Category Archives: Budgeting

EPM, Project Orion, and the Beginner’s Mind

I’ll always be thankful for my time at Salesforce both because I met so many amazing people and because I learned so much.  I learned about the importance of Trust in a SaaS company (and was drilled in the mantra, “nothing is more important than the Trust of our customers.”)  And I learned about shoshin, the Zen concept of the Beginner’s Mind.

The Beginner’s Mind
It’s not unusual when working at Salesforce to hear about Zen concepts or get an email reply from Marc containing only a Zen proverb.  But of all the concepts I learned about, the most powerful and elusive was shoshin, a concept that Benioff says he adopted from Steve Jobs.  Per Wikipedia:

Shoshin (初心) is a word from Zen Buddhism meaning “Beginner’s Mind.” It refers to having an attitude of openness, eagerness, and lack of preconceptions when studying a subject, even when studying at an advanced level, just as a beginner would.

Shoshin is powerful because it enables you to take a fresh look at an old problem.  Shoshin is elusive, however, because it requires you to step outside your paradigm — the filters through which you see the world — which perhaps sounds easy, but can be incredibly difficult.  In fact, in what I all the paradox of knowledge, the more you know about something the more difficult it is to break out of your paradigm, to get outside the metaphorical box.

As an example of this, our head of products, Sanjay Vyas, recently went to a silent, ten-day vipassana meditation retreat.  Vipassana means “to see things as they really are”  and is a technique that has been passed down from the Buddha by an unbroken chain of teachers to the present day.  At the retreat, the first phase is three days spent simply trying to calm the noise in your mind.  Only then, after three days of silent meditation, are you ready to start to attempt to see things as they really are.  Such is the difficulty in breaking free from a paradigm.

The Problem We Approached With a Beginner’s Mind
What problem did we try to see with a Beginner’s Mind at Host Analytics?  End-user planning, budgeting, and forecasting (three key pieces of enterprise performance management, also known as EPM).  Why did we do it?  Because despite decades of great success within finance organizations, we believe that EPM has under-penetrated the overall market.

Far too many people rely solely on Excel for planning/budgeting and far too many EPM end-users build budgets in Excel and mail them to finance as opposed to using the EPM system.  The same is true for reporting, where far too often users drop out of the EPM system and into Excel to make reports and charts.  (This is less true of Host users due to our strong reporting, but the trend remains true at an industry level.)

While as EPMers, we take great pride in our category and, at Host, in our ability to move enterprise-class EPM to the cloud, we must recognize that at some level EPM has failed to deliver against its broad vision of accountability and empowerment.  To get to the bottom of this, as Clayton Christensen has often observed, you can’t just talk to your customers to understand your market, you need to understand non-consumers as well.  All those Excel-only or primarily-Excel users are Christensen’s non-consumers, so we decided to talk to them.  Here’s an example of what we heard.

“I hate budgeting.  They made me attend the meeting to look at these tools.  I don’t want to use any of them.”  — Chief Legal Officer

We heard this over and over.  The average business user would seemingly prefer a root canal to working on the budget.  Yet we knew these same business users were passionate about metrics, empowerment, accountability, and performance.  So where had the whole category gone wrong?  Thus was born Project Orion.

By Finance For Finance
We realized that for forty years EPM has been designed by finance for finance (or even more specifically, by FP&A for FP&A).  EPM vendors did a great job of listening to EPM customers.  And EPM customers, particularly EPM buyers, often had job titles like Vice President of Financial Planning & Analysis (FP&A).  These were the people who selected the tools.  These were the people who bought the tools.  But, these weren’t always the people who used the tools.  An important part of EPM is to roll it out broadly across an organization, meaning to put the tool into the hands of business end-users, budget owners, in all the various departments.

The Perils of “Configuration” to Dumb Down the Interface
The universal answer to the end-user question was dumb it down.  Configure it.  Take the product that was built for a heavily analytical, highly skilled, finance professional — and FP&A people are whip smart — and dumb down the interface for a business end-user.  Hide some menu items.  Remove some toolbar buttons.  Take away some tabs.

That was the conventional wisdom.  Take a product built for one person and configure it for use by another.  Now some EPM vendors were better than others at this bluff, some had slicker interfaces that would be relatively more appealing than others.  But amazingly, nobody ever said,  “wait a minute, what if we designed the product for people who actually used it?

Thank to shoshin, that’s exactly what we did with Project Orion at Host Analytics.

