2007 Budgeting and forecasting study

2007 by PricewaterhouseCoopers – “The research was executed via 200 cross-industry web surveys and four in-depth interviews with organizations whose revenues are greater than $2 billion.

PricewaterhouseCoopers identified five key trends impacting budgeting and forecasting processes:

1. Budgeting and forecasting processes face significant transformation; linkage to strategy is top of mind.
2. Today's process is too granular and not focused on value-added activities.
3. Underlying technologies and applications lack integration.
4. Finance and operations must be more closely aligned.
5. Standardizing processes and systems is a primary focus of improvement efforts.

Key indicators

1. Fifty-six percent of budgeting and forecasting effort is spent on low value activities including data collection and consolidation, reviews, approvals, and report preparation.
2. Seventy percent of respondents are dependent on spreadsheets for all or a portion of their financial planning activities
3. Management and employee dissatisfaction with the current planning process is high due to the level of granularity and lack of alignment with business strategy
4. Sixty five percent of respondents believe that the strategic relevance of budgeting and forecasting will increase over time, while only five percent expect a decrease
5. More than half of respondents reported that creating closer links between strategy and operations was one of the top two priorities

Conclusions

“To improve and refocus budgeting and forecasting, organizations need to standardize, streamline, and integrate these activities with the company’s short- and long-term goals. If done properly, budgeting and forecasting processes can play a leading role in an organization’s strategic direction by becoming a way to rapidly assess and adapt to a changing marketplace. Companies that take full advantage of an ongoing strategic budgeting and forecasting process will:

• Use budgeting and forecasting as a tool to integrate strategic planning and day-to-day operations.
• Reduce the budgeting cycle time (perhaps even by creating an ongoing rolling forecast process) and improve forecasting accuracy by standardizing data collection and consolidation across the organization.
• Deploy rolling forecast concepts, which extend forecasting beyond year¬end. This reduces the dependency on manufactured deadlines that are not aligned with a constantly changing marketplace.
• Shift the focus of the budgeting and forecasting process from data collection and reporting to target setting, analysis, and ongoing measurement.
• Break organizational silos by using the budgeting and forecasting function as a way to increase collaboration between finance and operations.
• Increase the organization’s understanding of creating value through the budgeting and forecasting process and supporting it with a robust performance-management function.
• Consider developing or using a methodology that provides a flexible approach to changing business processes, technology and systems, organizational structure, and data.”

180 View – The report is 50 pages long and worth a read. Too bad that only organizations with revenues exceeding $2 Billion were included in this study. We think that mid-sized organizations suffer the same problems as the large ones. Our guess is that the indicators would be even greater for the mid-sized organizations.

Worst Practices in Business Intelligence: Why BI Applications Succeed Where BI Tools Fail

2007 from Information Builders – “Business intelligence (BI) software emerged in response to the need for accurate and timely information to support informed business decisions. With origins in COBOL-based, green-line reports in the 70s and 80s, BI has evolved into a complex market comprised of tools and platforms. Tools exist for report design, ad hoc query, and online analytical processing (OLAP), while BI platforms combine these tools with databases, integration technology, and portals to deliver sophisticated BI applications. Whereas COBOL required IT involvement and months to generate a single report, today’s solutions are targeted toward business users and boast real-time reports. Why is it then that the majority of organizations still feel that their information access and reporting needs are unfulfilled?

BI software – tools, platforms, and applications alike – holds great potential for helping organizations readily access the enterprise information needed to make informed business decisions and, ultimately, achieve their business objectives. But, as with any technology, the implementation, roll out, and usage practices play a critical role in the success of BI.

In tracking mediocre results, and even failure1, in the implementation of BI software over the years, many common threads, or “worst practices,” can be found. The top-four worst practices for BI include:

• Assuming the average business user has the know-how or the time to use BI tools
• Allowing Excel to become the default BI “platform”
• Assuming a data warehouse will solve all information access and delivery requirements
• Selecting a BI tool without a specific business need

These worst practices set companies on the auspicious path of BI failure. They have been repeated by some of the best run and smartest companies in the world. Typically, these worst practices are the result of wanting to ride the latest technology wave without balancing the hype with practical knowledge and experience…

Excerpt from Worst Practice #1: Assuming the Average Business User Has the Know-How or the Time to Use BI Tools:

Unfortunately, the end-user market is flooded with misguided hype from the vendor community, indicating that, “BI tools are for everyone.” Today’s BI tools are typically targeted at business users because they no longer require specific programming or database knowledge and primarily use graphical, drag-and-drop interfaces to allow businesspeople to compose questions and retrieve formatted results from databases. Even with these advances, however, they are still too complex for the average end user to adopt as a part of their day-to-day routine.

