Ventana Research: The Digital Transformation of Planning and Budgeting

The Digital Transformation

of Planning and Budgeting
A Dedicated Application Makes It Possible

Research Perspective
Sponsored by

1 © Ventana Research 2016

 Ventana Research: The Digital Transformation of Planning and Budgeting

Table of Contents

Transforming Planning and Budgeting 3

Planning for Success 3
Planning, Budgeting and Teamwork 5
The Power of Software 5
Improving Performance and Competitiveness 7
About Ventana Research 8

2 © Ventana Research 2016

 Ventana Research: The Digital Transformation of Planning and Budgeting

Transforming Planning and Budgeting

“Digital transformation” is a popular term that encompasses a range of
fundamental changes caused or catalyzed by modern information
technology. The internet and intelligent mobile devices have changed
how people live, work, shop and communicate. While digital
transformation is evident in our personal lives, both its results and its
potential can be seen in the business sector as well.

Corporate planning, for example, can be digi-

tally transformed and improved by applying
Corporate planning technology to integrate more tightly the
can be digitally company’s budget with its business opera-
ting plans. Doing that can make the plan-
transformed and
ning process more collaborative while re-
improved by applying ducing the time it takes to prepare, review
technology to and revise plans and budgets.
integrate more tightly
the company’s budget The medium for this particular change is
with its business dedicated planning software. Although this
technology will not by itself bring about sig-
operating plans.
nificant change, tighter integration between
operationally focused business planning and
financial budgeting will.

Achieving this goal does, however, require use of an application

designed for planning rather than less capable tools such as desktop
spreadsheets. Technology has made access to these considerably more
readily available; today planning and budgeting applications can be
accessed easily through cloud-resident deployments that require that
the user to have only a Web browser or a mobile app. Cloud-based
software options also are easier and less costly to deploy than on-
premises systems and are increasingly popular: our research found
that two-thirds (65%) of companies use the cloud for planning and
budgeting.

Planning for Success

Success in business is measured by what’s accomplished, and effective
planning improves an organization’s ability to consistently achieve its
objectives. Companies do a great deal of planning. They plan products
and services and how to sell and deliver them. They plan the head

3 © Ventana Research 2016

 Ventana Research: The Digital Transformation of Planning and Budgeting

count they’ll need and how to organize distribution and the supply
chain. They also produce a budget, which is a financial plan.

In fact, for most companies the budget is the only enterprise-wide

business plan. Often it is prepared from a mass of spreadsheets. The
process of assembling those spreadsheets into a consolidated budget
requires multiple iterations and is so time-consuming that there often
isn’t enough time to address business planning at a higher, more
strategic level.

Our benchmark research on next-generation business planning finds a

correlation between how effectively
a company connects individual plans
with the budget and how well its
planning process works. Two-thirds
(66%) of companies that have direct
links from individual plans to their
budget said that their planning pro-
cesses work well or very well, com-
pared to two in five (40%) of those
that copy detailed information from
individual plans into the budget and
just one-fourth (25%) of those that
have little or no connection between
individual plans and the budget.

Preparing a budget is not the same as business planning. The budget’s

main purpose is to set spending limits and ensure that those limits are
enforced. Budgets are essential for financial management, for
corporate governance and for control. They are much less useful for
determining how to achieve objectives through a set of coordinated
actions.

Typically budgeting and operational planning efforts are only loosely

connected. In contrast, a transformed business planning process is one
that is designed to integrate unit-level operational plans with financial
planning. At the corporate level, such business planning shifts the
emphasis from financial budgeting to planning and incorporates
performance reviews that integrate both operational and financial
measures. It uses information technology designed for this purpose to
enable faster planning with less effort. By applying dedicated planning
software to accurate, timely data, companies can simultaneously
support both better business planning and conventional budgeting.

4 © Ventana Research 2016

 Ventana Research: The Digital Transformation of Planning and Budgeting

Planning, Budgeting and Teamwork

The process of planning involves discussions about objectives and the
resources and tactics that people need to achieve them. Done
properly, planning gets everyone onto the same page to ensure that
the organization executes its strategy in a coordinated fashion.

Collaboration, therefore, is essential to effective planning. Perspectives

from people in different roles or departments can help produce more
complete plans and identify risks
and opportunities. Here again our
research shows that many organiza-
tions fall short: Only half said they
collaborate effectively or very effec-
tively. The extent of collaboration
impacts the process: 85 percent of
organizations that collaborate effec-
tively or very effectively said they
manage the planning process well or
very well, compared to only 11 per-
cent of those who said they collabo-
rate somewhat effectively or not at
all. Along similar lines, nearly half
(47%) of participants reported that
they have only a general idea of the impact of their department’s plan
on the rest of the company.

Most dedicated applications have built-in capabilities to enhance

collaboration and enable sharing of knowledge.

