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I recently attended Vision 2013, IBM’s annual conference for users of its financial governance, risk management and sales performance management software. These three groups have little in common operationally, but they share software infrastructure needs and basic supporting software components such as reporting and analytics. Moreover, while some other major vendors’ user group meetings concentrate on IT departments, Vision focuses on business users and their needs, which is a welcome difference. For me, there were three noteworthy features related to the finance portion of the program. First, IBM continues to advance its financial performance management (FPM) suite and emphasizes its Cognos TM1 platform to support a range of finance department tasks. Second, the user-led sessions illustrated improvements that finance departments can make to their core processes today, ones that improve the quality of these processes and go a long way toward enabling Finance to play a more strategic role in the company it serves. Third, the Cognos Disclosure Management product has better performance and useful new features to support the management of a full range of internal and external disclosure documents, including the extended close, which I have discussed.

It’s customary for companies to produce a slew of press releases to coincide with big conferences or user group events. Thus it’s interesting that IBM made no such announcements in this case: Product releases either happened months ago or are scheduled for later this year. This was probably incidental, but the lack of hoopla also reflects a good read of the audience attending this event (which tends to be skeptical, especially of anything that smacks of sales and marketing bombast) as well as recognition that the market is still catching up with FPM suite capabilities that have been available for years. From a user or potential user’s perspective, what’s old is still new.

Our Financial Performance Management Value Index evaluates suites of financial performance software rather than individual components for which IBM was rated Hot in 2012. There is a long-running debate on whether companies should buy suites of software or individual components. I advise companies to take the suite approach unless components fall short of business requirements because a suite can be – this isn’t guaranteed – less expensive to buy and maintain. It also may facilitate training and operations if there is a common interface and a single sign-on capability. A core element of IBM’s FPM product strategy is to emphasize its unified architecture to support a range of core finance department activities. This point was rarely stated explicitly at the conference probably because people working in non-IT roles are more focused on the benefits that come with this approach. IBM’s architecture facilitates the integration of specific finance functions such as planning, budgeting, forecasting, statutory consolidation and creation of disclosure documents as well as providing complementary capabilities such as performance management (including scorecards and dashboards and reporting) and analytics.

In particular, Cognos TM1 is enterprise planning software that helps manage the full planning cycle: business modeling, strategic and long-range planning, target setting, operational planning, budgeting and reviewing, along with the reporting and analytic functionality needed at each step. TM1 serves both midsize and larger companies. For the former, Cognos Express offers an integrated platform with standardized reporting, ad-hoc analysis and planning with an in-memory analytic server that utilizes a Microsoft Excel interface. Express is designed for smaller organizations with very limited IT capabilities. The in-memory architecture facilitates all planning and forward-looking activities. It enables organizations to quickly run even complex detailed models against large data sets. Having the ability to rapidly iterate scenarios with specific assumptions (as opposed to simplistic base, upside and downside cases) enables senior executives as well as line managers to have more forward visibility and anticipate the consequences of specific business scenarios and the impact of potential responses to different scenarios.

Software that utilizes in-memory processing has the capability to change the design of planning to create models to work as easily with the things used in running a business (units of materials or parts, hours of labor or purchase orders processed, to name just three) as well as the financial and accounting aspects. In-memory systems could become the tipping point in how companies plan and budget in the future. When weekly or monthly operational reviews are able to focus more on assessing future operational alternatives and their financial consequences and less on historical accounting data, it will enable a fundamental shift in corporate management. The planning-budgeting-review-reforecast cycle will become more useful for those running a company in adapting to the changing currents of markets and economic conditions. The emphasis will shift to achieving business success from focusing on budget conformity.

Another potential advantage of a suite is that it can simplify data management. (But keep in mind here that other data management strategies can achieve the same aim, and in practice organizations can do a poor job of managing data even with the best system architecture.) In the future, it probably won’t matter where a finance vr_lrp12_data_for_planning_is_only_somewhat_adequatedepartment collects its data, keeps its applications and stores its reports. For the moment, though, there is value in having a single system dedicated to the needs of the department to ensure data accessibility, consistency, timeliness and accuracy. A unified architecture also facilitates the creation and maintenance of a unified data set to keep everyone working off the same numbers that are more accurate, consistent and contemporaneous. In addition, IBM’s recent acquisition of Star Analytics has made Essbase data sources, such as those used by Oracle Hyperion, readily available to FPM users. Our research finds that data issues are a common impediment to the execution of business functions. For example, as the chart illustrates, just one-third (31%) of participants in our long-range planning research said the data they work with is adequate.

