New Software Takes Planning To the Web.

The need to give investors what they want has always played a big role in shaping corporate strategy. But in today's fast-changing, competitive business climate, the pressure to meet Wall Street's expectations has become intense. "If you ask most CFOs what's keeping them awake at night, they'll tell you it's that they made a commitment to the Street," says Paul Hill, vice president of marketing for Adaytum, a leading developer of planning software. "Hitting your earnings targets is critical."

The investment community's heightened demand for accurate earnings estimates is a byproduct of today's global business culture, which increasingly is characterized by intense competition, short product and operating cycles and instantaneous information transfers. With operating cycles shrinking, financial executives and securities analysts are under pressure to monitor actual results on an ongoing basis and to identify -- at an early stage -- problems with the potential to prevent the attainment of budget objectives and earnings forecasts. "Companies are being asked to move away from static annual planning processes and to provide rolling quarterly forecasts," says Scott Laughner, a partner in Andersen Consulting's Financial and Performance Management Services Line. "The investment community is increasingly valuing precision in quarterly disclosures."

"The world is more dynamic; things are happening faster," says Adaytum's Hill. Companies like Amazon com, for example, are continually adding new product lines and can have effective operating cycles as short as a month. Consequently, "there's a big disconnect between the annual planning process and the actual business cycle of most companies today," says Hill. Simultaneously, large organizations are looking for ways to provide financial services in a more cost-effective manner. All of these added pressures -- combined with recent technological advances that make innovative solutions possible -- are causing financial executives to reevaluate the traditional budgeting and planning processes and to find ways to make them more efficient and accurate.

Increasingly, companies are recognizing the need to involve a much greater number of employees in the budgeting and planning processes. Many are turning to modern Web-based technologies, which give "companies the ability to put the budgeting process in the hands of more people," says Lee Geishecker, Research Director, Corporate Financial Systems of for the Gartner Group. It's also allowing organizations to overcome many other problems associated with the traditional planning and budgeting cycles, including corporations' reliance on multiple data sources and complex spreadsheets. In the process, the new technology is helping managers to do a better job of analyzing and validating company forecasts.

Major consulting firms like Gartner say that only a handful of integrated, Web-based planning and budgeting systems currently make the short list of products they will consider for their large corporate clients. These include Adaytum e.planning, Cognos Finance, Comshare MPC 4.0, Hyperion Financial Management and Financial Planning, Longview's Khalix and OutlookSoft's Everest. Two other systems offered by relatively new vendors that appear to have the potential to meet the needs of large organizations are Revelwood SmartSite and QSP Inc. In addition, as Gartner's Geishecker points out, there are approximately 50 other software packages that offer much smaller planning and budgeting solutions.

To varying degrees, the systems provide enhanced modeling capabilities, including "what if' scenario analysis, top-down/bottom-up reconciliation, consolidation and drilldown features, report generation and the ability to view data in graphical form. "The latter is particularly useful in helping managers to identify anomalies and validate the accuracy of the numbers," notes Bill Tomaney, Product Director/North America for QSP.

As all financial professionals will readily attest, the traditional planning, budgeting, forecasting and consolidation processes are inordinately complex, labor-intensive, time-consuming and highly prone to error. A major source of the problems is the existence of multiple non-integrated data sources. In the traditional budgeting and planning processes, data is collected -- electronically or manually -- from various stand-alone systems (e.g., the general ledger, accounts payable, accounts receivable) and imported, or very often re-keyed into spreadsheets. For a medium to large-sized corporation, a single budgeting cycle can involve hundreds of spreadsheets, all linked together via complicated macros.

As the planning process moves forward, the spreadsheets are circulated to various managers for their review and input. Inevitably, more than a few enter incorrect data, key information into the wrong cell, adjust spreadsheet formulas and macros or delete important links. By the end of process, there are multiple variations of the same plan floating around, and no one knows which version is the most updated. "There simply is no way to be sure that everyone is looking at the same data," says Ken Wolf, president and CEO of Revelwood. "Typically, we are not."

According to Peter Urban, an analyst at AMR Research, the traditional planning and budgeting process "usually means chaos for the financial analysts and executives that need to understand complicated links and the various means of importing and exporting data between the spreadsheets and the databases." The inconsistencies are huge, and the room for error is great.

Very often, budget inconsistencies stem from poor communications among the various participants, notes QSP's Tomaney. For example, "corporate could easily make modifications to the plan and not pass this information back down the line," Tomaney says. As a result, managers with accountability for achieving budget objectives are sometimes working with the wrong data set.

As Madan Sheina, an analyst at the Aberdeen Group, notes: "Spreadsheets are designed as personal productivity tools, but they cannot adequately support the workflow inherent in these development cycles." They simply are not process-oriented. What's more, with so much time spent on spreadsheet maintenance, there's little remaining time for more critical elements of the process -- i.e., analysis and decision-making. "The biggest complaint we hear from financial executives is that they spend only 4 percent of their time on the most important part of the process -- validating the accuracy and reliability of the numbers -- because they had to spend 96 percent of their time performing clerical and administrative functions," says Tomaney.