Furthermore, few business users are involved in the decision process when it comes to BI. Because of this, their need for simplicity is neglected and BI tools are forced on them from the IT developers and business unit power users – a sure recipe for failure…

180 View - The whitepaper is self-serving but also provides useful information .

Process Improvement: When More Is Less

June 25, 2007 from ITBusinessEdge – “Is there such a thing as too much process improvement?

Yes, says consultant David Taber. While process improvement efforts like Six Sigma tend to work well for established products, helping companies ensure that high quality standards are met, they aren’t that helpful — and in fact may be harmful — when companies are trying to develop new and innovative products.

180 View – We defer to the comment posted by Dr. Phyllis Thompson on July 3, 2007, who said

“Don Zook has it right. When I started working some years ago, the emphasis was on “systems and task analysis.” Other cutely named strategies (good for marketing and for differentiating the designer from competitive companies) complemented and extended these approaches to figuring out what is going right and wrong, and how to demonstrate and measure that a problem has been fixed (emphasis on measurably, by the way, since without metrics you can’t prove change has occurred).

Over time we have been inundated with the menu of (quite literally) thought-provoking tools . . .and more (e.g., remember, or like others, have you forgotten Management by Objectives?). . .that Zook enumerates. The problem arises when folks check their analytical skills and common sense (assuming they have both) at the door and think a tool will serve as the holy grail, showing them the way to “the solution.” What they forget is that they, not the tool, hold the answer.

All Eyes on NetSuite: IPO and iPhone’s First On-Demand Business App

July 13, 2007 from AMR Research and written by Bruce Richardson – “NetSuite issued a press release on July 2 announcing it had filed a Form S-1 registration statement as a precursor to its initial public offering (IPO) expected late summer… Coincidentally, on the same day NetSuite unveiled its SuitePhone. Effective immediately, all NetSuite software is now accessible on Apple’s new iPhone as well as all Mac products…”

Bruce’s comments on the IPO and first impression of the new SuitePhone include:

• Oracle’s Larry Ellison controls nearly 75% of NetSuite
• NetSuite has accumulated a deficit of $193 million since it started 9 years ago
• The company on a nice ramp to break through the $100M sales barrier by the end of this year.
• Last quarter, NetSuite spent 54% of revenue on sales and marketing and 18% on product development. For the same period last year, it invested 75% in sales and marketing and 24% in development.
• Following Google: NetSuite to sell shares through an auction.
• Bruce predicts that the iPhone will drive demand for mobile business applications

180 View - Bruce's “First Thing Monday”article arrives by email and we are unable to provide you with a direct link. We suggest you subscribe to "First Thing Monday", a free newsletter from AMR.

Data protection a "contradiction in terms"

June 27, 2007 from ITBusiness - “"What's interesting in financial services is that it is the combination of data that becomes valuable information when it comes together to create an identity," Axelrod said. "If you are just going to file away social security numbers with no way to tie them to identity, they're actually pretty innocuous; but even if you just have a way to associate that information to a phone number or other data, someone can put things together..."

Axelrod said for the record that "data protection is a contradiction in terms," and that the process will never be perfected, based on the nature of IT systems and the need for businesses to easy retain access to important information…

Regulations like the Sarbanes-Oxley Act have proven less effective than legislators might have initially hoped they would be at improving overall data security because businesses have focused on meeting the terms of the guidelines versus boosting their overarching protection schemes, Fusco and other panelists agreed.

However, some industry-driven security requirements, such as the PCI (payment card industry) standard forwarded by credit card issuers, have had the desired effect, experts said.

Well-written guidelines can help make the difficult task of convincing senior executives to increase their IT security budgets easier, alleviating one of the most significant challenges of the entire data protection process, according to Steve Peltzman, chief information officer at the Museum of Modern Art in New York…”

180 View – Take a look at Payment Card Industry (PCI) Data Security Standard https://www.pcisecuritystandards.org/pdfs/pci_dss_v1-1.pdf to see the “well-written guidelines”. We see a lot of overlap between the various regulations and authorities on security, and sympathize with organizations struggling to protect their data as well as comply with regulations.

