This blog is the third in a series developed from research underwritten by SAP, which explores how new technologies such as cloud computing, mobility, and in-memory processing of Big Data are expanding planning, budgeting and forecasting best practices.
In last week's post I noted that most planning departments consume 77% of their time in gathering data and administering the budgeting, forecasting and planning processes. This leaves only 23% for value-added planning work such as identifying ways to close performance gaps, monitoring competitors' actions, and developing strategic recommendations for innovation and growth.
An easy way to visualize this situation is to think of a large work room with a big workbench. Most of this room is filled with boxes of materials. On top of the bench, over three-fourths of the surface is covered with boxes of materials and things related to work, but the materials are not necessarily in the right place to be efficient. While the workers want to produce good results, their work space is shrunk to less than one-fourth of the table. Most of their time is spent trying to make sure they are working with the right materials, moving things around, and trying to make sure they are working on the right things. They desperately want to be productive but their process and tools make this very difficult.
The last 10 years have seen a steady growth in innovative technologies that are solving this problem. Currently, they go under the broad banner of packaged planning applications or enterprise performance management solutions. One of the specific advances from a technology perspective has been cloud computing, which is broadly applied to the use of computing resources that are delivered as a service over the Internet. IT publications are flooded with the origins and nuances of different cloud approaches. For finance teams, it is enough to know that cloud computing helps you "stop doing dumb stuff."
If you have heard me speak or followed my writing you know I strongly believe current finance practices are filled with dumb stuff we are regularly asked to complete. Stopping these things creates tremendous capacity (at no additional costs). Simply put, cloud computing is freeing the capacity of planning departments to become more effective. Let me share five quick reasons why this is happening:
1. Speed to implement -- Cloud-based planning solutions are faster to turn on and get up and running. The time to value can be dramatically quicker. For the planning department, cloud computing means quicker support.
2. Lower upfront cost -- Since the cloud allows you to add users as required, the front-end costs are much lower. You can also avoid the front end cost of hardware and software. This stretches funding to provide planners with more firepower to support line managers.
3. It is flexible -- It allows organizations to test the water and prove its planning processes before committing large costs. Cloud technology enables planning agility, enabling many small experiments.
4. Latest releases are deployed seamlessly by the vendor -- This eliminates the need for scheduling IT involvement as well as finance time. Planners can stay focused on planning rather than adapting to vendor upgrade schedules.
5. Cloud costs are treated as an operating expense rather than a capital cost -- This provides greater flexibility to use capital investments for direct revenue producing assets. Leading edge planning departments know that discretion over capital spending is a leading driver in future success.
All these things have the effect of clearing a lot of workspace that can be focused on high value-added activities.
Next week our topic shifts to how you should use this new capacity: "Harvest Time is here." It discusses how Big Data/in-memory computing is expanding planning and forecasting capability.
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