International Journal of Advancements in Research & Technology, Volume 2, Issue 5, M ay-2013
ISSN 2278-7763
490
Financial Planning Solution using IBM Cognos TM1*
Swati Bhartiya (Author)
1
Computer Engineering (CMPN), Thakur College of Engineering & Technology, Mumbai, 400 101, INDIA
Email: swati.bhartiya@gmail.com
ABSTRACT
Financial planners and accountants are very comfortable with the use of spread sheets for all kinds of big and small businesses
calculations. But the problem with having critical financial information kept in spreadsheets on individual desktops/laptops is a
big risk as they also do not automatically integrate their information which leads to data inconsistencies and possible errors during data entry or copying and ultimately leads to loss of data and poor data quality.It also poses challenges in integration of information with other critical business applications of the enterprise for business forecasting and expense planning. The current
business scenario is very dynamic and it requires very accurate and timely up-to-date information that is critical for strategic
decision making. It is necessary for the business decision makers to try using new technologies to have integrated information
for faster decision making for strategic advantage. Success in a dynamic marketplace depends on getting the right information
to and from the right people at the right time. Success requires a powerful, flexible financial performance management solution
that scales across a business to drive decision-making from the storeroom to the boardroom. This document provides an insight
about the gaps of the existing procedures for expense planning and introduces a new integrated financial and expense planning
solution from IBM.
Keywords: TM1, Business Intelligence, Expense Planning, Analytics, Financial Performance Management (FPM), Business Performance Management (BPM).
1 INTRODUCTION – NEED FOR FINANCIAL PLANNING
F
IJOART
inance is the lifeline of any business from one end to another; it also plays a vital role in the planning and controlling expense for organizational activities in any company.
Chief financial officer is in-charge of the measuring and monitoring of financial performance. He drives the planning and
budgeting function which is historically prepared on an annual basis. There are numerous problems with this traditional
budgeting and planning process using spreadsheets. It is time
consuming, it slows response times, it lacks of transparency,
and it also sub-optimizes organizational results by limiting
reach. The reason for it is – that it is a lengthy, cumbersome
and time consuming procedure in order to integrate data from
various geographies each with their own definitions into a
single module. Even with faster computing power, many find
that annual budgets cannot keep up with the rapid changes in
the business today. Majority of companies still prefer to use
spreadsheets for budgeting and financial planning operations.
Spreadsheets are used traditionally for data storage, data
management and also for performance management processes
like planning, budgeting, forecasting, consolidation, analysis,
and reporting. Spreadsheets are flexible, user friendly, can
create charts and graphs and readily integrate with other
productivity tools. But the use spreadsheets for primary data
storage and performance management solution have several
shortcomings and associated risks. The associated problems
with spreadsheets include (1) their two-dimensional nature
and limit of the number of rows (2) hard to maintain (3) do not
integrate well with other systems (4) difficult to share and (5)
difficult to understand. Besides, they are very subjective in
nature because they allow operational managers to create their
own assumptions which often do not adhere to corporate
guidance and regulatory compliance. This results in attempts
to coordinate parts that are operating in different spheres
which ultimately give rise to a very disconnected system. In
Copyright © 2012 SciResPub.
case of a change in the policy; it is difficult to track the financial impact of the same through these stand alone spreadsheets.
Data in spreadsheets is stored in two-dimensional spreadsheet
files using unreliable links and complex macros without proper definitions (metadata). For building plans, budgeting and
forecasting a multitude of spreadsheets designed by a handful
of “power users”, who may be scattered overvarious functional units, is used. Collaboration across the different business
units and geographies is done via numerous conflicting and
scattered spreadsheets. Updating and version control of plans,
budgets, forecasts, reports and analyses is very difficult, almost impossible and may not be of any use.
The extensive use of spreadsheets is because we are very familiar with them, have flexible personal-productivity tools.
But they were never designed to handle the financial performance management needs of complex, rapidly growing enterprises in dynamic, highly competitive markets, nor for creating and applying rigorous definitions, auditing, tracking and
controls to business processes. Spreadsheets were never designed to be used as a data store for millions—even billions—
of cells. Neither were they designed for simultaneous use by
hundreds or thousands of users across a company.
