SEE IT NOW
Budgeting-and- planning software now comes with increasingly sophisticated visual aids: dashboards and scorecards.
By John Goff

Today, Krens is busy updating the information systems of the 81-year-old company. Much of the effort is aimed squarely at strategic planning, which until recently involved an Excel spreadsheet and a homemade model that he devised. Three years ago, Krens and his team convinced senior management at US$80 million (in revenues) Haas to purchase OFA, a financial-analysis program designed by Oracle. More recently, the CFO has championed the deployment of an Oracle dashboard at the Washington, D.C.-based company.

When the rollout of the dashboard is finished (it is scheduled for May 2004), Haas managers and department heads will be able to track key performance indicators from a desktop portal. Krens himself plans to monitor a greatest-hits collection - metrics culled from the dashboards of other users. "Every day," he says, "managers will be able to see how they're doing on their benchmarks."

This kind of approach has big appeal for finance managers - a fact not lost on makers of applications for finance managers. Over the past year or so, several marquee business-software vendors have acquired smaller budgeting-and-planning (B&P) outfits. Geac Computer bought Comshare, Lawson Software acquired Closedloop Solutions, and Hyperion Solutions acquired Brio Software. In the process, they've picked up considerable dashboard and scoreboard capabilities.

Likewise, enterprise resource planning (ERP) vendors like Oracle and SAP AG have begun to beef up the dashboard features of their enterprise offerings. The dashboards are selling, too. According to a June survey of 100 companies conducted by AMR Research, nearly 50 percent of respondents said they will (or plan to) roll out dashboards in the coming months. John Hagerty, a vice president at AMR Research, says that overall, sales for B&P software are up about 6 percent from the same period in 2002, and dashboards are helping fuel the increase. "Forecasting is very hot right now," says Hagerty. "Most people need a forward-looking view."

For many finance managers, the view from their existing budgeting tools - usually a patchwork of Excel spreadsheets - seems more like a glance through the rearview mirror. Often, managers must piece together budgets based on extremely historical data: last year's results. And creating a strategic plan from Excel-based forecasts offered up by scores of operating units can be a real pain. "Planning is important," says Colleen Johnston, managing director and CFO of Toronto-based Scotia Capital, which recently rolled out a planning system from INEA Corp. "But the work is disproportionate [to the reward]."

Web-enabled or portal-accessed performance dashboards, now part of robust B&P applications, offer some relief. At the very least, the technology can eliminate a lot of scut work. In many cases, dashboards sit on top of data warehouses or relational databases and are powered by superfast calculating engines within B&P software. The combination, consultants note, can make reforecasting a snap.

That's a considerable accomplishment, considering that many CFOs would rather have wisdom teeth extracted with bailing twine than run a reforecast. Before deploying a B&P program and dashboard from Clarity Systems last April, for example, monthly reforecasts at Jim Beam Brands took two weeks to complete, says Don Rogers, controller at the whiskey maker. "We dreaded it," he notes. "People were pulling their hair out."

And now? "Reforecasting takes five minutes.""

Warts and all

Ironically, dashboards would have arrived on the scene much earlier if it hadn't been for, well, dashboards. In the 1980s, software providers began flogging fancy dashboard products under the highfalutin name of executive information systems. While the systems promised plenty - and looked great - they took forever to roll out, and delivered little. Rejiggering a system required a phalanx of consultants and up to a year of recoding.

Today's breed of dashboards are much easier to use and much easier to put up. Online loan broker LendingTree, for example, rolled out its Hyperion-designed dashboard in a matter of months. "Most of the employees involved with the dashboard are financial folks," notes CFO and senior vice president Keith Hall. "The tech people did not put this together."

That ease of design, coupled with a generally improving data infrastructure at most corporations, has finance executives tracking all sorts of nonfinancial metrics on their dashboards. Gary Willenbrecht, manager of corporate reporting at medical-instrument maker Beckman Coulter, says he uses his dashboard (from OutlookSoft) to monitor, among other things, the number of diagnostic machines the company has sold or leased to hospitals, laboratories, and the like. This installed base, he says, provides insight into future revenue streams from the company's consumables line of products.

How? The California-based company's medical-diagnostic machines require reagents to test blood samples, and only reagents sold by Beckman Coulter work with the testing equipment sold by Beckman Coulter. "As you place units out there, you have a semicaptive audience," explains Willenbrecht. "If you see the installed base is growing, the consumables base is increasing."

At Haas, CFO Krens is still evaluating the metrics he wants on his dashboard. He'll probably include standard gauges like revenues (actual, historical, and budget), cash flow, and receivables. But given the unique nature of the hops business, it's fair to say that Krens's dashboard will feature some oddball items as well.

