Ventana Research Analyst Perspectives

SAP Advances Enterprise Performance Management in Version 10

Posted by Robert Kugel on May 21, 2011 12:12:30 AM

SAP announced the release of version 10 of its SAP BusinessObjects Enterprise Performance Management (EPM) Solutions suite, an enhanced and updated set of applications and capabilities for executives and managers. In our Value Index assessment of financial performance management suites and my analysis of it last year, Ventana Research gave SAP’s offering the highest score, and this new release builds on that solid foundation that I already assessed in my blog. It has been several years since SAP began acquiring and assembling its performance management and analytical software assets, and the company has progressed to the point where discussing the integration efforts is becoming irrelevant. This release revamps the user interface of the different components to provide a more consistent look and feel – a crucial factor in facilitating training and improving user productivity. Outside of the suite itself, the current release is designed to integrate better with ERP, SAP NetWeaver BW, risk management and BI. In facts it establishes a foundation for finance analytics that I have researched and is essential for doing what I call and have written about in putting the “A” back in FP&A

EPM incorporates a range of financial and performance management functionality, including strategy management, planning, sales and operations planning (S&OP), financial information management, profitability and cost management, spend management and supply chain performance management, as well as finance department process management software for financial consolidation, intercompany reconciliations and disclosure management. These components now have a more consistent user interface and all have been given some enhancements to their functionality especially in the path to supporting the need for I call integrated business planning that SAP has indicated is strategic to its future and use of its in-memory computing technology called HANA.

SAP also has improved integration of EPM with mobile devices like Apple iPad, which allows executives and managers who spend a large portion of their time away from their desks to have access to the information they need in a timely and contextual fashion, and lets them interact with the data to gain deeper understanding of underlying causes and potential outcomes. (My colleague Mark Smith covered mobile business intelligence in this blog.)

Release 10.0 includes the Disclosure Management application, which enables companies to automate the process of preparing external financial reports and regulatory disclosures. This capability will aid the increasing number of public companies in the U.S. that need to file their financial statements with a more complete set of eXtensible Business Reporting Language (XBRL) tags that I already assessed on the importance of automating. Companies can save considerable time using the software by systematizing their data collection, using workflows for managing the assembly of the text that goes into these filings, applying tags to text and data (if necessary) and automating the assembly of text and numbers in the exact format required. Automating this process gives executives more time to review filings and lessens the risk of reporting errors by changing mainly manual processes into a more systematized one. Performing this work in-house rather than outsourcing it gives companies greater control over the process and likely will save them a considerable amount of time following a relatively short learning curve. I provided some insight on this advancement when SAP acquired software assets for this new offering that has now come to market. 

The current release builds enhanced enterprise risk management procedures into the overall performance management process. Outside of financial services, few companies explicitly quantify risk in their planning and performance assessment processes. Too often, managers are evaluated solely on productivity measures and therefore can be given disincentives to weigh risk factors. These risks may be well understood by business unit and divisional managers but are almost never communicated to senior executives. As I noted in a previous blog, this gives rise to agency risk within a company.

Although almost every company is mindful of achieving its profitability objectives, many fall short in coordinating the actions of their various silos and operating units to optimize the trade-offs they must make, especially as events unfold after the annual planning process. Profitability management enables senior executives to analyze and assess alternatives and optimize these trade-offs. 

EPM 10 continues the necessary evolution of the financial performance management suite. It’s not necessary for finance organizations to manage performance and core finance operations using software from a single vendor (and most don’t). However, suites give companies the option of doing so, which can be a less costly way of buying and maintaining this functionality. Finance organizations looking at a consistent user experience and technology for GRC will find SAP BusinessObjects GRC 10 is empowered by SAP EPM 10 capabilities. 

Today, technology is pushing a fundamental shift in how companies use financial performance management software. The increasing availability of in-memory computing (HANA in SAP’s case, which my colleague David Menninger discussed in his blog), cloud computing and mobile devices enables a fundamental shift from today’s once-a-month, accounting-based rear-view-mirror approach to assessing performance via an anywhere, anytime interactive view that blends financial and operating results and provides a richer, more accurate measure of results. In fact my colleague at SAPPHIRE NOW 2011 user conference has already seen how SAP was demonstrating a new dynamic cash flow management on SAP HANA to help advance the efficiency of accounting and financial operations. 

