ima Enterprise Performance Management: Management Accountants Perceptions The Association of Accountants and Financial Professionals in Business

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1 ima The Assciatin f Accuntants and Financial Prfessinals in Business Underwritten by Hst Analytics 1

2 Abut IMA IMA, the assciatin f accuntants and financial prfessinals in business, is ne f the largest and mst respected assciatins fcused exclusively n advancing the management accunting prfessin. Glbally, IMA supprts the prfessin thrugh research, the CMA (Certified Management Accuntant) prgram, cntinuing educatin, netwrking, and advcacy f the highest ethical business practices. IMA has a glbal netwrk mre than 70,000 members in 120 cuntries and 300 prfessinal and student chapters. Headquartered in Mntvale, N.J., IMA prvides lcalized services thrugh its fur glbal regins: The Americas, Asia/Pacific, Eurpe and Middle East/Africa. Fr mre infrmatin abut IMA, please visit Research Partner: Hst Analytics Hst Analytics is the leader in clud-based financial applicatins fr planning, cnslidatin, reprting and analytics. Hst Analytics enterprise perfrmance management (EPM) custmers benefit frm imprved business agility, imprved security, and lwer verall cst cmpared t legacy n-premises alternatives. Wrld-class cmpanies like NEC, Burlingtn Cat Factry, and Crcs trust Hst Analytics t pwer their strategic financial prcesses. Hst Analytics is a fast-grwing, private cmpany backed by leading venture capitalists and is headquartered in Silicn Valley with ffices arund the glbe. July 2014 Institute f Management Accuntants 10 Paragn Drive, Suite 1 Mntvale, NJ,

3 Abut the Authr Denis Desrches Denis Desrches is Directr f Research fr the IMA (Institute f Management Accuntants). Prir t jining IMA, he spent 20 years supprting rganizatins with the selectin, implementatin and knwledge acquisitin f enterprise perfrmance management systems. He als was a prfessr f mathematics and business systems fr 11 years at Seneca Cllege f Applied Arts and Technlgy in Trnt, Ontari. Denis can be reached at ddesrches@imanet.rg r IMA Research Management Cntrl Systems This research area fcuses n hw rganizatins align emplyee actins with their strategic gals. It includes peratinal cntrl systems that fcus n measures that enable frnt-line emplyees t achieve cntinuus prcess imprvement. It als includes management cntrl systems that enable managers t align their actins with the cmpany s verall strategic gals.

4 Table f Cntents Intrductin... 5 Key Findings... 6 What Des EPM Architecture Lk Like?... 7 Wh Is Happy with Their EPM System?... 8 What D Yu Think f Yur Planning Ability?... 9 What D Yu Think f Yur Clse and Disclsure Ability? What D Yu Think f Yur Business Intelligence Ability? Adptin f Clud-Based Technlgy t Supprt EPM Appendix: Survey Demgraphics and Prcess... 14

5 Intrductin In a tw-week perid ending n May 8, 2014, IMA members were invited t respnd t a survey intended t better understand practitiner views n the functinality and technlgy t supprt enterprise perfrmance management (EPM). 1 The study cnsiders: The activities f: Planning, budgeting, and frecasting; Financial clse, reprting, and disclsure; and Perfrmance measurement, analysis, and business intelligence. Varius technical architectures t supprt EPM. Ntably, it cmpares rganizatins whse EPM functinality is dependent n: Mdules f their Enterprise Resurce Planning (ERP) (e.g., SAP, Oracle); Purpse-built, internally hused EPM sftware packages (e.g., Hyperin, COGNOS); Clud-based, purpse-built EPM sftware (e.g., Hst Analytics, Adaptive Planning); Applicatins develped in-huse; and Spreadsheets and manual prcesses. This reprt presents results f the survey: What Des EPM Architecture Lk Like? cmpares usage rates fr these EPM architectures. Wh Is Happy with Their Accunting System? utlines the level f happiness with the supprt fr EPM functinality that the varius EPM architectures prvide. Perceptins f the ease f use and ther EPM characteristics are presented in the specific sectins: What D Yu Think f Yur Planning Ability? ; What D Yu Think f Yur Clse and Disclsure Ability? ; and What D Yu Think f Yur Business Intelligence Ability? A special sectin, Adptin f Clud-Based Technlgy t Supprt EPM, lks at the adptin f clud-based, purpse-built sftware t supprt EPM and relative t adptin rates f general business supprt. 5

