Here is a contentious thought to start 2011 – most organizations are doing too much planning and budgeting. Now that’s not something you’d expect to hear from an EPM practitioner! So perhaps I should be more specific and say that in my opinion companies are doing too much of these activities in silos, ignoring the critical interdependencies between business departments.
Some years ago I worked for a global telecommunications company, managing financial planning processes. I then got involved in implementing a network planning solution for operations, and at about the same time our board committed the company to a new strategic direction. The marketing team’s demand plan supported the new strategy, so there could be no development of existing network capability – even though customers were crying out for our old products – something that was clearly shown in the sales pipeline forecasts. Result was that we had to turn away millions of dollars in revenues, the new products failed, and the company stock price fell by 95%.
Of course we were all planning like crazy, but working independently from different assumptions. Because we didn’t try to align the outputs of our plans there were no checks or balances – something all too common in the world of separate spreadsheet silos 10 years ago. Of course things have changed today – instead of lots of independent spreadsheet systems we have – lots of independent planning tools! Oh yes, and we still have lots of spreadsheets!
Solutions to this problem are usually covered by the term ‘Integrated Business Planning’ (IBP). In its widest sense, this represents the technologies, applications and processes of connecting the planning function across the enterprise to improve organizational alignment and financial performance. And it’s nothing new – in fact I was interested to discover in a recent article that the term originated in 1996.
So if there is general recognition that a solution is desirable, and management wants to make the change, what is holding companies back? I believe technology has – up until now – been the limiting factor. But in 2011 this is all about to change.
Any solution to delivering Integrated Business Planning requires three technical components (we also need a lot of change management expertise and executive leadership, but these topics are beyond the scope of this article). Firstly, a flexible planning tool that is both user-friendly and can also be administered by end-users. One that can easily take over the existing style of planning and budgeting – which is often spreadsheet based – without the high levels of disruption caused by learning a complex tool. Secondly, lots of raw database power to not only store but also process the large volumes of information that will arise when we bring together the separate planning silos (especially operational plans). And thirdly, a vendor capable of addressing industry-specific planning topics.
Let’s look at each of these in more detail.
- We’ve had flexible planning solutions such as SAP Business Objects Planning and Consolidation (formerly Outlooksoft) for many years now. At the last count approximately 2,500 customers were benefiting from its ease of use and integration with Microsoft Office – turning Excel spreadsheet models from stand-alone planning silos into the front-end of a hugely scalable, collaborative planning solution. Arguably, however, the relatively recent (April 2009) release of a version for SAP NetWeaver means that for the first time, the underlying planning data is stored within the same data-warehouse environment used by SAP Business Suite – the market-leader for Enterprise Resource Planning (ERP) systems. With this, and the subsequent release of the 7.5 version in August 2010, the worlds of flexible end-user planning solutions and detailed, robust ERP processes are brought into close alignment.
- But the biggest technical impetus to getting us out of our planning silos came later in 2010 when SAP released version 1 of their High Availability Analytic Appliance (HANA). This game-changing announcement means that for the first time, the full power of in-memory computing is made available, enabling customers to analyze large quantities of data from virtually any source in real time. With SAP BusinessObjects Strategic Workforce Planning, SAP has already delivered the first application built on HANA (one of the Top 10 EPM trends in 2011). Starting in 2011, customers will start to see other Planning solutions taking advantage of HANA, including SAP Business Objects Planning and Consolidation. Now at last, the raw power needed to calculate and integrate multiple detailed planning scenarios is available! For an inspiring video see Vishal Sikka speaking on HANA.
- However, these first two technical components – end-user flexibility and raw computing power, are of little value unless the solution accurately encompasses the specific planning requirements of the business. And here SAP is rapidly moving to address the needs of individual industries by releasing a series of Analytic Applications for Planning and Consolidation – initially in Healthcare, Banking and Public Sector, with more planned for 2011. SAP already has a range of solutions to help plan for generic business processes such as Trade Promotions, Material Requirements, Supply Chain, and Sales and Operational Planning. This level of in-depth domain expertise (in both SAP and throughout the SAP partner community) will be essential to deliver solutions that fully meet business expectations.
What is the future for Integrated Business Planning? Fifteen years after the term was first coined, I believe the requisite technical infrastructure will come of age in 2011. The three innovative solution areas outlined above will combine to allow customers to move their planners out of multiple silos and into an exciting new landscape of open data exchange and collaboration. Companies that move quickly to embrace these new capabilities will be able to adjust more quickly to changing market conditions, deploying their resources more effectively. They will serve their customers better, and take market share from their competition. They will spend less time on the mechanics of manipulating & reconciling data – and get more value from the planning function.
I’m looking forward to working with my customers in 2011, helping them to get out of their planning silos – and to sharing the successes, and no doubt some frustrations too – of the journey. And as always, I look forward to your feedback.
Best wishes for a Happy and Prosperous New Year!