Microsoft Excel is the de facto language of business. For nearly a quarter of a century, spreadsheets have helped businesspeople of all stripes communicate their past performance as well as their expectations for the future. In many companies, everyone from the CEO down to the financial analysts and the line-of-business managers relies on Excel spreadsheets to analyze numbers, manage their budgets, forecast financial outcomes, and model what-if scenarios.
The reasons for Excel's popularity are numerous. The application is pervasive, so employees transferring between companies don't have to learn new software. It is easy to use and intuitive to understand, and most corporate finance people already know it well. At the same time, Excel offers a raw analytic power that makes it many decision-makers' tool of choice as the front-end window into the budget and forecast.
Despite these benefits, spreadsheet software has come under increasing scrutiny in the past few years. Many business performance management (BPM) software vendors have incorporated strong messages into their marketing efforts urging finance departments to move away from Excel toward dashboards and more proprietary applications that supposedly offer richer analytic capabilities. Some consultants even say that the only way to improve budgeting and planning efficiency is to eliminate spreadsheets altogether.
Robert D. Kugel, vice president and research director, financial performance management, for Ventana Research, wrote in Business Performance Management's June 2004 issue, "Although spreadsheets are great for ad hoc analysis that involves only one or a few people, they're fundamentally unsuited for enterprisewide collaborative efforts such as budgeting and planning at the level of detail corporations require."
Granted, data accuracy and workflow management are both legitimate and serious areas of concern for spreadsheet users who participate in collaborative planning and reporting processes. However, it's a mistake to assume that these concerns require companies to abandon the familiarity and flexibility of Excel. A number of BPM software vendors are focusing on equipping their products with an Excel-based front end as an alternative to their product's primary user interface. Some are even leveraging Excel as their solution's core planning and reporting environment.
Give the People What They Want
One powerful reason to choose a spreadsheet-based BPM system is the fact that users simply like Excel. Many finance professionals are so accustomed to using Excel to manage their company's financial and operational performance that switching to a new, proprietary interface would be an uncomfortable transition, at the very least. Let's face it: Budgeting and planning are synonymous with the spreadsheet, and software vendors' marketing campaigns aren't going to change that.
Familiarity, accessibility, and functionality are all good reasons why the spreadsheet lives on. Excel's user interface is rich. Its formatting is flexible. And it gives users many options for enhancing the look and feel of budgets, forecasts, reports, and plans. Key is the fact that everyday workers already know how to use Excel. Gaining user buy-in -- a notable challenge for just about any type of software implementation -- can become much less daunting when users are already familiar with the application's front-end environment.
Of course, saving time and cutting costs are two more reasons why Excel-based solutions are attractive. Nearly every business desktop already runs Excel. This in itself can dramatically reduce client-side rollout requirements from a time, cost, and resource perspective. In addition, an Excel-based interface enables a company to keep user training expenditures to a minimum, lowering the total cost of ownership (TCO) for the software. After all, why reinvent the wheel when it comes to BPM? By providing an Excel-based system, you can remove a lot of the unnecessary costs and complications associated with more proprietary solutions.
From an IT perspective, it's worth noting that Microsoft has done significant work in driving end-user adoption of Excel, especially for planning and reporting purposes, even if at a personal-productivity level. Considering Microsoft holds a virtual monopoly of the desktop and office suite, it's no wonder that Excel is as popular and ubiquitous as it is today. Now the Redmond, Wash., giant has plans in the works to further expand Excel's native analytic capabilities. Companies running a Microsoft-based infrastructure -- one that includes SQL Server Analysis Services and .Net applications -- will likely save time and money by standardizing on an Excel-based BPM solution. In fact, this is almost a given when considering the shared underlying technology architecture and optimized data integration capabilities between Excel and other Microsoft front- and back-office applications.
Challenges in Alleviating "Excel Hell"
Spreadsheet-based budgeting systems have a well-deserved reputation for running amok. We've all heard horror stories about finance departments pulling their hair out trying to reconcile multiple versions of spreadsheets at the end of the month. But usually when companies complain of spreadsheet nightmares, their performance measurement and budgeting practices are in need of reform.
Clearly, a budgeting process that consists of e-mailing spreadsheets back and forth isn't going to cut it, especially in larger organizations. Excel on its own was simply not designed to manage data sets beyond a certain size and level of complexity. Nor does it do a good job of supporting frequent changes to data by numerous people in multiple departments. The consensus seems to be that although Excel makes for an ideal personal-planning tool, it falls short as an enterprise-scale budgeting, planning, and reporting solution. But when Excel is coupled with robust BPM functionality, it can be effective in a large-scale business environment. Selecting the right BPM system is critical in overcoming Excel's native limitations.
Although a number of BPM vendors make use of Excel as a front end for their proprietary products, most treat the spreadsheet interface as secondary to their core application. Typically the vendor will offer a limited-function "add-in" that equips Excel with specific BPM-type functionality. For example, an average add-in may augment Excel with more advanced analytic and reporting functionality, but at a work group or individual level only. The more powerful, sophisticated add-ins go further in transforming Excel from a localized desktop productivity tool into an enterprise-scale BPM solution.