6 Key Findings There is still a large dependency n the use f spreadsheet-based tls t supprt EPM activities. This is particularly true fr supprt f planning and budgeting as well as business intelligence and analysis. Yet thse dependent n the use f spreadsheets and manual prcesses expressed the lwest levels f satisfactin with their technlgy. Althugh a smaller number f respndents are using clud technlgy t supprt EPM activities, they expressed the highest verall level f satisfactin amng all technlgies cnsidered as well as the highest level f satisfactin fr supprting financial clse and disclsure activity and business intelligence. Spreadsheet-dependent respndents are least likely t believe that their planning and financial clse activities are efficient and effective r that they have excellent prcesses fr mnitring perfrmance. Thse using ERP are mst likely t believe that their planning and financial clse activities are efficient and effective. Thse using clud technlgy are mst likely t believe that their standard reprts prvide the infrmatin needed t perfrm their jb, that their internal stakehlders are able t run their wn reprts easily withut relying n accunting r IT, that they have effective tls fr answering ad hc questins, and that their rganizatin has an excellent prcess fr mnitring perfrmance. Previusly, analysts have seen adptin f clud technlgy fcus mainly in areas such as human resurce management, custmer relatinship management, cllabratin, and prcurement. But they are nw seeing significant interest in using clud technlgy in a brader range f areas. Althugh the reprted usage rates f clud technlgy fr EPM is lwer than the general clud technlgy adptin rates, there appears t be an upswing in applying clud technlgy t EPM activity, particularly t supprt business intelligence. 6

7 What Des EPM Architecture Lk Like? Survey respndents were asked t identify the primary architecture used t supprt EPM activities in their rganizatin. The respnses, summarized in Exhibit 1, shw that the technlgy used varies depending n the EPM activity, but the use f spreasheets and manual prcedures remains very cmmn. Mre than half f the respndents rely n spreadsheets and manual prcesses t supprt planning and budgeting activities. Internally hused EPM systems are the secnd-mst ppular architecture fr supprting planning, but, with less than 20% usage, they lag well behind the use f spreadsheets. The use f purpse-built ERP mdules is the mst cmmn technlgy (44%) fr supprting financial clse and disclsure activities. But the use f spreadsheets and manual prcesses remains well entrenched mre than ne-quarter f respndents still rely n them t supprt financial clse and disclsure activities. Once again, we find the use f spreadsheets and manual prcesses fr business intelligence mst cmmn amng respndents (45%), narrwly mre than thse wh use ERP mdules (37%) fr business intelligence. Exhibit 1. Current Architecture by EPM Activity 0% 10% 20% 30% 40% 50% 60% Planning, Budgeting ERP Internal EPM Financial Clse & Reprting Clud EPM In-huse-develped applicatins Spreadsheets and manual prcesses Business Intelligence & Analysis Other 7

8 Wh Is Happy with Their EPM System? Respndents were asked t state their level f agreement with the statement, We are very satisfied with the technlgy we have tday. Exhibit 2 summarizes thse wh agreed and strngly agreed t the statement by EPM functin area (and als prvides an verall average rating). Overall, respndents with clud technlgy expressed the highest level Exhibit 2. Level f Satisfactin with Current EPM Architecture Planning Clse Bl Average f satisfactin with their technlgy t supprt EPM. Clud EPM 44% 75% 67% 62% ERP 61% 42% 44% 49% Clud EPM respndents als indicated the highest level f satisfactin with In-huse-Applicatin Develped 41% 39% 40% functinality t supprt clse and Other 36% 35% 33% 35% disclsure activity and business intelligence. Thse using ERP Internal EPM 31% 26% 33% 30% expressed the highest satisfactin Spreadsheets and manual prcesses 30% 25% 27% 27% with supprt fr the planning activities. Thse relying n spreadsheets and manual prcesses gave the lwest satisfactin rating in all categries f EPM activity, even thugh spreadsheets and manual prcesses are frequently used. 8

