TechnologyA time for companies to reflect.

A time for companies to reflect.

With the slowdown in the economy over the past 12 months, many businesses have seen a drop in profits. To move onwards and upwards, now is the time for companies to take a long, hard look at themselves.

With the global economic uncertainties of the last 12 months or so producing a drop in profits for a good number of large businesses, many have been forced to take a long look at themselves to find out exactly which business lines are profitable and which are less so.

When a business is making profit, it can be tempted to ignore those areas that perform less than well. However when the bottom line does not look so rosy, many tend to look to manage themselves better and conduct greater analysis of themselves.

This is becoming increasingly the case as many businesses now also have to report to stakeholders, who in many cases demand high levels of business planning, presenting an opportunity for many software companies such as Hyperion, Cognos and Microsoft, which sell applications, to help this very process.

‘Whether or not government regulations require faster or more stringent reporting, shareholders are requesting it,’ says Jeff Rodek, chairman and CEO for Hyperion. ‘Companies need solutions to ensure that they can meet these needs. Business performance management software is a vital element in providing shareholders with the reassurance that their investments are being protected by intelligent business decisions.’

A recent survey by more than 600 executives at business performance management software provider, Hyperion’s Solutions 2002 user conference in Orlando last month, found more than 79% of business executives rely on business performance management software to help them manage through this challenging economic climate.

Added to this, nearly half indicated that they will increase spending on business performance management software in the coming 12 months. With economic indicators signalling a slow upturn in the market, executives continue to express cautious optimism about the economy overall, while emphasising that business performance management projects will increase in both size and sophistication.

More than half indicate that they will expand their implementations enterprise-wide within the next 12 months – a result which shows business performance management is front-of-mind with executives.

Added to this is the fact many companies are modifying their financial reporting methods as a result of increased scrutiny of their financial accounting practices – with many also increasing their budgets for financial reporting solutions in tandem.

Partially due to affairs such as Enron, corporate accountability has changed companies’ thinking so much that many companies are understood to have tripled the number of auditors they have in-house in recent times.

While the visibility of companies and pressure from CFOs means that scorecard, modelling, analytical and capability software are much in demand, according to many.

As a result processes and ethics are changing, while the CEOs and CFOs are now increasingly accountable, meaning they need tools to put all of this together. Additionally people are demanding information faster and faster, while since the dotcom crash there has been a requirement to manage their cash increasingly tightly.

And since 11 September many companies have rapidly moved towards quarterly or monthly planning.

‘Most companies in the US have moved up their reporting times to between six and 20 days. Managers want to get their reports out faster. FDs are not just releasing numbers, they need analysis of figures as they are increasingly being asked questions. If they don’t know the answers that is not good enough,’ adds Rodek.

David Jones, PwC Consulting director, adds: ‘In our view internet-based analysis tools are hot. We are receiving a lot of interest in planning and budgeting, strategic planning and corporate reporting.’

He adds: ‘We think this area is almost counter-cyclical. In boom times there is no pressure on where a company is making money. Now companies are needing to focus on how each business is performing.’

Return on investment is now critical for many companies, they are looking at how much they have spent on the web, ERP, CRM over the last few years and are looking to consolidate and leverage their spend, meaning it has become increasingly difficult for vendors to sell their wares.

Added to this, the market is now arguably more considered about its investment than ever before although it can be said companies are still as likely to begin new projects as they have ever been.

‘The next round of IT spend will be smaller, with not so many multi-million pound deals, instead smaller deals in the region of £100,000 but with faster ROI and quicker installations. Customers want to be shown the world now and do not trust as readily,’ adds Rodek.

Hyperion is planning a push to make its data warehousing and business intelligence applications enterprisewide in scope, making it easier for departments and business units to share information and giving executives a broader view of a company’s business.

The new road map for company comes in response to a demand for enterprisewide business intelligence, as opposed to departmentalised information. Such a trend is already prevalent in the ERP and CRM software worlds.

With a flurry of business intelligence introductions, software vendors are moving to meet the need for analytics integrated with enterprise applications.

For example, Hyperion Solutions recently released Version 6.2 of its Essbase online analytical processing server, the first step in the company’s drive to provide enterprisewide analytics. The new version of Essbase features a data source integration console that automates the transfer of data from sources, such as supply chain applications and data warehouses, said company officials in California.

However BI observers suggest Hyperion is somewhat late to the party.

Enterprise software vendors, such as PeopleSoft, Oracle and SAP have already built enterprise data warehouses for their applications.

Henry Morris, an analyst at International Data, says Hyperion’s move to standardise its applications on a common framework won’t happen overnight.

Even Hyperion officials concede that they won’t be able to provide a ‘critical mass’ of enterprise-wide analytical technology until 2004 – but it is certainly on the way.

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