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.

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.

To Automate...or not to Automate

A Deloitte study titled “When CFOs Debate: What Keeps You Up at Night?” finds CFOs agree that “finance should be extending its focus from accumulating information to adding value through insight” and asks what role automation should play. Deloitte's report (part of a pdf workbook with 9 important issues facing CFOs today) cites two reasons LOB managers still make decisions by ‘gut feel’:

1. they lack tools to unify finance and operational data, or
2. they rely on homegrown tools that generate numbers which are out-of-synch.

Does this mean companies should go all-in on a fully-automated performance management initiative? Look before you leap, it says, cautioning companies to assess their readiness in 3 key areas: 1) business processes, 2) master data management and 3) business alignment. After shoring-up these areas, it prescribes an 80/20 approach to automation, suggesting companies “shouldn’t have to manually mine multiple systems or conduct a special study for routine decisions and performance reports,” but still need flexibility to accommodate decisions that “require unique, in-depth analysis” or those that warrant a special data repository with “a ‘play room’ for analyzing non-routine decisions.”

Is 80/20 the right mix in an economy when few decisions are routine? Therein lies the question. With technology available to support 24/7 readiness of all data and business logic needed for structured AND unstructured analysis, finance departments no longer need to compromise. Making critical business decisions based on partially automated systems that are almost urgent enough to present data that’s somewhat complete lets technology vendors off the hook. Would you bet your next decision on that?

Getting to Useful

Forrester Research's new twist on BI introduces the concept of the `BI workspace' (see BI Without Borders report). The BI workspace offers a use case where "power users, especially power analysts, can explore data without their IT departments imposing any limitations or constraints, such as fixed data models, security, and production environment schedules."

Clearly identified as a supporting, not replacement solution for enterprise-grade BI implementations, options for the BI workspace leverage emerging technologies such as BI and Data Warehouse Software as a Service (SaaS), cloud computing and in-memory analytics as well as more established methods such as desktop analytics.

While solving some of the significant IT restrictions that can hobble an analyst's ability to perform, the BI workspace doesn't address many of the fundamental problems that are endemic in all BI systems – the inability for the business user, whether analyst, power user, or a departmental line manager, to access comprehensive operational and financial data in real-time or near real-time.

Business users must be armed with all of the data needed to make intelligent, accurate and forward-looking decisions. In order to make data truly meaningful, we must be able to export the financial data stored in the BI cube and integrate it into a larger warehouse that includes operational data. With hugely fluctuating external data, updated external data must be accessible in near-real time. If we cannot determine the economic value of a business decision (in this volatile market), how can we accurately forecast our future? As Boris Evelson, Forrester researcher and author of "BI Without Borders" said:

"Reporting and analysis are just the tip of the iceberg - it's getting data to the point where it can be useful is the real trick."

Understanding the Impact of New Technologies on BI

"Rather than relying solely on a rigid metaphor like data warehousing, BI needs the ability to access data anywhere it can be found and to perform integration on the fly, if necessary. Locating the right information to solve problems must be a semantic process, not requiring knowledge of data structures or canonical forms."

Neil Raden, Intelligent Enterprise, Business Intelligence 2.0

A long-standing concern between business teams and IT is the question "Have we spent the past years creating some monolithic solution that is now unmanageable?" Can it come close to addressing the needs of the current and future business? Have the Business Intelligence (BI) systems that we've created become rigid metaphors, as Neil Raden proposes that data warehouses have become?

Implementing a BI system has always been hard and costly. But the value, once up and running, can be enormous. Insight isn't something to be taken lightly; it can change the very nature of how a business is run. It is no wonder, then, that the markets for BI and performance management solutions are expanding rapidly.

The business needs for BI are going far beyond traditional analysis and reporting; companies are now expecting information access in real-time, across global constituencies, and beyond the limitations of financial data, or for that matter, data itself. The BI systems that we built over the past decade simply may not scale to meet today's requirements.

New technologies such as software as a service (SaaS) are impacting the very nature of software development and delivery, and are also helping to shape the future direction of BI. Even large vendors such as SAP and Oracle are testing out the on-demand waters, SAP with its' 'Business by Design' on-demand solution, and Oracle delivering Oracle Hyperion On Demand. While SaaS has yet to experience broad acceptance in the marketplace, niche BI companies such as LucidEra, Adaptive Planning, Host Analytics and PivotLink are gaining customers with their on-demand offerings, and open the market to small and mid-size (SMB) companies.

