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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

One of the important lessons company executives should have learned over the past 15 years is that it’s dangerous not to do contingency planning, a subject that I’ve written about before. By this I mean real, think-outside-the-box contingency planning (not just extrapolating), which is especially important when doing long-range planning. The past decade or so has been punctuated by periods of elevated volatility in financial and product markets, and there’s a good probability it will occur again in predictable yet improbable ways. The dot-com boom and its resulting bust as well as the real estate bubble and collapse were in part liquidity-driven events. Many people recognized the artificiality of the rise in values during both of those boom times. There were naysayers questioning the longevity of the upturns, but as they continued unchecked and proved the skeptics wrong, most investors, analysts and advisors grew complacent and unwilling to consider truly unfavorable scenarios. By not planning for a bust, companies and individuals were not in position to react as swiftly and intelligently as they could have.

This sorry history came to mind during a discussion I had recently with the head of financial planning and analysis (FP&A) for an insurance company. The conversation began with advanced analytics and budgeting and then moved to integrating strategic long-range planning and annual budgeting. I asked whether the company had looked at scenarios in which interest rates rose rapidly over the next three years (say, 20-year U.S. Treasury bond yields rising to 5% from about 2.8% today) along with a range of foreign exchange rate scenarios (say, a dollar/euro exchange rate ranging from 1.60 to parity) because the company has substantial business outside the U.S. The answer was no. The response was not surprising because I knew from our research on planning that relatively few companies are able to do meaningful, in-depth contingency planning. Most cannot consider the full implications of specific scenarios that affect key drivers of their business (such as interest rates in the case of insurance companies), the specific impacts on each part of their business under these scenarios and how best to address or take advantage of them ahead of time. Instead, most simply look at vague “upside” and “conservative” forecasts.

Contingency planning, especially in a strategic context, has three distinct purposes. One is to gain a clear and realistic understanding of feasible options under different circumstances by quantifying the implications of different scenarios. The second is to have a structured dialogue about possible options that is built on quantifiable assumptions and outcomes; this provides the frame for a discussion designed to ensure that all executives are on the same page. The third objective is to be better prepared – to have an action plan or at least the foundation for one. Then if the unlikely becomes reality, the organization can implement necessary changes faster than starting from scratch. Contingency planning allows a company to avoid frittering away time deciding what to do next or relying on gut instinct at critical moments. Also companies don’t have to confine their efforts to planning for the worst-case result. Better-than-expected sales may make it possible to accelerate introduction of new products in another division or to bring a new production facility on line sooner. Determining the impact of major contingencies is an important component in making planning more strategic.

For an insurance company, returns on asset classes have important consequences for strategies in sales, pricing and risk management, to name just three key business decisions. A rapid rise in prevailing interest rates can affect its balance sheet and have regulatory impacts. Considering interest rate environments well in advance enables the company to deploy its resources to address opportunities and risks ahead of the curve and perhaps ahead of the competition.

Because no planning process can be completely accurate in all events, it’s important to understand the implications of different outcomes. Including contingency planning in the planning process prepares an organization to quickly generate a revised detailed plan. At least six months in advance any company should be considering the implications of both positive and negative business environments. As the economic outlook changes, executives would have the ability to adjust the plan to make decisions based on fact-based analysis, not hunches. They could see how changes in specific prices, costs, volumes, currency rates and interest rates would impact revenue, profit, working capital and weekly or monthly cash flow. Then they’d be ready to do rapid contingency planning to determine the best response when changes occur.

Our research finds plenty of things that companies can do to improve in planning and budgeting – contingency planning is one of them. One mental mistake they make is confusing planning with budgeting. The objective in budgeting is to narrow things down so that the budget can serve as a yardstick and control mechanism. Contingency planning has a larger purpose, to think expansively about what might happen and to consider the limits of what’s probable in order to have an idea of what to do should that outcome become a reality. It’s not necessary to consider every possibility, just the ones that are likely to have the greatest impact. Having the right software and using it properly is a prerequisite for effective contingency planning. Desktop spreadsheets are not the right technology because they are poorly suited to performing repetitive, collaborative enterprise tasks such as strategic and long-range contingency planning. A dedicated planning application enables companies to quickly adjust scenarios and basic assumptions and immediately see the impact of such changes.

Most of the world has been living in a period of financial repression for the past several years. Its sameness has lulled people into behaving as if it will continue forever. Events over the past 15 years should have taught business executives – especially CFOs – that this is precisely the time to consider what might happen to their business if interest rates change rapidly and consider further how best to respond to the challenges and opportunities that emerge.


Robert Kugel

SVP Research

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