Task-Oriented Design
Instead of starting with what we had, a template-oriented product built for finance people, and a desire to twist/configure into something else, we started with a blank sheet.  We asked business end-users what they wanted to do with an EPM product.  Those end-users gave us a three-part answer:

  • We want to be able to quickly figure out where we stand relative to the plan.
  • We want help in determining where we are going to land on the current quarter — and to optimize that result.  (Not an easy problem, mind you.)
  • We want to get the next period planned in line with objectives and targets.

And we want to do all of the above quickly and easily because, much as we love this stuff (and we don’t), we’ve got a business to run.  This idea, what we came to call the stand / land / planned message, became the center of Orion design.

How We Knew We Were Onto Something
We noticed quickly that people had strong reactions to Orion, which typically fell into one of two types:

  • Reaction 1:  “Holy Cow, why didn’t I think of that?  It’s kind of obvious in 20/20 hindsight.”
  • Reaction 2:  “That’s not needed.  You just need to configure your way out of the problem.”

In the early days, we got a lot of reaction 2 — particularly from our internal EPM experts, who were somewhat blinded by the paradox of knowledge.  The internal resistance was, at times, intense.  But that resistance told me that we were onto something.  We were challenging the conventional wisdom in a way that could lead to a major breakthrough.  And the more we asked people outside Host, and the more we showed Orion to business end-users, the more convinced we were that we had made such a breakthrough.

The same chief legal officer who said “I hate budgeting” above, said this:

“When I look at Project Orion, it’s clear that you are the only folks thinking about me.  I could and would use this tool.” — Chief Legal Officer after seeing Orion.

Tips on Adopting a Beginner’s Mind
We’re launching Project Orion today and proud both of the software we built and how we came to build it.  We believe Orion is a breakthrough product that is going to change the EPM market.  All because we looked at an age-old problem in EPM with a Beginner’s Mind.

I’ll finish the post with some tips on how to take a shoshin approach that we learned along our journey — and which happily don’t involve 10 days of silent meditation.

  • Put a mix of veterans and neophytes on the project.  This will reduce the paradox of knowledge and naturally bring in some fresh eyes.
  • Confront tough facts.  The data says lots of people still use only or primarily Excel despite 40 years of EPM.  That’s a fact.  The question is why?
  • Challenge the team to document hidden assumptions.  Configuration as the solution to the end-user problem was one such huge assumption.  You can only go outside the box when you know its edges.
  •  Talk to non-consumers.  Talking to customers is great, but it can create an echo chamber.  Talk to non-consumers, too, particularly when fishing for breakthroughs, and ask them why they have not purchased in the product category.
  • Embrace resistance.  View resistance as a good sign, as a sign that you’re changing something big, and not just as a yellow flag.
  • Test early and often.  Go back to the non-consumers you interviewed and ask if your prototype would change their mind.  Iterate in response.

 

 

Is IBM Getting Out of Enterprise Performance Management?

I noticed that IBM last week sold off several EPM products — IBM Cognos Disclosure Management (CDM), IBM Cognos Financial Statement Reporting (FSR), and IBM Clarity 7 products — to a company called Certent.

This, combined with a pretty weak performance in Gartner’s recent financial and strategic CPM magic quadrants — where IBM landed as Visionary and one and a Challenger in the other, and  a Leader in neither — got me wondering about IBM’s commitment to EPM as a category going forward.  Could Planning or TM1 be next?

Moreover, it wasn’t just the new Gartner magic quadrants where IBM didn’t fare well.  In the Dresner Wisdom of Crowds market study, IBM was bottom-right in the Customer Experience model and was the only vendor entirely left out of (i.e., “outside the magnifying glass”) the vendor credibility model.  And IBM’s ring in the spider chart seems to gotten worse, not better, in 2017 over 2016.

Yes, we all know IBM is quite busy re-branding everything that’s not nailed down Watson, but could they be backing off EPM?

Which got me wondering, as I surfed around IBM’s website, why some products appeared to be first-class “products” while others were found under “marketplace.”  Why is DB2 under analytics products while TM1 is under marketplace?

db2 v tm1

Maybe it’s nothing, but I decided to check around a bit.  My friends in the know seem to believe that IBM remains committed to EPM, but that they view Clarity as a legacy product and were tired of getting beaten by Workiva in disclosure management.  That is, they saw it as a desire to focus more on planning and consolidation and as well things like compensation management.

Me, I’m not so sure.  When companies start pruning in an area sometimes they keep pruning.  And, in general, we don’t see them that much in the marketplace — particularly when you think of the powerhouse that Cognos was back in the day.  And, they don’t seem to be doing that well.  And, Watson is the big future focus.  So, file this under rumor and speculation, but watch this space.

