Scoping Out the Emerging Spreadsheet Management Market

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Summary Ventana Research has been on the leading edge of identifying issues posed by spreadsheet use in finance and other corporate functions. In our research studies, we have documented the negative impact that inappropriate use of stand-alone spreadsheets has on core business processes. We coined the term “enterprise spreadsheet” in 2004 to identify a product category as a contrast to the desktop spreadsheet’s lack of data integrity and referential integrity, as well as the difficulty it presents for users to control and audit it. We recently completed an analysis of the developing market for a class of applications that perform spreadsheet management. We estimate the market for these products (as well as support and maintenance of them) will grow significantly, from about $15 million this year to $500 million by 2011. View The electronic spreadsheet has transformed the workplace, spurring productivity, particularly in finance organizations. Many users see it as a quick and inexpensive way to handle recurring enterprise processes. However, when pushed beyond its role as a personal productivity tool, the spreadsheet wastes time. When it is forced into duty in recurring enterprise processes, the benefit of versatility is offset by errors in manual data entries and formulas and their lack of referential and data integrity. These inherent defects lead to an increased risk of financial misstatements, erroneous decisions and many more mistakes and omissions with implications for legal and regulatory compliance than more automated methods produce. Inefficiencies multiply as people struggle to find data entry errors, inaccurate formulas and mistakenly hard-coded values. Microsoft Excel has dominated the spreadsheet market for the past decade, and little innovation has occurred to address these fundamental issues. Now this is changing. For its part, Microsoft is offering major usability enhancements to the application and will introduce PerformancePoint, a tool companies can use for many collaborative processes for which they now use spreadsheets, in mid-2007. More significant, though, is an emerging class of applications that enable companies to manage the unruly mass of desktop spreadsheets. Methods for auditing, tracking and controlling spreadsheets exist within Excel, but we find them profoundly inadequate for all but the simplest requirements. To address these shortcomings, a significant new class of applications has been emerging that enables corporations to manage and control stand-alone spreadsheets more effectively and completely. We call these spreadsheet management tools. Vendors include ClusterSeven, Compassoft, Mobius, Lyquidity and Prodiance. Some vendors offer Excel add-ons that can help prevent one or several audit and control problems. Other applications provide a more comprehensive set of detection, management and control functions; they enable corporations to find and trace every spreadsheet on every desktop or laptop on the network, to provide a comprehensive range of controls for error detection and access, to track changes and use and to monitor all spreadsheets in use and the relationships between them. All companies will find error detection and formula validation a boon, and those that must comply with the Sarbanes-Oxley Act should be able to reduce their internal and external audit costs and the risk of material misstatements in their financial statements. (Please note that we exclude from the spreadsheet management category software for spreadsheet access and delivery, or applications that use Excel as an interface or offer a grid interface with some spreadsheet-like behavior. Such products address only indirectly the issues posed by the mass of uncontrolled spreadsheets.) We expect total potential revenue for the spreadsheet management market to approach $500 million by 2011, up from about $15 million this year. By the end of that period, we project the North American and European markets will be about the same size (each just under half of the total), while the rest of the world will account for slightly more than 10 percent of license sales. The rapid market growth will be driven by the substantial value these applications can add in preventing losses from errors and increasing productivity and auditability. We calculate that worldwide, the available market is approximately 3.9 million users (or about 2.6 percent of the licensed versions of Excel). Of this sliver of Excel users, our worldwide demand model assumes 19 percent will have purchased licenses between 2006 and 2011. Assessment After a decade of limited innovation, new advances will have a profound impact on how companies execute many of the business processes that involve spreadsheets. Since there has been so little new in so long, many executives and managers at first may remain oblivious to the scope of the problems stand-alone spreadsheets pose and therefore the substantial payoff they can achieve from investing in spreadsheet management tools. While we continue to advise companies to replace entirely spreadsheets used in sensitive processes (such as financial closing or post-closing activities) with greater automation using enterprise applications, this applies to only a fraction of all the stand-alone spreadsheets in use. Since the spreadsheets used in enterprise processes or recurring analyses are not going away, corporations must find ways to control them and limit their negative impacts. The curious thing about spreadsheets is, because they are so useful in so many ways, it is hard for people to recognize that frequently they are a problem. Rather than banning or placing too many controls on them, spreadsheet management is a practical way of imposing “tough love” on their use. About Ventana Research
Ventana Research is the leading Performance Management research and advisory services firm. By providing expert insight and detailed guidance, Ventana Research helps clients operate their companies more efficiently and effectively. These business improvements are delivered through a top-down approach that connects people, process, information and technology. What makes Ventana Research different from other analyst firms is a focus on Performance Management for finance, operations and IT. This focus, plus research as a foundation and reach into a community of over two million corporate executives through extensive media partnerships, allows Ventana Research to deliver a high-value, low-risk method for achieving optimal business performance. To learn how Ventana Research Performance Management workshops, assessments and advisory services can impact your bottom line, visit www.ventanaresearch.com.
2006 Ventana Research