Open source BI offerings may provide a clue into another alternative direction for BI markets – again with potential business benefit. As the time and cost of implementing and supporting BI solutions are reduced, so too will the bar lower to a level where SMBs can take advantage of BI, while larger companies can customize solutions and extend analytics across the enterprise. BI will broaden from the hands of the few into the hands of many.

While the new technologies broaden the BI market offerings, they exacerbate the issues companies currently face managing financial data across increasingly stratified and expanding markets. We are already dealing with a crisis in data management. Critical financial information is stored in proprietary BI systems and cannot be easily extracted or combined with operational data. Information from all source systems must be auditable and compliant. It must exist in standard structures that will support future development of combined data with other content sources. Before we can truly scale to meet the coming needs of the BI market we must create a reliable and consistent method for moving and managing data across the enterprise.

The increasingly complex business demands on BI systems are a further validation of the success and relevance of the market. We can learn from other rapidly-evolving technologies that have gone through major expansions as a result of their cumulative relevance. The Web, and Web based standards come to mind as an example of a technology that has successfully transitioned into a much higher form of relevance. Standardization, interoperability, and security are core Web concepts. Before we can hope to truly leverage new technologies, we must overcome the limitations that we've built into our existing BI systems, ensuring standardized data access mechanisms, real-time, secure access to data, and a framework that will extend into the next realm of BI technology development, and Radan's vision of "Locating the right information to solve problems must be a semantic process, not requiring knowledge of data structures or canonical forms."

BI Competency Centers: Do CFOs Help or Hinder?

Intelligent Enterprise Editor-in-Chief Doug Henschen moderated a webinar last week titled “Business Intelligence Competency Centers (BICCs): Many Choices, Many Pitfalls” sponsored by Forrester Research. With BI now considered “table stakes,” panelists Boris Evelson and James Kobielus of Forrester, BI consultant Claudia Imhoff and Capgemini’s Joe Moye discussed how enterprises can drive greater value from their BICC investments.

One recommendation was to cross-pollinate BICCs with other CCs in areas such as Business and IT Governance; Enterprise Architecture; Data Warehousing, Data Quality and Data Integration; ERP, CRM, Supply Chain Management, etc. While this makes perfect sense, doesn’t it seem ironic that we still need to encourage coordination after the costly lessons we (hopefully) learned from propagating BI application stovepipes?

Side note: With many of the CCs above revolving not just around competencies but applications and processes, it was interesting that James suggested BICCs be renamed BISCs (BI Solution Centers). We'll keep an eye on a Forrester report in queue on this topic for October.

The idea of coordinating CCs reminds me of conversations I’ve had with an aerospace and defense company that extended their BICC with specialized data integration technology for key applications. As a result of tapping into finance data, the company is supporting deeper BI analytics based on time-sensitive operational insights.

To boost synergy between CCs, one panelist suggested overlapping them and allowing personnel on the teams to create hybrid roles. This brings to mind the success story of a cosmetics company that adopted a war room approach to unite IT and line of business experts for projects.

The most interesting part of the discussion involved who should own a BICC: IT or line of business. Not surprisingly, opinions varied, with Evelson advocating for ownership by C-level business executives and Imhoff taking a more IT-centered approach. Evelson added that most of the successful BI environments he’s seen have had strong business ownership (for more check out his keynote at the Computerworld BI Perspectives conference Sept. 8th). Imhoff underscored the need for technical acumen beyond the skills of the business analyst – areas such as data integrity, data quality and database performance. (Rajan Chandras takes this a step further on his Intelligent Enterprise blog post, urging readers to explore the qualifications needed to influence BICC success)

Imhoff asserted that CCs should not report to the CEO’s or CFO’s offices, going so far as to suggest that CFOs may infuse too much of a finance or accounting flavor. It’s hard for me to imagine many business decisions that don’t impact profitability, competitive advantage or shareholder value, but since time ran out on the webinar, let’s open up that part of the discussion here.

What do you think? Are CFOs the best stewards of these BI centers?

