Robert Kugel's Analyst Perspectives

IBM Planning Analytics, formerly known as TM1, is a comprehensive planning and analytics application designed to integrate and streamline an organization’s planning processes. It can support multiple planning use cases on a single platform, including financial, headcount, sales and demand planning. The software automates enterprise-wide data collection to make it repeatable and scalable across multiple users and departments. It supports sophisticated driver-based modeling that enables rapid what-if or scenario-based planning, while its built-in analytics provide deep business intelligence capabilities. This enables senior executives and managers to work interactively to immediately assess their current position and consider the impact of various options to address opportunities and issues rather than laboring through a lengthy process.

The software has added an ability to ingest existing Excel spreadsheets as a starting point to streamline model building and updating. It offers full spreadsheet functionality to take advantage of that familiar interface, but eliminates spreadsheet challenges because it has full database, workflow and administrative capabilities.

Because of the significantly uncertain business environment in 2020 and the need to become more adaptable to changes, organizations are considering using dedicated planning software to rapidly create reliable plans, budgets and forecasts. To address its new mandate, finance, planning and analysis departments and business personnel can use this software to achieve greater agility, make budgeting easier for the budget owner and increase the business value of time spent planning and budgeting.

Dedicated planning applications like Planning Analytics also provide the ability to do rapid contingency planning in minutes and hours rather than days and weeks. Dedicated software enables Finance teams to alter plans, reforecast or modify budgets in real time and integrate planning across business units to speed decision-making, improving the accuracy and reliability of plans and forecasts. Unfortunately, by 2024, just 1 in 5 FP&A departments will have redefined their mission to make planning easier for business unit leaders. Those that do will be a strategic asset.

IBM recently added artificial intelligence-powered planning and forecasting capabilities to its Planning Analytics solution.

AI offers advanced capabilities for both FP&A teams as well as line-of-business users in the areas of analysis, planning and reporting.

Organizations can use AI to identify key drivers, creating more accurate projections based on historical patterns. This is especially valuable, as I recently noted, when external data such as economic and market statistics is used in creating and updating these models. External data is also necessary for more useful performance benchmarking. For scenario analysis and variance analysis, AI can be used with predictive analytics and value drivers to perform more accurate and deeper analysis, generating more data-driven insights. The software also provides FP&A departments with the means to more easily assess the appropriateness of applying different forecasting algorithms to improve model accuracy, and adapt these models to changing business conditions and data patterns.

The new capabilities and features give organizations further incentive to adopt a dedicated planning application that replaces desktop spreadsheets. Our Office of Finance Benchmark Research found that a majority (56%) of midsize and larger organizations still rely on manual processes built around desktop spreadsheets for core financial functions such as planning and budgeting. When performed manually using desktop spreadsheets, each step in these processes can take days. Dedicated planning software such as IBM Planning Analytics can dramatically reduce that time, enabling organizations to do more scenario planning and be more agile in responding to unexpected changes in markets and the economy. The research also found that 66% of companies using a dedicated planning application have a process that works well, compared to 36% that rely on desktop spreadsheets. In theory, you can do anything in a desktop spreadsheet if you have enough time, but time is the key constraint that makes value-based planning unworkable for desktop spreadsheets.

Periods of economic and market uncertainty highlight the value of using dedicated software for forecasting, planning and budgeting. It can compress process cycle times significantly and enable a company to respond faster with greater agility to changing outlooks. IBM Planning Analytics makes it possible for disparate business units and functions to plan their part of an organization in a way that makes most sense to them and immediately consolidate plans at a divisional or headquarters level. It can almost instantly generate an integrated set of financial statements (profit and loss, balance sheet and cash flow) to provide finance executives a complete understanding of the impact of any given scenario. I recommend that organizations using spreadsheets for budgeting and planning re-examine their processes and evaluate how a dedicated software can improve enterprise operations and decision-making to make the process easier for budget owners.

Regards,

Robert Kugel