skills and priorities. As a business executive, I would prefer to have nearly certain immediate and full recovery from system failures. Nonetheless, the world will continue to shift to the cloud at a measured pace because it is impractical for many companies to migrate core applications for financial or operational reasons.

One notable change from past OpenWorld events was that business applications were front and center in Larry Ellison’s Sunday night keynote. They are an integral part of the company’s positioning itself as offering a three-layer cake of software as a service, platform as a service and infrastructure as a service. Providing this range of services can enable Oracle to retain its customer base as these companies transition to the cloud by offering a range of options in how they transition from on-premises IT to the cloud.

Offering a full technology stack that spans infrastructure to packaged applications, Oracle has a differentiated product portfolio that provides value to business users. It gives companies flexibility in choosing deployment options over time. For example, it can make it easier to implement Oracle’s ERP, CRM and human capital management suites in a hybrid fashion, choosing which platform is best for the company, or to create extensions to these applications in the cloud to extend their capabilities or adapt to specific business requirements. Both platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) offerings are likely to provide Oracle with a significant revenue stream as its on-premises database license and maintenance business wanes.

Offering a common platform enabled Ellison to highlight a “full” integration of its business applications (notably ERP, CRM and HCM) in the keynote. Yet when it comes to integrating applications, the devil is in the details. At the very least full integration will make it simpler (but probably not simple) to share data, stitch together processes and potentially simplify authentications and sign-ons. Offering easier integration has some potential for increasing Oracle’s share of a company’s spending on applications, but one shouldn’t overestimate this appeal. Our Office of Finance research finds that a plurality of companies prefer to purchase suites of functionality. However, all larger companies (and most midsize ones) already have some or all of these components implemented and are unlikely to drop an incumbent application because integration is easier. Moreover, these three application categories are purchased by different groups within a company. In the past, cross-functional purchasing has been limited by emphasis on the suitability of each piece of software to address business requirements.

Various breakout sessions showed that Oracle continues to make progress in reworking its on-premises business applications for the cloud, especially E-Business Suite, performance management and financial consolidation. Just about all on-premises ERP and performance management vendors have had to rewrite their applications to be able to offer them in a multitenant environment for two main reasons. One is that the vendors could not afford to operate their on-premises software profitably as it was written or achieve levels of performance to make them viable at scale.

The other, somewhat related reason is that software vendors also recognized that they needed to clear out the mare’s nest of code that has accumulated over the years to address bugs, add a feature or two or address some architectural flaw. Often, the objective in writing these fixes is expedience, not elegance. As we enter a more mature phase of the business software industry, it may become common practice to rewrite applications every, say, seven years. While code doesn’t physically deteriorate, usually there’s an opportunity to revamp and rewrite the business, data and process models that undergird the application’s functionality, while also clearing out the digital deadwood that piles up in the code base.

The slow, steady transitions of Oracle and other vendors to offering multitenant cloud versions of their software indicate the magnitude of the effort that’s needed. While established vendors have had to slog through rewriting their code to work in a multitenant SaaS environment, the “legacy vendors are dinosaurs” pundits overlooked the steep hill new vendors have had to climb to create their software. ERP and statutory consolidation, for example, are complex applications. Writing and rewriting them appear to be difficult and time-consuming tasks.

The most significant takeaway from this year’s OpenWorld is that far from being a dinosaur, Oracle has positioned itself to maintain a leading share in the business applications business. The addition of adaptive Intelligent Applications as well as creating a well-architected infrastructure and platform for the cloud positions it well for the ongoing evolution of the business software market. The business applications business will continue to be highly competitive, but Oracle appears to be heading in the right direction.

Regards,

Robert Kugel

Senior Vice President Research

Follow Me on Twitter @rdkugelVR and

Connect with me on LinkedIn.

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