Addendum

I recently attended a business meeting with Mr. Howard Dresner, industry expert and thought leader for Enterprise Performance Management (EPM), and I paraphrased his comments in my last post on Insight vs. Accountability. In fact, it was his comments that inspired the post. Today, I came across a recent post from Mr. Dresner's blog that encapsulates and extends my paraphrasing. I thought I'd share the quote, and let you have it directly from his words:

"The inclination to buy "yet-another-tool" remains strong – even though most acknowledge it's the wrong thing to do. Of course, vendors like to sell more technology. However, most organizations already have plenty. What they lack is a roadmap and the vision to properly deploy it. But, buying another tool is so much easier than addressing the real problem: a lack of management commitment and organization dysfunction."

Food for thought…

Insight vs. Accountability: Redefining Corporate Performance

Insight: The clear (and often sudden) understanding of a complex situation. (1)

Accountability: The obligation to demonstrate and take responsibility for performance in light of commitments and expected outcomes. (2)

I recently had the opportunity to hear Howard Dresner speak at a business meeting where he touched on the scariest aspect of Enterprise Performance Management – that everyone in the organization becomes accountable (my apologies for the paraphrasing). As he spoke, I experienced an 'Aha' moment. Nobody really wants that. Not really. Well, maybe the CFO, but nobody else.

In past posts I've discussed the evolution of Business Intelligence (BI) and how we've moved from information gathering and analysis into performance-driven organizations. And while I have touched on the shift needed to create a performance-driven culture, I wanted to pause and really think about this.

RESPONSIBILITY FOR PERFORMANCE = ACCOUNTABILITY

It's not enough to understand where our business impacts are occurring, or even why they occur. Thus far, companies have made considerable investments to address these issues. We need to go beyond this: we need to know the what, understand the why, and ensure that the people who can take action have the tools in place to make the best decisions, and that they are accountable for the actions that they take, as well as the actions that they don't. That is a big, scary order. Imagine if every decision you made in a day showed up on a scoreboard. Hey, this was in my area of responsibility and I just blew it off, and everyone is the wiser. It cuts against the very grain of corporate culture.

Bob Kaplan and David Norton, creators of the balanced scorecard, identified in their recent Harvard Business Review article Mastering the Management System, (3) "breakdowns in a company's management system, not managers' lack of ability or effort, are what cause a company's underperformance. By management system, we're referring to the integrated set of processes and tools that a company uses to develop its strategy, translate it into operational actions, and monitor and improve the effectiveness of both."

Many companies, recognizing the benefits of performance management, have already made extensive investments in the technologies to support true organizational accountability:

• EPM systems provide the alignment between strategic, tactical and operational performance.
• The integration of data from financial, operational and stakeholder systems provides a comprehensive, accurate view of our organizational ecosystem.
• Process tools such as balanced scorecards let us manage and monitor the transition from strategy to execution.
• As we come closer to real-time analytics, we are working with a leading, predictive view of our businesses.

With these systems in place, and as we experience unprecedented insight into and understanding of our businesses, we have the infrastructure to support enterprise performance management. We need to continue to develop the business processes and philosophy that support a discipline of continuous awareness and accountability for decision-making within the company.

Building a performance-driven, accountable culture requires a ground-up rethinking of how we do business. It takes leaders from within the organization, at all levels, to drive accountability and to have the discipline to be continually aware of and adapt their plans to subtle changes in the business. They must have a view of the broader business environment, the impacts of their decisions on their own business areas as well as other groups, and access to the right information, updated in real-time. It is a tall order, but by combining accurate data, management tools, and sound business processes, companies can drastically change their performance within the market, and realize gains that go beyond financial success and into a transformation of their corporate culture.

Sources
1. Princeton University Cognitive Science Laboratory, WordNet, Insight

2. Government of Canada Information Management Glossary, Accountability
http://www.informationmanagement.gc.ca/docs/guid-orient/concepts/concepts07_e.asp

3. Robert Kaplan and David Norton. "Mastering the Management System," Harvard Business Review

Ready for Operational Business Intelligence? A Good Read…

Operational reporting isn't new; I remember slogging through reams of mainframe-generated reports in my very first job out of college, many years ago. So why is operational Business Intelligence (BI) garnering so much headline real estate these days?

