Spreadsheets Tug of War
It is estimated there are some one billion Microsoft Excel users analyzing and manipulating corporate data, which is hardly surprising when Microsoft Excel (and other spreadsheets) are loaded on over 90% of the computers in use today.
It is easy to see why. They are so easy to use, quick-to-build and allow us (often with minimal training) to turn data into useful information to aid decision making, and to aid presentation of complex scenarios.
But they come at a price; they fundamentally undermine the unity of data in a business enterprise.
SMEs & Spreadsheets
If you are an SME, it is quite probable that you are using QuickBooks, the world’s leading SME financial control system. If you are an SME who makes, buys, or sells stuff, you will probably be supplementing QuickBooks with spreadsheets for stock control.
But in addressing the QuickBooks stock control shortcomings by using spreadsheets, you have created bigger problem for yourself as you now have multiple versions of the truth!
You have spawned several, local departmental spreadsheets operating largely autonomously. This is wonderful for the department – they love it! They have their data as they want it, analyzed, and presented in a form that works for them.
But, believe me, it is not great for you, the CEO. It is not uncommon to find discrepancies in the reported stock-on-hand figure, with sales saying you have ten available, yet purchasing say you have only eight and production thinking you have sixteen!
This maybe down to data-entry errors, it may be down to timing. Whatever the reason, misinformation is all too common.
How on earth can you make decisions when you don’t have accurate data?
The Unexpected Benefits of ERP
One of the massive hidden benefits of implementing an ERP system in a smaller company is that as a by-product of installing the software and training your team, you create a joined-up company. You brush aside the departmental spreadsheets in favor of single integrated business system that you all use. One common set of data across the company. One version of the truth. Some rigor might be needed during implementation to stop the departments from continuing to use their local spreadsheets that are so familiar and easy. Education is the best way, making sure all team members buy into the need for a single source of shared data. If that doesn’t work, tougher measures maybe needed! You cannot afford to have terrorists undermining the benefits of creating a joined-up company.
So then, that’s an end to spreadsheets?
No, of course it isn’t! Spreadsheets still have their place as a speedy, fleet-afoot, local analysis tool. But you must police this. You must understand that whilst they are fantastic tools to supplement an ERP system, they can be very dangerous and damaging to your business if used unwisely.
The main drawback of spreadsheets is that they are non-collaborative. When VisiCalc, the world’s first killer app, popped into life in 1979, the beginning of the PC revolution, and spawned and entirely new business planning industry, it was non-collaborative by design. It was a local tool for local work and local decision making. Microsoft Excel, today’s most popular spreadsheet by a country-mile, continues the tradition.
Spreadsheets – some things to consider.
Programming is a Profession. Spreadsheets enable you to easily build local applications manipulating and storing local data. You are writing mini programs. In an ERP system, the programming is done by trained programmers, who are taught good practice from the outset. No work starts without a signed off and agreed specification that is written down. All development is performed within a rigorous quality-assured environment. Testing is a formal process that often takes longer than writing the code. Everything is fully documented, and all developments are subject to strict release-control procedures. All this protects, you, the user. Tell me, when you write your mini app in your spreadsheet, do you do all this? Of course, you don’t. And the results are often unintentional errors.
Spreadsheet Error. Both in calculation and in data entry. I guarantee there are errors in the spreadsheets in your business now. Their impact can be small or cataclysmic. A utility company found that in a lengthy spreadsheet, parentheses were out of place and projected gains fell from $20m to $25m (Deloitte). Fidelity, the financial services giant, reported a $1.3bn profit instead of loss as an employee forgot to add the minus sign and the company paid out to shareholders on the profit. (Quandary Consulting Group).
Security and Governance. An ERP system imposes governance and aids security. No one can see data unless they are authorized to do so. No one can change data without the correct levels of security and governance. Your company data cannot be tampered with; it cannot be intentionally or unwittingly shared with third parties. This is not true of spreadsheets!
Let’s end with some stats!
70% of US firms (surveyed by Deloitte) confirmed heavy utilization of spreadsheets for critical portions of the business.
88% of spreadsheets contain errors (Spreadsheets of Killing Your Business, Jason Stevens)
81% of small businesses cite flexibility as the key driver for their adoption of spreadsheets.
Therein lies the spreadsheet conundrum. The tug-of-war if you wish. On the one hand you want speed and flexibility and the ability to manipulate data at will. On the other hand, you want safety, security, governance, and data accuracy.
So please understand the benefits and risks and use the tools for the purpose for which they were designed.
If you don’t yet have an integrated business system at the heart of your business, then you probably don’t have a joined-up business and you probably don’t have one version of the truth.
Once you have one, and you are all singing off the same hymn sheet, then use spreadsheets wisely, for local data analysis only. And do be aware that it all to easy to email a spreadsheet outside your company’s firewall and into the hands of third parties who maybe less in their sharing of the data than you and your team.
Don’t give-away your company’s secret sauce too cheaply!
This paper is written with help from analysis by Vendata Research and Deloitte.
Andy Makeham has enjoyed a lifetime in software business development, as a programmer, implementor and entrepreneur. He has grown, bought and sold many business software companies and floated one on the public markets. He has worked with private and private equity owners. Today Andy acts as a business development advisor to the software sector. In that capacity he is working with SOS Inventory.