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Research from Ventana Research: Uses and Misuses of a Critical Business Technology

  • DM Review Special Report, October 2007

This benchmarking research, "Requirements for 21st Century Spreadsheets," conducted by Ventana Research confirmed that people use spreadsheets in all facets of business, often extensively. They wield these tools to support and manage important processes across the organization because, even if they know there is a better alternative, spreadsheets are readily available, easy to work with and less expensive than the alternatives. Finance people use spreadsheets to manage budgeting, forecasting, analysis and reporting. Sales and marketing people use them to forecast pipelines, analyze customers and assess the effectiveness of advertising campaigns. Others use them to plan production, manage projects and calculate commissions.

But while spreadsheets were designed to be an individual productivity tool, most businesspeople use them collaboratively to pull information together or to help manage processes. This usage extends to collaboration with people outside the organization, something that nearly one-quarter of our participants do frequently. In short, spreadsheet use is pervasive; one might say that the business economy runs on spreadsheets.

One routine use of spreadsheets is as a reporting tool, and they have no equal when it comes to one-off, ad hoc reporting. Yet when used for recurring reports, they become error-prone time wasters. This is particularly true when organizations grab data from central IT systems and (as is typical) perform additional analysis on them to create presentation materials. Often the change is not simply the addition of a “percentage change” column but the creation of pivot or dynamic matrix tables, incorporating data filters or live charts. Some users may incorporate Visual Basic code to automate additional steps in a process. When reports become this complex, many things can go wrong.

This research confirms that spreadsheets are fraught with problems. For example, half the participants reported they find major errors in data and formulas in the most important spreadsheets they use. As our analysis makes clear, the reason there are so many mistakes is that people mainly check by “eyeballing” the spreadsheet, looking for obvious errors, and so don’t catch many others. Yet even this streamlined (and not especially effective) approach can be a time-consuming chore.

Perhaps because dealing with errors is time-consuming, people report they are more concerned with the timeliness of the spreadsheet reports they receive than with their accuracy. When there are multiple contributors to the spreadsheet, fixing mistakes can take even longer. Nearly half of participants said that resolving issues about spreadsheets stretches out the time it takes to complete business processes. And 42 percent find out-of-date information in spreadsheets frequently or all the time.

Multiple versions of the same spreadsheet circulating in a company is also a common occurrence: More than half of participants said it happens frequently or all the time. Since spreadsheets are often used collaboratively, and because they are used as an analytical tool to combine different sets of data, almost all participants have to roll up spreadsheets. More than two-thirds said this process, too, is usually or always time-consuming.

An important source of errors is links between spreadsheets. It is difficult for people to spot errors when one spreadsheet links to another and much more difficult if two are “owned” by two different people. And it is extremely difficult to spot errors if the link is to a database (typically Microsoft Access) or a Web-based data feed because in these instances transparency is limited even more.

The paradox of spreadsheet use is that despite these shortcomings, users overwhelmingly embrace them as a tool and do not want to give them up. The source of this paradox is the training and experience many people have with spreadsheets. While they may pose difficulties when used repeatedly in business processes, they are an IT tool that most people feel comfortable using. They are fast and flexible. Mistakes happen, but usually the consequences are not dire. These factors appear to cause people to turn a blind eye to the cumulative impact on company performance.

This was one of the most striking findings from the research: the degree to which people who use spreadsheets have become numb to the difficulties they pose and the extent to which using them hinders their efficiency. Half of the participants said the time they spend addressing problems with spreadsheets is noticeable, but two-thirds of these said that spending that noticeable amount of time has a minimal impact on their productivity. We suspect they feel this way because they think their job description includes “debugging spreadsheets” as a regular duty. Indeed, we believe one of the biggest barriers to addressing spreadsheet shortcomings is people’s acceptance of them as an inevitable cost of doing business.

For the other half, who said the problems with spreadsheets consume very little of their time, we accept that this might be the case for those who spend less than half of their time working with them, but the 44 percent of these participants who almost always work with them also said it consumes very little of their time and has little or no impact on their productivity. The weight of evidence suggests this is not likely true for many such users. Even though most users have grown inured to frittering away hours checking spreadsheets, Ventana Research advises executives to regard this as a hidden drag on the productivity of their company.

Wasting time is something management always wants to curtail, but spreadsheet use carries a more serious risk. Over the past several years, larger publicly held companies in the United States have come to grips with the risks posed by spreadsheets because they need to control any that come within the scope of a Sarbanes-Oxley section 404 audit. By now, most manage very tightly access to and use of these spreadsheets, but this addresses only part of the problem. The business risks extend beyond SOX compliance and can have a significant impact on a company’s results and reputation. Spreadsheet users record, manage and analyze important processes that can have a negative impact on a company’s bottom line or propel its name into the news for undesirable reasons. Our research shows that spreadsheets are used extensively throughout corporations – not just in finance departments – to manage almost all critical business processes.

Amid the gloom of inefficiency and risk, however, there is a ray of light. Technology created this problem, and now technology is available to fix it. Today, organizations have a range of options that can allow them to keep the benefits of spreadsheets but address their shortcomings. Software now exists to help solve the issues that frequently arise whenever spreadsheets are used in collaborative, repetitive processes.

These take the form of tools that help companies manage and control comprehensively the spreadsheets in use, facilitate the use of spreadsheets that are part of a business process and automate the creation of spreadsheet-based reports. Likewise, there are services that allow companies to use spreadsheets more effectively and safely in collaborative efforts, even when these involve (as is common) people who are not part of the company. In addition, formal applications that have been designed to supplant some common uses of spreadsheets (such as budgeting) often have a familiar grid for data entry or manipulation, and some use Microsoft Excel as their user interface to take advantage of the high degree of people’s familiarity with the software.

Left to their own devices, many users will prefer to continue with spreadsheets, in spite of their shortcomings and even when they know better alternatives exist. In the past, the only choice was to replace spreadsheets with a formal application or a rigidly controlled report format. Today, there are a range of products that allow organizations of all sizes to “eat their cake and have it, too,” making spreadsheets mind their manners when used in the collaborative, repetitive business processes spreadsheets were never designed to address.


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