Innovation for Finance - A Breakthrough!

Dynamic words we are obsessed with: optimization, reduction, alignment, integration, operational execution, performance, flexibility, planning, forecasting, budgeting…

Wait, the last three words don’t really fit in the paradigm of the others. If we played a word association game, how can we link three dynamic critical applications - on which every finance department worldwide is focused, with the prior words which denote cohesion and a level of perfection in process that is only dreamed about? Until now, there was no way to link all these seemingly disparate concepts together. An army of consultants and programmers were your only hope of creating a single tightly coupled view of all your finance assets (even if you only purchased products from a single vendor). As of April 7, 2009 we are changing the game in Finance. Welcome to the true source of innovation in Finance. Today Star Analytics is launching the Star Finance Command Center. A breath of fresh air to the gloomy economic climate that has left us: devoid of manpower, riddled with gaps in availability from IT-delivered services, saddled with applications that have become lethargic and over-burdened with code fixes, data that seems inconsistent and stale, having to do business with vendors that merge and divest so fast it makes your head spin, and with the incongruous explicit need to be flexible, nimble and time-sensitive to drive profitability. What a conundrum.

The Star Finance Command Center delivers a technology platform imbued with a priori finance knowledge to provide a visual roadmap to your data and processes that drive the applications and reporting needs of the Office of the CFO. Any application from any vendor can easily be added as an ecosystem to share and process events and data to any other application. Applications such as global cash management, foreign exchange rates, strategic performance management, expense management, revenue costing, GAAP and IFRS reporting, and incentive compensation management can easily share data and integrate with the planning, budgeting and forecasting and consolidation applications which are the mainstay of finance.

Transforming code-based scripts and integrations into widgets and automations eliminates the need for technologically-savvy finance team members and reduces reliance on others from outside the department. We have customers with defunct and legacy applications, the latest releases, and one-off homegrown solutions simultaneously integrating and sharing data with Oracle, SAP, SAS, IBM Cognos, live data feeds and others. Most any data source one can imagine can be identified and named to help deliver laser-focused precision on defining a financial environment that drives your profitability.

The beauty of the system is that it can be deployed immediately in your current environment with little or no tailoring. Immediately you will see improvement in your business process and reduction in your operation’s costs. While implementing, you will be able to redeploy expensive manpower to other critical tasks. Your efforts with Master Data Management and Governance, Risk and Compliance initiatives will be supported out of the box and none of your previous work will be discarded or made obsolete until you choose. You can increase your level of sophistication with the Star Finance Command Center over time and take advantage of the finance-rich capabilities and simplify your existing code and integrations as you mature in achieving your goal to become a sleek, responsive, innovative and profitable organization.

This day marks the starting point of a new era of finance data integration and management. Welcome to Star Analytics and the Star Finance Command Center. http://www.staranalytics.com/

A letter to the CIO we'd like to see...

Dear CIO,

I bet you never thought this day would come…me writing with good news that my team in Finance will be submitting fewer IT requests. Go figure (pun intended).

Turns out there’s a new way for my staff to manage more of the data, processes and workflows that your team has been handling for us from the finance and BI systems. No more resources needed to manually code and manage this. We can automate most of it while working within the security and data integrity parameters that IT has in place.

Let’s discuss two action items:
- Cancel next week’s sales meeting with our ERP vendor. The allure of standardizing on one supplier is no longer appealing. We’ll save a bundle using the systems we’ve already got and sticking with a best-of-breed approach for financial data management.
- Let’s schedule a roundtable for the IT and Finance teams to strategize on the initiatives we’ve been tasked with by the CEO: Expense and Revenue Management, Performance Management and our adoption of International Financial Reporting Standards (IFRS).

Gotta run - my weekly 1-1 meeting with the CEO.

Regards,
The CFO

Closing Faster

This is the third in the series of posts about 2009 Finance System priorities following discussions with Rob Kugel of Ventana Research and the executive team from Star Analytics. After reviewing Resolution #1: Focus attention on more strategic activities and less on transactions processing, and Resolution #2. Improve planning effectiveness, here's the next area Kugel recommends that you consider.

Resolution #3. Close faster

"Our research shows that most companies that take more than five business days to complete their accounting close believe they can and should reduce the time this takes."

He adds, "There are many business reasons, including being able to present performance information to people in the business as soon as possible and having more time to spend on preparing reports presenting results to shareholders and regulators.