Expanding beyond traditional, strategic business intelligence, operational BI provides an unprecedented level of business insight to support the management of daily operations. And as we look at ways to extend our existing investments in analytic applications, this seems a natural evolution. But introducing operational BI into your organization comes at a cost. The impact on your data warehouse environment can be enormously disruptive if not approached with the understanding that this is a broad-scale project that will have significant impact (and benefits to be realized) across the organization.

Claudia Imhoff, recognized thought leader and expert on business intelligence, has published a new white paper on The Ever-Evolving Data Warehouse: Dealing with Changes and Pressures for BI Today that discusses the impacts of operational BI on the data warehouse environment. Some of her key takeaways regarding the impacts to data warehouse include:

• Scalability
• Performance
• Continuous availability
• Ability to combine different sources of data

While not exactly summertime holiday light reading, her white paper focuses on the impacts to the data warehouse and provides great food for thought for those of you who are considering or beginning an operational BI project. The paper digs into issues beyond the `headline-hype' of operational BI; in fact, the considerations that she discusses are applicable beyond operations and are equally appropriate for any project aimed at extending the foundation laid with your existing BI systems.

Insight on the Gartner BI Conference in Chicago

As a long time attendee of the various Gartner events, my favorite has always been the more intimate setting of the BI summit - typically held in Chicago. Boy, was I surprised at the 1200+ attendees of this year's conference and the expectation of bigger growth to fuel a move to Washington, DC in 2009. Last year’s event pales in comparison. BI advocates, typically a cross-over role between Finance and IT, have made a rather dramatic transition into the IT camp for this conference. Many of the sessions were educational and entry-level in scope and oriented to the first time architect and supporter of Business Intelligence environments. The event has clearly moved away from the user of past years.

Also notable was the absence of discussions on the relative cost savings in deploying a BI environment for better business planning and analysis. Other than the one rather cheeky session on how to negotiate a good deal with your BI vendor, I expected to hear more about cost cutting and using BI data to enable efficiencies and identify cost-prohibitive inefficiencies. The market picture has been doom and gloom and the "R" word blatantly used. Instead I heard a great deal about enabling integration and the expansion of analytic applications.

I think this is great news! Clearly the message was to expand the BI footprint and make use of the technology that can drive profitability, not focus on doing more with less. I had conversations with luminaries such as Howard Dresner and Ron Powell, but I also spoke with a number of vendors and implementers such as IBM GBS and Palladium, who had similar messaging of exploiting the existing technologies and refining processes to drive revenue and deliver data on a more continual basis to the employees who can make the right decisions in real-time. This to me is a message of expansion and focus, rather than retrenchment and limitations. I heard a great deal about the continual need for data, an almost real-time need to do continuous planning and report on finer levels of granular information in a more automated fashion. The message was clear. BI is tops in priority and destined to gain more mindshare of senior IT executives as the business expands and focuses their growth. To grow and expand you always need Innovators who can do more with less, but also the visionaries who can see the gold amongst the rock.

The Challenge Remains the Same

In the recently published "Cost Cutting in Data Management and Integration, 2008," Gartner emphasizes the need to reduce costs while continuing to support BI initiatives. Sound familiar? The operating motto for CIOs and IT teams for the past several years: Do more with less.

With recent downturns in the US economy, the business needs for the data coming from BI systems have become critical to companies’ maintaining their competitiveness. When there is less money in play, companies have to understand all facets of their business: where they are making money and where they are leaving opportunities for improvement on the table, to plan continuously, and to have the frameworks in place to change directions quickly in order to stay at the forefront of their markets. There is a pressing need for accurate, reliable data from which they can analyze and gain the insight needed to make the best business decisions possible. This source data comes from the same IT team tasked with reducing their costs.

Balancing the business need for insight into the organization and the IT need to reduce costs is where innovation can occur. Gartner’s report provides a number of recommendations for cutting costs within data management initiatives, ranging from the common-sense Optimize Data Integration Tools Licensing to recommendations that are complex and require creativity within the IT teams to successfully achieve: projects like Perform Operational Database Consolidation and Perform Data Mart Consolidation. Gartner estimates the payback from data mart consolidation as a savings of “approximately 50 percent of the total cost allocated to supporting their disparate data marts if they consolidate those marts into an application-neutral data warehouse.”