User-led sessions at Vision 2013 focused on the nuts and bolts of achieving success in deploying FPM software. These demonstrations are a main reason why people attend user conferences. Here the sessions underscored the disparity in maturity we find in how companies approach financial performance management. They often pointed out the data and IT infrastructure challenges most face when attempting a transformative change in a finance organization. The takeaway of most of these success stories was the need to change management of some core process. For this reason, to summarize the lessons learned from the presentations, the first key to success typically is executive buy-in coupled with repeated communication of the objectives. Promoting accountability is often an important motivation for FPM initiatives, and that requires accurate and consistent data to ensure buy-in. Although plenty of companies are proving the value of software in managing more effectively, we had enough conversations with those in the trenches to confirm that in areas like planning and budgeting, analytics and scorecarding, maturity levels are still low.

Today’s FPM suites are designed to require as little IT involvement as possible, a feature that all vendors emphasize. One session at the conference, however, served as a reminder that for most larger companies these systems are never “hands free.” Even well-designed software can be configured improperly or require modification as use evolves. For example, unless TM1 is properly configured, senior executives reviewing corporate plans as a deadline approaches could experience frustration because the numerous last-minute adjustments to individual plans can bog down a system’s performance. The circumstances and fixes for these sorts of issues differ between software packages and companies. However, a universal best practice companies must follow is having an ongoing dialog between Finance and IT to address issues as they arise, as well as an emphasis in IT organizations on uncovering these sorts of problems and addressing them quickly.

Turning to a specific product, I see Cognos Disclosure Management (CDM) as a welcome upgrade to Cognos FSR. Both products are designed to automate and streamline the process of composing and editing disclosure documents such as the Form 10-K annual report filed with the U.S. Securities and Exchange Commission (SEC) as well as tagging the documents using eXtensible Business Reporting Language (XBRL). I have been enthusiastic about this product category from the start because it facilitates the production of external disclosures, eliminates the need for people to handle repetitive mechanical tasks and promotes accuracy. It allows organizations to focus more on what goes into the disclosure by cutting the effort required to assemble the multiple components. (In general, however, our anecdotal sampling indicates that XBRL tagging is universally viewed as a compliance requirement without benefit to the company.) CDM makes it easier for public companies to handle the tagging process internally rather than having a third party provide this service. My conversations with users confirm that this approach gives them more time to complete their disclosure documents, provides greater flexibility in managing the process (especially in incorporating last-minute changes) and gives the CFO much greater control over decisions about which XBRL tags to use. The revamped CDM is able to handle more users, which is increasingly important as companies use it for more extensive reporting and disclosure activities such as internal reports (for example, board books) and external compliance filings that require the integration of text and numbers.

Well-designed and smoothly run user group meetings are a useful and efficient way for people who have made considerable investments in software to see what others have accomplished and to network with their peers to understand how best to implement change. The software is a consistent topic, of course, but for attendees the people, process and project management elements are equally important. Our benchmark research shows that a majority of finance departments have scope (often considerable) in which to improve the quality of, and the efficiency with which they execute, core processes and support the strategic objectives of their company. Software by itself is only one element, but it can be either enabler or impediment in efforts to improve finance department performance.


Robert Kugel – SVP Research

At this year’s Inforum user group conference, Infor representatives showed the progress the organization has made since last year in transforming itself from a ragbag of mostly small, often obsolete software companies to a competitive vendor of a modern enterprise management software suite. Infor was created by private equity investors employing a “rollup” strategy, aimed at combining smaller companies within an industry to form a single larger company that could achieve economies of scale and greater market presence. Others have tried this in the software industry in the past and encountered difficulty in making it work for two primary reasons. One is the technical challenge of achieving economies of scale in enterprise applications by turning a set of similar but separately developed software pieces into a single offering. Computer Associates achieved economies of scale through acquisition in the 1990s in the IT infrastructure software segment. But it did this largely by forcing customers of the various acquired companies to migrate to its single offering in the specific category. This is not a practical approach for business and finance enterprise applications because customers are willing to go off maintenance and eventually look for another vendor. The second difficulty is that newer or larger competitors can focus on innovation and overtake the rollup company while its attention and resources are focused on stitching the pieces together.

