It’s Getting Easier To Go Beyond Spreadsheets for Modeling

One trend in business software that’s still in its early stages but gathering momentum is the availability of modeling tools that fill the gap between desktop spreadsheets and enterprise systems. Granted this “early stage” has been under way for quite some time, but the technology has finally progressed to the point where I expect it to get increasing market traction.

The temptation for business modelers and analysts is that it is very easy to create models using spreadsheets like Microsoft Excel. Tens of millions of people worldwide are trained in using spreadsheets, so it’s often a default choice. Desktop spreadsheets are handy because they make it simple for anyone to translate their concepts into a computer model. As someone who has done this for more than 30 years, I can attest that analysts skilled in using spreadsheets mentally frame business issues and relationships in a grid structure. It’s relatively easy, for instance, to create a dynamic integrated income statement, balance sheet and cash-flow model in a spreadsheet; it’s a laborious process to construct one using a relational or multidimensional database. Yet especially where complex calculations are used or where the models involve more than a few dimensions (more on this below), models created this way are error-prone and “brittle,” which means that they break quickly when someone tries to make a change to the original construction.

In contrast, more sophisticated business intelligence tools or dedicated enterprise planning applications, which can produce more powerful and flexible models, have required formal training. Although some individuals and/or companies have been willing to make the investment in such training, the majority have not, opting to keep using spreadsheets. I suspect the main reason is that the amount of training required and the frustration that most spreadsheet jockeys encounter when changing to a new tool have been too great. As well, there is a network effect in reverse: In any organization where many or even just several people share a model, all must be trained in using a tool or its usefulness is substantially diminished.

To be sure, the problem – and solutions to address it – is not new. For example, Essbase was developed in the 1980s partly to address the above issues. However, Essbase has been lightly adopted by purely business or financial analysts because of the training it requires. More recently, Microsoft has offered an Excel Server that can address some – but not all – of the shortcomings of shared desktop spreadsheets. (Note that for many companies this will require purchasing new versions of Microsoft Office and Microsoft SQL Server.) And the rise of model-building alternatives is part of a broader adoption of more powerful but easier-to-use alternatives that fit between Excel and enterprise systems. For example, BizNet Software offers what I would call an enterprise spreadsheet for more sophisticated reporting on other business applications using its in-memory computing technology.

So what is it that makes me see the barriers to going beyond spreadsheets for modeling beginning to fall?

One reason is that organizations increasingly want more value from modeling and analyses. Spreadsheets are easy to set up, but as well as being error-prone and producing brittle models, they have other inherent flaws that limit their overall effectiveness when they are used to support repetitive and collaborative business functions. For example, they lack referential integrity, which means that adding rows and columns creates issues when multiple spreadsheets must be collated. Another is that they can readily handle two or three “dimensions” but grow exponentially harder to work with as modelers try to add more. Dimensions include time, corporate structure (divisions and business units), organizational structure (functions and roles), product lines, customers and currency, to name some of the more common ones, which obviously can overlap. Businesses are inherently multidimensional, so to be truly useful for assessing outcomes, choosing between options and making plans, models and analyses must be structured to reflect the various dimensions. Nor do spreadsheets compare well to in-memory computing, an increasingly popular technology that allows for more interactive interplay with models. This means, for example, being able to do detailed what-if analyses rapidly while in a business review meeting in order to determine what to do next about some opportunity or issue. Desktop spreadsheets seldom can do this interactively at a detailed level.

To get more value from modeling and analyses requires changing the balance of the work that business analysts do. Today, analysts spend too much time on the mechanics of analytics and modeling and not enough on analyses and their implications for the business, as our analytics research shows. A main reason for this waste of time is the limitations of spreadsheets.

The other reason I expect the barriers to change to fall is that the alternatives to spreadsheets are increasingly easier to learn and use. One example is Quantrix, which has been around for a decade and therefore was early to a market that has been slow to develop. It is one in the latest round of new tools that attempts to fill the gap between spreadsheets and enterprise BI and analytic applications. Quantrix requires training, but in my judgment, it’s not hard to pick up and not difficult for business analysts to adapt their spreadsheet skills to building models in this tool. Another example is Anaplan, which my colleague Mark Smith commented on. It is designed to replace spreadsheets in operational planning functions (such as sales operations or demand planning, to name just two) as well as in financial planning and budgeting. It, too, offers modeling capabilities that are more powerful and more flexible than spreadsheets yet not difficult for business analysts to learn.