Thus various shortcomings with use of spreadsheets highlighted above make it very difficult to integrate huge databases and make mid-term forecasts. It also takes a lot of effort
and time to arrive at such forecasts, usually three to four
weeks and then also the focus remains on few issues and a
fully integrated picture fails to emerge. There is lot of subjectivity and lack of consistency in arriving at various interpretations. It becomes almost impossible to analyze what factors
are contributing to the success or failure. Even though the
faults of use of spreadsheets e.g. for budgeting purposes are
International Journal of Advancements in Research & Technology, Volume 2, Issue 5, M ay-2013
ISSN 2278-7763
well documented, finance professionals prefer to use traditional approaches. Decisions makers require data that is correct, up-to-date, as well as consistent in order to make critical
decisions for better prospects. Thus it becomes pertinent to
make them aware of the better and automated tools which are
available
2 COMPANIES NEED TO CHANGE THE WAY THEY WORK
All companies, both big and small, need to gear up to react to
a dynamically changing business environment. For this they
need their decisions to be informed, quick and effective and
ability to what-if and scenario building. Moreover, they have
to make correct decisions at the very first time because there
may not be any second chance for beating the competition.
Midsize companies lack experienced staff, budget, time, and
they also cannot manage complex, dedicated toolsets data
storage, planning, budgeting, forecasting, consolidations, analytics, and reporting. Hence they use spreadsheet based financial performance management techniques for their needs of
financial planning.
Expenses are typically a major focus of corporate profit and
loss statements. At the corporate level, maximum effort is required to manage expenses and set spending guidelines, while
at the divisional level; line managers make expense decisions
to improve efficiency and productivity. Forward-looking collaboration must occur so that divisional decisions align with
strategic and tactical corporate goals. Executives need to see
how planned expenses fit with corporate goals and how they
affect profit objectives.
They want to see the data that is the result of expense planning. With real-time data access, they can view the scope of
planning for different organizational levels and the degree of
completeness from each contributing business unit. With its
reports and ad-hoc analysis tools, it is possible to see the corporate financial impacts of their decision-making. Because
executives seldom use the ad-hoc analysis tools, reports provide the information most relevant to them. The executive
launch point is the Expense Planning and Control Dashboard,
which provides a general overview of key metrics and results
and implications against established targets without the need
to access the Planning application. There are many solutions
available that provide effective means for data storage and
processing which are listed in Table 1.
491
Vendor/Product
Advizor Solutions
Differentiator
Advanced
Visualization
IBM Solid
In-memory
relational
database
In-memory
OLAP
IBM Cognos TM1
Microsoft Gemini
Combination
Excel add-in
and Analysis
Service enhancement
Oracle Times Ten
Relational inmemory database
In-memory
option to BI
platform
MicroStrategy 9 OLAP
Services
IJOART
Qlikteck Qlikview
Associative
in-memory
analysis tool
SAP BW Accelerator
Combination
in-memory,
column-store
database and
appliance
Advanced
visualization
Tableau Software
TIBCO Spotfire
Advanced
visualization
Highlights
Interactive data
visualization for
discovering patterns and anomalies
Speeding updates
in transaction
processing
Budgeting and
planning with
flexible hierarchies and what-if
analysis
Excel users who
want to interact
with large volumes of data as
personal that can
be shared
Speeding updates
in transaction
processing
Existing Microstrategy deployments experiencing slow query
times
Departments and
workgroups that
want highly interactive dashboards
or small businesses that wish to
avoid data warehouse deployments
Experiencing SAP
BW deployments
experiencing slow
query times
Interactive data
visualization for
discovering patterns and anomalies
Interactive data
visualization for
discovering patterns and anomalies
Table 1 –High Level overview of Solutions available
3 IBM COGNOS TM1 AS THE SOLUTION
Copyright © 2012 SciResPub.
IBM Cognos TM1 integrates business planning, performance
measurement and operational data to enable companies to
optimize business effectiveness and customer interaction regardless of geography or structure. It provides immediate visibility into data, accountability within a collaborative process
and a consistent view of information, allowing managers to
International Journal of Advancements in Research & Technology, Volume 2, Issue 5, M ay-2013
ISSN 2278-7763
quickly stabilize operational fluctuations and take advantage
of new opportunities. It is a multidimensional solution for
budgeting, planning, forecasting, consolidations, reporting,
and analytics. TM1 allows organizations to continuously monitor and manage overall business performance. It integrates
with Microsoft Excel, and enables users to perform agile, selfservice analysis of large, highly complex, and rapidly changing data sets with real-time response. IBM Cognos TM1 Web is
a web-enabled front end that provides read, write, and what-if
modeling capabilities and the IBM Cognos TM1 Executive
Viewer is an easy-to-use self-service reporting and analytics
tool.