Infor has addressed the economies-of-scale issue with its loosely coupled, XML-based ION middleware. Introduced in 2011, ION is an elegant method for integrating the data and process elements of the disparate pieces of Infor’s portfolio. (And of other software, too: Half of Infor’s customers use it to integrate with other vendors’ software.) ION has made it easier and less costly, for example, for Infor’s ERP customers to add its financial performance management software, according to our Value Index analysis. This cross-selling had been at the core of the company’s strategy from the start but needed a practical solution to make it work; ION supplied that.

Innovation is the other important issue that Infor needed to address. The numerous incremental technology advances that have taken place over the past decade, combined with the rise of the “millennials” and the retirement of the Baby Boomers in the workforce, are driving fundamental changes in how people expect to work with software. This shift is a key part of my research agenda for this year.

vr_bti_br_access_preferences_for_innovative_technologiesNothing says “modern” like the Cloud. Most observers now recognize that corporations will continue to pick and choose how they deploy software and data for quite some time. Our benchmark research into business technology innovation confirms that organizations have different preferences in how they deploy information technology, as the chart shows. In some cases, such as analytics, they prefer on-premises by a substantial margin, while the cloud rules for social media. Many companies that won’t dream of having their ERP and financial management systems in the cloud are long-time users of Salesforce.

Infor has made strides in addressing this situation. For example, Inforce is a native tool that connects Salesforce with Infor’s back-office applications. Inforce enables a company to automate management of, say, the full scope of a sales order process that begins as an opportunity in Salesforce and ends with posting all details of the completed transaction in the company’s ERP system. This structure eliminates the need to rekey data and enables controls such as credit limit approvals to be enforced. Similarly, Infor recently announced Sky Vault, an offering based on Amazon Web Services’ Redshift. Sky Vault is a cloud-based variation of Infor’s Business Vault, a dedicated repository for data generated by any transaction system (not just Infor’s). Business Vault offers users a way to immediately access a full range of company data for analysis and reporting. When it is formally launched in the second half of this year Sky Vault will provide a cloud-based repository that includes prebuilt,vr_bigdata_benefits_of_big_data_technologies industry- and function-specific business analytics, reports and dashboards. Its purpose is to give users low-cost big data capabilities. Our research shows that corporations are increasingly looking at big data technologies to retain and analyze more corporate data, increase the speed of analysis of that data and make it more accurate.

Simply having a cloud-based offering or an approach to big data is less important than what you do with it. To that end Infor has focused on improving the efficiency with which people use its software (one metric being the number of clicks required to perform a process) as well as making “beautiful apps,” in what it is calling “the SoHo Experience” created by its internal creative design organization. The dull, cluttered and difficult-to-navigate interfaces of the past were the result of inexperience in design and constrained computing resources. Today, it’s important to apply basic concepts of industrial design and ergonomics to creating user interfaces. This goes beyond making old code bases pretty. Largely because of tablets and mobile computing platforms, people now work with multiple types of interfaces and use a wider range of methods and gestures to interact with their devices. Today’s software design must reflect these changes. Having a modern user experience also makes it easier for Infor to attract customers and deflect claims that it is selling warmed-over applications that it acquired, which would have been a competitive vulnerability had it taken a more conventional approach.

Enhanced business collaboration for every part of the organization increasingly is a key requirement for software, and Infor is at work here also. Its Ming.le social collaboration software provides the means to connect groups of people within a workforce to achieve faster communication and more effective interaction in the context of specific issues or processes supported by computing systems. Instant messaging evolved from teenagers passing electronic notes to their friends into an easier way for business people to connect faster than through phones and email. Similarly, social collaboration is now more than a Facebook metaphor and addresses a key drawback to instant messaging systems. Individuals have multiple roles and multiple networks of people with whom they interact. Some relationships are tight, but others are transient. Some may be focused on a general topic such as marketing and therefore include a large and possibly diffuse group, while others such as performing reconciliations in the financial close process have a defined and controlled set of members. Well-designed social collaboration software can manage all of these types of interactions and enable people to resolve issues faster and with less effort than other means of communication.

As well, Infor has been building out mobility applications for extending functionality to people and functions that aren’t confined to a desk, such as a shop-floor tablet application, proof of delivery, requisitions and field service, to name a few. Mobility is rapidly becoming a table-stakes capability expected by software customers.

