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I’ve been using spreadsheets for more than 30 years. I consider this technology tool among the five most important advances in business management of the 20th century. Spreadsheets have revolutionized many aspects of running an organization. Yet as enthusiastic as I am about them, I know the limits of desktop spreadsheets and the price we pay if we fail to respect those limits. The essential problem arises when people use desktop spreadsheets for purposes beyond what they were originally designed to do. Desktop spreadsheets were designed to be a personal productivity tool, and they are good for prototyping models and creating analytics used in processes, performing one-off analyses using simple models and storing small amounts of data. They were not designed built to be used to manage or support repetitive, collaborative enterprise-wide processes. As a rule of thumb, when a spreadsheet is used by more than six people six or more times, it’s time to look for an alternative. Otherwise, errors and inconsistencies easily creep in and undermine the accuracy and value of important data.
But long-time business users, especially the most skilled ones, keep on using spreadsheets inappropriately. They often rationalize continued use by insisting that the ease with which they can create spreadsheets is a reasonable trade-off for the problems they routinely encounter (especially errors and excessive time spent maintaining shared spreadsheets). As well, these persistent users typically believe that alternatives to desktop spreadsheets are too expensive and require substantial training. But this view is out of date. Today, there are relatively inexpensive spreadsheet alternatives that address their common shortcomings and are designed for business users, not IT professionals.
One area where spreadsheets are commonly misused is as a “data off-ramp” for business intelligence and other systems, leaving the highway of reliability for a back road that is hard for others to follow. Our recent benchmark research Spreadsheet Use in Today’s Enterprise found that three-fourths (74%) of companies use spreadsheets and BI systems frequently or all the time. This also applies to other enterprise data sources such as ERP or CRM systems. Ad-hoc analyses or reports, prototypes and exploratory models are examples of work that’s probably best done in a desktop spreadsheet. And many of those who use a spreadsheet as a data off-ramp are not abusing the technology. However, when people use desktop spreadsheets to repetitively create analyses and reports that they share with others, they are creating a problem. Downloading data from an enterprise system into a spreadsheet severs the connection between the source system and the report. This is a root cause behind inefficient processes that ultimately blunt the effectiveness of company executives and managers. It also can present governance and compliance issues since these spreadsheets may not be controlled and therefore may not represent the source information properly and may contain material errors.
What people usually find missing when they employ desktop spreadsheets as an enterprise system off-ramp is revealed in the top three capabilities that research participants find absent in their spreadsheets. Heading the list was the ability to make real-time connections to company data from within the spreadsheet, cited by three-fourths. Dumping BI system data into a spreadsheet model and/or a report is handy and expedient, but doing so severs the link to the source systems, rendering the data static. Maintaining the link to data ensures that those viewing the numbers are seeing the most up-to-date version. It cuts down or even eliminates the time spent recreating the analyses and reports to produce an updated version and reduces the probability that people will be looking at different versions of the report. Nearly as many participants said they’d like to be able to drill down into the underlying data when using spreadsheets. Again, by severing the link to the source data and lacking multidimensional links to that data, users are unable to uncover the numbers that are behind the numbers in their static spreadsheet. This same root cause is behind the desire by almost as many (72%) who want decision-makers to be able to refresh and filter the reports that they receive.
The most interesting fact about these research findings of what users would like to have in spreadsheets is that these capabilities are already available in software that is easy to use and, for many companies, affordable. For many years desktop spreadsheets were the only solution, but today inertia is the main reason why more organizations aren’t using spreadsheet alternatives. Few people are aware that affordable and easy-to-use alternatives to desktop spreadsheets exist, and fewer still are looking for them. Companies – especially their finance departments – need to find ways to automate mechanical repetitive tasks to free up resources for more useful and productive activities. Desktop spreadsheets are an indispensible tool, but they are not capable of doing everything well. There are a wide array of applications that can help – you just have to look for them. We recommend making that effort now.