Multi-core gives software hard time

July 22, 2007 from Globeandmail.com – “A fundamental change in the design of microprocessors is presenting software developers with a challenge — and a huge financial opportunity.

Chip makers are no longer racing to have the fastest microprocessor and have shifted their focus away from building chips with a single, super-fast calculating core. Instead, to save energy and reduce heat, they're putting multiple cores on the same chip — the equivalent of several computers on the same slice of silicon.

The cores run slower but are more energy-efficient, and are designed to break up big chores and work on the separate pieces simultaneously.

The resulting technology is ideal for the most demanding multimedia tasks, such as processing large video files, pulling information from multiple databases at the same time, or playing a computer game while downloading music and burning a DVD.

The problem is that many software applications weren't written for chips with multiple cores, and the hardware is advancing so fast that the software runs the risk of being left behind…

But now that chip makers are no longer focused solely on speed, programmers must change their tactics and learn to send instructions to different parts of the chip instead of through a single processing core…

“The software industry would have been very happy if the processor industry could have been able to double performance every two years without having to go to this parallel world,” said Marc Tremblay, chief technology officer for Sun Microsystems Inc.'s microelectronics business, where he oversees the server and software maker's processor road map. “Unfortunately people ran into roadblocks, and the winners will be the people who can actually leverage this disruption.”

180 View – You’ve heard of Moore’s Law whereby the number of transistors on a computer chip, and thus its power, doubles every 18-24 months. The “Law” was first introduced in 1975, and for those of us who have been around long enough, have seen unbelievable progress. Although the article describes a disruption of Moore’s Law, it is also possible that by running parallel processes that we will continue to reap the benefits of faster processing as developers apply new techniques to take advantage of multiple core technology.

The wide world of Wi-Max

June 26 2007 from CNNMoney.com – “(Business 2.0 Magazine) -- Wireless Internet service works great - so long as you're in a Wi-Fi hotspot. But what if you could have wireless Internet everywhere you go, available on your laptop and cell phone, at speeds that can leave both DSL and 3G data networks in the dust?

That's what Sprint Nextel customers could get later this year, when the Reston, Va., carrier starts rolling out its $3 billion mobile Wi-Max network.

The promise of Wi-Max, which stands for worldwide interoperability for microwave access, has been talked about for years. Unlike Wi-Fi, which was designed to send signals no farther than 300 feet, only a few Wi-Max transmitters are needed to blanket an entire city with high-speed Internet connectivity.

Fasten your seat belts: The Internet service model of telecoms, cable companies, and cellular operators is about to be disrupted.

Sprint says its new service will go live in three markets - Baltimore, Chicago, and Washington - by the end of 2007. It will be the first U.S. carrier to launch the next-generation network, which already exists in South Korea and is five times faster than current 3G cellular data services. Sprint hopes to have coverage available to 100 million Americans in about 35 regions nationwide by 2009...

Sprint is not the only Wi-Max player. Clearwire, founded by famed cellular entrepreneur Craig McCaw, should have its network up and running in 2008, with coverage for 45 million people. "We're doing for the Internet what cell phones did for voice 20 years ago," says Clearwire CEO Ben Wolff.”

180 View – What do you think the impact will be if the internet is available everywhere? In the ERP world, it will extend the applications to everyone en route, in remote offices or in the field. Construction supervisors will be able to communicate in real time with head office and prevent mistakes made because of a lag in communications; companies that provide services directly to businesses and consumers will be more effective in responding to customer requests…

The virtual reality

June 2007 from CAmagazine – “Virtualization makes it possible to use just one physical machine to run many platforms (or operating systems) and to make more efficient use of the hardware’s capacity. Each of these operating systems runs within its secure sandbox. With virtualization, you can improve resource allocation, allow for online migration of applications from one server to another and offer developers a safer environment for debugging and testing new applications…

180 View –Yves Godbout, who wrote this article, is the technical editor of CAmagazine and is another reason for reading this magazine.

