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The reasons for Excel's popularity are numerous. The application is pervasive, so employees transferring between companies don't have to learn new software. It is easy to use and intuitive to understand, and most corporate finance people already know it well. At the same time, Excel offers a raw analytic power that makes it many decision-makers' tool of choice as the front-end window into the budget and forecast.
Despite these benefits, spreadsheet software has come under increasing scrutiny in the past few years. Many business performance management (BPM) software vendors have incorporated strong messages into their marketing efforts urging finance departments to move away from Excel toward dashboards and more proprietary applications that supposedly offer richer analytic capabilities. Some consultants even say that the only way to improve budgeting and planning efficiency is to eliminate spreadsheets altogether.
Robert D. Kugel, vice president and research director, financial performance management, for Ventana Research, wrote in Business Performance Management's June 2004 issue, "Although spreadsheets are great for ad hoc analysis that involves only one or a few people, they're fundamentally unsuited for enterprisewide collaborative efforts such as budgeting and planning at the level Budgeting and of detail corporations require."
Give the People What They Want
Familiarity, accessibility, and functionality are all good reasons why the spreadsheet lives on. Excel's user interface is rich. Its formatting is flexible. And it gives users many options for enhancing the look and feel of budgets, forecasts, reports, and plans. Key is the fact that everyday workers already know how to use Excel. Gaining user buy-in - a notable challenge for just about any type of software implementation - can become much less daunting when users are already familiar with the application's front-end environment.
Of course, saving time and cutting costs are two more reasons why Excel-based solutions are attractive. Nearly every business desktop already runs Excel. This in itself can dramatically reduce client-side rollout requirements from a time, cost, and resource perspective. In addition, an Excel-based interface enables a company to keep user training expenditures to a minimum, lowering the total cost of ownership (TCO) for the software. After all, why reinvent the wheel when it comes to BPM? By providing an Excel-based system, you can remove a lot of the unnecessary costs and complications associated with more proprietary solutions.
From an IT perspective, it's worth noting that Microsoft has done significant work in driving end-user adoption of Excel, especially for planning and reporting purposes, even if at a personal-productivity level. Considering Microsoft holds a virtual monopoly of the desktop and office suite, it's no wonder that Excel is as popular and ubiquitous as it is today. Now the Redmond, Wash., giant has plans in the works to further expand Excel's native analytic capabilities. Companies running a Microsoft-based infrastructure - one that includes SQL Server Analysis Services and .Net applications - will likely save time and money by standardizing on an Excel-based BPM solution. In fact, this is almost a given when considering the shared underlying technology architecture and optimized data integration capabilities between Excel and other Microsoft front- and back-office applications.
Challenges in Alleviating "Excel Hell"
Spreadsheet-based budgeting systems have a well-deserved reputation for running amok. We've all heard horror stories about finance departments pulling their hair out trying to reconcile multiple versions of spreadsheets at the end of the month. But usually when companies complain of spreadsheet nightmares, their performance measurement and budgeting practices are in need of reform.
Clearly, a budgeting process that consists of e-mailing spreadsheets back and forth isn't going to cut it, especially in larger organizations. Excel on its own was simply not designed to manage data sets beyond a certain size and level of complexity. Nor does it do a good job of supporting frequent changes to data by numerous people in multiple departments. The consensus seems to be that although Excel makes for an ideal personal-planning tool, it falls short as an enterprise-scale budgeting, planning, and reporting solution. But when Excel is coupled with robust BPM functionality, it can be effective in a large-scale business environment. Selecting the right BPM system is critical in overcoming Excel's native limitations.
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