So long, spreadsheets -- hello in-memory cloud financial tools

So long, spreadsheets -- hello in-memory cloud financial tools

Summary: It's time to cull some of the spreadsheets that finance (and operational) executives are using. Cloud-based solutions can offer the audit trails, one-source-of-truth, collaboration and other features missing in solutions of yore.

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Intervention program for spreadsheet addicts: The key points

  • Businesses are rebounding but Finance/Accounting groups getting no new headcount post-2008
  • Big changes in financial/managerial reporting tools are here
  • New technology leaders well on the way
  • Yet, the crack cocaine of accountants, spreadsheets, still has a strong appeal
  • Challenge to businesses will be to accept all new kinds and volumes of operational, financial and external data with the tools they have today (or get a more relevant toolset fast)

I have completed several interviews of late with executives from financial software vendors Kyriba, AnaPlan, Adaptive Insights (nee Adaptive Planning) and others.  I’ve also interviewed some accounting professionals and how they approach things such as closes, budgeting, reporting, etc.

Let’s start with the latter.

While not scientific, I’ve learned that:

  • Businesses are growing but Finance/Accounting headcount is staying flat (i.e., pre-2008 recession levels). Shareholders want more of these departments without paying any more for it.
  • The pressure to deliver to growing shareholder expectations is putting pressure on back office executives. The problem is, not all of have the time or technology to make material changes to the way they do things (i.e., processes) and the tools they use (i.e., financial accounting technology). Some are not changing as they believe things are just fine the way they are.
  • Spreadsheets, like paper, haven’t gone away. Their presence in Finance/Accounting groups is as entrenched as ever as accounting professionals continue to find ways to make this tool into something it was never designed to be.
  • Finance/Accounting may be missing out in its (in)ability to really help the operations of a firm.
financial reporting consolidation budgeting planning
Copyright 2014 - TechVentive, Inc. - All Rights Reserved

I’ve probably seen a dozen variations of this image over the years. Businesses develop financial budgets from summary data that resides in their General Ledger or Consolidation systems. Operational plans and reports spring forth from the ERP software or some sort of custom data warehouse. In most environments, data flows one-way and people who are skilled in one reporting tool rarely know the nuances of other tools and data sources.

It is an “islands of automation” world and spreadsheets are often used to try to piece together data fragments from one data source to another. This is an imperfect world, to say the least.

I’ve had the opportunity to listen in to management meetings in firms with this reporting environment. People start having great heated arguments debating whose report is more complete or accurate. These grownups are coming to blows over what another executive has defined to be a “customer” or “supplier”.  It’s a tragic-comedic situation.

The critical problems with this reporting world are that:

  • There is no single repository for business data (financial and operational)
  • No one comprehensive data dictionary exists
  • Controls over the data exist for only a portion of the reporting and data capture systems. Spreadsheet systems, if you can call them that, are often absent effective dating, restart/recovery technology, etc.

Over time, Financial/Accounting groups have compounded the problem by piling on more and more spreadsheets. They’ve added baling twine, bubble gum and bandages to the imperfect solution and have created a monster.

The problem has gotten even more troubling as new kinds of data are being utilized by businesses and shoehorning these data types into the old solutions and patchwork remedies just won’t work.

 It’s obvious to me that Financial/Accounting types must change their toolset. They must find a better tool (than spreadsheets) for much of their planning, consolidation, reporting and value creation activities. They have to change as the old ways are at the end of their useful life. The old ways and tools do not scale or scale very elegantly.

financial reporting planning budgeting consolidation
Copyright 2014 - TechVentive, Inc. - All Rights Reserved

Yes, I know some spreadsheet purist will probably point out that spreadsheet technology has continued to improve over the years. Spreadsheets can now support things like pivot tables. But, let’s get real for a minute.

The typical PC spreadsheet application was designed as a personal productivity tool and was  never designed to crunch through big data feeds (e.g., social sentiment information) or point of sale (POS) data from major retailers. Moreover, correlating data from some of these sources with one or more other sources is just not what a spreadsheet was designed to do.

Try this exercise

Pretend to be a new hire in your firm’s Financial/Accounting organization. Document all of the spreadsheets in use throughout the year. How many have current documentation, procedures, etc.? How consistent are the spreadsheets and data types found within them? Do they look like they were all built by one person at one time or by a committee of strangers over a multi-year period?  Can you tell immediately who updated each and every cell and when this happened? Can you see the history of changes to any one report?