The New 2017 Gartner Magic Quadrants for Cloud Strategic CPM (SCPM) and Cloud Financial CPM (FCPM) – How to Download; A Few Thoughts

For some odd reason, I always think of this scene — The New Phone Book’s Here – from an old Steve Martin comedy whenever Gartner rolls out their new Magic Quadrants (MQ) for corporate performance management (CPM). It’s probably because all of the excitement they generate.

Last year, Gartner researchers John Van Decker and Chris Iervolino kept that excitement up by making the provocative move of splitting the CPM quadrant in two — strategic CPM (SCPM) and financial CPM (FCPM). Never complacent, this year they stirred things up again by inserting the word “cloud” before the category name for each; we’ll discuss the ramifications of that in a minute.

Free Download of 2017 CPM Magic Quadrants

But first, let me provide some links where you can download the new FCPM and SCPM magic quadrants:

Significance of the New 2017 FPCM and SCPM Magic Quadrants

The biggest change this year is the insertion of the word “cloud” in the title of the magic quadrants.  This perhaps seemingly small change, like a butterfly effect, results in an entirely new world order where two of the three megavendors in the category (i.e., IBM, SAP) get displaced from market leadership due to the lack of the credibility and/or sophistication of their cloud offerings.

For example:

  • In the strategic CPM quadrant, IBM is relegated to the Visionary quadrant (bottom right) and SAP does not even make the cut.
  • In the financial CPM quadrant, IBM is relegated to the Challenger quadrant (top left) and SAP again does not even make the cut.

Well, I suppose one might then ask, well if IBM and SAP do poorly in the cloud financial and strategic CPM magic quadrants, then how do they do in the “regular” ones?

To which the answer is, there aren’t any “regular” ones; they only made cloud ones.  That’s the point.

So I view this as the mainstreaming of cloud in EPM [1].  Gartner is effectively saying a few things:

  • Who cares how much maintenance fees a vendor derives from legacy products?
  • The size of a vendor’s legacy base is independent of its position for the future.
  • The cloud is now the norm in CPM product selection, so it’s uninteresting to even produce a non-cloud MQ for CPM. The only CPM MQs are the cloud ones.

While I have plenty of beefs with Oracle as a prospective business partner — and nearly as many with their cloud EPM offerings — to their credit, they have been making an effort at cloud EPM while IBM and SAP seem to have somehow been caught off-guard, at least from an EPM perspective.

(Some of Oracle’s overall cloud revenue success is likely cloudwashing though they settled a related lawsuit with the whistleblower so we’ll never know the details.)

Unlikely Bedfellows:  Only Two Vendors are Leaders in Both FCPM and SCPM Magic Quadrants

This creates the rather odd situation where there are only two vendors in the Leaders section of both the financial and strategic CPM magic quadrants:  Host Analytics and Oracle.  That means only two vendors can provide the depth and breadth of products in the cloud to qualify for the Leaders quadrant in both the FCPM and SCPM MQ.

I know who I’d rather buy from.

In my view, Host Analytics has a more complete, mature, and proven product line – we’ve been at this a lot longer than they have — and, well, oligopolists aren’t really famous for their customer success and solutions orientation.  More infamous, in fact.  See the section of the FCPM report where it says Oracle ranks in the “bottom 25% of vendors in this MQ on ‘overall satisfaction with vendor.’”

Or how an Oracle alumni once defined “solution selling” for me:

Your problem is you are out of compliance with the license agreement and we’re going to shut down the system.  The solution is to give us money.

Nice.

For more editorial, you can read John O’Rourke’s post on the Host Analytics corporate blog.

Download the 2017 FCPM and SCPM Magic Quadrants

Or you can download the new 2017 Gartner CPM MQs here.

# # #

Notes:

[1] Gartner refers to the category as corporate performance management (CPM).  I generally refer to it as enterprise performance management (EPM), reflecting the fact that EPM software is useful not only for corporations, but other forms of organization such as not-for-profit, partnerships, government, etc.  That difference aside, I generally view EPM and CPM as synonyms.

EPM: Now More Than Ever

The theme of my presentation at past spring’s Host Analytics World was that EPM is needed in fair, foul, or uncertain weather.  While EPM is used differently in fair and foul weather scenarios, it is a critical navigational instrument to help pilot the business.