9 What D Yu Think f Yur Planning Ability? Respndents were asked t identify their level f agreement with statements abut their planning activities. Exhibit 3 summarizes the ttals f thse wh agreed r strngly agreed with each statement by system architecture. Exhibit 3. Agree r Strngly Agree: Planning System Characteristics ERP Internal EPM Clud EPM In-huse Apps Spreadsheets and Manual Overall My rganizatin s financial planning prcesses are efficient and effective. 80% 61% 67% 67% 32% 47% My rganizatin effectively integrates its financial planning prcess with its peratinal planning prcess. 75% 61% 56% 81% 44% 55% My rganizatin effectively integrates its financial planning prcess with its strategic planning prcess. 73% 56% 67% 44% 74% 54% My rganizatin uses a rlling financial frecast n a weekly, mnthly, r quarterly basis. 73% 57% 67% 67% 43% 52% Our planning prcess allws us t anticipate change and rapidly take actin. 45% 46% 33% 56% 31% 38% Our business wners and stakehlders utside f finance feel empwered by and accuntable t their budgets. 70% 56% 22% 29% 67% 42% Much f ur financial planning activity represents wasted time. 20% 28% 33% 22% 32% 29% We have very little ability t d prper budgeting, planning, r frecasting. 23% 11% 11% 7% 28% 22% Generally, the respndents see value in their planning and budgeting activities. Few believe that their financial planning activity represents wasted time r that they have very little ability t d prper budgeting, planning, r frecasting. Althugh less than half f respndents believe their financial planning prcesses are efficient and effective, this result is heavily influenced by the lw satisfactin results (32%) f thse wh use spreadsheets and manual prcesses (the mst ppular technlgy fr planning). The satisfactin rating fr the ther technlgy types reflect a mre psitive feeling abut the efficiency f their planning prcesses. Mre than half believe they effectively integrate the financial planning prcess with the peratinal planning prcess and the financial planning prcess with the strategic planning prcess. Slightly mre than half f all respndents reprt the use f rlling frecasts, while less than half f thse using spreadsheets reprt the use f rlling frecasts. Respndents appear t be cncerned abut their ability t anticipate change and rapidly take actin. Fewer than half agree that their planning prcess allws them t anticipate change and rapidly take actin. Thse using in-huse applicatins fr planning express higher satisfactin in their ability t respnd t change. Thse using ERP and spreadsheet-based systems are mst likely t agree that their business wners and stakehlders utside f finance feel empwered by and accuntable t their budgets. 9

10 What D Yu Think f Yur Clse and Disclsure Ability? Respndents were asked t identify their level f agreement with statements abut their clse and disclsure activities. Exhibit 4 identifies thse wh agreed r strngly agreed with each statement by system architecture. Exhibit 4. Agree r Strngly Agree: Clse and Disclsure Activity Characteristics ERP Internal EPM Clud EPM In-huse Apps Spreadsheets and Manual Overall My rganizatin s financial clse, reprting, and disclsure activities are efficient and effective. 79% 74% 75% 67% 46% 68% We always clse ur bks in an acceptable time frame. 82% 84% 88% 83% 57% 76% My rganizatin has an excellent prcess fr mnitring the prgress f ur financial clse activity. 62% 71% 75% 67% 38% 58% Mst f ur disclsure dcumentatin is manually assembled. 49% 50% 25% 53% 86% 58% Much f ur financial clse, reprting, and disclsure activity represents wasted time. 7% 13% 0% 14% 23% 12% We have very limited ability t d prper clse, reprting, and disclsure. 3% 0% 13% 6% 26% 9% Generally, the respndents see value in their financial clse, reprting, and disclsure activity. Few agree that it represents wasted time, and few agree that they have very limited ability t d prper clse, reprting, and disclsure. Mst believe their financial clse, reprting, and disclsure activities are efficient and effective. The slight exceptin is that nly 46% f thse wh use spreadsheets and manual prcesses believe their financial clse, reprting, and disclsure activities are efficient and effective. Mst agree they effectively clse their bks in an acceptable time frame, but the use f spreadsheets has the lwest agreement rate. Mre than half agree that they have an excellent prcess fr mnitring the prgress f their financial clse activity. The exceptin is that nly 38% f thse wh rely n spreadsheets and manual prcesses believe they have an excellent prcess fr mnitring the prgress f their financial clse activity Clud technlgy appears t prvide an advantage fr autmating the assembly f disclsure dcumentatin. While abut half f thse using ERP, internal EPM, and applicatins develped in-huse agree that there is a dependence n manual assembly f disclsure dcumentatin, nly ne-quarter f thse using clud technlgy agree that there is dependence. Nt surprisingly, mst f thse using spreadsheets display a dependence n manual assembly f disclsure dcumentatin. 10