The level of integration between the add-in and the "primary" application environment is a key consideration when evaluating BPM solutions. Integration varies from product to product. Some vendors provide an Excel-based front end that simply allows users to move data back and forth between Excel and the primary application environment. Other, more sophisticated add-in solutions meld seamlessly with Excel, creating a richer, more robust planning and reporting environment directly from the native Excel interface. At the highest end of the spectrum are solutions that leverage the full extent of Excel for all BPM functionality, with seamless integration at the end-user level.
Some add-in products suffer from noticeable limitations in terms of the standard Excel-type features they support. While a product may mirror the familiar look and feel of a spreadsheet, for example, it may lack Excel's native formatting, charting, and graphing functions -- which are key reasons why users like Excel in the first place. In other instances, a BPM application may allow for the export and import of data to and from Excel, but formulas and calculations may be incompatible between Excel and the primary application environment. This significantly limits Excel's usefulness and complicates the end-user experience. After all, the point of a BPM system is to unify data, both at the presentation and calculation levels.
Another key differentiator among add-ins concerns versioning, or the way in which the application prevents multiple people from using different versions of the same data simultaneously. Keeping files updated and synchronized across the organization can be a huge headache, especially when each department is using its own spreadsheets. For unquestioned accuracy, the solution must ensure that a single version of the data is maintained across all departments. In addition to versioning, other important process issues include collaboration, workflow, status tracking, security, and auditability.
A centralized database is instrumental in obtaining that elusive "single version of the truth." Excel add-ins need to be equipped with a real-time hook into that database; many fall short in this crucial area. Less-advanced add-ins, much like standard Excel, store data, formulas, and calculations at the spreadsheet level only. More sophisticated solutions can link dynamically to the centralized data store and all related logic. The best applications handle business rules, calculations, and metadata on the server side, not the client. In effect, Excel becomes a "window" for real-time data access, retrieval, and analysis. In these products, server-based calculations and aggregations update instantaneously whenever data is changed, and users of the spreadsheet interface can access, interact with, and refresh Excel-based data in a real-time fashion.
Among other benefits of a centralized approach, template maintenance is reduced because spreadsheets are dynamically updated, thus eliminating the need for manual updates. Companies transitioning from standard Excel to BPM-enhanced systems have reported substantial cost savings resulting from this, in addition to a dramatic reduction in the total number of templates required to enable the various budgeting and forecasting processes. The transition from static spreadsheets to dynamic, database-driven spreadsheets makes this possible.
During the BPM implementation process, data accuracy problems can be commonplace, especially if the new solution fails to automatically import data from existing company spreadsheets and databases. This is typical for BPM solutions that require users to manually extract and rekey data and associated calculations and linkages from what could amount to thousands of spreadsheets. For obvious reasons, this type of setup is costly and problematic; the data can easily become riddled with errors.
Mobile users introduce yet another area of concern when it comes to ensuring data accuracy. Although one might think Web-based accessibility would be standard in modern-day Excel add-ins, many fail to support even the most basic Internet connectivity. Consequently, offline users opting to use Excel are forced to work with static data only -- a scenario that leads to data silos and out-of-sync plans and models.
Other add-ins enable users to save data locally, then resync to the centralized data store at a later time. For users lacking Internet connectivity, this can prove ideal for personal modeling and planning functions. However, if the add-in lacks the ability to remotely tie into the centralized data store, any changes to that data will not be reflected in the localized spreadsheet. The user will never be sure if he or she is working with the most current data set.
The Search for Enterprise-Scale Excel
Navigating the BPM market can be complicated. Most of the common Excel add-ins provide some form of version control and include basic data import/export capabilities, but they fail to make the integration of Excel and the BPM back end seamless. Because of the potential severity of BPM/Excel connectivity problems, companies that require both an easy-to-use spreadsheet front end and a powerful underlying performance management system should focus their software search on the handful of BPM vendors that have staked their claim on Excel.
Following are some questions to consider when determining whether an Excel-based BPM system is truly integrated and enterprise-scale:
Is Excel the primary application environment for the bulk of BPM tasks and functions? A majority of BPM vendors view the Excel environment as secondary to their core solution, so few provide a single Excel interface that spans the full spectrum of their BPM functionality. Simple import/export Excel add-ins fail to leverage the true benefits of spreadsheets, given that a lion's share of the work is done via a proprietary interface.
Only a handful of vendors treat Excel as their primary BPM environment. Their goal is to marry the flexibility and familiarity of Excel with the standardization, control, and scalability of a packaged enterprise-grade BPM solution. Companies shopping for Excel-based BPM software should look for a spreadsheet interface in which users can perform advanced planning and modeling; fulfill all of their budgeting responsibilities; create rolling forecasts; manage the statutory consolidation process; build scorecards and dashboards; and create, publish, and distribute reports.
Can Excel effectively scale with the BPM process? Although a majority of Excel add-ins support basic process-management features, most are ill-equipped to handle real-world enterprise-scale requirements. Only the most sophisticated add-ins can rise to the occasion.