The Power of Software

A major contributing factor to poor use of time and resources and lack
of agility is inappropriate software, especially desktop spreadsheets.
Spreadsheets have inherent technological shortcomings that make
them ineffective for managing collaborative, repetitive business
processes like planning and budgeting. They make it time-consuming
and difficult to consolidate individual business unit plans into a
corporate view. Half (52%) of midsize and larger companies in our
research said that spreadsheets make it difficult to manage their
budget process.

5 © Ventana Research 2016

 Ventana Research: The Digital Transformation of Planning and Budgeting

In contrast, dedicated applications can consolidate plans almost

instantly and still allow individuals to drill into the underlying details of
plans. They also provide in-depth analyses and timely alerts for
managers and executives. It’s faster and easier to create reports in a
dedicated application. Thus companies using such planning
applications can achieve greater returns on the time they invest in
planning and budgeting. In short, dedicated software supports the
transformation of planning and budgeting, making these processes
more accurate, adaptive and action-oriented.

Furthermore, a dedicated application has the potential to make

business planning more useful by enabling an integrated approach. It
allows individual parts of the company to continue to plan as they are
used to doing while making it possible for them to see what other
parts of the company are planning. People can determine, for
example, whether the marketing budget aligns with individual sales
plans or if there are enough people to make the plan work.

Companies aren’t incapable of doing

this today, but they take too long to
do it and don’t get enough value
from the time they invest. They
aren’t able to achieve the kind of ac-
curacy they need nor to adapt
quickly as business conditions
change.

Our research finds a connection be-

tween how well a company manages
its planning processes and the ac-
curacy of the resulting plans: 80
percent of those that manage their
processes well or very well said they
have plans that are accurate or very accurate. Only one-fourth (24%)
of those that said they manage their processes just adequately
reported these kinds of results, and almost none (8%) of those that
manage their processes poorly said their plans are accurate.
Used properly, today’s dedicated applications support better
management of the planning process. They provide a common
environment in which individual functions or business units can create
and revise plans to meet their requirements while making the plans
available to the senior leadership team and the rest of the
organization. Because all are working from a common database, it’s

6 © Ventana Research 2016

 Ventana Research: The Digital Transformation of Planning and Budgeting

relatively easy to combine the most up-to-date data from individual

contributors or to aggregate planning data from multiple sources.

Residing in the cloud, these applications can be easier to deploy than

older ones kept on-premises. Cloud-based software makes it easier to
support broader and more collaborative planning and budgeting across
an enterprise because it is designed to be accessed securely from
anywhere at any time.

Improving Performance and

Competitiveness
Applying technology that while innovative also is practical and proven
can help transform a company’s planning and budgeting. Companies
that integrate business planning and budgeting can improve their
results and competitiveness. Dedicated planning software makes
integrating them practical and helps transform the processes.

Dedicated software helps many roles in an organization. Executives

and managers can quickly and intelligently assess all relevant
contingencies and trade-offs to support their decisions. Each individual
business planning group can work in the same central system,
simplifying integration of their plans into a single view of planning in
the company.

Crucially, a dedicated application uses people’s time efficiently. Having

a timely planning process makes it possible to improve a company’s
agility in responding to change, especially for larger organizations.
A dedicated application makes it easier to focus on performance by
establishing a baseline against which people can measure results, both
business and financial.

To fully understand the business and its challenges, performance must

be measured against business objectives, not just against the budget.
Financial performance and analysis groups that want to transform
planning and budgeting to increase their business value should
evaluate dedicated planning software.

7 © Ventana Research 2016

 Ventana Research: The Digital Transformation of Planning and Budgeting

About Ventana Research

Ventana Research is the most authoritative and respected benchmark
business technology research and advisory services firm. We provide
insight and expert guidance on mainstream and disruptive
technologies through a unique set of research-based offerings
including benchmark research and technology evaluation assessments,
education workshops and our research and advisory services, Ventana
On-Demand. Our unparalleled understanding of the role of technology
in optimizing business processes and performance and our best
practices guidance are rooted in our rigorous research-based
benchmarking of people, processes, information and technology across
business and IT functions in every industry. This benchmark research
plus our market coverage and in-depth knowledge of hundreds of
technology providers means we can deliver education and expertise to
our clients to increase the value they derive from technology
investments while reducing time, cost and risk.

Ventana Research provides the most comprehensive analyst and

research coverage in the industry; business and IT professionals
worldwide are members of our community and benefit from Ventana
Research’s insights, as do highly regarded media and association
partners around the globe. Our views and analyses are distributed
daily through blogs and social media channels including Twitter,
Facebook, LinkedIn and Google+.

To learn how Ventana Research advances the maturity of

organizations’ use of information and technology through benchmark
research, education and advisory services, visit
www.ventanaresearch.com.

8 © Ventana Research 2016