The potential for inaccurate estimates and forecasts is compounded by the exclusion of many line managers and other employees who have first-hand knowledge about the company's operations and a deep understanding of trends and events that greatly affect the company's ability to achieve its goals. "For deeply related cultural and technological reasons, most corporations continue to yield control of enterprise financial planning to a cadre of financial professionals instead of line mangers who have their fingers on the business pulse," says an analyst at the Aberdeen Group.

Enter the Internet. "A key objective of the new systems is to reduce the time consumed by the processes that do not add value (i.e, reconciling and correcting spreadsheet errors) and to make more time for those that do (i.e., analysis and decision-making)," says QSP's Tomaney. One way in which the new systems are achieving this objective is by harnessing the power of Web technology to support a collaborative, work flow-driven process. "Ifs important to view planning and budgeting as a process, not just a series of reports and schedules," says Revelwood's Wolf. A company intranet is the perfect venue for bringing disbursed user groups together and guiding them, step-by-step, through an iterative process. Virtually all of the systems shown in the table on page 28 take full advantage of the ability afforded by Web technology to provide users with easy-to-follow, customized work-flow guides.

Web technology -- specifically the portal -- is also allowing companies to deliver volumes of information to employees throughout the enterprise without the need to install software on individual desktops. Importantly, the information can be customized to the users' specific needs and role in the planning and budgeting process. "I can go into Outlooksoft's Everest, for example, and my financial forecast portal has been designed for me," notes Gartner's Geishecker.

The portal allows users to view the particular items they wish to monitor on a regular basis, such as sales, in an intelligent format without having to call up a spreadsheet. Users can query databases using simple business terms and call up plans at various levels of detail. Upper-level management, for example, can view summary level budgets, while other professionals can drill down and view the details.

Another important way in which the new Web-based systems are streamlining the planning process is by doing a better job of controlling data quality from the start. All of the new systems shown in the table are built using relational database systems -- such as Informix, Microsoft SQL, Sybase or Oracle -- which serve as a single, centralized data repository. Data is entered, validated and captured at the source.

"The new systems don't allow people to enter information into the wrong cell, to change formulas or to delete links," explains AMR Research's Urban. Because the systems store data in a central place -- rather than on a local drive -- all users automatically access the most updated version. "Thus, at any given time, there is only one version of the truth," says Rob Marks, a vice president at Longview Solutions.

The new systems also enhance data quality and the accuracy of forecasts by integrating the once-disparate planning, budgeting, forecasting and analysis processes. "It's becoming very important for enterprises to have a seamless, automated system," says Derrick Dominique, an electronic business analyst at the Hurwitz Group. By linking all of these processes, the new systems make it much easier for managers to monitor actual performance against the plan on an ongoing basis and to reconcile top down plans with bottom-up budgets. In the process, it is helping to ensure that the company's strategic goals drive the budgeting process and not the other way around.

"A strategic plan must be developed from the top down," says Gartner's Geishecker. "It must drive the details of the budget."

Of course, virtually all of these systems have their individual strengths and weaknesses. Hyperion, for example, is widely perceived to have strong planning and budgeting capabilities, but its systems are currently less integrated than some of the other vendors'. Similarly, Comshare has a solid reputation for its strong statutory reporting capabilities, while other packages are noted for their consolidation capabilities.

Some of these companies are attracting major business partners. Adaytum, for instance, has secured a $24 million cash-and-services investment from a group of investors led by AC Ventures, the venture capital unit of Andersen Consulting, with additional participation from St. Paul Venture Capital, 3i, and Chase H&Q. Andersen Consulting and Adaytum have also formed an alliance to develop and implement a broad range of initiatives to deliver comprehensive business planning solutions worldwide; Andersen Consulting will include Adaytum-focused solutions in its Finance and Performance Management offerings.

Laurie Kaplan Singh is a business writer based in Winnetka, Ill. She can be reached at LaurieKilameritech.net.

Choices, Choices: Things to Consider

Choosing the best system for your company will require a deep understanding of your company's functional and technical requirements and the degree to which the packages you are considering can fulfill them. Most of the products claim to perform the same functions, "so it's very important to ask how," says Gartner Group's Lee Geishecker. To understand the differences, you need to understand the underlying methodology.

As the Hurtwitz Group's Derrick Dominique emphasizes, it's important to understand key aspects of the software, including its flexibility, scalability and the ease with which it can be implemented and integrated with existing and future systems. Very importantly, buyers should be sure to investigate the vendor's ability to provide consulting services and support and to continue on as ongoing firm.

"The expense of installing software today is so great that you are effectively becoming a partner with the vendor," says Andersen Consulting's Scott Laughner. Finally, ask to see the vendor's client portfolio and be sure to talk to existing clients. As Dominque says, "There is absolutely no substitute for proper due diligence."