I recently interviewed a corporate accountant who was being trained at her new employer.  She described how this group used spreadsheets to do most every accounting task in the company. Unfortunately, these spreadsheet “systems” were rife with problems. If documentation existed, it was often massively out-of-date. When using the spreadsheets or spreadsheet templates, numerous errors were present and rarely got permanently fixed. No audit trails exist for who and when these spreadsheets were completed.  And, the problems just kept coming. 

The best part of the story is that this company wants to go public in the next year or so. I’d bet against that happening as no reputable auditor will sign-off on this mess.

Spreadsheets aren’t bad, per se

It’s just that well-meaning people use them in inappropriate ways or use them as permanent fixes to their reporting shortcomings.  Spreadsheet usage in financial circles can become like an addiction. And, now may be the time for an intervention. Do you have the courage to say: “I’m a spreadsheet addict and I’ve got a problem”?  If you are, read on.

Periodically, Financial/Accounting types have to realize that their old, shop-worn but very comfy technologies are no longer relevant to their new, demanding work environment.  Today, a lot of Finance groups need to downsize the number of disparate reporting systems and spreadsheets that they actively use.  The diversity, lack of commonality/standards and difficulty in reconciling data across this environment is not a good thing. It’s a time wasting, value-destroying problem and it needs to go away.  It has to go away as the organization they work for is awash in new data feeds and the old tools aren’t serving the rest of the business well, if at all.

financial reporting planning budgeting consolidation
Copyright 2014 - TechVentive, Inc. - All Rights Reserved

Financial/Accounting departments should move to a different, more unified reporting environment. This environment:

  • Puts more data types (financial, operational, big data and external) into one system
  • Uses more powerful computing platforms (i.e., in-memory databases)
  • Collapses the number of reporting tools in use to a small number
  • Provides clean and obvious audit trails
  • Expands the user base of this data beyond the financial/accounting boundaries

What are some of the new tools? Here are some examples:

Adaptive Insights

Adaptive has undergone a rebranding in recent weeks as its product line has evolved measurably from its lone planning tool a couple of years ago.  The software now sports functionality for budgeting/planning, a solid consolidation module, corporate performance management and in-memory analytics tool for marrying financial, operational and external together in a single cloud-based in-memory database.  

adaptive 1
Image courtesy of Adaptive Insights and used with their permission

Adaptive now has about 2000 customers in about 100 countries. Its rapid growth has attracted a blue-chip investor group including Norwest (an early PeopleSoft investor), Bessemer and salesforce.com.  Their latest investment round is being earmarked for more sales growth, new products and international expansion.

adaptive 2
Image courtesy of Adaptive Insights and used with their permission

Their most recent release has enhanced usability and user experience features. Collaboration functions were also enhanced. While the software looks more Excel-like than ever, it differs from many spreadsheets with enhanced collaboration functionality that contains a process tracker, workflow, approvals, task manager, organizational driven workflow, notes and conversation capabilities.

One of their customers is using the software to capture and monitor the maintenance, wear & tear, and costs of thousands of pieces of mining equipment. The financial benefits of this system rapidly covered the costs of implementing this solution.  It’s an Internet of Things meets financial reporting world at this customer.  Their use of Adaptive includes mine servicing, fleet utilization and sensor feedback as part of the solution.  One Adaptive executive described the solution as “operational cloud deployment at the hard end of business”.

Anaplan

Anaplan is a relatively young company that’s grown quite rapidly and is now on their third round of venture funding (salesforce.com is one of their backers).

Last year, they discussed with me their ‘modeling as a service’ solution that married operational and financial data in an in-memory, cloud technology.  The software could serve more than financial types as it offered business insights to more users in more operational roles. The software supported what-if scenarios, modeling and consolidation. Last year, the company had already attracted the attention of two major systems integrators and the business of several Fortune 500 firms.

anaplan 1
Image courtesy of Anaplan and used with their permission

 Today, Anaplan has expanded its product focus and messaging.  Anaplan is now a rapidly growing provider of “cloud-based modeling and planning (tools) for sales, operations and finance”.   Their software permits the rapid construction of dashboards that are populated with the data found in a variety of internal and external data sources. One Anaplan customer has populated some 7 billion cells in their data model.  Anaplan reports that some users are doing territory planning and promotions management from this toolset.

