Robert Kugel's Analyst Perspectives

Anaplan offers a cloud-based business planning platform that incorporates a modeling and calculation engine. The tool makes it relatively easy to add or expand the scope of plans that can be connected and monitored on a single platform. This Integrated Business Planning (IBP) approach enables organizations to use the software for financial planning or budgeting, sales, supply chain, workforce, marketing and IT planning. These are the types of plans in which companies often need to create models that incorporate their specific requirements, business systems and strategy. I expect that by 2025, one-fourth of financial planning and analysis (FP&A) groups will have implemented IBP.

Anaplan recently held its annual user conference, Anaplan LIVE!, which took place at a pivotal time for business planning software. The ructions in markets over the past two years and continuing high levels of uncertainty about the future direction of economies, markets and financial conditions have increased the need for faster planning and budgeting cycles and the ability to perform rapid contingency planning. Organizations have increasingly adopted dedicated planning software like Anaplan as they find stand-alone spreadsheets are inadequate for the task. Reflecting this, Anaplan’s revenues grew 70% over the latest two fiscal years.

Although back-of-the-envelope planning has utility and desktop spreadsheet-based planning can perform well enough on a small scale, midsize and larger organizations increasingly want to be able to accelerate the planning cycles. They want to examine contingencies, making high-level assumptions about business conditions and see the potential impact on their operations and financial condition on a granular basis. They want to rapidly explore the detailed impact of different scenarios at the pace of a conversation without hearing “I’ll get back to you with that” as the standard answer to any what-if question.

At the same time, planning software is evolving to make it increasingly easier for FP&A groups to accelerate planning processes, support detailed contingency planning to achieve both operational and financial objectives, as well as provide deeper insight into the most important factors driving results at the business unit level. Vendors like Anaplan are at the early stages of infusing artificial intelligence (AI) and predictive analytics capabilities into planning software to make this possible. These capabilities will be a key aspect of product differentiation over the next five years.

Anaplan does not just aim to satisfy the needs of organizations with the most complex and demanding requirements. It also can help those currently using spreadsheets for a wide range of departmental planning requirements to adopt an application that eliminates the many issues this desktop tool imposes. For example, spreadsheets are two-dimensional grids; this lack of dimensionality makes it time-consuming and difficult to manage the process of balancing supply and demand, updating plans, assessing contingencies and reporting. Anaplan’s Sales and Operations Planning application, for example, is designed to start simple and build out to adapt to the organization’s needs.

In terms of product updates and introductions, there were several topics covered in product keynotes and breakout sessions at the conference that are worth noting. Although first announced late in 2021, Anaplan highlighted its Polaris Calculation Engine, which is designed to complement its “classic” Hyperblock engine. Polaris enables organizations working with sparse data sets to natively store and efficiently calculate this data faster and at scale. It is not a replacement for Hyperblock, but an option that can be used where needed.

PlanIQ is a promising start to offering AI capabilities designed to improve the accuracy of forecasts and make the use of predictive analytics more accessible for organizations. AI used for planning is in its infancy, but even well-established, sophisticated analytical techniques are lightly adopted. For example, our Office of Finance Benchmark Research finds that just 24% of participants use predictive analytics, which can be useful in improving forecast accuracy as well as providing a baseline for alerts when results begin to differ materially from that forecast. PlanIQ supports multivariate linear regression for statistical forecasting that factors in calendar events and seasonality, as well as using external data as explanatory variables such as economic or market measures.

Having a dedicated data store such as Anaplan’s Data Hub is highly useful for an integrated planning application because modeling, analysis and forecasting across multiple departments involves sourcing data from multiple systems of record such as ERP, customer relationship management, warehouse management, supply chain management and marketing automation, to name a handful. A dedicated store eliminates manual data processes, improving efficiency while ensuring the accuracy and consistency of planning data used across an enterprise. Some years ago, I began using the term “data pantry” to describe structures like Data Hub. A pantry is especially suited to business software that, like Anaplan, describes itself as a platform because, typically, these platforms are designed to work with any number of other applications or data sources, using application programming interfaces (APIs) to automate the integration of processes and data. Anaplan’s CloudWorks enables organizations to import data from other applications and third-party sources. Eliminating the need for manual integration of data is important because our Analytics and Data Benchmark Research reveals that individuals spend a considerable portion of their time preparing data for analysis and reviewing it for quality and consistency issues, activities that are no longer necessary when a data pantry is available.

However, another compelling use case for a data pantry that I recently commented on is supporting capabilities such as PlanIQ because it enables the machine learning (ML) necessary for training AI systems. The need to support ML will increase significantly over the next three years because I assert that by 2025, almost all vendors of software designed for finance organizations will have incorporated some AI capabilities to reduce workloads and improve performance. This will especially be the case for planning and predictive analytics purposes.

Anaplan LIVE! also coincided with the completion of the company’s acquisition by Thoma Bravo, a private equity firm. With the change in ownership, Frank Calderoni stepped down as CEO and there are likely to be other changes in the coming months. It also comes at a time when Anaplan is facing intensifying competition as the use of AI for more effective analysis, planning, reviewing and reporting will offer vendors an avenue for innovation and greater product differentiation. Heavy investment in building out AI-driven capabilities will be necessary to sustain competitiveness. There are likely to be changes in the company’s priorities and focus over the coming months. Anaplan’s success in the market (revenues have grown eight-fold since fiscal 2016) reflects its fundamental design, which is appealing to financial and business analysts because it facilitates modeling in a way that is familiar to them. Anaplan is especially well-suited for organizations that take a decentralized or federated approach to planning, but this is one segment of the broader market. The company should take steps to support more centralized planning organizations.

Anaplan was categorized as an Exemplary vendor in this year’s Business Planning Value Index, and ranked as a leader in Manageability, TCO/ROI and Validation. Our assessment finds that Anaplan could perform better in Usability by examining its ability to support a variety of approaches to access planning and in Reliability, where it could improve the level of depth provided in how it manages and measures system performance. Ventana Research has designed the Value Index to provide a balanced perspective of vendors and products that is rooted in an understanding of business drivers and needs. This approach not only reduces cost and time but also minimizes the risk of making a decision that is bad for the business. Using the Value Index enables organizations to achieve the levels of efficiency and effectiveness needed to optimize business planning. I recommend that organizations that are using stand-alone spreadsheets for business planning or that are looking to replace an on-premises system should assess Anaplan.

Regards,

Robert Kugel