What changes are needed? "We’ve found there are many small process improvements companies can make, but it’s equally important to have an ongoing focus on finding ways to shorten the process. Along with this, we also find that technology (too many spreadsheets) and data issues (it’s too difficult to combine data from multiple sources) can impede a faster close."

For more on this topic, check out Mark Smith's post on "Continuous Improvement in Finance" on BusinessWeek's Business Exchange, where he refers to the firm's "Fast Clean Close" research benchmark.

Stay tuned for the next resolution, laying the groundwork for effective performance management.

Information Week: Data access & integration hurdles

Better data access and integration tops the list of priorities in the new "2009 InformationWeek Analytics/Intelligent Enterprise.com Reader Priorities" report. Doug Henschen notes, "...many companies still struggle with the basics of information management. After all, you won't be worrying about reducing data latency and supporting faster decision-making if you're still stuck at the first-level challenge of accessing and integrating data." Read more

Is Innovation Magic?

There seems to be this perception that if you are introducing innovation or a new way to capture information and, as yet, no one else is doing it that way that it must be magic. Hardly. The paradigm of "thinking outside the box" is about enabling a perspective that has either been overlooked or underutilized. The simple concept of combining finance data with operational data should not be new or insightful or magical. It should be a simple everyday occurrence, but yet, it has been cited as unnatural or innovative.

In today’s economy the only way a company can guarantee success is by careful planning. If we think of the three elements driving the financial aspect of the business: the Plan, the Budget and the Forecast, only one of those has to be in constant motion to achieve success with the other two. If you are constantly planning and adjusting your plan, your budget and forecast will follow and you can take adjustments to the budget and forecast in lesser increments than the planning process. The key to enabling the continuous planning process is in having access to the financial data. That data is derived from the business and starts with a baseline plan. It needs to be continually fed with operational data to be reflective of the immediate business health. Then the Forecast will be adjusted and consequently the Budget to meet that Forecast and the iteration of the Plan.

Robert Kugel from Ventana Research sums up the path of the source of the data nicely in his blog of March 13th. CFOs Need Better Financial Information Management. I contend that it is not only the CFO who needs better Financial Data, but the Office of the CFO who must deliver the aggregated Financial data back down to the business to assist them in planning and creating profitable plans. This constant loop of data means that IT and Finance have to be in synch in the granularity of the data and the delivery of the data regardless of the tools in place. Today, it is less about the end-user technology than it is about data access and data delivery. Bad data yields bad decisions. That’s the obvious parable here.

So if we tie this back to innovation and magic, the result is that Merlin has yet to be uncovered in this economy and we suffer from a simple problem of a lack of access to the right data or information to be able to make the right decisions in real-time with the most current and scintillating data. And, more importantly, we have to bring together the education necessary to see what the data is telling us, but that is left for another blog post. Here we advocate continuous planning. The next phase is continuous data education. Can we achieve success in the future by always assessing based on the events of the past? That is where innovation may help.

Planning Your Assumptions

Probably every budget ever created was out of date before it was even completed, so the smarter finance innovators have adopted (or are at least moving towards) a continuous planning cycle, where real-time planning occurs in response to real-world events and new information, whether actual past results or better assumptions about the future.

So it's a welcome development that CFO Magazine is continuing its excellent webcast series with a CFO Master Class entitled The Evolution from Budgeting to Continuous Planning and Forecasting. In these turbulent economic times, dynamic planning seems like the only way to go.

With any budget, it's the assumptions you make that have the most impact on the accuracy and usefulness of your projections. That's why in my previous post I emphasized the critical nature of near real-time access to the data in your financial systems - not just to report against historical numbers, but to be able to combine that data in a timely manner with operational data to see how current trends and external factors affect profitability - and so allow you make better assumptions, and ultimately, plan more effectively and accurately.

.

Better Bottom Line Decisions

Right now who doesn't want to improve their bottom line? To help with this CFO Magazine and SAP are sponsoring a webcast on Improving Cost and Profitability Decisions in a Challenging Economic Environment. There are many well-defined methodologies, techniques and tools to measure both costs and profitability, and everyone should be aware of these (and ideally applying them to their businesses).

However one of the most critical issues that is often overlooked is the need to have access to the right data, to understand the real cost of a decision and whether it's a profitable one (or not). In many companies, this is viewed as an IT problem, but it's typically the Finance Department that owns the critical information which allows the true measurement of both cost and profitability. In many companies that data is trapped in proprietary financial systems that aren't well integrated with the organization's operational data. Yet access to that financial information in real-time (or near real-time) and the ability to instantly analyze any operational decision using that financial information can make the difference between a profitable decision and one which gets you in to trouble - sometime in the future.