IBM Cognos TM1 is a patented 64-bit read-write inmemory OLAP engine that provides compact data storage and
exceptionally fast performance. It has an ease of use, due to a
development environment that enables users to create sophisticated applications with no need for programming or traditional IT skills.
IBM Cognos TM1 is a complete FPM (Financial Performance Management) environment supporting key financial
processes from planning, budgeting, and forecasting to consolidation, reporting, and analytics. Immediate feedback enhances decision-support at all levels of a business. Powered by the
industry’s only on-demand, in-memory, multi-dimension analytics engine, IBM Cognos TM1 deploys easier, reacts faster,
and reaches farther across an organization than any other financial performance management product. It streamlines information gathering, aggregation, and analysis so that more
time can be spent on running as well as growing the business.
This software can automate and manage financial performance management processes by engaging, empowering, and
monitoring executives, line-of-business managers, and staff
across functional areas and business units. For example, IBM
Cognos TM1 helps in creating high-level plans, assign responsibility for providing information, and track progress until
plans are complete.
There is a cost-benefit tradeoff in reviewing expenses that is
part of the bigger picture of business performance. The BI
model provides information to managers and executives so
that they can make informed decisions that drive stronger
business performance. Viewing the details captured by planning contributors from all business units and geographic locations, IBM Cognos TM1 delivers information for operational,
tactical and strategic decisions that drive stronger business
performance and a sharper competitive edge.
Business Performance Management is the continuous management and monitoring of Financial, Operational, and Customer and Organizational performance across the enterprise.
Business Performance Management solutions have the following capabilities:
● Wide deployment
● Collaborative decision making
● Continuous and real-time review and refinement
● Monitoring of Key Performance Indicators
492
needs. Various advantages are listed in Table 2
IBM Cognos TM1
It implements quickly and begins from wher-
Deploys Easier
ever the need is greatest. With self-help components like wizards, workflow, prebuilt databases, sample cubes, and plans, the company’s users can configure their own applications, maintain data, and generate reports
quickly and easily, even across the Web.
Business rules, data, and metadata are shared
across applications so that the company’s
teams work with only one set of rules and
hierarchies. It gives its users self sufficiency
along with solid security to ensure data accuracy and integrity.
IBM Cognos TM1
The IBM Cognos TM1 high-performance en-
Reacts Faster
gine empowers users to perform analysis on
frequently changing data across myriad transactions like daily or hourly sales reviews by
store, brand, or representative; or perhaps
IJOART
A large number of companies worldwide are using IBM
Cognos TM1 to meet their financial performance management
Copyright © 2012 SciResPub.
day-by-day activity across hundreds of service
facilities.
Business problems can be tackled
immediately as the company’s finance executives, planners, controllers, and managers can
change input values—even business models—
and recalculate them on-the-fly.
With the
power of 64-bit in-memory technology to meet
even the most complex needs, it is easy for
rapid planning, budgeting, forecasting, reporting, and analyzing whenever
need be—no
matter how vast the data set may be. For ready
access to valuable information locked away in
back-office applications, IBM Cognos TM1
provides
data
orchestration—user-friendly
prebuilt tools such as an SAP connector and
Turbo Integrator which offers integration capability that streamlines loading multi-source
data. Users can easily create processes to automate data importation, metadata management, and other tasks.
IBM Cognos TM1
A company can engage hundreds of opera-
Reaches Farther
tional
managers—not
just
those
from
fi-
nance—in a collaborative process using guided applications. With a choice of interfaces for
both business users and power users, the
company can leverage everyone’s existing
skills, which means minimal training and minimal IT assistance. Thus it is readily adaptable
for rapid growth and change.
Table 2: TM1’s capabilities
International Journal of Advancements in Research & Technology, Volume 2, Issue 5, M ay-2013
ISSN 2278-7763
4 TM1’S ADVANTAGES OVER SPREADSHEETS:
Eliminate spreadsheets errors: Spreadsheet—based performance management “solutions” are fundamentally errorprone. Whether stemming from users (“hitting the wrong
key”), from logic (choosing or creating an inappropriate formula), or from omission (leaving out a critical model component like a row or column), calculation errors are nearly guaranteed. In fact, recent research shows that some 94 percent of
spreadsheet models are seriously flawed in one way or another. IBM Cognos TM1 offers a centralized, single FPM solution
that encompasses data management, planning, budgeting,
forecasting, consolidation, reporting, and analysis. IBM
Cognos TM1 facilitates high-participation and collaboration
across a company, yet offers managed workflow that enables
closely monitored data collection, rapid aggregation, clearly
defined rules and hierarchies, a rigorous approval process,
role-based security, and a clear audit trail that facilitates accountability and accuracy.