For example, in tougher times:

  • You’re constantly re-forecasting
  • You’re doing expense reduction modeling
  • You might do a zero-based budget (particularly popular among recently PE-acquired firms)
  • You’re likely to try and reduce capex (unless you see a quick rebound)
  • You’re probably making P&L, budget, and spend authority more centralized in order to keep tighter reins on the company.

In better times:

  • You model and compare new growth opportunities
  • You often build trended budgets more than bottom-up budgets
  • You adopt rolling forecasts
  • You increase capital investment and build for the future
  • You do more strategic initiatives planning
  • You decentralize P&L responsibility

These (and others) are all capabilities of a complete EPM suite.  The point is that you use that suite differently depending on the state of the business and the economy.

Well, now with the surprise election of our 45th President, Donald Trump, we can be certain of one thing:  uncertain times.

  • Will massive investments in infrastructure (including but not limited to, The Wall) happen and what effect will that have on economic growth and interest rates?
  • Will Trump deliver the promise 4% GDP growth that he’s promised or will the economy grow slower?
  • Will promised deregulation happen and if so will it accelerate economic growth?  What effects will deregulation have on key industries like financial services, energy, and raw materials?
  • What, as a result of this and foreign policies, will be the price of a barrel of oil in one year?  What effect will that have on key industries such as transportation?
  • Will Trump spark a trade war, increasing the price imports and reducing the purchasing power of low and middle-income consumers?  What effect might a trade war have on GDP growth?
  • What impact will all this have on financial markets and the cost and availability of capital?

I don’t pretend to know the answers to these questions.  I do know, however, that there is uncertainty about all of these questions– and dozens of others — that will directly impact businesses in their performance and planning.

If you cannot predict the future, you should at least be able to respond to it in agile way.

If your company takes 6 months to make a budget that gets changed once a year, you will be very exposed to surprise changes.  If you run on rolling forecasts, you will be far more agile.  If you have good EPM tools you will able to automate tasks like reporting, consolidation, and forecasting in order to free up time for the now much more important tasks of scenario planning and modeling.

Again, if you can’t know whether oil will be $40, $50, or $70 — you can at least have modeling out all three scenarios in advance so you can react quickly when it moves.

I’ve always been a big believer in planning and EPM.  And, in this uncertain environment, companies need EPM now more than ever.

The New Split CPM Magic Quadrants from Gartner

This week Gartner research vice president John Van Decker and research director Chris Iervolino took the bold move of splitting the corporate performance management (CPM), also known as enterprise performance management (EPM), magic quadrant in two.

Instead of publishing a single magic quadrant (MQ) for all of CPM, they published two MQs, one for strategic CPM and one for financial CPM, which they define as follows:

  • Strategic Corporate Performance Management (SCPM) Solutions – this includes Corporate Planning and Modeling, Integrated Financial Planning, Strategy Management, Profitability Management, and Performance Reporting.
  • Financial Corporate Performance Management (FCPM) Solutions – this includes Financial Consolidation, Financial Reporting, Management Reporting/Costing/Forecasting, Reconciliations/Close Management, Intercompany Transactions, and Disclosure Management (including XBRL tagging)

You can download these new CPM magic quadrants here.

What do I think about this?

  • It’s bold.  It’s the first time to my recollection that an MQ has included product from different categories.  Put differently, normally MQs are full of substitute products — e.g., 15 different types of butter.  Here, we have butter next to olive oil on the same MQ.
  • It’s smart.  Their uber point is that while CPM solutions are now pretty varied, that you can pretty easily classify them into more tactical/financial uses and more strategic uses.  Highlighting this by splitting the MQs does customers a service because it reminds them to think both tactically and strategically.  That’s important — and often needed in many finance departments who are struggling simply to keep up with the ongoing tactical workload.
  • It’s potentially confusing.  You can find not just substitutes but complements on the same MQ.  For example, Host Analytics and our partner Blackline are both on the FCPM MQ.  That’s cool because we both serve core finance needs.  It’s potentially confusing because we do one thing and they do another.
  • We are stoked.  Among cloud pure-play EPM vendors, Host Analytics is the only supplier listed on both MQs.   We believe this supports our contention that we have the broadest pure-play cloud EPM product line in the business.  Only Host has both!
  • In a hype-filled world, I think Gartner does a great job of seeing through the hype-haze and focusing on customers and solutions.  They do a better job than most at not being over-influenced by Halo Effects, and I suspect that’s because they spend a lot of time talking to real customers about solving real problems.

For more, see the Future of Finance blog post on the new MQs or just go ahead and download them here.

