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Finance managers at some businesses are choosing to rent their planning applications.
Esther Shein, CFO Magazine
April 1, 2005
Other than iron lungs and bowling shoes, few things in this world are best rented. That statement extends to business software as well. Thin-client computing did spark some interest in rentable software in the late 1990s, but other than some CRM and HR titles, the apps-on-tap approach never really caught on big with corporate users. For many, the advantages of owning a program—deductions, depreciation, and customization—blotted out the benefits of renting it.
That may be changing in some circles, most notably Rung Number 9 of the B&P Inferno. Indeed, the recent trend toward collaborative budgeting has put serious stress on Microsoft's venerable Excel application, which in turn is stressing out those who depend on spreadsheets for corporate planning. While a growing number of corporations are turning to dedicated budgeting-and-planning applications to sidestep the Excel bottleneck (see "In the Fast Lane," December 2004), not all companies have the IT chops to support such a move.
Instead, finance managers at some businesses are choosing to rent their planning applications. In 2004, E-procurement specialist Ketera Technologies Inc. dumped Excel for a subscription-based B&P application from Adaptive Planning. With the browser-based app, Ketera CFO Rick Gustafson says managers at the company are able to access a single file at the same time—an impossible feat using Microsoft's spreadsheet. "Excel is a terrible tool for budgeting," he says. "It's not collaborative whatsoever."
Currently, several vendors (including NetSuite, Adaptive Planning, and Host Analytics) offer B&P software rentals. The vendors maintain, tweak, and service the proprietary apps, all for a subscription fee. "It really enables us to focus our resources," says Todd Haedrich, president of My Flat in London, a New Jersey-based fashion house that signed on with NetSuite in May 2004. "[We don't have to build] some sort of network where we need to retain technology staff and invest heavily in the personnel of technology."
Typically, the monthly fees for hosted B&P apps range from $50 to $75 per user. The price is particularly attractive for executives at small and midsize businesses—executives who can't afford the risk of complex software implementations. "It's easier to deploy [software] without a big upfront cost," notes Paul Hamerman, vice president of enterprise applications at consultancy Forrester Research. "There's less of a lock-in."
Longtime users of Excel know something about being locked in. Until recently, employees at Deloro Stellite Group Ltd., a maker of wear-resistant alloys, were forced to rekey data from various sources when generating Excel-based monthly management books.
Then, management at the $165 million (in revenues) company signed a contract with Host Analytics. After settling on a format for reports, the company began allowing authorized plant workers to fill in the input screens that populate the budgeting database. The cost: $1,200 per month. John Pawlikowski, previously Deloro's CFO and COO and now CEO of the company's consumables division, says he can't see going back to Excel or even purchasing the Host Analytics program. "If we want to change something, either a new report or a new way to look at it," he notes, "[the vendor] can make changes a lot easier than someone internally."
Of course, some finance managers are more than a little spooked by the idea of sending internal financial documents over the Internet. But spreadsheet-based budgets, often transmitted as attachments to E-mail, bring their own set of privacy headaches. Whenever Gustafson needed to add to the budgeting data he had already entered into Excel, for instance, he had to break apart each of the functional spreadsheets, sending them to individual departments. Later he would reintegrate the new data. "I couldn't send them the whole model, because there's a whole bunch of confidential data on it," he explains. "I don't want the sales guy to see all the compensation data for the services organization."
Before ditching Excel, Gustafson reckons his staff spent 90 percent of their time collecting data and 10 percent analyzing it. The hosted approach, he says, has reversed those numbers. "We need to be analysts," he says, "not data monkeys."
Esther Shein is a regular contributor to CFO.