Windows Vista Hits the 60 Million Mark

July 27, 2007 from CIO Today – “At Microsoft 's annual meeting with analysts, Chief Operating Officer Kevin Turner announced that the software giant had sold 60 million copies of Windows Vista since the product's launch in late January.
During the first five weeks alone, Turner said, sales numbers of Windows Vista exceeded the number of computers that Apple currently has as its total installed base.

But not everyone was impressed. "There were probably nearly 120 million PCs shipped in the first two quarters of 2007, so I'm not sure 60 million is that great," observed Gartner Client Computing research vice president Michael Silver.

Microsoft is "trying to dampen Apple's latest quarterly results, which saw a significant increase in shipments," he said.

Turner said he thinks Vista's prospects going forward are "huge" -- especially in emerging markets such as Brazil, Russia, India, and China. Nevertheless, the software giant has just reduced its Vista sales growth forecast to roughly 10 percent over the next 12 months.

The continuing popularity of Windows XP is one reason Vista sales haven't been as strong as some analysts had expected initially. In addition, Vista's lack of a "killer app" means that potential buyers have no compelling reason to migrate from XP aside from Vista's "coolness" factor, wrote analysts at Forrester Research on the eve of Vista's launch…”

180 View – I (Michael Burns) have now been working with Vista for about 3 months. The first few weeks were awful as discussed in the May edition of this newsletter, but it’s been smooth sailing ever since.

Fool vs. Jerk: Whom Would You Hire?

July 25, 2005 from Harvard Business School – “When given the choice of whom to work with, people will pick one person over another for any number of reasons: the prestige of being associated with a star performer, for example, or the hope that spending time with a strategically placed superior will further their careers. But in most cases, people choose their work partners according to two criteria. One is competence at the job (Does Joe know what he's doing?). The other is likability (Is Joe enjoyable to work with?). Obviously, both things matter. Less obvious is how much they matter—and exactly how they matter...

These two criteria—competence and likability—combine to produce four archetypes: the competent jerk, who knows a lot but is unpleasant to deal with; the lovable fool, who doesn't know much but is a delight to have around; the lovable star, who's both smart and likable; and the incompetent jerk, who…well, that's self-explanatory. These archetypes are caricatures, of course: Organizations usually—well, much of the time—weed out both the hopelessly incompetent and the socially clueless. Still, people in an organization can be roughly classified using a simple matrix.

Our research showed (not surprisingly) that, no matter what kind of organization we studied, everybody wanted to work with the lovable star, and nobody wanted to work with the incompetent jerk. Things got a lot more interesting, though, when people faced the choice between competent jerks and lovable fools…”

180 View – As I (Lawrence Young) have repeatedly observed, the great majority of individuals empowered to hire new employees are genuinely concerned with ensuring that each new employee will be effective with respect to fulfilling the duties stated in their job description (alas, the importance of a clear job description!).

How likable the candidate is, while significant, is normally secondary to his or her core competence. As the article states about one person’s view on the subject: “I really care about the skills and expertise you bring to the table. If you’re a nice person on top of that, that’s simply a bonus.”

It’s also well understood that how the new employee will be perceived by others becomes an important factor in that employee’s overall effectiveness. As the article states, “…social psychologists have long known that we like people who are similar to us.”

My experience has often showed, as the article states, that the problem of choosing to work with similar people is “the limited range of perspectives that a homogeneous group often brings to bear on a problem”. In other words, a group comprised mainly of people who are similar often suffers from the’ drinking your own bathwater’ syndrome. In acute situations, the authors suggest that “if you keep hiring only people you like, you can kill a company.”

Given all of the above, who is the ideal candidate to hire? Cleary, it’s the ‘lovable star’, someone who’s both ‘smart and likable’. Only one problem-the candidates you have to choose from may not always include such a sought-after individual.

Assuming you will always avoid hiring the ‘incompetent jerk’, you may have to choose between the ‘competent jerk’ and the ‘lovable fool’. Not an easy decision to have to make, but sometimes in life, ‘it is what it is’. Given this choice, I suggest that the job description may facilitate the decision. For example, hiring a chemist who will be working in a laboratory and who will be secluded from the rest of the work force is arguably different than hiring a front line individual who will be answering the phones in a call centre. And as the authors point out, when given the reality of having to hire a less-than-ideal candidate, “that doesn’t preclude executives from doing some things that will positively affect those interactions…”