I believe a lack of awareness of what’s possible is a major barrier to analysts adopting more capable tools for modeling, forecasting and reviewing. As the number of products that address the inherent limitations of desktop spreadsheets increases, marketing efforts in this area are going to gain attention. Companies are going to realize that they can achieve greater awareness and better decision-making if they have a more effective approach to modeling and analysis. There will always be a need for desktop spreadsheets, which serve the needs of tens of millions of users daily. But these tools no longer need be a barrier to modelers and analysts being able to do a better job of doing what they are hired to do: model and analyze.


Robert Kugel CFA – SVP of Research

Ventana Research’s Business Technology Innovation Research Agenda for 2012

Now finishing our first decade of providing research and education for business and IT professionals, we at Ventana Research have learned what it takes to improve the value of processes and performance in many industries. This is no easy task; it requires thorough and wide-ranging research on the best (and worst) practices that organizations need to understand as they try to increase their competency and effectiveness – and our firm is committed to that work. For 2012 we are moving forward from the business technology revolution agenda we outlined at this time last year, including business analytics, business collaboration, cloud computing, mobile technology and social media. We have added a focus on big data, a trend that has reinvigorated the dialog about managing large volumes of data and how to use it effectively. Our research framework spans a diverse set of research agendas and practices from the viewpoints of the lines of business, IT and specific industries and knits together the necessary strategies and best practices across the four critical aspects of people, processes, information and technology.

Our research agendas for 2012 again will help your organization balancing its investments in enterprise software to ensure that they deliver business value. Our expertise is built from delivering hundreds of benchmarks and harvesting insights from the more than 240,000 members of our community. The facts we’ve discovered from research and experience contribute to building relevant best practices that can save you time and reduce the risk of not achieving your full potential. More than ever it’s a challenge to find the time to understand how to get the largest return on your technology investment in the shortest period of time. I am obviously a big believer in the kind of research that as I wrote last year is diminishing rapidly in analyst firms that tout themselves to be experts without putting in the thought and effort necessary to become them.

In this context I am proud to offer the following well-defined and methodical research agendas and insights for 2012. Thanks to all of you for rating me as the number-one industry analyst in enterprise software for 2011 as determined by the Institute of Industry Analyst Relations. That sort of recognition is most meaningful because it comes from the community that utilizes our research to help improve their competencies and extract full value from technology.

Here are the six areas of business technology innovation that can help your efforts in 2012 whether you are in business or IT but have a significant responsibility for your line of business’s efficiency and industry competitiveness.

Big Data

The variety, volumes and velocity of data being generated by businesses and received from consumers or customers on the Internet are huge and increasing, and managing it all poses a major challenge for organizations. What is colloquially called Big Data has become a point for serious discussion between business and IT as they try to figure out how not only to derive value from data-related investments but also the benefits that can come from understanding and acting on the data. Our firm conducted benchmark research on Big Data to determine how organizations are adapting to this information management challenge and working it into their business technology strategy. Managing and utilizing big data requires a framework of technologies that starts with efficient storage and integration with other data, moves to whatever processing is needed, including analytics, and extends to providing access so users can apply the analysis to their operational or decision support needs. As organizations realize they must diversify their data strategies beyond a single database and the RDBMS approach to serve the entire business, the range of technologies available to assist this change includes data appliances, in-memory computing and Hadoop. As our research shows Hadoop is fast becoming a critical component of many information and analytic strategies. Organizations that do not have solid information management practices and people who understand the information life cycle will struggle in dealing with big data in the short term.

Business Analytics

Competitive pressures force businesses to operate smarter and move faster. To do this requires having the numbers that can help business understand the past and present and anticipate the future. These numbers, often called metrics, can be used to create a range of relevant business indicators about people, performance, processes, risk and factors to guide actions and decisions across business. This is the realm of business analytics, and our benchmark research involving thousands of organizations found large gaps among organizations of all sizes and industries in terms of the business and IT skills, processes, data and technology they use to help obtain the most timely and useful information. To acquire superior business analytics organizations must invest resources and time to find the right technology to help them not just address obvious problems but discover new opportunity. We assert that they need dedicated tools that go beyond personal productivity tools like spreadsheets in order to design analytics appropriate for the roles and competency levels of their users and able to deliver insights and actions.