I recommend that organizations considering any component of a financial performance management suite should include SAP BusinessObjects EPM 10 in their list of products to investigate. This application suite can clearly help finance and is a better path than doing what I call the ERP forklift migration

Regards,

Robert Kugel – SVP Research

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Topics: Planning, Sales Performance, SAP, Supply Chain Performance, Sustainability, Forecast, Office of Finance, budget, Budgeting, XBRL, Operational Performance, Business Intelligence, Business Performance, Customer & Contact Center, Financial Performance, Governance, Risk & Compliance (GRC), Information Management, Workforce Performance, CFO, agile, budgeting software, CEO, Corporate Finance, Financial Performance Management, Integrated Business Planning

Acquisition of Lawson Complements Infor’s Portfolio

Posted by Ventana Research on May 12, 2011 2:25:52 PM

Golden Gate Capital and Infor (which is owned largely by Golden Gate Capital) will acquire Lawson Software for approximately $2 billion  in a transaction that is expected to be completed sometime in this year’s third quarter. Lawson is the latest in a string of enterprise software acquisitions made or financed by Golden Gate that began almost a decade ago. Today, Infor is made up of legacy companies such as Baan, Comshare, ePiphany, Dun & Bradstreet Software, SSA, Sun Systems and Symix, to name just a handful. Compared to Oracle’s acquisition approach, I would describe Golden Gate’s as more of a “rollup” of applications software vendors because it incorporates a larger number of smaller companies. While Oracle has focused primarily on serving the largest corporations, Infor’s customers tend to be midsize to large companies or divisions of very large corporations. Nonetheless, with this acquisition Infor will have a larger base of revenue and installations to work from in an industry where size and economies of scale drive profitability and competitiveness.

Lawson’s focus has been on two main vertical segments that I think nicely complement Infor’s lineup: services-oriented S3 strategic industries, which includes healthcare and public sector organizations as well as the cross-industry market for human capital management (HCM) software that my colleague recently outlined its importance for 2011; and light manufacturing-oriented M3 strategic industries, which targets fashion companies, equipment service management and rental as well as food and beverage. The HCM portfolio of Lawson will significantly help Infor who has not been as aggressive with its workforce management solution acquired many years back and for a market that is growing and consolidating rapidly in the last several years. Lawson’s strategy has been to focus on midsize-to-larger organizations in its core markets with a vertical-specific product focus and a value proposition of lower cost of ownership.

One objective in an acquisition such as this is to keep customers paying maintenance as long as possible. (I covered this topic in an earlier blog, “The Technology Stack and Innovation.”) When the final deal was announced it was accompanied by a letter from Infor’s CEO, Charles Phillips, to Lawson’s customers aimed at reassuring them that Infor is in it for the long run to keep them as customers and that Lawson’s current products will continue to receive support.

Beyond the goal of continuing to receive maintenance fees on Lawson’s existing product lines, I think that the Lawson acquisition reaffirms Infor’s basic product approach of making it simple for its customers to migrate from their existing software to a next-generation Infor offering. Software companies that like Infor have acquired an array of similar business applications have big incentives to move established customers onto a new or substantially updated system as painlessly as possible; otherwise they are likely to stop paying maintenance and start evaluating a full set of alternatives. (I just covered this point in a recent blog on ending “forklift migrations.” Reducing migration pain makes it much easier for a vendor to keep customers on maintenance and hold onto an important and highly profitable source of revenue. Moreover, it’s a way for these vendors to consolidate the number of code bases they are maintaining, which at the very least will make their development programs more effective, rationalize sales efforts and offer operating savings.

While the price Golden Gate and Infor are paying is hardly cheap (at about 2.6 times this year’s projected revenue for Lawson), it does give the acquirers a large, incremental, maintenance-paying installed base that can be targeted with a “pain-free” migration offering. Whether this ultimately pays off for Infor’s and Golden Gate’s investors depends, of course, on execution. Infor has been a company with good (and some not so good) products with unfulfilled potential. It’s up to Charles Phillips who already and his team to realize that potential and put into action his letter to Infor and Lawson on the announcement.                  

Regards,

Robert Kugel – SVP Research

 
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Topics: Sales Performance, Supply Chain Performance, ERP, Human Capital Management, Operational Performance, Business Analytics, Business Performance, Business Technology, Customer & Contact Center, Financial Performance, Governance, Risk & Compliance (GRC), Oracle, Workforce Performance, CFO, Infor, Talent Management, Corporate Finance, Financial Performance Management

Infor Helps Midsize Multinationals Manage Finance

Posted by Robert Kugel on Apr 14, 2011 10:38:33 PM

While Europeans have long had to adapt to working in many languages, currencies and legal jurisdictions, a generation ago most midsize companies in the United States did all their business in their home country and in U.S. dollars. Today, though, the relentless globalization of the world economy means that an increasing number of midsize companies in North America are functionally multinational and face the challenges of managing a more complex and demanding accounting and financial management function.

