Business Intelligence

Client Company size affects the BPM Vendor Choice

Business finance has an interesting article on how company size affects the BPM Vendor Choice.

Budgeting and forecasting continues to be the most important component of business performance management (BPM) for companies of all sizes, according to the results of BPM Partners' annual BPM Pulse survey.

Companies were split on the type of vendor they're looking for -- 44 percent chose vendors of both BI and BPM and 38 percent wanted pure BPM application vendors.

The remaining respondents were looking for an enterprise resource planning (ERP) provider or a business intelligence (BI) tools vendor. Company size played a role in this choice and the smallest- and largest-sized companies preferred vendors of both tools and applications while midsized companies leaned toward pure application vendors. This article is the second in a series by Craig Schiff analyzing the Pulse survey results.

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Performance management Best Practices

A survey of business professionals on their performance management efforts has revealed seven performance improvement best practices. Respondents agreed that organizations should do the following:

1.  take a sequential approach, which moves an organization through performance management activities in phases;
2. align goals and strategies; implement analytic technologies; address cultural issues;
3. seek executive level sponsorship of initiatives; include the entire organization in performance management efforts; and
4. avoid overemphasizing metrics in the beginning stages.

I think there should be a few more "best practices", such as:

1. First get the process right, even if it means using Excel
2. When you move to a Data Warehouse and Analytical tool from decades old Excel models.. look at your data model afresh!  Excel Models of the 90's should not dictate the Data models of today!
3. Look at all the aspects in a holistic manner - planning, forecasing, consolidations and dashboards have a relationship... understand its rationale and importance.

...... will add more if I can think of them.. if you know any, please leave them in the comments.

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BI and BPM are really hot!!!

BI and Performance management are coming together.. PM is the next step to BI really.. BI is about past and PM is about future (or should be).. a study says many companies are going that route now:  the break-up will be:

• dashboards: $5.5 bn
• data warehouses: $ 4.3 bn
• planning, budgeting and forecasting applications: $4.1 bn
• analytic applications: $3.4 bn

North American businesses will spend $23.9 billion in 2007 on BI and performance management (PM) solutions, according to a new report by AMR Research. The report, which separates spending into software, hardware, labor, and integration services for BI and PM, notes that spending is expected to increase by nearly 9 percent this year.

AMR found that the majority of spending will be on BI tools, with organizations dishing out $6.6 billion on these systems. Dashboards and scorecards will garner $5.5 billion in 2007, as companies look to track KPIs and view how an organization is performing across multiple departments.

Rounding out the remaining $11.8 billion will be analytic infrastructure, such as data warehouses and data stores; planning, budgeting, and forecasting applications; and analytic applications; on which companies will spend $4.3, $4.1, and $3.4 billion in 2007, respectively. "We are nowhere near the BI and PM saturation point," says John Hagerty, vice president and research fellow at AMR Research. "The vast majority of companies say they will expand their purchases this year. While BI tools are still the largest area of spending and could be considered the meat and potatoes of this space, analytics applications as well as dashboards and scorecards are growing at a healthy rate."

Though overall spending is strong, 18 percent of companies report that a lack of resources to work on BI and PM is the primary challenge impacting expansion within their business. Even so, organizations report they plan to spend less on external services this year, offsetting scarce consulting resources with significantly higher internal headcount spending.

Historically, corporate PM can trace its origins to the finance department, and was originally associated with analytic applications for finance, budgeting, statutory reporting, and planning. Simultaneously, BI emerged as the tool of choice for reporting operational metrics for departments such as HR, sales, and operations. It was only a matter of time before vendors and customers alike realized the synergies between the two. As a result, according to Hagerty, is that BI and PM have become two sides of the same coin, and should be executed in one broad strategy. As companies look to put financial data into the hands of departmental managers, and place increased emphasis on embracing operational metrics, they're using BI to bring PM to the masses. "We continue to see the breakdown of the walls separating BI and PM. Customers don't notice such harsh distinctions between the two categories, and are making deployment and purchase decisions accordingly."

Oracle's announcement of its intent to purchase Hyperion on March 1 signifies this growing trend, Hagerty says. "Oracle positioned this acquisition as an extension of its overall BI strategy." The acquisitions won't stop there; Hagerty speculates that SAP, IBM, and HP might be "likely acquirers in this market space," he says. "Business Objects, Cognos, MicroStrategy, and Information Builders are potential targets, among a host of smaller players."

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The elusive Strategy-Operations link!