Anaplan_Tiles 2
Image courtesy of Anaplan and used with their permission

Anaplan’s CEO, Fred Laluyaux, told me that they weren’t trying to build “an Excel spreadsheet in the cloud”.  To that point, part of what these new tools offer is a more visual look at the massive amounts of data that firms must analyze.  Where spreadsheets are a personal productivity tool, these new generation solutions are business productivity tools – the difference is significant.

Tidemark

Tidemark provides a number of enterprise planning and analytics tools. Its all-cloud suite has modules for:

  • Financial planning
  • Operational planning
  • Metrics management
  • Labor & expense planning
  • Model & analyze profitability

As one of the newest players in this space, they also possess some of the most interesting cloud and in-memory technology. I hope to do a comprehensive review of Tidemark soon. Stay tuned.

Kyriba

Kyriba fills a different niche from Adaptive and Anaplan. Kyriba deals with treasury functions via a cloud-based technology suite.

The treasury world shares a lot of the same pain points and spreadsheet abuses found in the reporting scenarios above. For example, many treasurers must contend with a variety of different, disjointed technologies to see their cash positions across multiple banks. These must be married to data from Accounts Payable and Accounts Receivable systems to see what upcoming payments are planned, which checks have recently cleared, what payments are in arrears, etc.

Pulling all of this data together in a visible, singular solution is often tough to do even for firms with only one material banking relationship. In gets more complicated when Treasury must also factor in trade promotions, season sales and other factors that impact purchases of raw materials and/or customer payments.

Treasury functions will regain importance in many corporations as the economy grows and interest rates inevitably rise.  With rising interest rates, a company’s cost of capital will increase, debt service costs will increase and customers may get tardy in making payments. Cash is the lifeblood of businesses and close attention to same can be the difference between market success and bankruptcy.

Risk management is also a concern. Businesses must manage exchange rate fluctuations and hedges. Timely visibility to these risks (and positions) is a key treasury need.  

Kyriba’s portfolio of solutions includes products for mobile users, mid-market firms and large enterprises. The large enterprise solutions include products for: cash and liquidity management, payment management, bank relationship management, financial transactions, risk management and trade solutions.

Other products

I’ll be doing more research on the space and I’ll be covering more vendors like ReVal, Prophix, Host Analytics and others.  But, it’s clear that Financial/Accounting tools have moved to cloud platforms.

Why is cloud the deployment method of choice now?  Like users in other application areas, Financial/Accounting types like software that the vendor (not the user or IT) maintains. Some products are especially easy and quick to implement, too.

In-memory is also becoming a must-have technology component, too.  Established vendors like SAP (with HANA) and Oracle are pushing their in-memory capabilities as they can materially reduce reporting timeframes and make the running (and re-running) of complicated multivariate financial algorithms a super quick snap.  Years ago, I worked with a client in Houston, Texas, that had a mainframe–based financial modelling application. Anytime they fired that baby up, it dimmed the lights across all of South Texas. Today’s tools run on third party cloud systems with the scalable computing environments that also possess a lot of in-memory capacity for just this sort of analysis.

What’s also clear is that the data crush hitting Finance/Accounting will not be solved by adding more spreadsheets or more cells/dimensions to existing spreadsheets. The variety of data coming into businesses (e.g., video, tweets, etc.) was never part of the initial design considerations that spreadsheet software creators envisioned. Their ‘vision’ was for a different time, a different kind of business and different kind of data. The business world has changed. It’s time that reporting changes, too. 

Disclosure: You’ll probably hear me expound on these topics at length at several vendor’s user conferences, webinars, etc. this year.  I’ll continue to research the sector and will likely produce a white paper or two on these matters. Next week, I’m even doing a webinar on the financial close processand after that a webinar on treasury.  

Topic: Enterprise Software

About

Brian is currently CEO of TechVentive, a strategy consultancy serving technology providers and other firms. He is also a research analyst with Vital Analysis.

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12 comments
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  • Hopefully, a big business is not using spreadsheets . . .

    You're talking things like "big data" and such - that leads me to think you're talking mostly enterprise level financials - and hopefully at that scale they're not using spreadsheets! At that size, I'm sure there are enterprise-level products they can use.

