Provider Perspective: EPM Software Digital World Class Matrix™ – Transcript

Jason Logman:

We should look at technology as the silver bullet. We do need to think about it in a very logical way in terms of how do we focus our teams – get to the right set of drivers, the right elements – before we start looking at automating?

Announcer:

Welcome to The Hackett Group’s “Business Excelleration Podcast.” Week after week, you’ll hear from top experts on how to achieve Digital World Class® performance.

Andy Warzeka:

Welcome. My name is Andy Warzeka. I am The Hackett Group’s chief market intelligence officer. And we’re here today to talk about our recent released enterprise performance management Digital World Class Matrix. I’m joined today with Jason Logman, who is a principal in our Transformation Finance area, and Drew Johnson, a director in our Transformation Finance area. Jason was actually one of the executive sponsors for this, and Drew was our primary scorer and a subject matter expert on this particular study. We introduced this study earlier this year, and it remains one of the hotter topics that we actually have. This challenge in terms of being able to forecast business performance is an area that with organizations having diversified systems with the changes that we’ve had in terms of economic upheaval, supply chain disruption and, of course, just the everyday mergers and acquisitions and the way business has done, this has remained one of our hotter topics in terms of inquiries in our Advisory service. So I’m going to ask our experts here, starting with Jason, why is this different and what’s unique about this study?

Jason Logman:

Thanks, Andy. When I was asked to be a part of this now maybe a year ago, I was excited by the opportunity having been in this space for about 25 years across processes, systems, organizations – to really be able to take a look at the vendors that are out there today and not just look at the features and the functionality, the extended road map of where they’re looking to go and when, all of which are certainly important as one considers acquiring one of these packages, but to really look at the value that companies are achieving by implementing these tools. And whether that’s some of the aspects that Andy had just touched on – visibility to business performance, ability to more quickly forecast or otherwise – what we really tried to do is take a look at what are those outputs or those outcomes that really drive value for companies and allow us to then evaluate vendors on a bit of a different scale – this value-realized scale – than we’ve seen with other studies. Along with, of course, the other pieces that might be more traditional around the features and functionality. So excited to dig in a bit more onto this topic.

Andy Warzeka:

So Drew, in terms of the scoring, what was our approach? What was the methodology that we used and the rigor into this particular study?

Drew Johnson:

Thanks, Andy. Yeah, I would say that we went through a very robust and extensive process to evaluate each of the specific vendors. And it all started with our Hackett process taxonomy. So we used that to identify EPM capabilities that would be in scope. Then we established three matrices – an integrated EPM matrix, planning and forecasting matrix, and a close and external reporting matrix. Some vendors really ran the gamut across all capabilities and aligned to the integrated EPM, and some specifically aligned to planning and forecasting, and close and external reporting. At the end, we looked out across the landscape and in terms of vendors that we would target for participation, and we ultimately settled on about 12 that were in the study.

And then we started with a prerecorded kickoff overview of our framework and the approach and timeline – sent that out to all of the various software providers. And then as they came back in and indicated that they would participate, we sent them a request for information. We conducted strategy sessions, gathered a lot of great supporting materials, and used that to really develop a very comprehensive scoring model that was comprised of 28 key criteria, business process areas, and value drivers. And then at the end, we did a calibration exercise to make sure that we all agreed on how we were assessing scores. And we went through a number of internal challenge board reviews and then ultimately reviews with the various software providers as well.

Andy Warzeka:

Thanks, Drew. Let’s get to the meat of the matter. Jason, what were the key takeaways that came out of this?

Jason Logman:

What was fascinating, I think, across the board was with each of the different tools, as Drew had mentioned – some more integrated platforms that might have reporting, planning, forecasting, consolidation, and close all put together. Some might be more focused on forecasting or close or account reconciliations. We found that each of the tools or each in the different dynamic sets of the different processes did add tremendous value to the organization when implemented in a way that was efficient and effective in the sense that the companies that we saw that were most effective across the board were ones that didn’t just take what they did today and just put it into any of these tools, but that thoughtfully came back and said, “What are the metrics and measures we need? How do we need to make our closes more efficient? How do we need to look across the roles, responsibilities, processes, and organizations of these different elements of performance management and get those into one of these applications that allows us to then automate, govern, apply statistical modeling and forecasting artificial intelligence to help look at different areas of risk or other pieces of the puzzle?”