It is one thing to have a strategy but quite another to execute it.  I have yet to see a company that has any (forget a robust one) mechanism to even attempt to do so.  Most companies - and most of the companies I have consulted at are fairly big and household names at times - are still struggling at "One Version of Truth" holy grail!  That is the first step.. just to get the right and consistent information and then you need to tie in the strategy-to-operations linkages through that information platform!  Here are some interesting results from a study by American Management Association and Human Resource Institute as reported by Business Finance Magazine Newsletter.

The survey found that only 3 percent of executives think their company is very successful at executing on its strategies, while 62 percent think it's only moderately successful -- or worse. The study of more than 1,500 business and HR managers around the world gauged participants' ability to execute on strategy by both asking them to rate their success and asking how much they use and value 57 strategy-implementation practices. While many respondents indicated that they are skilled at developing strategies, few seem to excel at implementing those plans. Those that do excel are differentiated by placing more emphasis on clear strategy, clear goals, and clear focus than do poor performers.

Perhaps the need for clarity explains the findings of a different survey. This study of 240 risk management professionals from 47 countries, conducted by the nonprofit Professional Risk Managers' International Association (PRMIA), reveals that risk-adjusted performance measures have reached a new level of popularity. Nearly ninety percent of PRMIA respondents said their organization currently uses some risk-adjusted performance measures, or else intends to use them within three years. These metrics are most popular in the insurance and banking sectors (not surprisingly), and their use is expected to grow most rapidly in the Asia/Pacific region.

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Companies that focus on Planning, Budgeting and Forecasting Outperform those who focus on Controlling!

This is an interesting study that discusses how the concentration of predictive methodologies as opposed to controlling processes pays higher dividends (literally!) to the shareholders!  The underlying reason is pretty simple - if you dont know where you are going, it doesn't matter how lean and mean you are... you may jetting up on a ladder that is against the wrong wall!!

A recent APQC and IBM Global Business Services survey of 400 participants within the finance organization, internal controls, revenue accounting and profit and cost management areas, finds that organizations that focus on planning, budgeting and forecasting as a business strategy are higher performers in all areas than those that focus on cost accounting, control and cost management. Additionally, the report found significant correlations between performance and how fast it takes to complete forecasting schedules.

The report, By The Numbers: Finance, recently released by APQC – a global resource for process and performance improvement — found that high performing organizations spend $0.29 per $1,000 in revenue on the process of planning, budgeting and forecasting; $0.25 per $1,000 in revenue on cost accounting, control and cost management and $0.24 per $1,000 on evaluating and managing financial performance.

Conversely, low performing organizations spend their time and dollars very differently and are focused on cost accounting and control. The largest spend within low performers was $2.47 per $1,000 in revenue in cost accounting and control, followed by $2.08 per $1,000 revenue on evaluating and managing financial performance process. Additionally, $1.81 per $1,000 of revenue was for planning, budgeting and forecasting.

“APQC research demonstrates that comprehensive and integrated planning, budgeting and forecasting (PBF) processes are key business drivers for effectively converting strategy into action,” said Lisa Higgins, chief operating officer for APQC. “Many organizations have found that effectively linking planning and strategy to budgeting and forecasting provides ways to continuously update action plans and adapt to changing conditions.”

“While finance organizations may believe that they excel in their basic requirements of reporting and control, to move to the next level — that of providing strategic forward-looking insight to help ignite growth — they need to drastically reform their operations. This reform comes largely in the form of common, simplified processes and enhanced performance measurement standards to address the organization’s inherent structural complexity,” said Stephen Rogers, IBM Institute for Business Value.

The study also found that there is a significant gap between high and low performers in the number of days to complete the annual budgeting cycle. High performing finance organizations complete forecasting cycles three times faster than low performers. It takes low performing organizations 90 days to complete the annual budget compared to 30 days in high performing organizations. The use of rolling forecasts within the budget and forecast process were a key practice found in high performing organizations. By The Numbers: Finance is designed for finance executives and managers who want to understand meaningful measures to identify and evaluate benchmarks for performance. IBM Business Consulting provided thought leadership and underwriting of the data collection efforts reflected throughout By The Numbers: Finance.