Business Collaboration

It is clear that organizations need to harness the potential of their people to work together more regularly to boost performance and productivity. Despite the widespread adoption of electronic communications, however, the state of collaboration within most organizations has not matured much beyond sending files by email and using web conferencing. A new generation of business collaboration utilizes the lessons learned and user experiences from social media led by Facebook, LinkedIn and Twitter and now new digital magazines. Users of social media are both consumers and employees, and they think that in the enterprise it should be as simple to connect to people and interact for working purposes as for interacting with friends. Smart executives sense that effective collaboration can advance the mission of the workforce while also providing high levels of employee satisfaction and thus talent retention. Our forthcoming research into next-generation workforce management and business intelligence will uncover exciting new trends and best practices in business collaboration in the context of specific organizational needs. Our latest benchmark research into managing sales performance identified new demands for using wall posting, broadcasting or Twitter-like capabilities in sales. These are among the new methods to utilize collaboration technologies to serve the needs of the overall business or the nuances of roles within a line of business.

Cloud Computing

The cloud computing phenomenon has changed the basis of providing enterprise software with software as a service (SaaS). Obsolescence of enterprise software, the arrival of appliances that combine hardware and software, the challenges of fewer resources and capacity of in-house IT have driven organization to embrace cloud computing for a range of needs beyond standard business applications. Businesses that have come to accept cloud computing have found that they can establish and make available a range of capabilities in days rather than months. Cloud computing also is an avenue to acquire new capabilities such as those I’ve just discussed here (big data, business analytics and business collaboration) as well as making software readily available to mobile technologies including smartphones and tablets. But we recognize that, whether it is a public cloud used as a service or a private cloud just for one business, users need to integrate at the data and application levels with their on-premises enterprise systems; our research on Business Data in the Cloud explores this side of cloud computing. In any case, organizations that do not evaluate the use of cloud computing are needlessly closing off a path to business effectiveness.

Mobile Technology

Smartphones and tablets  are bringing consumers and business professionals into a single global environment. The instant availability of computing activated by the stroke of a finger has radically changed the expectations of workers who think that business-focused enterprise software should be much simpler and intuitive to interact with and use to complete tasks. In 2011, the shape of a new generation of applications and tools on mobile technology began to impact the user experience of enterprise software. Our benchmark into business analytics and sales found that fast access is of growing importance to business while IT struggles to move beyond its protective BI supplier mode and access control. Our forthcoming research into next-generation workforce management and business intelligence will uncover exciting new trends and best practices in mobile technology in the context of specific organizational needs. The battles of Apple vs. Android for dominating the smartphone and tablet markets are of serious interest to businesses. The other vendors of mobile products – Hewlett-Packard, Microsoft, Nokia and RIM – have fallen from prominence and are becoming irrelevant to the technology’s intersection with enterprise software. The rationalization of technology suppliers allows software vendors to provide their applications in the native capabilities for fuller functioning. We will be eagerly tracking a new wave of mobile business computing that will help willing organizations innovate as workers play an unprecedented role in determining their future working environment.

Social Media

The viral nature of social media has made large corporations and even nations feel the impact of people who harness their voices in a directed manner. Using Facebook and Twitter, LinkedIn, FourSquare and Yelp, consumers and business professionals confront each other in an immediate manner has forced lines of business, from marketing, sales and service to manufacturing and supply chains, to change the way they operate. Social media is a new wave of influence that can reach the CEO of a company as well as its customer service agents as the opinion of one consumer, broadcast to millions of others, echoes in every level of an organization. Social media makes it easier and faster for businesses to determine customer satisfaction and the usefulness of interactions, though they may not like what people say about their customer experience and our new research into customer feedback will assess if organizations are taking it seriously. Our benchmark research on customer relationship maturity finds that businesses are not yet taking steps to use social media to stay ahead of their competition. New research that we will conduct on next-generation marketing processes will look at social media as a method to develop intelligence about customers and how to engage and deliver relevant interactions that are profitable while delivering superior customer experiences. And social media has other business uses, such as helping find and recruit talent in larger pools of people from Facebook or LinkedIn. Our benchmark Social Media in Recruiting found those who value finding the best talent embracing the social channel as critical to reducing cost and time to hire. These examples provide evidence that the impact of social media goes well beyond the “what are they saying about me?” aspect and that it should be part of every organization’s strategy.


Mark Smith – Chief Research Officer