The broad topic of enterprise reporting, budgeting, and forecasting is one that speaks directly to my experience as an accountant and which, for so many years, was something that only the financially trained could understand. Even then, 'understand' as a qualification is something that even the best of us knew was largely based on incomplete and/or inaccurate information. Thankfully the world has moved on and today we are awash with data but we still see plenty of businesses wedded to the spreadsheet as their 'go to' resources for what should be a tightly controlled discipline.
At the risk of sounding like a broken record, I have, for the last 22 years, penned an annual rant about the idiocy of using spreadsheets. But as many an accountant tells me, spreadsheets will live with us until hell freezes over. That kind of thinking makes no sense to me, having understood from a very early time (c.1980) that spreadsheets are general purpose tools that, while capable of producing EPM type reports, were never designed with that purpose in mind. Add in the fact that very few spreadsheets used in this manner were ever documented and you quickly realize that the day of reckoning for spreadsheet hell is only a matter of time. Check this story from 2008, in which I document some spectacular failures such as:
...the mortgage provider that overpaid some $270 million for a debt book, through to energy futures overpaid by $9 billion down to the $2 million a month interest calculation error. Heck, there's even an annual European spreadsheet risk conference.
And more recently:
As in the spreadsheets of widely cited economist Thomas Piketty, however, even minor infelicities undermine credibility. With Goldman in line for a fee of nearly $50 million, Tibco surely expected exemplary attention to detail. Then again, shareholders might have thought Chief Executive Vivek Ranadivé and finance lieutenants would have the enterprise’s dollar value to hand in real time, and to have noticed when Goldman’s number was off in the fairly obvious second significant figure.
Tibco touts the ability of its products “to capture the right information at the right time.” The lesson of Goldman’s snafu for companies and financial advisers alike is to double-check, in spreadsheets and any other software, that’s what is really happening.
Now fast forward to 2017 and this Host Analytics customer story.
Functionally, Host enables LT Apparel to plan and budget in near real-time but more important, the company can now model without worrying about the impact that spreadsheets might have on the outcome. At the same time, report times have been dramatically reduced to the point where report production is almost trivial.
There is a lot more to like about that story - here's another teaser:
I inherited a bunch of spreadsheets that likely built up over time. When I started I fancied myself as quite the Excel expert. No budget model could intimidate me but what I found wasn’t close to usable. The problem was very old versions of Excel integrated into newer versions which caused issues of itself. There were different support file for every calculation you could think of. Ultimately when you get to a consolidation it would have links to up to 30 other workbooks. Some of the calculations, tabs and so on changed and there was no clean way to get rid of old content. I understand the attachment of Excel but it was never intended for what its become.
I rest my rant.
If you still think that doesn't matter then consider this - we are now talking about operational decision-making in the moment. That directly impacts the EPM numbers. How are you going to manage that level of complexity or context without a specialized EPM solution such as that from Host Analytics? I have no idea but am willing to play whack a mole with those who think they have an answer.
And while it is relatively easy for companies to put forward strong customer stories, it is on the customer show floor where we find that the proverbial rubber hits the road. This from Brian Sommer who attended Host Analytics customer event last May:
I had conversations with customers and prospects at the show. They like Host. One of the customers, a major university, has financial planning issues no one would want. They have to deal with dedicated funds, academic calendars, etc. Their use of Host helps them a lot.
More to the point, I am a firm believer in the idea that finance is at the center of the organization and, that with the right tools, has the ability to act as the cross-functional glue that holds the business together. How might this work?
Finance holds the EPM reins but it is the departmental leader who has to create and parse budgets, forecasts and the like. Modern solutions like Host Analytics make that easy so that while finance remains in charge of the technical roll up, they can actively help the operational leaders come to the best answers. That requires getting from underneath the drudge of checking and rechecking numbers, a key comfort component of what Host offers.
As we were finalizing the deal, Host Analytics was acquired by Vector Capital. As Brian Sommer said:
Deal terms and other information have not been released. One source noted that by the mid-2017 timeframe, the company had already raised $80 million in venture capital and had approximately 700 customers. With this deal, Dave Kellogg (CEO) and Ian Charles (CFO) will be exiting the company. Dave promised me he’ll give me a call on this once he can answer the questions he knows I’ll be asking.
Whatever the inside baseball looks like that is of less interest to me than what happens next on the development front. How you choose to view that is your choice but I like Dave Kellog's opus as he exited the company:
First, we did an enormous amount of groundwork during my tenure at Host. The biggest slug of that was on product and specifically on non-functional requirements. As a fan of Greek mythology, the technical debt I inherited felt like the fifth labor of Hercules, cleaning the Augean stables. But, like Hercules, we got it done, and in so doing shored up the internals of a functionally excellent product and transformed our Hyderabad operation into a world-class product development center.
Second, the market has moved in Host’s direction. Since I have an affinity for numbers, I’ll explain the market with one single number: three. Anaplan’s average sales price is three times Host’s. Host’s is three times Adaptive’s. Despite considerable vendor marketing, posturing, positioning, haze, and confusion to the contrary, there are three clear segments in today’s EPM market.
- Anaplan is expensive, up-market, and focused primarily on operational planning.
- Adaptive is cheap, down-market, and focused primarily on financial planning.
- Host is reasonably priced, mid-market, focused primarily on financial planning, with some operational modeling capabilities.
Host serves the vast middle where people don’t want (1) to pay $250K/year in subscription and build a $500K/year center of excellence to support the system or (2) to pay $25K/year only to be nickeled and dimed on downstream services and end up with a tool they outgrow in a few years.
OK - so every outgoing CEO gets to toot their horn to a degree but then we know from experience that Dave K is the real deal. It will be interesting to see how his assessment pans out as we not only follow Host Analytics more closely but also get deeper into the product and customer stories.
In the meantime, I leave you with this morsel: