Do you really need the Financial Planning & Analytics Rolls Royce?

I have seen a lot of change in the Financial Planning & Analytics (FP&A) space over the last 20 years but one thing was constant: it’s not cheap.

I just came back from a conference where I got first-hand proof when asking about the required investment for specialized FP&A software. The answers I got from some of the now listed vendors (or backed by heavy VC investments – investors that likely want to see quick returns…) were in the range of $80k+ for software and then typically twice that for the consulting investments.

The Organized Rip-Off…

This strategy of “milking the market” (either dedicated FP&A but equally so the ERP behemoths) has worked for many years, as vendors played on the budget power of their target audience. If the CFO -the ultimate money authority in an organization- says “I need that”, it usually happens.

This situation resulted in a market place that I would dare to call at a minimum overpriced and tending towards “rip off.”

FP&A Runs Better on Proven Standard Platforms

Yes, FP&A processes are complex, but it’s not rocket science: more than competitive, interactive financial reports with live connections to the source are now available in Office productivity or analytics solutions costing a few ten dollars/user/month.

Standardized cloud systems -particularly for ERP systems- enable adding financial data warehouses with a click. These are not just for read purposes but provide high performance, concurrent write back for planning and forecasting, even with complex allocation and distributions.

You want AI, predictive analytics, and complex forecasting with this? No problem, above mentioned approach will give you all that as open source (r, Python, etc.) or as reasonably priced off-the-shelf cloud capacity, with massive community support.

The best part of it all: the knowledge to maintain and even extend the solution is typically already in house or available from an extensive pool of community experts. These offer their services at a competitive market rate as they don’t have the bargaining power benefits that proprietary, FP&A specialist vendors enjoy.

Considering this, I would ask a few questions when you are proposed to invest the price of a Rolls Royce alongside 50 days of $4,000 a day consultants by your friendly legacy FP&A software vendor…

(Martin Kratky is the CEO of Acterys and has worked with most major financial Planning & Analytics (FP&A)  solutions over the last 25 years)

Key Takeaways

1. Financial Planning & Analytics (FP&A) software has consistently been associated with high costs, making it an expensive investment for organizations. 
2. Some FP&A vendors, including those backed by significant venture capital investments, have quoted prices upwards of $80,000 for software licenses and double that amount for consulting services, contributing to overpriced solutions. 
3. Market Manipulation: Vendors often capitalize on the budget authority of CFOs, resulting in a market that could be considered overpriced and potentially exploitative. 
4. Competitive, interactive financial reporting tools with live data connections are now available within Office productivity and analytics solutions at a much lower cost, typically priced at a few dollars per user per month. 
5. Standardized cloud systems, especially for ERP systems, allow for easy integration of financial data warehouses. These systems offer high performance and concurrent write-back capabilities for planning, forecasting, allocations, and distributions.

FAQs

• Why has FP&A software traditionally been considered expensive?

FP&A software has often been associated with high costs due to factors such as specialized solutions and consulting services. Vendors have leveraged the budget authority of CFOs, resulting in higher pricing structures for their products.

• Are there more cost-effective alternatives to specialized FP&A software?

Yes, there are alternatives that offer competitive financial reporting, live data connections, and interactive features at a significantly lower cost. Standardized cloud systems, especially for ERP, provide cost-effective options with advanced planning and forecasting capabilities.

• How can organizations leverage AI, predictive analytics, and complex forecasting without exorbitant costs?

Organizations can utilize open-source tools like R and Python or opt for reasonably priced off-the-shelf cloud solutions with strong community support. This approach allows them to access advanced analytics capabilities without breaking the bank.