Like many small but growing businesses, Otis Spunkmeyer was struggling with spreadsheet sprawl.
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By 2007, the San Leandro, Calif.-based frozen cookie dough maker was working with literally hundreds of spreadsheets to manage its sales pipeline and financial planning, according to Joel Feldman, the company’s director of financial planning and analysis.
As a result, manual errors were common, departments often didn’t communicate well, and even some key executives and managers were being left out of the corporate performance management (CPM) process.
“We were at the breaking point,” Feldman recalls. Once the company reached $500 million in revenue, he decided it had grown large enough to justify an investment in proper CPM software.
Otis Spunkmeyer’s predicament is not an uncommon one among growing companies. Most businesses currently use Excel and other spreadsheet programs for CPM and financial planning and budgeting tasks. Gartner estimates that fully 75% of small and medium-sized businesses (SMBs) are among them.
But even as revenues rise and CPM needs become more complex, many SMBs are not in a financial position to buy traditional, on-premise CPM software from mega-vendors like Oracle and SAP.
As in other software categories, software as a service (SaaS) CPM offerings are stepping in to fill the void. With lower upfront costs and rapid deployments, SaaS CPM vendors like Host Analytics and Adaptive Planning are marketing their wares to SMBs that are large enough to benefit from CPM software but can’t afford expensive on-premise installations.
“The promise of CPM has been out of their reach,” said Jon Kondo, Host Analytics CEO. “We break down those barriers.” Kondo said his firm specifically targets companies with between $200 million and $1 billion in revenue.
SaaS CPM software breaks down time, money barriers
Transplace, a third-party logistics software company based in Dallas, is largely an Oracle and Microsoft shop, according to Ken Crawford, the company’s vice president of finance. When the time came for Transplace to invest in CPM software, Crawford naturally looked first to the two mega-vendors.
But the company quickly came upon the two main barriers to SMB CPM adoption – time and money. Microsoft’s CPM software was going to take too long to customize to Transplace’s needs, Crawford said, while Oracle’s Hyperion software “was way too expensive.”
The company turned its attention instead to SaaS CPM software from Host Analytics. With little upfront investment, Transplace had the software up and running in a matter of weeks, Crawford said. And because its user interface is similar to Excel, Transplace workers didn’t require extensive training.
“Excel’s wonderful if it can be rolled out with a great deal of discipline,” he said. But in an organization whose CPM needs are as complex as Transplace’s, “usually that discipline doesn’t exist.”
Otis Spunkmeyer’s Feldman made a similar point. When spreadsheets were the CPM tool of choice, the company’s executives rarely elicited input from the regional and divisional managers who best knew the sales and budget numbers for their particular business.
To do so would have meant emailing spreadsheets back and forth, all the while keeping track of who made what changes, when and why. With multiple managers involved, that could get real messy real fast. So Otis Spunkmeyer’s execs just didn’t do it.
“It would be just too hard,” Feldman said.
Like Crawford at Transplace, Feldman turned to Host Analytics’ on-demand CPM software. The software provides a common, Web-based platform where both executives and regional managers can work with sales and budget numbers. Changes are tracked, and people don’t have to worry that they’re working with an outdated spreadsheet.
Performance concerns among SaaS CPM drawbacks
While security concerns surrounding SaaS technologies are fading – neither Feldman nor Crawford said they were particularly worried about exposing their corporate data to a third party -- on-demand CPM software does present some dangers.
Among them, SaaS CPM customers are dependent on the vendor -- rather than their own servers and data centers -- for performance and uptime levels. Some customers experience few performance problems, but others don’t fare so well.
The city of Vancouver, Wash., for example, has struggled with system crashes and lost work almost since the day it began using Host Analytics’ on-demand financial budgeting software.
“It’s been pretty miserable,” Natasha Ramras, the city’s budgeting and planning manager, told SearchBusinessAnalytics.com in June.
Transplace also suffered performance problems, though not as severe, according to Crawford. At one point, the software wasn’t very responsive, taking more than a minute for certain templates to load, he said. It took Host Analytics “a week or two” to fix the problem.
Companies considering SaaS CPM tools and technologies must therefore weigh the benefits of affordability and quick implementation times against the risks of potential performance problems.
Crawford also warned companies not to get entranced by SaaS CPM vendors’ multiple CPM modules, though the advice could just as easily apply to traditional CPM vendors.
Stay focused on just the functionality that will most help the business, he said. After all, part of SaaS CPM’s allure is lower costs, at least upfront, so companies shouldn’t pay for features or modules that they don’t need and won’t use.
Transplace, for one, uses just Host Analytics’ forecasting and budgeting on-demand software. The vendor also sells financial consolidation and revenue planning modules, but Crawford said Transplace has no need for them.
“Prioritize the parts of the application that are most important to you and then move forward,” Feldman agreed. Otis Spunkmeyer also uses Host Analytics’ sales forecasting module but not the vendor’s on-demand scorecards and dashboards.
Finally, don’t invest in CPM software, on-demand or on-premise, until the use of spreadsheets becomes untenable, Feldman said.
“Companies that are [using] Excel and not having a problem, I think it’s all right to stay there,” he said.