Let us start this blog by understanding the evolution of planning, then look at some unique aspects of planning and finally see how SAP is focusing here now.
Planning over the last few decades
Over the last few decades, Planning processes have changed around the technologies available to the finance departments. Till the end of 1970s, planning was done mostly manually and therefore it was more in the heads of owners/managers of the business, or it was documented using a typewriter. So there was no way of doing any kind of detailed planning at that time.
In the 80s, with the advent of spreadsheets, lot of management practitioners preached the new process of annual budgets. This was in line with the reporting of annual financial numbers and building multiyear financial projections. The spreadsheet technologies got better and more usable, but still it took a while (several months) to create comprehensive budgets, which was of no use other than for the satisfaction of few souls who had that specific responsibility, and lay in the corporate department shelves.
In the 90s, with ERP coming up in a big way and availability of data in plenty, the accounting and reporting become more frequent – quarterly, and therefore naturally the planning process also got more frequent – quarterly. But again this still did not solve the real need of planning, to facilitate the managers to track their performance and take decisions effectively. The plans were created as a mere time trend, the approach was to take last period actuals and increment it by x%age. No, the actual business may not run that way as there were no assumptions.
So as we entered the 2000s, it became clear that to derive success from planning process, it was essential to allow the business users, to build complex models, that allows planning to be done across multiple dimensions of the business. This could not be solved through transaction based systems alone. And that resulted in adoption of multi dimensional OLAP technologies for the planning processes. So it was perceived that in order to have a successful planning, it was very important to have technologies that can provide both the modeling capabilities that can be done by the business users as well as access to data. Now even at this point, the planning process and technologies did not give the necessary results as desired. Why? As still it remained a finance centric activity, the technologies relied on data input and did not have any predictive capabilities.
In the current phase and as we see the future, the planning process takes a total transformation – the planning has become continuous (quarterly rolling forecasts), driver based (built based on assumptions provided by the business users, not mere data input), collaborative (beyond finance) and predictive. Again the current phase was possible because of technologies available, that allows for quick and easy modeling of driver based models, collaborations across departments through web 2.0 technologies, and predictive analytics using statistical techniques.
Unique aspects of Planning Processes and Technologies
Future oriented
Planning is future oriented. Everyone knows it. It is all about future products, future customers, future business opportunities for existing customers, future facilities etc. So these are not already available in your master library of products, customers or assets. Therefore these have to be constantly modeled for the changing business needs. And it is not just one scenario by which managers can take decisions. There are multiple scenarios that needs to be modeled to take the best course of action. What is the use of technologies that would have to rely on IT to create all these scenarios? It’s never going to be done. So the ability to model multiple what if scenarios and not just single what is plan would be very critical. And better so if the technology can predict the future for the users.
Assumptions input, less detail
I have lot of past data, and therefore I want to use all of them for my future planning. Let it be photocopier expenses that contribute to 0.0001% of my revenue, still I would like to detail it out. Sounds familiar? This is what a typical planning process should avoid and look at planning for the things that matter, top 10 customers, new channel opportunities etc. So the unique aspect here is to allow the users to input various assumptions for these relevant elements. This will enhance the usage of the planning and allow managers to engage and collaborate in the process.
Calculation centric
Compared to a transaction system which is more towards collecting data and is spread out over a time period consistently, planning is highly calculation centric and has peak loads. More than automating transactions, the planning process involves assumption inputs and complex calculations to derive results out of the assumptions. So the technologies that support comprehensive calculation engine and which has high performance for peak usage, is very critical for the multiple scenario planning models to run.
SAP Business Planning – where are we and going in future Looking at the evolution and the unique technology requirements of planning, SAP took a decision to acquire Outlooksoft product in order to offer their existing and future customer base a planning solution, that can bring true value out of their investments and ensure positive results through driver based,collaborative and predictable planning. With integration to SAP BI in the near future, SAP Business Planning product is slated to be the most apt solution to use the data generated from the SAP transaction systems and leverage the same to plan a predictable future. With this SAP continues in its endeavor to make every business a best run business.
