Business intelligence should inform financial management, and by combining financial information systems, enterprises can gain better control of costs and revenue streams, says E&T.
Financial software is the black hole of enterprise IT - always expanding, sucking-in functionality from the applications that are around it, extending its influence to customers, suppliers, and partners through the Internet and business-to-business infrastructures. Now this expansion is about to accelerate, propelled by a number of fundamental changes in the nature of business - most notably its increasingly global and online nature - along with its growing dependence on analysis as a steer to business strategy.
This situation raises a dilemma for enterprises. On the one hand financial software platforms, along with other components of enterprise resource planning (ERP) such as customer relationship management have become a natural focal point for integration of information and business intelligence (BI). On the other hand this places them more under the sway of the top ERP vendors, dominated by SAP, Oracle, and Microsoft. Indeed, as SAP's senior financial pre-sales consultant James Willis asserts, 'To address these changes in the business environment, such as global competition, [organisations] need to integrate disparate disciplines into a single solution that can handle the demand for unified information, collaborative decisions, and business network optimisation'.
Naturally, Willis argues that SAP should provide this single solution, and, just as naturally, this view does not go uncontested. Recent surveys seem to confirm the strengthening grip of SAP, Oracle, and Microsoft, and have also highlighted a marked reluctance to outsource or consider Software-as-a-Service (SaaS) models for financial software, on the basis that it is so important to the business it must be retained in-house under full, direct control of the IT department.
This, in turn, has increased pressure on the IT department to keep under control the cost of the financial software itself, for as the 2010 'ERP Vendor Analysis' report from Panorama Consulting points out, ERP is almost as likely to run over-budget as any other IT project, with only 47 per cent of implementations coming close to their projected costs, and over 90 per cent over-running their agreed delivery deadlines.
This is a problem right across the IT spectrum, however, with major IT projects notorious for coming in late and over-budget, to the extent that pressure has increased for solutions that improve control. Some feel that ERP solutions have been slow to rise to this challenge, thus leaving opportunities for mainstream IT system vendors such as HP and IBM to enter the fray, alongside a new generation of niche vendors.
However, IT financial management is now becoming better integrated with the leading ERP packages (see box 'Extracting value from ERP', pg55), while providing improved visibility of ongoing IT project costs, although it is too early to say whether this is working.
The scope of enterprise financial software is also extending into BI, by providing valuable information and support for business decision processes that improve competitiveness rather than just informing cost reductions. As Oracle business development manager Sue Adams explains, traditional financial systems - such as the General Ledger, which summarises all of an enterprise's transactions - contain data whose value has perhaps been overlooked.
'We can help our clients analyse the behaviour of their customers, suppliers, and own workforce by integrating applications in our BI family into financial systems,' Adams says. 'For example, Oracle Financial Analytics provides better insight into the General Ledger to gain better understanding of customer profitability, or to highlight how staffing costs and employee or supplier performance, correlate with increased revenue and customer satisfaction. We can provide financial metrics, alerts, reports, and 'dashboards' to line-of-business managers, enabling them to gain insight, and to take appropriate actions.'
More specifically, information extracted from core financial systems is helping enterprises optimise pricing on the basis of fluctuating supply, demand, and market conditions. The task can be stated simply - being to charge as much as you can, and as little as you need, in order to sell a product - but the algorithms involved to achieve this can be complex and vary significantly between industries and individual businesses (see 'Extracting value from ERP', right). So, although enterprise financial software may be consuming ever-more resources, it is also delivering a return on the investment as well as continuing to meet governance requirements and keep the books.
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