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Save Your CFO From Spreadsheet Hell:
And Keep Your Spreadsheet Users Happy

  Article published in DM Direct Newsletter
May 5, 2006 Issue
 
  By Robert Lautt

While sales of packaged budgeting and planning applications continue to increase, the rate of increase is slowing steadily. Why is this? Why is it that, in an industry where the replacement market for corporate spreadsheet systems constitutes a multibillion-dollar opportunity to enhance corporate decision-making, improve productivity and decrease compliance risk, sales are topping out?

As it turns out, packaged applications are not nearly the silver bullet to "spreadsheet hell" that we had all come to believe. In fact, to achieve the centralization, control and compliance promised by packaged applications, buyers of packages quickly come to the realization that they must accept significant compromise in modeling capability and flexibility - features that they had come to take for granted in their spreadsheets. Are we seeing a backlash, a growing resistance to packages as a solution to the spreadsheet problem? It would appear that we are. Years after the introduction of packages into the market, 80 percent of enterprises still plan and manage their businesses in desktop spreadsheets - islands of data isolated on the desktops of analysts and managers - and most of them, having kicked the tires of packaged applications, seem content to sit on the sidelines and wait for the next generation products, something more flexible, more cost-effective, more maintainable... something more like their spreadsheets!

What is the solution? This article introduces a new category of solution called "spreadsheet automation" that, rather than eliminating spreadsheets, embraces them. Solutions that enable enterprises to harness the power of spreadsheets in a scalable, secure environment without any loss of the flexibility and ease of use that spreadsheets are known for. These are solutions that transform spreadsheet hell into enterprise analytic applications.

Corporate Performance Management

Corporate performance management (CPM) consists of the strategic management processes uniting the strategic vision of the CEO and executive team with the day-to-day actions and accountability of midlevel and frontline management. In addition to the very visible executive dashboards, corporate performance management consists of the foundational resource allocation processes that feed these dashboards - processes such as enterprise budgeting, revenue and product forecasting, capital and human resource planning, product and customer profitability analysis and other operations resource allocation tools. CPM is one of the most complex corporate management processes and one of the most poorly supported technologically. This is because corporate performance management attempts three very difficult objectives:

  • Continuously link long-term executive vision to short-term, day-to-day management accountability.
  • Facilitate the dynamic supply and demand balance of scarce resources - including financial, human resource and capital assets - across corporate functions.
  • Model and measure efforts for revenue enhancement, expense reduction and efficiency improvement year-round.

CPM is both a people-intensive, collaborative process and a financial modeling-intensive process. Until recently, performance management tools either achieved centralization and process control or served the flexibility and modeling needs of end-users - never both. They were either collaborative or modeling - never both. And few, if any, successfully integrated financial models across functions of the enterprise.

New Technologies Bring Unified Corporate Performance Management Within Reach

Imagine a platform that does both, a platform centrally administered with security, auditability and workflow, yet also supporting the flexible financial modeling that you've come to take for granted in your spreadsheets. Imagine also that this platform unifies multiple corporate performance management processes under a single application architecture, processes such as enterprise budgeting, compensation and human resource planning, capital budgeting, revenue forecasting, product and customer profitability forecasting. With this feature set, a new generation of corporate performance management solutions comes within reach.

For example: Marketing, studying recent sales forecasts, identifies hot product trends and wants to change the six-month product-mix forecast. Rather than emailing iterations of spreadsheet models to affected parties for them to analyze, marketing enters the new forecasts into their forecasting models that dynamically drive related forecasts in manufacturing, sales and fulfillment. Seconds later, marketing, navigating the organizational hierarchy, "messages" affected parties inviting them to view and provide feedback to the latest changes. The entire collaboration occurs as quickly as humanly possible without technological impediment, compressing an otherwise unwieldy decision process into a near real-time event. Business interruption is minimized. Furthermore, as actuals data becomes available and variances are reported, the decision can be reviewed for deeper understanding, and additional course corrections can be made.

Solutions Available Today - Which Path Will You Take Out of Spreadsheet Hell?

Solutions to spreadsheet hell, that is attempts by software developers to centralize control of the planning process, fall within a spectrum ranging from traditional packaged applications at one end to a new technology called the spreadsheet automation server at the other. Each has its advantages, both tactically and strategically. Each has its disadvantages.

Packaged Applications

Traditional packaged applications take the view that spreadsheets are the problem, the source of all evil in collaborative budgeting and forecasting, the primary source of inaccuracy and inefficiency. Packaged applications are often inspired by easily identified, high visibility spreadsheet processes. Typically, a vendor team of domain experts, product managers and architects design and engineer a package containing a fixed feature set, a 60- to 80-percent "best practices" solution, aimed at completely replacing these common spreadsheet processes. The value proposition of packaged applications is that enterprises are so frustrated with their spreadsheets and so hungry for centralization, security and control, that they will gladly throw their spreadsheets to the wind and replace them entirely with the packaged application. One could make the case that the corporate performance management industry is a contest among vendors to replace manual spreadsheets with a series of freestanding packaged applications.

Packaged applications have important advantages. For example, if the prepackaged functionality of the package closely matches a customer's business requirements, the package can be installed quickly and inexpensively. Packages also bring the benefit, in cases where planning standards and expertise are lacking, of imposing "industry best practices" which are built into the package.

The Spreadsheet Automation Server

The new spreadsheet automation server, on the other hand, embraces customers' existing spreadsheet systems by allowing Excel administrators using just their Excel skills to configure and post their templates on the application server. In doing so, their models are "automated" over the Web. Now, any end user (given the security clearance) who requests a model gets a real-time, personalized rendering of it. Yes, the spreadsheet automation server constructs a fresh, real-time model populated from source systems (OLAP cubes), personalized, formatted, protected and ready for input and write-back. Not only does this centralized architecture eliminate data integrity and redundancy usually associated with spreadsheet systems, it enables integrated security and workflow.

Traditional Packaged Application or a Spreadsheet Automation Server?

Figure 1 provides a chart summarizing the advantages and disadvantages of each. In general, it is advisable to investigate examples of each.

Figure 1

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For more information on related topics visit the following related portals...
Business Intelligence (BI), Corporate Performance Management (CPM) and Databases.

Robert Lautt, CEO of A3 Solutions, Inc., is a pioneer in spreadsheet automation technology and the visionary behind A3 Modeling, an enterprise analytic application platform combining the Web with spreadsheet and OLAP technologies to enable business users using just their spreadsheet skills to construct flexible, scalable enterprise budgeting, dashboard and reporting solutions. A3 Modeling is now being used by more than 40 Fortune 1000 companies. Lautt can be reached by telephone (415) 356-2310 or email rlautt@a3solutions.com at his San Francisco office.



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