In-Depth

Q&A: A Closer Look at Enterprise Budgeting and Planning Tools

Enterprise planning needs to provide CFOs enough reaction time to respond to problems. Spreadsheets are cumbersome and don't provide a good corporate overview. So what tools should planners use?

• By Stephen Swoyer
• 04/28/2004

Delbert Krause, director of enterprise product planning with business intelligence vendor Cognos, doesn’t dispute the argument that the venerable spreadsheet is far from dead as a tool for budgeting and planning, as we recently reported (see http://info.101com.com/default.asp?id=6311). In fact, he allows, many users of Cognos’ own Enterprise Planning product still work with spreadsheets on the side, and the company expects to incorporate more spreadsheet-like features and functionality into future versions of Enterprise Planning.

Nevertheless, Krause argues, the use of a dedicated budgeting and planning tool does confer advantages beyond even of managed spreadsheets, particularly with respect to rapidly accelerating the budgeting and planning process and, he maintains, tying everything back into BI.

You’ve said that spreadsheets are great end-user or personal tools, but that at some level, there’s too much complexity associated with their use to make them ideal for planning and budgeting. Why do you believe that’s the case?

One of the areas of complexity that hits people the hardest is that it’s not sometimes that hard to get an initial pass [on budgeting and planning] within an organization. It’s painful, but you can get it done. It’s when someone at the top says I want to lower this by a certain percentage, I want to hold this one constant, things like that—that’s one of the intersection points where organizations really start to struggle. Even if they get the first [budget plan] done in, say, three months, every top-down revision is so enormous and complex and difficult that they tend to only make the adjustments at the top level.

You believe this [period]—this three or four months that it takes them to get the first one [budget plan] done—that’s too long?

Yes. The reason three or four months is too long—well, there are lots of reasons. CFOs want more of a warning. Let’s say there’s a “Bridge Out Ahead: 8 Feet” sign, but if you’re driving down the highway at high speed and you see that sign, there’s probably not a lot of time to react, and you’re in big trouble.

That’s really what enterprise planning is about: to provide CFOs with enough of a reaction time so that they can do the adaptive response far enough in the future with enough of an adjustment. If their revenue [projections] are off, they find out too late, so they can’t make adjustments by cutting back or eliminating things, because by the time they find out, they’re already committed to spending.

And another reason is that spreadsheets are so cumbersome and difficult to work with, they consume so much time, [that] four months is too long in most industries. You’re already in to the business [plan] well before you’re able to react. That makes it difficult it if it takes four months to do an annual budget.

What’s missing, in your opinion?

In many of these cases, there’s not a single integrated view across an [organization] that gives the CFO visibility and insight. When I look at what we do with our planning application, the values of the planning application are there to provide characteristics so that you can deliver enterprise plans or budgets or forecasts. So the thing we’re doing is modeling the business flexibly so that there’s a great capability to define the business with quantitative calculations and rules.

There’s also a scalability component, so that you can manage data and manage users in terms of thousands of users participating around the organization. It’s just not possible to do that with native Excel.

Because of the lack of a single version of truth, or of a way to manage [the spreadsheet] centrally?

Yes. I think people building spreadsheet applications, people in accounting, realize that taking a spreadsheet and replicating it across 100 different spreadsheets—the realization in finance is that’s not the effective, timely way to deliver and gather a budget. It’s taking organizations four or five months to put together an annual forecast, they can’t do rolling plans very easily. So I think the use of spreadsheets in that context is going to diminish.

Okay, data management—Excel and other spreadsheets don’t do that natively, granted, but a lot of vendors have addressed this problem.

They’ve solved the data management problem, but you still have other issues. Some of the core planning values aren’t there to build the kind of linked, connected enterprise planning models that people want to build. And how are they going to tie that back in to what they’re doing with business intelligence?

With Cognos, what we’ve done in the latest version of Enterprise Planning --we’ve removed the technical barriers that existed between the Cognos business intelligence solutions and [Enterprise] Planning, so for the users, the two are seamless and interrelated to each other. This lets [customers] have real-time, self-service reporting, removing the latency and delay. Also, for customers who use Cognos’ business intelligence solutions for worldwide distribution of reports, being able to marry planning information into reports is key.

So when a customer rolls out a tool like Enterprise Planning, do you find that they eighty-six their spreadsheets altogether?

Today most of our customers use the planning application kind of independently of spreadsheets. The kinds of things you can do with the planning application around scalability and flexibility—these have been the cornerstone of success for our enterprise customers and deploying that across thousands of users. We do believe there’s an additional benefit we can provide our customers by embracing spreadsheets and providing better facilities to bring spreadsheets into the mix of planning. So what we’re going to do, we’re just going to add some additional benefit in terms of embracing spreadsheets as part of the solution.

Finally, when they’ve made the switch from a standalone Excel-based solution to a dedicated planning tool, what kind of return are they seeing?

What we’re finding is that one of the characteristics is saving time. So for most customers, they’ve gone from four to five months to a month, so that’s enabled them to better focus on analysis and understanding business.

The other time continuum that we’re finding happens with our customers is that they’re able to move from annual reviews of the business to quarterly or monthly reviews, and then from that to rolling reviews. In a lot of organizations, there’s a decreasing amount of time to create a review of the business, then there’s an acceleration of the time and opportunity to look at it and understand.