Host Analytics World 2016 EPM Keynote Address

We’re just finishing up a fantastic Host Analytics World 2016, with over 800 people gathered together in San Francisco to talk about enterprise performance management (EPM).   Here are a few pictures to give you a feel for the event.

Here’s 49ers football legend Steve Young delivering his keynote address:

IMG_3627

Here’s me delivering my keynote on EPM in fair weather and foul.

IMG_3614

Here’s an artsy shot of someone taking a picture during my keynote.

IMG_3615

And, of course, here are our mascots, Tick and Tie, stuffing bags for Project Night Night, the philanthropic activity we had at the conference cosponsored by Host Analytics and our amazing customer, Thrivent Financial.

tick and tie

The conference has been superb and I want to thank everyone — customers, prospective customers, analysts, journalists, pundits, and partners — for being a part of this great event.

I find it amazing that at such a great time to be in the cloud EPM market that we have competitors more focused on business intelligence (BI), predictive analytics, and functional performance management than on core EPM itself.  At Host Analytics, we know who we want to be:  the best vendor in cloud EPM, serving the fat middle 80% of the market.  More importantly, perhaps, we know who we don’t want to be:  we don’t want to be a visual analytics vendor, a social collaboration vendor, or a sales performance management vendor — hence our partnerships with Qlik, Socialcast, and Xactly.

We serve finance, we speak finance, and we’re proud of that.  Oh, and yes, our customers, finance leaders, care about the whole enterprise so we offer not only solutions to automate core finance processes but also tools to model the entire enterprise and align finance and operations.

You can hear about this and other topics by watching the 75 minute keynote speech and demo, embedded below.

 

Finally, please remember to save the date for Host Analytics World 2017 — May 16 through 19, 2017.

nashville

 

The Confusion Around Workday Planning

Workday’s planning strategy is enough to make an observer confused.

This far in, it looks pretty clear what happened:  Workday started out betting on Tidemark, but things didn’t work out (I’d guess because of Tidemark’s wandering eye and lack of focus on EPM), so they switched horses to Anaplan.  It happens.

But then it starts to get more interesting:

  • In January 2015, Tidemark COO Phil Wilmington leaves Tidemark (per his LinkedIn).
  • In mid-June of 2015, Workday announces leading a $25M round in Tidemark, rumored to be under fairly Draconian terms, including some non-trivial layoffs to cut the burn rate.

OK, it’s more confusing but it still looks explainable from the outside.  After switching horses to Anaplan, perhaps they found the grass wasn’t any greener, so they decide to switch back.  People get divorced and then remarried.  It happens.

Maybe Wilmington influenced things and was trying to help out his old company, or maybe he had nothing to do with it.  It’s impossible to see from the outside, but at the same time hard to believe he had nothing to do with it.

But then things get even more interesting:

  • Two weeks later, on June 30 2015, Workday announces its own “enterprise planning, budgeting, and forecasting” solution, a seemingly independent initiative without any reference to Tidemark’s technology in the announcement.  Moreover, it appears to be a a hurried, deep future announcement with availability specified sometime “in calendar year 2016.”
  • Even today, almost 2 months after the announcement, the “Learn More” link on the products page for Workday Planning points to the press release, in an actual circular reference from the press release to products page — something I can’t recall ever seeing before in my career, and certainly implying both a hurried announcement and a lack of meat to support it.

cap2

What’s going on? Who knows?  (I have a guess and maybe I’ll share it one day in a separate post.)

But regardless of the underlying stories, the whole situation says a few things to me:

  • It’s another demonstration of why ERP and EPM are different categories.  Even a highly sophisticated ERP vendor like Workday can’t get its EPM strategy right.  It’s a different market, with a different buyer, with a different purpose, and which uses different and specialized technologies.  This pattern existed in the on-premises days and has continued into the cloud.
  • As such, it validates the desire buyers may have to go best-of-breed and buy EPM from a dedicated EPM vendor as opposed to expecting to see a great solution rolled into an ERP suite.
  • Most importantly, Workday’s pattern suggests it will be years before their EPM strategy is clear, their in-house product is delivered and proven, and whether the final strategy rides on their in-house product, Tidemark’s technology possibly picked up via a future acquisition, or some hybrid thereof.

Let me conclude by reminding anyone interested in doing EPM functions — like planning, budgeting, forecasting consolidation, reporting, and analytics — against Workday data, that at Host Analytics we have a clear strategy for Workday customers who want proven, cloud-based enterprise performance management (EPM).