The information includes standard measures used regardless of industry or geography and identifies gaps among poor, average, and excellent performance in the overall finance function as well as within the three key finance processes:

1. Planning, Budgeting and Forecasting

2. Internal Controls

3. Order to Cash (Revenue Accounting)

Other key study findings include:

Internal Controls

• Organizations that perform risk assessment more frequently only take nine days to report, investigate and implement steps to remediate control violations. Those that perform assessment annually typically take 23 days.
• Nearly 52 percent of organizations participating in the study perform formal risk assessment only once a year. These organizations had reported less number of violations per 1,000 employees compared to organizations performing more frequent formal risk assessments.
• In terms of cycle time for remediation of control violations, there is a variance of 34 days among high performers and low performers from identification and reporting to remediation. Organizations that operate in a centralized structure and use technology to enable the process are more apt to clearly define accountability for the controls processes and have a significantly reduced cycle time in remediation of violations.
• While the APQC study found that the presence of a formal risk assessment process in the organization helps to reduce the cycle time to report, investigate and remediate control violations, it is surprising to note that 42 percent of the survey participants indicate no formal controls processes in place.

Order to Cash (Revenue Accounting)

A wide variance was found in revenue accounting in both cost and productivity.

• It costs $0.07 to process receivables per $1,000 revenue in top performing organizations compared to $0.99 in low performing organizations.
• One of the key drivers was productivity. APQC found that high performers process 19 times more invoices per FTE than low performers.

APQC research also assessed technology use in terms of where it is used, what is specifically used and its impact on the process performance in terms of process cost, efficiency and effectiveness:

• ERP and other vendor solutions are widely utilized throughout finance and accounting.
• Specialized and custom applications are most used in managing cash, with MS Office applications being the most used within planning, budgeting and forecasting and standard vendor packages are widely utilized in accounts payable, payroll, general accounting and fixed asset accounting

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Treasury is Evolving!

I was reading the Business Finance Magazine (Jan 2007 issue) and came across an interesting insight.  Bethesda, Md based Association of Financial Professionals (AFP) says that the function of treasury is evolving from mere cash managers.  The reasons are:

1. Need for corporations to leverage the diverse skills of their treasury department
2. Heightened cross-functional attention to strategy in today's corporations.

It says that nearly all the treasury departments surveyed (95%) play a significant role financial risk management and 75% play active role in nonfinancial risk management.  Other stuff that the treasury folks are upto:

• Acting as internal financial consultant (90%)
• Assisting in M&A (84%)
• Ensuring compliance with SEC mandates (84%)
• Planning for business Continuity (74%)
• Managing Retirement and pension plans (70%)
• Managing other employee benefits (56%)

Thought it was an interesting survey to show that it is no longer important to just manage money.. but manage it to achieve a certain strategic objective.  However simple this may seem to be.. in practical terms this is still a tough shot!

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Why the "Why" in a decision is so important for support?

Rajesh Jain posts about the article on why the "why" in a decision for the company is so important for buying in support from the employees!  This is the basic requirement of a good change management effort.. but most often forgotten.  Sometimes because the executives do not believe that those under them will understand them or appreciate them in any way... thus assuming they are leading a bunch of dumb people! 

In a study last year, Mr. Clampitt found that employees are more likely to support decisions when they are told about the rationale. The study surveyed roughly 300 managers and employees at more than 100 U.S. employers, asking what they knew of decisions and how supportive they were of them. Mr. Clampitt says employees of companies that explained decisions more fully were more than twice as likely to support those decisions as workers who got less information.

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Business Intelligence will be the Top ERP Investment in 2007

Old stuff in ERP - the OLTP variety - is now going to take a slightly back seat for most IT shops in the companies.  Business Intelligence and Analytics is going to be the most important investment area for the CIOs in the ERP area!  That is what the AMR Research Report for the 2007 ERP Spending (titled "Enterprise Resource Planning Spending Report, 2006-2007") says!

In the next 12 months, however, BI/analytics (25 percent), financial management (21 percent), and order management, manufacturing, and CRM from an ERP vendor (each with 20 percent) are the top five new functional areas that respondents contend will be covered by ERP software. It should be noted, however, that the remaining functional categories were each separated by no more than two percentage points from the next closest functional area. Companies designated BI/analytics as their most strategically important 2007 ERP software investment and the ERP software investment where they'll spend the most in 2007 (15 percent, 20 percent), followed by manufacturing (14 percent, 10 percent), and customer management (13 percent, 9 percent). Globalization (15 percent) and lean manufacturing (14 percent) are the two most important business issues survey respondents intend to address with their largest ERP investments, just slightly edging past business intelligence and visibility and control, both with 13 percent.