11 What D Yu Think f Yur Business Intelligence Ability? Respndents were asked t identify their level f agreement with statements abut their perfrmance measurement, analysis, and business intelligence activities. Exhibit 5 identifies thse wh agreed r strngly agreed with each statement by system architecture. Exhibit 5. Agree r Strngly Agree: Business Intelligence Characteristics ERP Internal Bl Tls Clud Bl Tls Spreadsheets and Manual Overall Our standard reprts prvide me with mst f the infrmatin I need t perfrm my jb. 74% 66% 80% 57% 66% Our internal stakehlders are able t easily run their wn reprts withut relying n accunting r IT. 31% 30% 53% 16% 26% My rganizatin has an excellent prcess fr mnitring perfrmance. 31% 49% 60% 27% 35% We have effective tls fr answering ad hc questins. 31% 59% 67% 37% 41% It is difficult t get the reprts we need t run the business effectively. 31% 23% 27% 33% 29% We d nt trust the data in ur management reprts. 31% 3% 20% 12% 16% Althugh almst tw-thirds f respndents feel that their standard reprts prvide mst f the infrmatin they need, nly abut ne-quarter felt they culd run their wn reprts withut assistance. Slightly mre than ne-third f respndents feel that their rganizatin has an excellent prcess fr mnitring perfrmance, and abut tw-fifths feel that they have effective tls fr answering ad hc questins. Clud technlgy users declared the highest level f agreement fr supprting business-intelligence-related activities: 80% agreed that their standard reprts prvide mst f the infrmatin needed t perfrm their jb. Mre than half believed internal stakehlders are able t easily run their wn reprts withut relying n accunting r IT. N ther architecture prvides mre than ne-third in agreement. 60% agree that their rganizatin has an excellent prcess fr mnitring perfrmance. The secnd-highest level f agreement was with the use f internal BI tls (49%). 67% agree that they have effective tls fr answering ad hc questins. Irrespective f technlgy, nly abut three in 10 respndents agreed that it is difficult t get the reprts they need t run the business effectively. Althugh few agreed that they d nt trust the data in their management reprts, it s interesting t nte that almst ne-third f thse relying n their ERP fr business intelligence agreed that they d nt trust the data in their management reprts (representing the architecture with the highest level f agreement). 11

12 Adptin f Clud-Based Technlgy t Supprt EPM In March 2014, Gartner, Inc., reprted that 18.8% f the 2014 Magic Quadrant survey participants indicated that their rganizatin uses sme type f clud-based slutin (fr any purpse, including EPM). 2 Exhibit 6. EPM Functinality by Clud Architecture All EPM Business Intelligence & Analysis Financial Clse & Reprting Planning, Budgeting 0% 10% 20% 30% 40% 50% 60% 70% 80% In May 2014, Frrester Research, Inc. reprted seeing a trend tward clud architecture and away frm n-premise systems. 3 While it reprts that adptin has been fcused mstly n fur segments t date (human resurce management, custmer relatinship management, cllabratin sftware, and prcurement slutins), future investment plans reveal a significant interest in clud technlgy t supprt a brad range f areas, such as enterprise resurce planning, finance, and business intelligence. Thus, it makes sense that adptin f clud technlgy t supprt EPM functinality wuld be lwer than the verall clud adptin rate. Our survey f IMA members indicates that 7% f respndents are using clud technlgy t supprt sme aspect f EPM functinality. Of thse using clud technlgy t supprt EPM functinality, mre than tw-thirds are using it t supprt business intelligence and analysis, almst 40% are using clud technlgy t supprt planning and budgeting activities, and almst 40% t supprt financial clse and reprting (see Exhibit 6). Abut 22% f clud adpters are using it t supprt all three f the majr EPM functin areas. 12