So what was interesting was the clear value proposition that really existed across almost all of the different vendors when the tools were implemented in a way that was thoughtful and not just the lift and shift mentality. And the ways that we saw that take place and the types of value that we were seeing. Some of the biggest, especially for a finance function, were around the amount of time that people were able to take out of their day focused on getting data from one system to another, changing that data to look from one way to another set of accounts or charts, making it so the data was accurate, complete, and timely – kind of that compilation and reconciliation function. We see about a 55% reduction – 55% in that type of activity when these tools are implemented the right way. And companies we see take advantage of that excess capacity through cost reduction where it makes sense through applying people to better and more high value-added tasks or to letting people go home or stop working at 5:00 versus 10:00.

But that’s a massive amount of impact and value for an organization. We also saw forecast accuracy, thinking about the planning and forecasting side of things three times more accurate. And this is becoming, as Andy mentioned earlier, increasingly difficult with market volatility – interest rate volatility. All the good stuff that happens and is happening more frequently to be able to get a better view of forecasted business performance is just a tremendous tool for executives to make resource allocation decisions and really decide where to put their bets and to get the most value out of their bottom line. And lastly, a key highlight of the value that we saw was around cost. And about a $48 million cost advantage for a typical $10 billion enterprise, so you could scale that up or down. It scales pretty evenly based on the size of company. That’s real money that can be applied to a number of different areas. And that somewhat was related to head count or FTEs, as we would talk about – could also be software.

Andy mentioned it prior. We see a lot of companies that have multiple of these tools with different instances, different data models, different ways of looking at the business. Seeing a lot of organizations now saying, “Look, this is my tool. These are my pieces of the puzzle I need to rely on going forward. And I’m going to put my eggs in a basket and make sure that we’ve got a single view for the company.” Getting to that nearly $50 million for a $10 billion company is significant. So again, these benefits were fairly consistent. You’ll see in our ratings that we’ll talk about in the study itself where some tools might have a bit of an advantage, but a tremendous impact for organizations to take a look at and address these processes in the systems related to them.

Andy Warzeka:

So Jason, what were the key takeaways?

Jason Logman:

Andy, what we’ve seen pretty consistently through the course of the study was a very clear value proposition for addressing this area of the business – performance management. And we saw that value proposition really come across in three different ways. One, significant capacity creation for finance – be that in the closed consolidation process, be that in management reporting, be that in FP&A. A nearly 55% increase in capacity, which companies can use in any number of ways, cost reduction, just being able to focus on more value-added activities, or even just workload reduction for their staff.

We also saw a significant forecast accuracy increase – over three times better forecast accuracy. Huge benefit to executives as they look to better understand what their future holds and be able to better allocate resources to areas of greatest import to drive their business. And also, significant cost savings, about $50 million – $48 million to be exact – for a $10 billion company. So again, across those three items’ massive value proposition. In addition to the more I got better information faster to run the business, we’re seeing true tangible value in addressing these applications and putting in these systems, again, pretty much across the board. And Drew will talk a little bit about how that might differentiate a bit across the different software vendors that we looked at.

Andy Warzeka:

And ultimately, this was a comparative study. We normally have in these studies geographic differences, industry differences, size of the customer that the vendor is serving. But ultimately, there is differentiation inherently in what these vendors are attempting to do. So Drew, maybe you can start off with what are some of those differentiations that we saw in this study?

Drew Johnson:

Well, it really all starts with solution architecture, business process maturity, the availability of pre-built functionality, and how much you’re having to go out and create strategic partnerships with other providers to solve process gaps or capability gaps. So that was really a key area of differentiation. And when we surveyed customers of the various providers, a large percentage of them deployed multiple applications still to be able to solution the end-to-end EPM process. We think that process has been evolving over time and will continue, and these strategic partnerships are also adding a layer of net new capabilities that weren’t previously solutioned. Then you start to look at things like data connectors, platform structures, collection of applications modules – is it all contained in the same ecosystem? Do you have to navigate across? And what’s that user interface? How modern is it? And what’s that experience look like? And then the availability of shared logic, business rules, rate tables, driving new capabilities, and the ability to blend data.

So leveraging things like extensible dimensionality to be able to create relational and periodic blending, so you can join financial data with operational data. Then being able to drill into detail on that data. So whether it’s in stage or all the way back to source, having visual edibilities with database write-back capabilities. I thought that was a very cool thing that we saw out in the marketplace today where you could essentially take a data visual and drag it around, and edit data and have it right back to database. That’s next gen. I don’t know how they’ll put controls in place there to avoid errors but really cool functionality. Other things like workflow automation, visual editing capabilities there, and business process control and support. And then all the rage right now that everybody wants to talk about, but it’s still sort of in its infancy in terms of development, deployment and uptake, is artificial intelligence and data science.