(Emphasis added) And by the way, as the last post about SAP's resurgence said, SAP is the dominant player.  Consider this:

....SAP and Oracle top the list. Fifty-three percent of respondents are using SAP and in the next 12 months 55 percent will be considering them, while 51 percent are currently running Oracle (including PeopleSoft and Siebel Systems) ERP offerings and 43 percent are considering them.

India is the Destination of Choice for Outsourcing

India is the world wide champ when it comes to outsourcing! In a survey of the best cities to outsource to, the first seven slots go to Indian cities with - hold your breath - New Delhi - my home - leading the way!! And what is the primary reason for that?  Here is an interesting point made by the senior person of the company which did the study as per the Yahoo story.

"The labour pool remains a huge advantage in India -- you don't have to spend lots of money training people up," Sabyasachi Satyaprasad, a senior director at neoIT, told reporters in New Delhi.

I have been convinced that the most important reason for outsourcing to India is NOT its cost but its supply (read earlier story "The Great Offshoring Debate")!  Cost is NEVER the cause - it is the derivative of Supply and Demand!  It doesn't seem that way because we are so obsessed with the money we pay for our goods and services... but honestly, cost or price in a competitive market is not a cause but is caused! The reason why India remains a great outsourcing destination is because that is the only country in the world - given its talent pool - that you can actually scale your operations without much hitch.  In which other country can companies from IBM to Infosys can all project to add >10,000 technical people in a single year?  The trained pool from such high caliber companies that becomes available to all is not easily attainable anywhere else!  That is, in my personal view, the main reason for outsourcing to India, not the cost of those people.

As for the choice of New Delhi as the best city, I agree fully!  New Delhi is really the only place in India where you can find decent infrastructure.  Bangalore for all its hype is at least 10 years behind Delhi if not more!  My prediction is that if the outsourcers to India have a bit of common sense and intelligence then given the infrastructure improvements that have happened and those in the offing, Chandigarh-Delhi corridor should be the destination of choice for outsourcing and not the Southern Indian cities.

ERP/BI Innovations: CIO and CFO disconnect!

What is it that the Finance personnel do not get to fully innovate and use the tools that are available to them from the IT organization? Here is a fairly interesting insight in the new Business Finance Magazine article titled "ERP: Light Under a Bushel"

Do look at the reasons provided by Kugel as to why the finance guys do not use the ERP systems to their fullest when it comes to innovative processes.

Over the years, I have seriously felt that there is a major disconnect between today's CIO and the CFO. The CFO does not understand what his/her organization has and the CIO cares only about the cheapest and fastest possible implementations and in some cases - passing the buck of taking any decision on the systems to someone else! No CIO organization revels in taking the tough decision regarding the systems!

The report shows that finance functions use ERP software to implement new processes and improve tried-and-true methods, but mostly in their comfort zones, such as reporting and accounting. "We found that when it came to the familiar areas, the areas that they normally think of using ERP for, that's where they would use it," says Robert Kugel, vice president and research director, financial performance management, at Ventana Research. "When you got outside of the familiar areas, it began to fall off pretty sharply." End-to-end processes lend themselves to ERP-based innovation, yet only half of respondents have used their system to set up an order-to-cash process. Two-thirds of participants have incorporated it into a purchase-to-pay process.

The report shows that finance functions use ERP software to implement new processes and improve tried-and-true methods, but mostly in their comfort zones, such as reporting and accounting. "We found that when it came to the familiar areas, the areas that they normally think of using ERP for, that's where they would use it," says Robert Kugel, vice president and research director, financial performance management, at Ventana Research. "When you got outside of the familiar areas, it began to fall off pretty sharply." End-to-end processes lend themselves to ERP-based innovation, yet only half of respondents have used their system to set up an order-to-cash process. Two-thirds of participants have incorporated it into a purchase-to-pay process.

In the area of analytical processes, scarcely more than half of respondents' companies have been adventurous in using ERP to support planning and budgeting, and less than one-third have leveraged the software for profitability management. And although pairing enabling technologies with ERP systems can boost efficiencies significantly, fewer than half of those surveyed say they use ERP software for electronic invoicing and payment. Less than 33 percent say they convert paper documents such as invoices into electronic images.

Two reasons for companies' reluctance to innovate with ERP surfaced in the research. Participants provided a lukewarm response when asked whether the software has a positive, measurable impact on their company's performance, and many view their system as somewhat difficult to use. Kugel says the overriding reason is that exploiting ERP for innovation is not that important to finance people. They believe IT staff take care of the ERP pieces, he points out.

 

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