    Spreadsheets may be okay for mom-and-pop types (although even then, shouldn't they be using Quicken?), but for larger scales, I don't see spreadsheets scaling very well.

    Of course, I'm not a supporter of "big data" (not very convinced it's effective, it may lead to privacy concerns), but even without it, I don't think a spreadsheet would scale that large.
    CobraA1
    • MS's Hadoop incentive is that it can use Excel as a front end

      That seems to be the incentive MS is showing to users so that they switch to Azure and their implementation of Hadoop. Though if you look at MS's cloud offering prices, it is anything but simple. I am guessing they will nickel and dime you and drive you crazy too as there are certain portions where they do not even offer you an SLA
      GoForTheBest
    • Big Business does still use spreadsheets

      My wife works for a large company and they have huge spreadsheets that come out of there analysis tools. Personally I think the data should remain in the databases but somehow they have to extract it via queries into Excel, do all kinds of vlookups and other formulas, and then keep that spreadsheet for other reports. I find it a strange way to do forecasting as she is a financial analyst, but that is what they do.
      hoppmang
  • Just a couple of words of warning about using this type of service:

    1. You can't use these services like this UNLESS you have an UNLIMITED data service, at present most of the world outside the USA pays per megabyte of download and upload. For the data service cost of such a service a typical medium sized Australian company can replace all their hardware and hire two new staff (or more) each year. The same applies in other countries.

    To use a cloud service for something normally done in-house, or could be done in house, can cost more than the in-house option once you include the full costs of the required Internet connection and data upload / download costs. Check them out before moving.

    2. Check out the local accounting, financial management, and privacy laws to make sure what these people do is in line with your local ones as most of these services will be operating as per the US laws.

    3. Be concerned about data intercepts as anything going out into the cloud can be intercepted and read.

    4. Make sure you have back up and the contract calls for high penalties should the service people leak your data in some way or they close down at short notice, and thus making it hard for you to do the work and find a replacement service.

    If you can safely answer all these concerns go for it, if not, keep away from it.
    Deadly Ernest
  • On the use of spreadsheets, at heart all accounting systems are spreadsheet

    systems - balance sheet, profit and loss statement, cash book, account journals, assets lists all of them start life as a spreadsheet, so is it any wonder accounts keep using them - spreadsheets make the listings and understandings easy.
    Deadly Ernest
  • Death of the Spreadsheet

    First, anyone running a business should be using a proper accounting package suitable for their business needs. This makes tracking financials correctly much easier. Spreadsheets in this financial scenario should be used to make final reports based on data stored in the accounting package not as the primary store of the data. This is today not in the future.

    While I do not work with financial databases, I work with databases and find spreadsheets very useful for two situations: very preliminary data analysis and making final reports. In the first situation I am trying to understand and possibly ensuring the data is in the correct format before committing it to the database system. In the other, I am generating usually an ad-hoc report.
    Linux_Lurker
    • Excel isn't dying

      If anything it is becoming more prevalent as Microsoft continues to add additional functionality to it.
      hoppmang
      • Excel features

        I would argue that spreadsheets do not need new features to be useful for the foreseeable future. They are too convenient for many tasks. I routinely use a spreadsheet to prep and analyze data and I am very comfortable with using a relational database. I am not using any advanced features. But adding new features may actually make spreadsheets more valuable not less.

        Also, what is overlooked is that database systems are harder for many users to understand but spreadsheets are very easy for not-technical users to understand.
        Linux_Lurker
  • Change.....

    While spreadsheets may change over the course of time, they will never go away permanently, and while big corporations might be able to convert all their information into cloud-storage, a Small/Medium Business might not have this kind of manpower....financial backing...or just enough incentive to go that route, they might be doing it the old way...but using their MS Excel for their spreadsheets which are stored locally and remotely and then archived etc...might be just what works for them.,..and unless there's some sort of financial gain to be had.....quite a few of them might not scuttle their spreadsheet system for an accounting / financial package. Which might require them to not only have to train their people...but it might require hardware upgrades, software upgrades and not a lot of those companies have that kind of cash...especially in this current economy.
    Knighthawk5193@...
  • Spreadsheets are here to stay....

    The problem with software vendors (and I work for one) is that they have to come up with a compelling story to justify why you should evaluate their product as something to buy.

    The cloud is sexy, standalone spreadsheets are not.