Robert Kugel – SVP Research
For four years Adaptive Planning has been building out its cloud-based financial software. Starting with budgeting, planning and forecasting, it added analytics, data visualization, dashboards and alerting as well as flexible reporting and collaboration tools. It recently announced the general availability of consolidation functionality in its cloud-based suite. This addition eliminates a notable gap in the company’s functionality, giving it a more complete financial performance management suite. The addition of the consolidation capability should increase its appeal to larger companies and broaden usage within its existing customer base. According to Adaptive Planning, already about one-fourth of its customers are organizations or parts of organizations that have annual revenue in excess of US$500 million.
Tools that automate statutory consolidation have been around for three decades. They are most useful for corporations that have ERP systems from multiple vendors and/or multiple instances of a single vendor’s financial software with different charts of accounts. Yet use of consolidation software is not ubiquitous. Our benchmark research Trends in Developing the Fast, Clean Close found that among companies with at least 100 employees, 26 percent use a dedicated consolidation system, 38 percent mainly use their ERP system and 30 percent use spreadsheets. The research also shows that 45 percent of midsize companies (those with 100 to 1,000 employees) and 62 percent of large and very large companies (those with 1,000 or more employees) have multiple ERP system vendors. (Most businesses with fewer than 100 employees have a single ERP vendor.) More companies with multiple ERP vendors use dedicated consolidation software than those with a single vendor (36% vs. 10%); the software speeds up the process of combining data from disparate systems. These organizations often get better results as well, the research reveals. Corporations that use dedicated consolidation software are more satisfied with their ability to manage the close process than those that use their ERP system and considerably more satisfied than those that use spreadsheets. Dedicated consolidation systems typically are more adept at managing the accounting close for companies that have complex ownership structures, which need to report results in multiple jurisdictions that have different accounting standards and different currencies.
At this point, our research finds minor differentiation in basic features and functions among products for consolidation software. Buyers’ preferences most often are shaped by their assessment of how easy it is to use a given vendor’s product, how well the software aligns with their existing business practices, the total cost of ownership, how closely the software fits with their company’s internal IT requirements and the degree to which a company prefers vendor standardization.
Yet even corporations with a single ERP vendor can shorten the time it takes them to close because process automation features can speed handoffs and quickly identify delays and bottlenecks. As well, using dedicated consolidation software often enables a company to reduce the use of desktop spreadsheets in the closing process because, for example, it can have calculations for common cost allocations built into the system (as Adaptive Planning’s does). Our research has consistently found that heavy use of desktop spreadsheets results in more errors and that resolving these errors consumes time and resources. On average, companies that are substantial users of spreadsheets in their close said they could save 1.7 days if all errors in the close were eliminated, compared to just 1.1 day for those that use spreadsheets infrequently in closing.
Adaptive Planning’s software has a prebuilt connection with NetSuite and can incorporate financial and accounting data from cloud vendors such as FinancialForce, Intacct and Workday, or from on-premises vendors such as Infor, Microsoft Dynamics, Oracle, QuickBooks, Sage and SAP through direct or flat file connectors. As the number of systems deployed increases, especially in larger organizations, Adaptive Planning will be able to demonstrate the ability of its existing users to handle the data loads required by prospective customers.
One significant challenge Adaptive Planning will face in gaining customers is the reluctance of finance department buyers to choose cloud-based systems over on-premises ones. Our research shows that 43 percent of those in the finance function prefer on-premises software compared to 22 percent who prefer cloud-based deployments. One of the top reasons companies still give for avoiding the cloud is security, a concern cited by 59 percent of organizations in our recent research Business Technology Innovation. I think such concerns are short-sighted and expect objections to cloud deployments to subside rapidly over the next several years since, especially for midsize and smaller enterprise buyers, cloud-based systems can be more cost-effective and more secure than on-premises alternatives. One of the bigger opportunities for Adaptive Planning is to increase adoption of consolidation software by midsize companies, which are more likely to be using capabilities in their ERP systems and/or desktop spreadsheets to manage and support the process. These companies may have found on-premises consolidation systems too expensive. In regard to cost, their finance departments may find that automation and reporting capabilities of the software can reduce the resources they are now devoting to purely mechanical functions that have little business value, while they also speed their close and gain more time and resources to provide a strategic perspective on the company’s performance and prospects.
Robert Kugel – SVP Research