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Topics: ERP, Office of Finance, Sunsystems, Business Performance, Financial Performance, CFO, Financial Management, Infor, Corporate Finance, FMS

Bringing Tax Into Mainstream Finance

Posted by Ventana Research on Mar 1, 2011 7:04:34 AM

Taxes are a big expense for most companies, profitable or not. Many larger and midsize companies must traverse a complex and constantly shifting landscape of tax rules, rates, and jurisdictions. I’ve previously written about the need for corporations to manage their taxes more intelligently, and that that may require someone in the tax department who understands both the department’s functional requirements and what information technology can do to improve those functions. Today I am going to discuss some organizational changes that are required to transform the tax department from a poorly understood, isolated and tactically driven silo into a mainstream finance function that is tightly integrated with the rest of that organization.

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Topics: Tax, Business Performance, Financial Performance, CFO, Corporate Finance, Financial Performance Management

Your Company Needs a Tax Technology Expert

Posted by Robert Kugel on Feb 21, 2011 2:05:39 PM

To manage taxes more intelligently  tax departments need to focus more on execution than compliance. I’ll confess that this observation is based on informal rather than rigorous research, so I’ll leave it up to individuals that work in these departments and in the finance function generally to consider whether this applies to their company.

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Topics: Tax, Business Performance, CFO, Corporate Finance, Financial Performance Management

XBRL Filing Errors Point to Need for Automation through Technology

Posted by Robert Kugel on Nov 28, 2010 12:49:22 PM

The US Securities and Exchange Commission’s (SEC) “Interactive Data” initiative continues to progress forward. Thus far, some 1,500 corporations have filed their financial information using XBRL tags to facilitate review and analysis, of which almost 400 have had done detailed tagging of their footnotes. By June 2011 all public companies will have to provide an XBRL-tagged, interactive version of their financial statements. As I’ve noted in the past, I think companies should find ways to automate the XBRL tagging process to make it as efficient as possible and make this a part of a close-to-report process automation effort that can lower the cost of compliance, and give companies more time to review the substance (not just the details) of their filings.

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Topics: Office of Finance, XBRL, IT Performance, Business Performance, Business Technology, Financial Performance, CFO, Corporate Finance, Financial Performance Management

What is the Value of Your Financial Performance Management Software?

Posted by Robert Kugel on Nov 28, 2010 12:21:02 PM

Ventana Research has just announced its Value Index for Financial Performance Management (FPM) for 2010. Our value indexes are user-focused assessments of how well software vendors and packages enable companies to improve their execution of core processes. This one is designed to help businesses, especially the finance organization, evaluate the FPM software suites offered by major vendors in the context of their specific needs. Ventana Research defines financial performance management as the practice of managing the efficiency and effectiveness of financial processes including analytics, budgeting, consolidation, planning, reporting and strategy. The methodology we use to produce the Value Indexes involves evaluating in detail aspects of product functionality and suitability-to-task as well as the effectiveness of vendor support for the buying process and customer assurance.

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Topics: ERP, Office of Finance, Financial Applications, Business Performance, Business Technology, Financial Performance, Business Planning, CFO, finance, Corporate Finance, Financial Performance Management

Corporations Must Manage Taxes More Intelligently

Posted by Robert Kugel on Nov 28, 2010 11:56:38 AM

For the past couple of years I’ve been asserting that most larger companies (those with 1,000 or employees) need to adopt a new approach to using software to handle their taxes comprehensively, both the direct sort (income taxes) and the indirect variety (sales and use taxes as well as value-added or goods and services taxes). This is a necessary response to an emerging challenge from more competent and determined tax enforcement by governments worldwide. It will require corporations to make changes in how they employ software to manage their taxes, structure their tax-related data and manage their tax processes. Increasingly, corporations will need to have better control over the way they manage tax data, calculate taxes and handle associated processes so they can minimize their tax liabilities and their tax risk exposure.

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Topics: Office of Finance, Enterprise Tax, Tax Software, Business Performance, Financial Performance, CFO, Corporate Finance, Financial Performance Management, International Finance

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