Easily said, but how to get from here to there? The solution lies in feeding a central application-neutral data warehouse with business critical data from application-specific data marts. To do this requires using intelligent data movement applications to ensure that this feeding of the warehouse is both seamless (does not interfere with the data mart applications), highly dynamic (so the data is refreshed in near real-time), persisted (ensuring a physical copy of calculated or aggregated data is available in the warehouse), and auditable (for data governance and regulatory compliance).

There are myriad opportunities to reduce costs within the IT department. The challenge is to develop innovative solutions that meet the requirements of data governance, security and accuracy, and still provide business users with the data they need to drive the company forward.

Enterprise software - hip again?

The previous post on finance innovators caught my attention. Early in my career, I helped document the journey of some of those same early adopters in BI and financial analytics—like Steve Beitler, former Controller at Sears, and his peers at companies like Blue Cross/Blue Shield of RI, Sealand (Maersk) and Lockheed Martin. I started reflecting on what helped their initiatives rise above the noise surrounding things like the Internet, AOL and cell phones in the '90s. Some argued BI, DW and financial systems lacked that cool factor back then, yet the enterprise solutions that startups were enabling for companies like Sears were grabbing headlines right alongside cool tools and gadgets.

It felt like déjà vu at a Red Herring magazine event this week. The entrepreneurs that converged on the soiree passionately described breakthroughs like wireless gas meters, on-demand Internet video TV without a PC (http://www.building-b.com/), mobile entertainment (http://www.mspot.com/) and a self-serve ecommerce site I like a lot called http://www.cafepress.com/. The energy and passion in the room brought me right back to my most recent stint at a venture-backed company that created collaborative technology for dynamic email applications.

Three prosciutto rolls later, I started to wonder…with all these hip ideas in new media and ecommerce, has enterprise software lost its cool factor? No sooner did conversations start to unfold with execs who are delivering interesting new enterprise solutions. Examples include a company that specializes in web-based task and project management (http://www.attask.com/), another that focuses on salesforce analytics (http://www.cloud9analytics.com/), and one that derives financial intelligence from data strewn across enterprise systems (http://www.staranalytics.com/, a company with whom I consult).


As the execs lobbed stories back and forth about their customers, it signaled that not only is innovation alive and well in the enterprise space, solutions are delivering real business value. Much like the time when Beitler and others made bold commitments to new platforms from startups, today's solutions are driven by customers who share their vision with vendors to help make their companies smarter and more competitive.

Conversations that evening helped me realize the tremendous impact and responsibility this community of entrepreneurs has during this unique moment in business. I walked away inspired by many promising young companies with solutions that aren’t just making our lives more enjoyable, our connections more meaningful and our contributions more lasting, they’re advancing technologies that help the corporations we work for, buy from and invest in operate more effectively based on timely, accurate information.

Now that’s pretty cool.

Integrating Information Across Vendor Applications

Whoever wins this week's performance management battle in the ongoing acquisition war, Doug Henschen's blog post (Intelligent Enterprise, 3/10/2008) is a direct reflection of one of the key issues that performance management customers face: While companies like Oracle and SAP buy up vendors and consolidate to strengthen and extend their market offerings and positions, their customers, many of which we share in common with these vendors, are involved in exactly the same process. The untold story from a customer’s perspective is that the mergers and acquisition strategies of vendors create enormous challenges for departments that are tasked with ensuring compliance, stability, and maintainability of critical systems and financial data. These customers have to synthesize duplicate applications and the requirement to integrate systems without disrupting workflow or degrading the integrity of data.

Performance Management systems hold some of the most important data in an organization - and key executives sign their names on dotted lines every quarter guaranteeing that the information is reflected accurately. The value of the information locked into source performance management systems drives the need to elegantly move data and metadata between performance management applications and reporting tools within the larger financial data warehouse.

Perhaps the concept of "unifying the full range of financial and operational processes in a single stack" should be reserved for that Utopian environment where there are no mergers, no acquisitions, no disparate systems, and no legacy applications. For customers in today’s global business environment, a solution that can move data, metadata and security out of these source performance management systems and into the larger financial data warehouse, where the information can be shared among a variety of vendor tools, as needed, is the hill that must be conquered in the vendor wars.

(cross-posted on Intelligent Enterprise)