True finance innovators know this, and the smart ones are investing in the technologies that allow them this kind of instantaneous access and seamless integration of their finance systems with their operational ones, to help them make better bottom line decisions.

.

2009 Finance System Resolution #2: The Best Laid Plans

Here are more outtakes from my conversation with Rob Kugel of Ventana Research and the executive team from Star Analytics. The discussion focused on how the economic meltdown is impacting senior executives in corporate finance departments and how technology can help.

If you’re making headway on our previous post about Resolution #1: Focus attention on more strategic activities and less on transactions processing, then this next step may come naturally.

Resolution #2. Improve planning effectiveness.

Kugel points out: “Few companies have achieved a high level of maturity in their planning processes. While some point to the need to reduce the time spent on planning and budgeting, companies need to make their planning and budgeting more effective, not just more efficient. They have to use planning to gain better insight into their performance, achieve greater forecasting accuracy and improving the alignment of strategy and budgets across and within business units. The single biggest factor hindering more effective planning is the use of desktop spreadsheets to drive the process. Dedicated planning applications make it possible to do more effective planning and, in a period of high business volatility, enable companies to revise their plans more rapidly.”

Got an example of where this is working well? Let us know.

Gartner BI Summit 2009 Day 2

Since I am attending the Performance Management Track, it has a decidedly PM feel to the conference. I can't judge the total audience except from the perspective of the Keynote attendance. The group is shy. During the "Comparing the Megavendors" session Bill Gassman was trying to solicit feedback from the audience (a packed house) and the attendees were reluctant to share their experiences and their opinions. It might have made for more lively discussions. I think it is important to sound out ideas and get others' opinions and perspectives to take advantage of avenues to innovation.

At the last count there were 730+ attendees to the Gartner BI Conference. Of those more than 30% were government and public sector. Another 20+% were vendors. That would seem inline with the expectations for curtailed travel budgets. Vendors are hoping that maybe somebody may still have a budget. The government gets a better rate than the commercial attendees and their fiscal year started before the severe downturn. As to why there is 18% from financial services? It isn't the banks but the insurance companies. No one seems to be buying, though. A less-than-scientific survey of the attendees resulted in a great number of people who are trying to figure out if their deployment is keeping pace with their peers and what they can look forward to for NEXT year - 2010.

I would have liked to go to the different vendor presentations but they were all at the same time limiting my ability. IBM (as commented on by another attendee) showed their traditional positioning presentation that had more rhetoric than content. Oracle seems to fitting into that mold as well from what I could see. Microsoft was confused about their BI offering with the elimination of PerformancePoint and Gartner discounted them in their vendor discussions. I was surprised that Gartner was least supportive (fewer positive ratings) of SAP. They seemed most favorable towards IBM/Cognos and resigned to Oracle as the big dog. In advance of the "Cool Vendors" report they also mentioned Adaptive Planning and Host Analytics, but left off Birst and PivotLink. SaaS, Hosting and OpenSource was mentioned but not with the exuberance I might have expected. The audience seemed to prefer a staid, perfunctory BI and PM implementation as opposed to participating in any kind of dynamic discussion on new technologies and methods. A far more toned down environment even than last year. Is it only the economy or did the venue also change the chemistry of the audience and participants?

Thoughts from the Gartner BI Summit

Only marginally into the BI Summit, but have already had the realization that the Performance Management sessions will be under-attended. Business Intelligence is the domain of IT, but Performance Management is in the hands of the business. Corporate Performance Management, the term which Gartner has chosen to use to refer to those financial applications that are the mainstream of corporate America i.e. planning, budgeting, forecasting, consolidation and financial reporting, is of little interest to the mainly IT audience here in DC.

An interesting observation. Applications that are tailored to meet the business, but have proscribed functions are within the domain of the business, but the tools used for reporting and dashboarding are in the hands of IT. Business Process Management by definition then, should be in the hands of the business; but it is not.

So the conundrum is in where the attention is focused. If there is extensive on-going development or a relational footprint to the applications or tools it comes under the dominion of IT. If it appears as if the majority of the effort in deployment is in the installation and initial implementation then it is under the business' hands. That doesn't make sense to me.