13 Exhibit 7. Technlgy Acceptance by Clud Adpters My rganizatin embraces new technlgy and is willing t adpt early. My rganizatin stays n tp f new technlgy and intrduces it after its benefits have been prven. My rganizatin accepts new technlgy nly when it is necessary t upgrade existing systems. My rganizatin reluctantly intrduces new technlgy. 0% 10% 20% 30% 40% 50% Gartner als reprts that while mst rganizatins dn t currently use cludbased CPM suites, they have accepted the clud as a viable platfrm. 4 Nt surprisingly then, ur survey results shw that thse wh indicate their rganizatin embraces new technlgy are mre likely t reprt the use f clud architecture t supprt EPM functinality. Exhibit 7 shws that 12.5% f rganizatins that are willing t be early adpters have intrduced clud technlgy t supprt EPM. This cmpares favrably, cnsidering the statistic cited previusly 18.8% f the 2014 Magic Quadrant survey participants indicate that their rganizatin uses sme type f clud-based slutin. It appears that many rganizatins remained uncnvinced f the benefits f this technlgy: Only 6% f thse wh indicate that they wait fr new technlgy t shw prven benefits are using clud technlgy t supprt EPM functinality. Exhibit 8. Overall EPM Capabilities fr Clud Adpters Thse wh have adpted 4% 30% 30% 35% Bad / Dreadful / Wrst Practice Adequate Gd Best Practice / Exceptinal clud technlgy t supprt sme aspect f EPM functinality are mre likely t demnstrate a psitive attitude abut their EPM capabilities. Respndents t ur survey were asked t rate their verall EPM capabilities. Exhibit 8 shws hw respndents wh have adpted clud technlgy rate their rganizatin s EPM capability. Abut 35% cnsider their EPM capabilities t be best practice r exceptinal, while nly 4% believe their EPM capability is less than adequate. 13

14 Appendix: Survey Demgraphics and Prcess Cllectin f survey respnses was cnducted in a tw-week perid ending n May 9, Invitatins t cmplete the survey were sent t 15,581 IMA members, and 330 (2.1%) respnses were received. This sectin presents a summary f the respndent demgraphics. Exhibit 9. Respndent Jb Titles Jb Titles 12% 14% 19% 19% 37% Other Directr Manager Executive Level Cntrller Cntrllers represented the largest grup (37%) f respndents. In additin, 19% f respndents were executive management (executive fficers, crprate fficers, and vice presidents), 19% were managers, and 14% were directrs (see Exhibit 9). Wrkplace Exhibit 10 shws that abut half f the respndents (50.5%) were frm privately held rganizatins, and 28.3% were frm publicly traded cmpanies. Exhibit 10. Respndent Wrkplace 2% Academic institutin 3% Other 4% Gvernment agency 11% Nt-fr-prfit 28% Publically traded 50% Privately held 14

15 Headcunt Exhibit 11 shws that 62% f the respndents were frm cmpanies with fewer than 1,000 emplyees, and a further 32% were frm cmpanies with mre than 2,000 emplyees. (There were very few respndents in the cmpany size between 1,000 and 2,000 emplyees.) Exhibit 11. Headcunt f Respndents Firms Mre then 2,000 1,000-2,000 Less than 1,000 0% 10% 20% 30% 40% 50% 60% 70% 1 Other terms used t describe enterprise perfrmance management include crprate perfrmance management, business perfrmance management, and perfrmance management. 2 Christpher Iervlin and Jhn E. Van Decker, Magic Quadrant fr Crprate Perfrmance Management Suites, Gartner Inc., March 19, Paul D. Hamerman, Hlger Kisker, and David Murphy, Applicatin Adptin Trends: The Rise f SaaS, Frrester Research, May 5, Iervlin and Van Decker, March