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SAS in the Finance Function
18th July 2005
SAS is a giant of the global software industry which has built its reputation for the excellence of its data warehousing, data mining and analytical applications over a period of nearly thirty years. Whilst it is an acknowledged leader in the IT industry and widely admired by IT professionals in industry, commerce, the public sector and academic institutions world-wide, its capabilities have largely gone unnoticed in the finance function. However, there is a growing recognition that finance functions require 'industrial strength' technology of the sort that SAS can provide if they are to cope with the increasing speed and complexity of business operations and the emerging culture of performance management and compliance.
SAS is the largest privately owned software house in the world, with annual revenues in excess of $1.53 billion and an unbroken record of profitability and revenue growth since its formation in 1976. It has more than 40,000 customers world-wide including , 97 of the top 100 companies on the 2004 Fortune 500 List.
Formed by its current CEO, Dr Jim Goodnight out of North Carolina State University it has a culture of self-sufficiency and rarely makes acquisitions. As a private company, SAS has not been distracted by the short term demands of external shareholders and using its formidable resources has consistently ploughed back 25% of its revenues into in-house product development. Unlike many of its competitors this means that SAS retains deep product expertise in-house, is free to develop innovative solutions and controls absolutely the destiny of its key technologies and applications.
One of its most important developments in recent years was the release in 2004 of its SAS ® 9 Business Intelligence Suite and technology platform which underpins all of its business solutions such as Financial Management 4. But why should the finance community be concerned about a technology solution?
The answer to this vital question is threefold. Firstly, the demands of business performance management and compliance means that data has to be merged from a variety of different business applications at will in order to answer complex business problems. Secondly, information has to be provided to different classes of business users in a way that they can understand and is meaningful to their role. Thirdly, data has to be gathered quickly, accurately and efficiently from an increasingly diverse range of data sources in order to satisfy the information demands of the organisation.
The problems facing FD's
Finance directors of large enterprise today face an unprecedented series of pressures. The nature of business has changed out of all recognition in the last twenty years, regulatory demands means that every aspect of performance is scrutinised and the speed at which business is transacted has accelerated relentlessly.
All businesses today seek to squeeze every last drop of productivity and performance out of the organisation, yet the way that businesses are measured and valued by the capital markets has changed. The erosion of the manufacturing base of companies in the West means that a greater proportion of market value is attributable to intangible assets, such as the strength of major brands, 'know-how' and intellectual property. As a result, traditional measures of performance such as Return on Capital Employed have to be supplemented by other measures around, say, human capital and customer satisfaction. Fund managers are taking an increasingly complex view of financial and non-financial measures in order to value companies. This in turn requires performance management processes and systems to garner information from a wider variety of data sources in order to provide the information needed to ensure that company is creating shareholder value according to this new model of performance.
At the same time, new disclosure requirements such as the Operational and Financial Review (OFR) and the expanded Directors Report for large companies under the EU Accounts Modernisation Directive are stretching the information which companies need to disclose. Some of these cover quite novel areas such as environmental and corporate social reporting. With criminal penalties and fines for non compliance, directors have to be confident that their management information systems are robust and can provide complete and accurate information.
It is interesting to note that performance management systems are no longer the preserve of the finance function. The complexity and diversity of performance measures illustrated by the foregoing paragraphs means that a wide range of users are engaged in providing information or monitoring and interpreting Key Performance Indicators. So present day systems have to be able to present information in a wide variety of relevant formats to cater for the needs of individuals at all levels of the organisation and in different functional areas.
Finally, the speed with which information flows and the timescales in which business decisions have to be made has changed the way in which finance departments budget and forecast performance. Market opportunities appear and evaporate with lightening speed and forecasting performance in these timescales requires access on demand to information about actual and historic results as well forecasts from the 'coalface' supported by predictive analytical techniques. In an environment where traditional annual budgets are becoming increasingly irrelevant it is vital that technology enables more frequent forecasting and re-forecasting.
Challenges such as these are multi-faceted. They transcend traditional views of the organisation, its resources and traditional measures of performance. Information systems established to meet the performance measurement demands of the last decade simply cannot cope with the new pressures.
SAS technology and the finance function. Over the years, many software vendors have sought to provide the finance community with business intelligence solutions and allied applications designed to solve individual business problems in isolation. The so called "Best of Breed" approach has provided a succession of individual applications, such as budgeting, activity based costing and financial consolidation. Whilst companies have benefited from the specialist functionality embedded in these applications, they have failed to work in concert with each other because they have been grounded in a diverse selection of incompatible technologies and data structures.
On the other hand SAS ® 9 technology which underpins the Financial Intelligence application suite is fundamentally different in two ways. Firstly, it provides the means to harvest data from a wide variety of transaction and other information stores in a highly controlled, automated and uninterrupted process. Secondly it holds structural information about the data (metadata) in one place so that any application, for example financial intelligence, customer intelligence or risk management can share the information in real time, safe in the knowledge that it is consistent across the entire organisation.