Truly the answer should be one of a collaborative effort where there is someone technical assigned to meet the needs of the business to help them craft the solution that best meets their strategic needs. Finance IT was born for exactly this reason. This role bridges the gap or divide between the implementation of the application and the eventual use and refinement of the implementation AND the future sculpting of the application to keep it in line with the needs of the business. This is the true role of innovation where a blend of fact and function meet the evolving needs of a dynamic business.

Somehow that's lost here at the Gartner event. But as I said, we are only half a day into it - maybe it will resolve itself to be more on topic and dynamic. I should point out that I think Gartner does see the evolution towards a Performance Management driven business culture, but they also say we are two (yikes!) years away from it.

Thought of the Week

Where exactly did all the money from everyone's 401K's and the bank's balance sheets go? I know I don't have it. Maybe it disappeared into the cloud?

Thought of the Week

What happens to the economy when the banks (e.g. Citi or Bank of America) that are too big to fail, fail?

2009 Finance System Resolutions: Hunker Down or Thrive?

I recently caught up with Rob Kugel of Ventana Research during a conversation with the executive team from Star Analytics. One of the most interesting parts of the discussion centered on how the economic meltdown is impacting senior executives in corporate finance departments and the ways technology can help.

Kugel mentioned, “Unfortunately, the financial meltdown has driven many senior financial executives to hunker down and focus only on survival tactics. It’s a shame because this is a great time to throw off organizational complacency and make important changes to how the finance department operates.”

The challenge, he says, is that people delay making changes in better times because they think they’re too busy, complicated by the tendency of people trained in accounting to reflexively answer “we’ve always done it this way” when asked about a policy or process.

“Now is the time to make changes because facing deep, persistent challenges, people are more willing to accept change and the results can be dramatic.”

Star Analytics CEO Trevor Hughes agreed, “From a technology perspective, we’re starting to see a shift this year as more finance executives look for ways their existing technologies can provide the slightest competitive advantage in this economy.”

Hughes remarked that the days of making decisions on yesterday’s data are long gone, and what’s emerging are continuous planning and forecasting environments and make it easy to adapt to uncertainty in the markets.

Hughes added, “The challenge is that financial data has been inaccessible in non-standard proprietary systems and beyond the immediate reach of the business decision makers. This is driving a surge of interest in simple and cost-effective solutions that allow IT and Finance to communicate and provide a stream of continuous data into the hands of everyone who needs it.”

The discussion surfaced a call to action for finance executives, with Rob outlining simple and cost effective ways Ventana Research believes they can drive change in 2009 and prepare to capitalize on an economic turnaround – both from an IT and business perspective. Over the next few weeks and months, I’ll reveal his top 10 “resolutions.”

Kugel points out, “Many of the ten resolutions are interrelated, and almost always there is a connection between the business and IT issues since the latter drives or heavily influences how well departments can do the former. Our research consistently shows companies misuse spreadsheets and consequently suffer from – for example – a longer than necessary closing cycle and ineffective business planning. It’s also not intended to be an exhaustive list.”

Resolution #1. Focus attention on more strategic activities and less on transactions processing.

For years CFOs have been advised to change the focus of finance departments from transaction processing to more strategic activities. Surveys show, however, not much has happened. The two biggest barriers to making this shift are people and IT. Sadly, too many finance executives love managing minutiae because it’s at the core of their comfort zone. Misusing technology contributes to the problem since not applying automation to rote functions or using spreadsheets inappropriately. There is a data dimension as well: frequently it is too difficult to bring together finance department data and data from business operations because companies are not using the right tools to reliably automate this process.

Is your company making headway in this area?

Thought of the Week

Even though companies have collectively spent billions of dollars on Business Intelligence applications, it's still frightening how much financial reporting at major enterprises is still done using spreadsheets...

A Cloud Over Your Financials?

With all the hoopla recently over cloud computing, I’ve been wondering if companies would be willing to entrust their sensitive and confidential financial data (including financial transactions, financial and statutory reports, etc.) to the cloud. I have little doubt that small companies and even large enterprises will eventually manage (and more than a few are already managing) many forms of information using the cloud, but would an experienced Enterprise CFO or CIO even risk making an “orange-jumpsuit” kind of mistake by risking legally privileged data (e.g. SEC filings, as just one example) leaking out into the public domain inappropriately?

While it might be an easy step to conceptualize the cloud as an abstract remote processing and storage mechanism that you can rent by the hour, gigabyte, or megaflop, the reality is that when you push your data into the cloud you are storing it on a real hard drive on a physical server somewhere. Compared to the expense and hassle of managing a data center it can be an extremely cheap and cost effective way of handling large volumes of information. However, using the cloud does require you have to have an extraordinary degree of trust in the provider; not just in the security of storage and transmission of your data, but also in its availability.

