FSN: Why do 60- 80 percent of organisations still use spreadsheets for planning and forecasting?

Why do 60- 80 percent of organisations still use spreadsheets for planning and forecasting?

28th April 2008
Give up your spreadsheet – not likely!! A recent Oracle webcast poll provided a salutary reminder of the power of spreadsheets. Not power in the sense of processing performance (although it is undeniably astonishing) but power from the point of view of the vice-like grip that spreadsheets have on the accounting mind set. After two decades of specialist applications, spreadsheets stubbornly remain the accountants planning tool of choice. Gary Simon, FSN's managing editor looks at the reasons.

Like most internet polls, it has to be said that the method of gauging opinion was not very scientific. Whoever turned up to the webcast was entitled to vote and the result wasn't accompanied by any detailed analysis of sample size, demographics and so forth. But as a snapshot of attitudes at a particular point in time the sheer weight of opinion in favour of spreadsheets for planning (somewhere between 60 and 80 percent) suggests more than a passing interest in the technology.

However, if you are a subscriber to the ‘half full' glass theory rather than ‘half empty' theory this still leaves up to 40 percent who are using specialised applications for budgeting, planning and forecasting. But after more than two decades of specialist tools from heavy weight suppliers such as Oracle (the Hyperion bit), SAP (the Business Objects bit) and many others, one has to wonder why the spreadsheet still prevails.

There is no denying that spreadsheets are wonderful tools, although some may regard their functionality as overwhelming in some respects. In a world governed by strict corporate procedures, processes and governance there is something liberating and mischievous about spreadsheets. They allow people personal freedom and the ability to give vent to creativity. There is definitely something satisfying in developing one's own solution without being answerable to corporate standards. As a personal productivity tool they are unsurpassable.

So it is not too surprising that spreadsheets are the favoured tool for long range planning which by its nature is uncodified and limited to very few users. Strategy development and planning is arguably a volatile mix of intuition and science, creativity and discipline. As such it is often thought easier to commit the thinking to a spreadsheet rather than specify the requirements to a packaged application.

What initially appears to be a justifiable position does not survive deep scrutiny because strategy development is not a solitary activity to be carried out in a vacuum. The ability to communicate strategic objectives and embed them in the organisation together with appropriate performance measures is crucial to strategy execution. Similarly, downstream activities, such as budgeting, forecasting and performance measurement inform the setting of strategy in what is often referred to as a closed loop. But if strategy is side-lined in a spreadsheet the loop is broken and the strategy cannot be readily adjusted and refined to reflect what is happening on the shop floor.

In fact communication and collaboration strike at the very heart of the spreadsheet debate. Most planning, budgeting and forecasting activities are foremost exercises in negotiation and discussion. Multiple rounds of iteration improve data quality, management buy-in and the accuracy of forecasts. But one cannot drive collaboration on the back of a personal productivity tool.

Neither can organisations improve work flows with the cumbersome spreadsheet, emailed between one location and another. Loss of visibility, control and management time are just some of the shortcomings of a spreadsheet backed budgeting and forecasting process. That is not to say that spreadsheets do not have a role.

The familiarity of the Excel interface has its benefits. For finance professionals a grid of numbers is as compelling as a canvas to an artist. A spreadsheet interface linked to a specialised budgeting and planning application has its merits. But in an increasingly wired world in which hundreds or perhaps thousands of users can economically be engaged in the budgeting process over the web, there is a need to broaden the appeal of the user interface beyond the narrow interests of finance professionals.

Finally, the spreadsheet may appear to be the cheap option but is this really the case? The cost of errors, the lost days, the lack of forecasting accuracy and its impact on management decision making are all ‘hidden' costs of a spreadsheet enabled process but getting a handle on these takes effort. So many organisations opt for the easy option and the spreadsheet persists in territories for which it was not designed.

There is no doubt that the message that there is a better way of doing things is getting through – but it should not need another two decades to make the case for change. Now is the time to move on!

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