For example, Krens notes that some brewers place their orders for hops in January and February, although most hops aren't harvested until the fall (hops serve double duty, protecting beer and adding flavor and aroma). Hence, it's crucial for Haas to know how much product the company will have available to fill orders - not exactly a slam dunk when you're talking about a crop.

To get a handle on crop yield, Haas maintains an agronomy department in the Yakima Valley in Washington State, and the company operates a production facility for each of its three 1,000-acre farms in Washington and Oregon. The department tracks temperature and rainfall information, predicts harvests based on past weather/yield patterns, and conducts testing of growth on the vines.

The crop report, along with metrics taken from the dashboards of managers in other departments such as human resources and sales, will probably end up on Krens's dashboard. "The department heads know their business better than I do, so they're developing their own metrics," he notes. "I'll glean one or two from each to get a full view of the company.".

Red Light, Green Light

The view on many B&P dashboards can be color-coded, to help users spot variances and avoid nasty surprises. On LendingTree's "Packer chart," for example, a 5 percent or better favorable variance to budget is green, says Hall, while a 5 percent or worse unfavorable variance is yellow.

Most dashboards feature a traffic-light setup, with a red signal flagging sizable negative deviations. That sort of eye-grabbing visibility can cause problems, however. "If a certain business sector is having a bad quarter, you can end up with too much red on the screen," notes Beckman Coulter's Willenbrecht. That can stir up hard feelings among employees. "Some people say it's too distracting," he adds.

Indeed, some users say the technology can be overwhelming at times. Not surprisingly, vendors that tout dashboards and B&P software as part of a corporate performance-management suite tend to trumpet the full - and we mean full - capabilities of their products. In some cases, screens contain 20 or more charts, graphs, and visuals. "The [vendor's] argument," says Lee Geishecker, research vice president at consultancy Gartner, "is, 'Your business is complicated, and our software gives you everything you need.'"

Sometimes, more than you need. Progress Rail, a US railroad services and products specialist (2002 revenues: US$900 million), recently deployed a dashboard product from SAS. CFO David Klementz says the company's management is pleased with the product so far. In fact, he says the next phase of the rollout will involve adding a greater degree of "resolution" (granularity) to the information presented on screen. But, Klementz cautions, it's crucial to balance resolution with perspective. It's important to keep the data useful, he explains, but users could end up with a system that's impossible to manage if there are too many metrics being tracked.

Finance executives know exactly what Klementz is talking about. They're also pretty familiar with long, costly rollouts of software. Mark Dani, financial systems analyst at Accelrys, says the San Diegobased scientific-software maker recently decided to move from Excel-based budgeting to an enterprisewide approach - a big step up. But, he says, officers wanted an application that would be readily picked up by employees. They settled on Active Planner, a program marketed by Best Software. "It has an Excel-ish look," notes Dani. "We wanted the learning curve to be minimal."

That appears to top the wish list for many shoppers of dashboards and B&P offerings. Controller Rogers says that when Jim Beam's managers began shopping for a B&P product, they looked at an extremely powerful offering from a well-known business-intelligence (BI) vendor. But they decided not to buy it. How come? "You need Jedi [knights] to run the stuff," claims Rogers..

What's Wrong With Quicken?

Ultimately, Jim Beam purchased a B&P program from Clarity Systems. The application cost US$50,000, compared with US$250,000 for the app from the spurned BI vendor. Initially, the dramatic price difference was a cause of concern for Jim Beam's management. "The [Clarity] software was so cheap," says Rogers, "we wondered if we were buying Quicken to close our books."

In reality, the wildly varying prices probably say more about marketing strategies than software. Most ERP vendors, for instance, don't sell B&P apps (or performance dashboards) separately. Rather, they market the programs as modules within larger, enterprisewide packages. The vendors stick to enterprise pricing as well: dashboard deployments with those software makers can run as high as US$500,000.

Niche players offer more-reasonable prices, often below US$250,000. In fact, according to an AMR Research study of dashboard rollouts, 37 percent of respondents said they had budgeted less than US$100,000 for their dashboard and scorecard projects.

But shoppers who have come to expect serious discounting from software vendors may be in for a bit of a surprise when dealing with B&P outfits. Unlike customer relationship management software, planning apps are in demand right now. "[B&P] vendors are not that hungry," says AMR Research's Hagerty. "There's some ability to negotiate, but the vendors are not giving it away."

On the other hand, high sticker prices might have a silver lining - if, that is, they prod buyers to make better plans for buying planning software.

John Goff is technology editor of CFO, CFO Asia's sister publication.