A graphic example recently was when a certain major online accounting package went offline for some of its users for almost an entire day – those companies were literally dead in the water, effectively unable to issue invoices, record payments, or generate financial reports for 24 hours. If that outage had happened at the end of a quarter or another similar time, the consequences could have been disastrous. If your company were put in that position, who can you call? Remember, everyone else is also calling, and you would be just one voice among many in the same position.

My impression is that at least as far as large enterprises are concerned, we aren’t quite there yet. The security of data centers is improving daily, yet the ingenuity and determination of hackers remains a constant threat. The overall uptime record of many cloud service providers is exceptional, but what happens if they do go offline? For a small company with few resources the risk/cost equation is minimal. However for larger organizations which have the resources to manage their own data, there is still some value to controlling their own destiny.

Thought of the Week

Many businesses are cutting their spending because revenues are down, and those cuts in spending in turn cause other businesses to lose revenue, and so cut spending, and so on. When does this spiral end? Why don't all businesses just fire all their employees, and cut their spending to zero? That way everyone can at least break even...

Can we really afford to hide?

If we stay the course, what will change? One of the interesting phenomena of this economy is the “turtle syndrome” it has evinced. If I just become invisible and don’t do anything extraordinary maybe I can hold on to my job just a bit longer…

In fact, the opposite is the reality. I am not advocating for being outrageous or creative beyond measure, but I am advocating for innovation. This is a tough economy and no one is going anywhere if we just keep doing what we have been doing. We have less, but we have to DO MORE. That means that innovation and moderate creativity are the orders of the day, not the opposite.

Profit is measured in reduced headcount and better efficiencies, not just in increased revenue, although that would be a bit nice as well. If we introduce innovation, even at a marginal cost, or apply new education to a problem, the payback will be almost immediate and the effect, dramatic. An example of that is in the use of current technology. If a process or an event takes a tremendous manual effort or a “Rube Goldberg” string of spaghetti code because of lack of knowledge, then find and justify the solution – as long as the return on the investment is immediate.

If you are a technical user of Oracle Hyperion products and need additional hands-on experience with the products and could benefit from face-to-face access to the experts in the field, then you need to attend ODTUG Kaleidoscope – the Oracle Development Tools User Group in Monterey, CA June 21-25, 2009. www.odtugkaleidoscope.com . Even if you have to pay for it out of your pocket, this type of event is of immediate tactical value in helping overcome specific technical challenges that might inhibit the short term growth of your company and possibly your career. At this juncture tactical wins are more visible and may have the strategic impact we all need. This is just one example. I am certain that we each encounter solutions like this everyday. Free user groups and lectures abound if you are willing to make an effort to attend and a commitment to empower yourself to innovation. Perhaps that is the first step in the process of being innovative; making an effort.

Thanks to Gary Crisci for bringing this to our attention. http://garycris.blogspot.com/2009/02/some-tips-for-kaleidoscope-2009.html

Thought of the Week

If the major US banks are nationalized by the Government, would the Government be any worse at running them than the bankers?

Innovation versus Inventive

“Why Accounting Can’t Keep Up with Financial Innovation,” a CFO Blog from 01/12/2009 written by Tim Reason,(http://www.cfo.com/blogs/index.cfm/l_detail/12922621) cites innovation as the perpetrator of evil undoings. It is unfortunate that the GAO chose to use the term “innovation” instead of using a less technologically associated term when referring to unique, pioneering or inventive financial malfeasance. While innovation does envision new and a more packaged offering and involves the “bright shiny object” paradigm, it also invokes an idea that technology was a component of the creation. The perception is that the innovation is one of disruption. In this case the disruption was more an effort to circumvent the basic rules instead of to introduce true innovation. Non-disruptive technology can be innovative without being speculative or corrosive to basic ethical principles and guidelines. Financial innovation should be the hallmark of any Office of the CFO or Controller who is fiscally responsible and actually altering their assumptions in their planning and budgeting process in the attempt to improve their cash and revenue instead of find less-than-acceptable means of generating paper profits. Maybe a new policing body should exist that prevents accounting rulemakers from accepting the use of any instruments that were designed by non-practitioners and applaud the use of technical innovation that supports and enforces legally acceptable processes. This is the heart of governance and compliance applied to innovation.