Integration and innovation support Infor’s core strength, which has been – and will continue to be – a customer base that values Infor’s highly specialized offerings. Infor’s “micro-vertical” strategy suits midsize companies (and midsize divisions of larger corporations) that have limited IT budgets yet want their specialized requirements addressed without having to pay a premium for customization and configuration. Many types of business adapt well to standard software, and all major ERP software companies have built industry-specific variations of their software offering over the past two decades. But milk and beer, for instance, remain two very different types of beverages with distinct requirements. Likewise steel service is a distinct form of distribution, and different types of industrial equipment dealers have specific requirements. Even Lawson’s S3 customers are focused in businesses such as government and healthcare that are people-intensive and therefore must manage the complexities associated with rapidly evolving workforce relationships.

Addressing micro-vertical specific requirements in business analytics, planning and control software will enable Infor to continue vr_fcc_financial_close_and_automationincreasing its penetration of these products into its installed base. For example,  by deploying Infor’s financial management software, one longstanding ERP customer I spoke with was able to shave half a day from its accounting close in part because it was able to automate more and eliminate 300 spreadsheets that were used in the process. Rather than have three people spend a half day each creating spreadsheet reports that were distributed to individuals by email, reports are generated automatically and individuals can retrieve them from a central repository. In addition, the company controller is now able to complete the management accounting narratives half a day earlier, making critical information available sooner than before. All of this is consistent with our research that demonstrates the value of automation in accelerating the financial close process, as shown in the chart. Across its range of micro-verticals Infor offers off-the-rack basic dashboards and reports tailored to the businesses requirements of its customers. Another example of cross-sell potential is its Approva continuous monitoring software, which can be especially useful for government, education and nonprofits. Unlike most businesses that pay expenses from a common pot, almost all of these entities must use funds-based accounting, so it’s necessary to keep tabs on these individual funds’ balances for specific programs, departments and so on to avoid overspending.

None of what Infor has added over the past two years is groundbreaking technology or a revolutionary approach to enterprise computing compared to what’s available in the broader marketplace. On the other hand, it doesn’t have to be. The changes it has made offer existing customers substantial advantages for sustaining and even expanding Infor’s footprint in their organization. From the perspective of private equity investors and bondholders, this has been and continues to be the most critical aspect of the company’s business strategy. Without it, their investment in Infor would be doomed. And in this respect current leadership has succeeded where the previous management group did not. All of the steps in modernizing and upgrading the products have been achieved at a critical time. The prices paid for software companies in the consolidation of the past decade were based on the assumption of a long stream of annual maintenance payments. However, new technology and a new generation of buyers with more demanding requirements put those dependable maintenance streams in peril. Vendors can no longer assume that they will sustain their current share of wallet without adding functionality and capabilities as well as eliminating ancillary ownership costs (for example, by reducing customization and implementation costs).

The company’s senior executives appeared much more at ease this year than in the past, which might be an indicator that business is improving. But it’s hard to know for certain because Infor is a closely held corporation and is not required to routinely disclose its financial statements. Presenters declined to answer specific questions about the financial performance this year. However, Infor filed its fiscal 2012 financials with the U.S. Securities and Exchange Commission (SEC) as a result of an exchange offer for its debt last year. The company data relates to its fiscal 2012, which ended that May 31, so the information is now almost a year old. The S-4 filing shows the company had revenues of $2.5 billion, a 35% increase over the prior year. This reflected increased demand for software generally but also renewed confidence in the company’s future as well as the Lawson Software acquisition, without which the top line would have been up 24%. Infor’s income statement had been holding its own under the weight of heavy interest expense related to debt taken on to fund acquisitions and a substantial investment in R&D. In fiscal 2012 it lost money on a reported basis but was slightly above break-even when noncash and nonrecurring items are excluded, as well as solidly profitable before interest expense. The numbers also illustrate the substantial investment Infor has made in R&D, which rose by $115 million to $322 million, representing 13% of revenues, up from 11% in the previous two years. For Infor to go public, the company would have to demonstrate ongoing organic revenue growth and prospects for more in the future. One reason for going public would be to retire the company’s high-cost debt, which would allow more spending on sales and marketing focused on gaining new customers.

Infor appears to have come a long way toward achieving the objective of making a very challenging enterprise software rollup work. The first, relatively easy step was buying a set of unsustainably small software companies at reasonable prices. The more recent, much more difficult step has been to make the technology and product design investments needed to transform solid but stodgy intellectual property into a modern software suite. I’ve been describing Infor as “the largest software company you never heard of,” but I expect that won’t be true much longer.


Robert Kugel – SVP Research

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