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July 25, 2001

Business Planning Software Enables Visibility

Software suppliers find product in high demand

by Mark Smith

The last year has put new renewed focus on the word "visibility." Corporations are struggling to balance revenue with operating costs to meet financial goals. The challenge for most companies is that they have no automated way to get access to this information on a timely basis. This goal is not about reports, but about the business managers across the organization providing up to date operating plans and sales forecasts that can be blended to determine profitability. This process is critical in order to give the CFO the predictability required to satisfy shareholder expectations.

Controlling operating costs is nothing new, but the ability to manage them on a more frequent (weekly or daily) basis could have significant benefits to shareholders. These operating costs — such as salaries, travel, office supplies, computers and invoices to capital budgets — are usually planned to the quarter and monthly levels. The discretion to utilize money to these budgets is delegated to the manager and not easily controlled except by telephone and email. This issue — which spans the entire company — is critical in order to control and coordinate the company in an automated fashion.

Over the last two years, a new class of Web-based financial performance management applications called "business planning" has come to market and over the last year have had significant adoption by companies of all sizes. This adoption has been driven by companies to address the issues outlined and automate the process and provide the CFO and distributed line of business management a proactive way to manage the business. This approach has taken hold in companies across all industries (energy, insurance, telco) as a way to manage operating costs.

Companies have speaking their way with good-sized purchases from vendors such as Adaytum, Hyperion and Outlook Software. Two weeks ago, Adaytum announced its second quarter financials — which includes some very large projects, but more important, reflects that customers beginning to see significant value in its software. Hyperion has seen significant growth in its Hyperion Planning sales, with more than 100 new customers in the last nine months. Outlook Software recently announced another eight customers for its new financial planning and analysis and enterprise analytic portal products. SRC Software has seen some good growth as well.

Analysis & Recommendation:
The importance of enabling visibility and predictability across the enterprise has never been more important. A new class of financial performance management applications called business planning now has the functionality and architecture to be utilized across the enterprise to meet these needs. These capabilities are not found in your traditional BI tools but in a small set of specialized vendors. If you haven't got one of these packages, you'd better get with it: Your shareholders will react based on the expectations you provide. I hope you have the confidence to meet them.