Faced with a choice between continuing to manage about 6,000 Excel spreadsheets or getting in line for IT's help selecting new software, the national office of the American Automobile Association (AAA) discovered a different path.
The finance department of the Heathrow, Fla.-based national office of AAA, a not-for-profit organization offering travel and insurance services, is using a corporate performance management (CPM) tool delivered as Software as a Service (SaaS), also called on-demand or hosted software. With SaaS, AAA doesn't install CPM software on-premise; rather, it's hosted by the vendor and accessed over the Web. But analysts from Gartner and Bloor Research have their doubts about whether SaaS CPM will really take off.
AAA gets more efficient with SaaS CPM
The SaaS CPM deployment method helps the national AAA office more efficiently consolidate the detailed financial information of 125 different business units, according to Jeff Collins, manager of budgets and financial analysis. Before, finance managed the process with a shared drive and about 6,000 Excel spreadsheets, many elaborately linked together. It was a time-consuming process, fraught with potential data integrity problems.
"People were always breaking the links. We couldn't do consolidations very quickly, and any time a rate changed, we'd have to go into every single spreadsheet and change it. It wasn't in a database where we could react to changes quickly," Collins said.
Since Adaptive Planning would set up and host the software, it meant that the finance group, not IT, could be in control of the project. This was important because going through the busy IT department is time-consuming and can result in too many "restraints" on a project, Collins explained.
"The way it works here, if I want a change, I have to submit paperwork. [IT] reviews it and decides what they want to do. Having Adaptive Planning do it all -- I can just give them a call and say, 'This is what I need,'" Collins said.
For the implementation, AAA sent its spreadsheets to Adaptive Planning to upload, so no data had to be re-entered, Collins said. After about three months, AAA was up and running. Now, the business units can access the tool directly over the Web, there are no broken links and it's much faster to make formula changes, because Collins can make changes in one system instead of 125 different spreadsheets. The biggest benefit is that finance can consolidate numbers at any time and instantly provide the bottom line to management. Before, with spreadsheets, it would take hours to do this, and Collins worried about data integrity. Now, financial closings that used to take a week and a half take only a day. And Collins estimates that the new system has saved the department about two months of effort since its installation.
Analysts have doubts about SaaS CPM
However, it's a stretch to call Adaptive Planning's tools "real" CPM software, according to Gerry Brown, senior analyst with Towcester, U.K.-based Bloor Research International Ltd. The tools handle financial budgeting, planning and forecasting, but don't appear to have the features for enterprise-wide CPM deployments, he said. No one should confuse financial applications with CPM, he added. Enterprise-wide CPM is deployed across an organization, not just in one department, to give "top to bottom" visibility into how corporate strategy is aligning with execution.
"You're going to find it really difficult to do real CPM online, because you're probably going to take feeds from lots of different databases and aggregate data to turn it into one version of the truth, and you don't do that with a SaaS system," Brown said.
Adaptive Planning's SaaS system may offer efficiency and cost benefits to finance departments and small or midmarket companies that need basic budgeting and planning tools, especially those that are geographically distributed or replacing Excel spreadsheets, he said.
"I think it's likely that all of the budgeting and planning providers will offer some kind of solution on a SaaS basis, but more as a way of gaining new business. It's more a way of introducing the midmarket to more complex financial applications," Brown said.
Since SaaS generally has lower startup costs and shorter deployment times, it can be an attractive way to bring customers on board with the hopes of up-selling them later. Another CPM analyst agreed.
"On-demand is only important at the low end of the market. A department or a small company may look for an on-demand tool as a cost reduction strategy," said Nigel Rayner, author of Gartner Inc.'s December 2006 Magic Quadrant for CPM suites and research vice president with the Stamford, Conn.-based analyst firm.
SaaS tools also aren't in demand because CPM software isn't that hard to implement, Rayner said. He thinks SaaS benefits the vendor more than users, because it allows a new vendor to quickly add customers and become a credible player faster. It's vendor market penetration strategy, not driven by user demand, he said.