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The battle to replace Excel with dedicated budgeting and planning software takes an unexpected turn.
Justin Wood, CFO Asia
August 24, 2005
There's a certain irony to one of the trends sweeping across the market for business performance management (BPM) tools. The humble spreadsheet — heavily criticized by makers of specialist BPM software — is making a comeback. And intriguingly, it is the BPM vendors themselves who are pushing spreadsheets back up to the coalface of finance.
For the past 25 years, finance departments the world over have relied on electronic spreadsheets — especially Microsoft Excel — to handle tasks such as budgeting, planning, reporting, and forecasting. Accountants and analysts have grown to love the simple, intuitive workings of spreadsheet programs, and to prize the ease they bring to business modeling. Indeed, many observers reckon that electronic spreadsheets were the "killer application" that drove the phenomenal spread of the desktop PC.
But as companies grew in size and complexity over the past two decades, and as the need for better and faster information increased, the shortcomings of Excel as a BPM tool started to outweigh the benefits. For a start, spreadsheet programs don't scale well — they are poor at accommodating lots of different users, and struggle to consolidate data files from many different sources. Issues such as data security and workflow management are equally troublesome.
It is for this reason that a new breed of dedicated BPM software has sprung up in recent years. Playing on a theme of "Excel hell," companies such as Hyperion, SAS Institute, Business Objects, and Cognos have all released software aimed at providing the perfect BPM solution for finance teams. Effortlessly pulling in data from across the company, such products promised powerful analysis and reporting capabilities with none of the challenges inherent to mere spreadsheets.
But after years of bashing electronic spreadsheets, vendors of BPM software have undergone something of an about-face in recent months. Rather than distancing themselves from Excel, suppliers of BPM tools have started to embrace the arch-enemy as their new best friend.
The reason? "Client demand," says John Van Decker, a financial software analyst at Meta Group, a U.S.-based IT research firm. "Finance teams recognize the advantages that BPM software gives them, but they're still really addicted to Excel."
Much of that addiction stems from the fact that spreadsheets offer a range of benefits that BPM software has been unable to match. In particular, spreadsheets offer unparalleled flexibility when it comes to building business models. Users, for example, can tailor their spreadsheets with complex formulas and functions in a way that traditional BPM solutions have often proved too rigid to emulate.
Robert Kugel, a director at Ventana Research, another IT research firm in the US, agrees with Van Decker. "In our recent research," he says, "we found Microsoft Excel functionality was the most important feature users were looking for in a dedicated budgeting and planning application."
He highlights the fact that many companies have developed "planning or operational models in Microsoft Excel that they don't want to give up." And then there's the fact that finance staff feel so comfortable with the Excel environment that they are reluctant to learn a new system.
BPM vendors have long offered a degree of integration with Excel, with many software packages able to upload spreadsheet files into a centralized planning and budgeting database and then export reports back into Excel. However, the working environment itself wasn't Excel, and when spreadsheets were uploaded, formulas and formatting were often lost.
To address their clients' passion for spreadsheets, many BPM vendors have decided to put Excel at the heart of their offerings. This process, of bolting a spreadsheet to a centralized computer system, gives rise to what Ventana's Kugel calls "enterprise spreadsheets." The result is the best of Excel and the best of BPM in one package.
SAS Institute, for example, unveiled the latest version of its Financial Management suite of software in October last year and in the process dropped its web-based front-end in favor of Excel as the main interface for data entry and reporting in its budgeting software. "The system still sits on our SAS architecture, but now the front-end has all the look and feel of Excel," explains Bill Lee, managing director of SAS Institute in Singapore.
Users are able to manage their budgeting and reporting in a spreadsheet environment, but without any of the traditional Excel headaches. For example, says Lee: "Our solution provides a full audit trail. You can see exactly who changed a formula and when." And rather than having lots of different staff working on many different budget spreadsheets, the union of SAS and Excel means that finance teams only ever have "one version of the truth", all managed and controlled by the SAS software that sits behind the Excel interface.
Cognos took a similar step in June last year by upgrading its Excel "add-in." Now, users of Cognos's planning software can not only import and export spreadsheet files, they can also run the whole planning function in an Excel environment. Once again, Cognos software sits behind the Excel user interface, providing the rules that govern the process, adding functionality, and managing the consolidation and storage of planning data.
Forest Palmer, managing director of Cognos in Asia, says that using Excel lets customers address the inevitable diversity that exists within a large firm. "By introducing the Excel add-in, staff in different business units can take our centralized planning model and customize it to a much greater degree to fit their own particular operating environment," he says.
Russell Pennington, vice president of planning and budgeting at Trinsic, a US$251 million-a-year telco in the United States, is a fan of the Excel/Cognos link-up. "When your employees — including the CEO — can easily perform sophisticated analysis, modeling, and planning without having to know anything other than Excel, that completely changes the game of true, enterprise-wide planning," he enthuses.
Giving Excel Wings
Zarina Peperdi, vice-president of finance and human resources for SIA Cargo, a S$2.5 billion-a-year (US$1.5 billion) subsidiary of Singapore Airlines, is another convert. For years, she and her team used Excel to carry out profitability analysis on her company's 80 international cargo routes. It was a gargantuan task. Every cost item, from fuel burned, to landing and parking fees at different airports, to the cost of depreciation and operating licenses for aircraft had to be broken down for each route and matched against revenues.
But just as many other companies have found, Peperdi grew increasingly frustrated with the shortfalls of Excel. "We were having difficulty keeping track of who was making changes, when, and to what," she recalls, not to mention questions of data security, and issues of users over-personalizing their spreadsheets.
To help improve the process, Peperdi installed a BPM solution from SRC Software and went live with it in early 2004. One of her chief criteria in choosing a BPM solution was Excel compatibility, and in SRC, Peperdi found what she needed.
Indeed, ever since being launched in the United States 20 years ago, SRC Software products have always used Excel as their user interface, with the software primarily acting as the rules and logic that connect the spreadsheet front-end to a back-end database, usually from Oracle or Microsoft's SQL Server.
Tom Malone, CEO of SRC Software, says his company was often derided in the past as being merely "Excel on steroids." But now, with BPM vendors tripping over themselves to boost their Excel credentials, he feels it's he who is having the last laugh. "Within five years, all performance management software will have Excel as its primary user interface," he predicts.
For Peperdi, having a BPM package based around Excel has brought numerous benefits. There is the high level of flexibility, for one. "We need a lot of scope to run what-if scenarios, to compare different time periods, and to slice and dice our data," she says.
Peperdi also values the ease of installing and using the new system. "People are very familiar with Excel. It took almost no training to install the software because everybody knew it already," she notes.
As one commentator puts it: "In the past, the CFO of a company was often also the CEO — the Chief Excel Officer. Now it looks set to stay that way."