Metadata is the structural information which provides the backbone of reporting. In a finance context it includes items such as organisational hierarchies, product hierarchies and chart of account structures. Metadata management within SAS ® 9 ensures that all of the metadata is defined, managed and rationalised across all data stores so that information can be produced on a consistent basis and that any changes affect all applications simultaneously. In other words, SAS recognises that no matter how clever the applications and reporting systems the old maxim, "garbage in/garbage out" applies, i.e. the key to information integrity is to ensure that it is captured reliably and accurately, managed effectively and presented consistently.
SAS Enterprise ETL Server is the state of the art technology which manages the collection of data from diverse data sources. It extracts, transforms and loads the data (ETL) into a staging area or data store for further processing but is capable of working with flat files, relational databases, non-relational databases, multidimensional databases (OLAP cubes) and all manner of transaction systems. In many cases, vendor certified 'plugs' (e.g. SAP, PeopleSoft, Siebel) which define the intricacies of the interface in advance allow data to be extracted with ease. It can merge, match and standardise data from any source even if they are in different national languages.
It is important to appreciate that once the ETL process is defined it will automatically furnish data to all of the systems that need it and provide appropriate warning, checks and balance if the underlying sources of data change shape.
The Financial Intelligence applications The Financial Intelligence applications 'sit' on the SAS Intelligence technology platform described above and comprises SAS Financial Management, SAS Strategic Performance Management and SAS Activity Based Management. All of these application areas benefit from the flexibility and power of the Enterprise ETL Server and the metadata management. This means that they can share data between them and metadata, for example, organisational hierarchy is visible to all of the applications in the suite. The latter includes applications such as Risk Management, dealing with anti- money laundering, fraud detection and compliance and Customer Intelligence which is focussed on the collection, management and interpretation of customer data, marketing and sales tracking and campaigns.
SAS Financial Management is concerned with two core financial processes, namely; financial consolidation and budgeting, planning, forecasting and predictive analysis.
The latter supports collaborative budgeting across the organisation and allows users to create business rules and scenarios which allow potential outcomes to be modelled as business circumstances change. Data from the planning application can be shared with actual results collected through the consolidation engine to provide insight into under or over-performance.
SAS Strategic Performance Management provides a performance measurement framework that allows corporate strategy to be cascaded down through the organisation. It can accommodate any of the popular strategic methodologies such as, Kaplan & Norton Balanced Scorecard or perhaps Six Sigma or an in-house methodology.
The application allows the measurement and management of strategic objectives and evidences the link between cause and effect (including complex nested measures). The relationships between strategic variables are captured in strategy maps so that the impact of resource constraints and activities, whether at the corporate, management or employee level within the organisation can be assessed with everyone in the organisation aligned to the strategic goals. The application employs a wide variety of techniques for displaying information such as Key Performance Indicators in interesting ways, for example, executive dashboards, dials and traffic lights.
Finally, SAS Activity-Based Management allows the true costs of activities (cost drivers) and processes to be identified and measured so that management obtain a realistic view of, say, processes, customer and product profitability. The product originates from the acquisition of ABC Technologies' Oros ABM which was the No.1 activity-based costing (ABC) software brand for more than a decade. The Oros product has since been re-engineered for the SAS platform, fully dimensioned and web enabled.
Summary
SAS has a very distinctive positioning in the financial applications and performance management marketplace. Its formidable capability in the technologies that underpin a successful performance management regime, most notably, data management including the ability to handle almost any data source, sets it apart from many of the business intelligence and performance management solutions available today.
SAS considers that this technical foundation is of paramount importance in securing the integrity and reliability of all the applications that share this foundation. Once established the technical foundation provides a joined up process that collects and manages data automatically and readily expands to new data sources if required, so that finance professionals can concentrate on the interpretation of results and fulfil their compliance reporting obligations . To this end, SAS has an impressive array of applications and analytical capability which allow data and metadata to be shared and reported upon or presented in a variety of ways.
Although a relatively late entrant to the financial applications market the advantages of the SAS approach are compelling. With information demands becoming increasingly complex and diverse the advantages of the SAS platform should soon be acknowledged by finance professionals.
SAS is the largest privately owned software house in the world, with annual revenues in excess of $1.53 billion and an unbroken record of profitability and revenue growth since its formation in 1976. It has more than 40,000 customers world-wide including , 97 of the top 100 companies on the 2004 Fortune 500 List. 
Over the years, many software vendors have sought to provide the finance community with business intelligence solutions and allied applications designed to solve individual business problems in isolation. The so called "Best of Breed" approach has provided a succession of individual applications, such as budgeting, activity based costing and financial consolidation. Whilst companies have benefited from the specialist functionality embedded in these applications, they have failed to work in concert with each other because they have been grounded in a diverse selection of incompatible technologies and data structures.