    That’s really the bottom line. Whether you’re a massive corporation or a corner store mom and pop you’re likely to be dealing with spreadsheets somewhere long the way and the real question is whether they are effective tools for you to get your work done.

    Yes, there are risks, yes there are governance and integration issues and of course there’s the “uncool” factor that I previously mentioned.

    Other commentators have said it all already, don’t rely on spreadsheets too much, they are brittle and vulnerable technology that are very easy to use and put your business data at risk if you damage the file, make a mistake or accidentally leak it to the outside world. The reality too, though is that they are indispensable and are not going away.

    I would say anytime soon, but since they have been around in one or more incarnation electronically for more than 25 years, ‘anytime soon’ is relative.

    All your assertions are correct, headcount is constrained, transaction volumes are growing, there’s pressure on the back-office.

    Finance execs are trying to be more strategic and less tactical, more valued by their C-suite peers and do less of the scorekeeping but a cloud based finance tools isn’t going to do that, not in your wildest wildest dreams.

    Your accounting system keeps the score, those who need access to it should have access to it. Your accounting staff should be doing more analysis than capture of data and there should be automation everywhere, from sales orders to purchase orders to payments and cash receipts. A lot of data lands in spreadsheets because suppliers and customers send or need it that way. Additionally, when everyone doesn’t have access and its kept to a select few how are others supposed to supply and get information – simple, they often use a spreadsheet or worse – an email – yuk!

    So you can critique the spreadsheet reports that are generated out of the SoR (System of Record) but in reality part of the problem is one of trust (of non finance users) and then of course the costs associated with making systems available to a wider audience. When the business and IT agree on a middle ground here, then many spreadsheet concerns and issues dissipate.

    Spreadsheets in the cloud are conceptually interesting but in reality they’re not the way people really work. Real-time collaboration on the same datasets has yet to be proven statistically prevalent so you can nix that feature. Hand off, well yes, everyone likes the idea of handoff but then you have versioning issues and then you’re back to the middle ground I talked about before.

    Finally don’t underestimate the importance of secrecy and non-disclosure, while many preach openness of information in reality that ‘s not really what people want to do, knowledge is power and the gatekeepers like to keep it that way.
    uploadsap
  • THX for the feedback

    Everyone - thanks for all the comments. I'd like to add a bit.

    Before I wrote the post, I checked in with a couple of mid-market firm's finance groups. I saw spreadsheets being used for more than preliminary or final reports. The volume of spreadsheets was amazing. They were using spreadsheets to audit freight bills, to manage customer credits, to prepare journal entries (before uploading them to the general ledger), etc. Several people spend virtually their whole day working with and in spreadsheets and spend less that 15 minutes a day on the actual accounting software.

    Why this is so was due to a number of issues that I didn't have space to cover in this piece. Suffice to say that there are functional deficiencies in the accounting software. But, there were also situations where the accountants never bothered to learn (or were taught) how to do many of these functions in the accounting software. In some cases, spreadsheets were employed because a critical integration to a feeder system was never created. I could go on and on.

    This piece focused mostly on the back-end reporting, consolidation and planning tasks and the reliance on spreadsheets there. That's all.

    Now, as to fears re: cloud security. Most cloud vendors have to meet security audit standards such as ISO 27001 and/or SAS 70 Part II/SSAE 16/ISAE 3402 certification. Not enough corporate data centers do this (but should). I agree that security is a big deal and I am definitely advocating people take it seriously. Just look at the stats on file at: https://www.privacyrights.org/data-breach/print for some amazing insights on data breaches. However, to be fair, a lot of the breaches were NOT caused by cloud systems or vendors. They were often caused by insiders and they often targeted less secure sites (like universities).

    Finally, I don't expect spreadsheets will go away. Like one of the commenters wrote, financial systems share a lot of design similarities to these. It's the overuse or abuse of these (when better solutions exist) that must be watched. Let's instead focus on what can be done to make all financial accounting personnel more value added to the business (instead of debugging a spreadsheet template).
    Brian
    brian sommer
  • Other in-memory players

    Hi Brian, you mention technologies like SAP HANA for powering this evolution in the fintech space. There are a few other technologies in this space supporting the fintech industry. Here is one in particular:

    http://inside-bigdata.com/2014/02/03/real-time-mapreduce-becomes-reality/
    plambre