Andy Warzeka:

Thanks, Drew. Appreciate that. Jason, any thoughts from your side?

Jason Logman:

I think Drew covered it really well. The one point that I would make that is part of the reason we split the study into a couple different categories, there is a view around the integrated architecture, companies like a OneStream or an Oracle, which provide in-depth performance management views – integrated components across what Drew had mentioned. Or then you’ve got the folks that are more focused on the individual components, whether that be planning and forecasting or close and consolidation. What we’re seeing is rapid development of capability across both. We do see a bit of an edge, as you’ll see in the rankings for the teams that have put a lot of effort and a lot of energy to incorporating some of this next-gen functionality in an integrated fashion across the board. Because what we’re really trying to get to is an automated, touchless set of processes, closed reporting and planning. And the more you can get those integrated, the faster you can keep them integrated, the better off we’re seeing companies realize those value aspects that we mentioned prior.

Andy Warzeka:

So Drew, with the study, like every other study we’ve had, these vendors are investing very, very heavily in AI technology. Can you talk a little bit about what they’re doing, what’s forthcoming in their offerings, and why does it matter to our customers?

Drew Johnson:

This is the one everyone gets really excited about, right? And it’s a long journey to get to the ability to leverage these new technologies. But when you talk about AI, it’s really around two capabilities – internal systems and data, and then external. So on the internal side, capabilities like predictive analytics; machine learning; helping with data model setup, design and support enhancements ­– whether it’s on the data model side, report creation or generation; helping out with workflow guidance, recommendations, task training and support; having that assistant that’s embedded in the tool that can help you troubleshoot or problem solve as you’re working through key tasks and activities; leveraging large language model Q&As. So similar to ChatGPT if you want to ask questions around sales volume, price, product cost, gross margin, G&A – having that capability to quickly query a specific data point and the system return values and insights back to you. Then more specific use cases around risk and fraud or anomaly monitoring, account health, reconciliation, transaction matching, intercompany financial management, journal entry analysis, and then management discussion and analysis commentary, footnote support, and creating better reports over time.

When you look at the external side of the house, data mining, going out and bringing in data from external sources that are in the environment outside of your enterprise’s ecosystem, generating insights off of that data and then connecting it to your internal models and systems to really be able to drive these next-gen capabilities and get better data, decision-making, and action planning over time.

Jason Logman:

Yeah, Drew, thanks. All great points. And what’s exciting about it is AI is coming and it’s coming fast. We’re all fully aware. Was sitting with the CFO of a $16 billion company and one of the vendors in our study the other day, and there’s a lot of promises out there – some of which are already ready to be implemented, maybe some of which aren’t quite there. And that’s a big part of what – as you’re going through a selection process, as you’re thinking through it – we’ll often do working with a tool we call the AI Explorer is kind of think through what is real. What is out there? What can I do today – be it in EPM, finance, HR, whatever area or domain? And how do I prioritize the things I’m doing today to be ready for taking advantage of the components that will eventually be ready tomorrow? So again, extremely exciting. The ability to incorporate this is, without a doubt, coming. We do ask that companies have their eyes open to what we can do today and think carefully about what that road map looks like to tomorrow.

Andy Warzeka:

Thanks. And for those that are looking for the report, we do have an abridged version of this report that’s available at no cost if you go out to The Hackett Group – our .com site – which you can search on Google. If you look for the market intelligence tab, you’ll find a whole series of these Digital World Class Matrix reports. Again, this will be the abridged version. If you happen to be a customer of ours, you actually get the full version of the report, which includes some significant metrics, as well as some details on the vendors themselves. So to wrap up our call today in terms of the enterprise performance management Digital World Class Matrix, Jason, what action should our listeners take away?

Jason Logman:

I would say that probably two primary actions, Andy, the first of which is what I referred to earlier, which is the value proposition in this space is real. Looking across the vendors that we worked through on this very detailed study, we saw solid value provided in each of the different areas, and it’s an area that we absolutely, as we speak with chief financial officers of almost any size company, an area where we can really stand out in terms of finance’s ability to drive value for the business in a faster, intuitive, more automated way. So a lot of value there is the first point.

The second point is we shouldn’t look at technology as the silver bullet. We do need to think about it in a very logical way in terms of how do we focus our teams – get to the right set of drivers, the right elements – before we start looking at automating? We saw that consistently where there was a differentiation between those that kind of did a lift and shift, if you will, of capabilities versus those that took a minute and really understood how they wanted to drive that forward to show a value proposition for the company.

Andy Warzeka:

Very good. Thank you very much. Appreciate everybody’s time during our podcast today. Thank you.

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