Effective Excel-based solutions provide most, if not all, of the following: centralized data and application management; status monitoring of users' progress in the planning and budgeting process; workflow management providing rules-based process flows; document management and controlled collaboration in which communications and messaging are structured and centralized; audit trail complete with user name, time stamp, and other dimensional attributes for budgeting, forecasting, and actuals; versioning control that supports an infinite number of versions; data lockdown by any dimension or time period; and user authentication and a roles-based security system.
Can the BPM application be fully administered via the Excel interface? Managers should be able to create user profiles, establish security groups, and grant both application-specific and member-specific access privileges all from within the Excel interface. Extract, transform, and load (ETL) processes should likewise be manageable directly from Excel. A majority of Excel add-ins, even the more sophisticated ones, require users to manage the system from a proprietary, separate application. This leads to unnecessary fragmentation, additional maintenance, and increased costs. Equipping the Excel add-in environment with full administrative and application-building capabilities works to unify and simplify the application and the process.
The BPM software should also be extensible, providing built-in wizards that allow even nontechnical users to quickly build new "applications" or data cubes that address further BPM processes. For example, a company may buy software initially for planning and budgeting purposes, then later want to extend the system to address functions such as sales forecasting and statutory consolidation. Companies will save time and money if this addition of functionality can be managed entirely via the Excel add-in environment.
What are the software's capabilities for multidimensional data analysis? In other words, how solid is the BPM foundation underlying the Excel front end? Online analytical processing (OLAP) functionality is key to optimizing the planning, reporting, and analysis processes. The value of OLAP technologies lies in their ability to deliver fast, interactive access to aggregated (summarized) data, along with their ability to enable users to drill down into the underlying details. Moreover, OLAP supports both parameterized (predefined) reports and ad hoc queries. By enabling end users to develop their own ad hoc reports, OLAP applications empower them to engage in self-service reporting and further alleviate the burden on IT.
Interestingly, only a limited number of BPM add-ins support real-time, dynamic OLAP integration and reporting. Those that do reward end users with the ability to interact with data in real time and make faster, more informed decisions. These benefits are made possible through OLAP-optimized capabilities including "slice-and-dice" (the ability to view data from multiple perspectives through filtering and other techniques) and "drill-down" (the ability for users to move through the data hierarchy to view more detailed levels of information).
To note, Microsoft Analysis Services is currently the market-leading OLAP solution, as determined by The OLAP Report. Given this, it's surprising how few BPM vendors have capitalized on Analysis Services technology -- especially considering the sheer volume of companies that leverage the Microsoft platform as a corporate standard. According to The OLAP Report, OutlookSoft was the first vendor to utilize Analysis Services for BPM through its Microsoft and Excel-based solution. More recently, other vendors, including Geac and CDC Solutions, have entered the fray.
Does the product support the dynamic refresh and write-back of live data? Real-time, up-to-the-second data should constantly be displayed without the need for a manual refresh. Data and reports should automatically refresh on user desktops whenever new numbers or entities are updated or added. Reports should automatically expand to accommodate new budget lines as they are added, without the need for IT support or for the creation of new reports. In addition, the product should support real-time server-based aggregations and write-back capability to the underlying OLAP database. This functionality is especially vital when the goal is to leverage enterprise-scale Excel for advanced planning and modeling purposes.
What is the quality of the report writer? Does the BPM solution offer a fully equipped Excel-based report writer, or does it rely on a secondary reporting solution, such as Crystal Reports? Report generation is one of the primary areas in which user familiarity with Excel can save companies time, money, and headaches, given Excel's simplicity and ease of use. Integrating Excel into a unified BPM system can significantly bolster its effectiveness in areas where spreadsheet reporting has historically fallen short, such as in working with large data sets or handling multientity consolidations.
Buyers of an Excel-based BPM solution should consider whether the interface offers the ability to publish production reports to a Web portal and to leverage Excel for advanced journal reporting as part of the financial close process. Also key is the ability for end users to create and manage their own reports. Where more proprietary solutions put the onus on IT or a centralized administrator to handle this function, sophisticated add-ins include intuitive wizards and tools that make client-side reporting a much easier task, even for nontechnical users.
BPM software that embraces Excel -- rather than disregards it or attempts to bypass it -- can effectively hurdle spreadsheets' many native limitations, which include process management, scalability, and data management. However, although a majority of BPM vendors offer Excel add-in functionality to some degree, only a handful have chosen to build the whole of their solution around Excel.
Those that have done so are transforming Excel from a desktop productivity tool to a full-fledged, enterprise-scale BPM solution. As BPM vendors continue to embrace this popular environment, Excel will likely remain the "king" of planning, budgeting, and reporting solutions for years to come. Long live the spreadsheet!
Essential Ingredients for Effective Excel-Based BPM
Mike Morini, president of OutlookSoft Corp., is a seasoned enterprise software executive. He has held leadership positions with IBM, J.D. Edwards, and Advent Software.