Multi-dimensional business data: Even in smaller companies, financial and business data is simply too complex to be
effectively stored, managed, and utilized in two-dimensional
row-and-column spreadsheets. When there is need to assess
product-line profitability by cost-of-goods-sold, by item, by
customer demographic, by region, by sales rep, and so on,
there is a need for a lot more firepower than a massive stack of
linked spreadsheets and even the cleverest macros can give.
Also when one measure changes, how is it known that
change-effects will accurately percolate all through the
spreadsheet model? Typically, it is not the case.
493
what-if scenarios. The IBM Cognos TM1 Web interface is perfect for a distributed environment where the team members,
work remotely across business units and geographies.
Workflow management: With a spreadsheet-based FPM
solution, managing process workflow is nearly impossible.
There can never be a guarantee if data contributors are progressing according to plan—or if they’ve begun work at all.
Also with spreadsheets, greater participation does not mean
greater effectiveness. Confusion can run rampant and the process can only move at the pace of its slowest participant.
IBM Cognos TM1 helps guide the FPM process by enabling
finance and line-of-business managers to assign functional
responsibility to individuals or groups. Contributors submit
data according to schedule, and tasks are designate as not
started, in progress, approved, rejected, or not delegated. Reviewers monitor progress and accept or reject contributions as
needed. IBM Cognos TM1 makes the entire FPM process highly visible and helps enhance timeliness and accountability.
Version control: With spreadsheets flying back and forth
through cyberspace, there is no assurity of knowing if everyone is working with the most recent iteration of a plan, budget, or forecast. The result is likely a “final version” that’s based
on inaccurate or mismatched data.
IJOART
IBM Cognos TM1 centrally manages business hierarchies,
rules, calculations, and data using in-memory multidimensional cubes with real business identifiers. With either a
user-friendly Web interface or the familiar Excel front-end,
user can read and write into the data set, and then see results
almost instantly. Data can be multi-dimensionally sliced-anddiced to match the planning, forecasting, or reporting needs of
the moment—all in real time. Read/write access is controlled
by role-based security, and model changes are instantly propagated to all users.
Collaboration: Successful financial performance management requires high levels of collaboration and participation:
the greater the cross-company input, the greater the resulting
accuracy and insight. But due to the deployment difficulty and
error frequency, spreadsheet based FPM demands a constrained, centralized process that can represent only a small
part of a company’s stakeholders.
Offering a choice of interfaces, scalable IBM Cognos TM1
allows involvement of more people than in a financial performance management process. Data from all across your company becomes valuable information when it can rapidly flow
via the Web to and from process contributors and management decision-makers. Working documents (“Websheets”) are
visible to stakeholders, and all users have read-and-write capability as required for contribution, ad hoc analyses, and
Copyright © 2012 SciResPub.
IBM Cognos TM1 enables planners, analysts, and managers
to develop iterative plans, budgets, forecasts, reports, and
analyses. For example, suppose a financial manager wants to
revise a forecast using the assumption that revenue in five
regions will increase by 15 percent next quarter. Email alerts
notify analysts and contributors of the revised assumption,
remind contributors that they must submit new numbers or
provide driver information to plan stakeholders. Comments—
such as reasons why a contribution was approved or rejected—can be stored along with each change in task status.
Aggregation: Consolidating input from multiple users and
spreadsheets also inhibits FPM process effectiveness. A single
person or group has to collect the numerous spreadsheets and
unite them in a single version. Even if individual spreadsheets
are error-free, aggregation is a huge task that can drag on for
weeks.
Turbo Integrator streamlines data aggregation and performs fast and precise data loads. It easily connects to any
ODBC-compliant database to load data. Depending on the
company’s resources and needs, Turbo Integrator can import
data from ERP systems like SAP and Oracle, from data warehouses, from Excel workbooks, and even ASCII files from legacy systems. It can also export data into ASCII files or any
ODBC compliant database to facilitate reconciliation.
Real-time FPM: An error-prone, cumbersome spreadsheetbased performance management process does not allow a
company’s results to beanalyzed, to react to a market change,
to ask and answer “what-if” questions, then alter plans, budgets, or forecasts rapidly and effectively. Real-time response is
International Journal of Advancements in Research & Technology, Volume 2, Issue 5, M ay-2013
ISSN 2278-7763
494
impossible, and—as a midsize business—there is a competitive disadvantage against larger companies.
sands of elements. Additionally, it is possible to hold multiple,
unlimited hierarchies of these elements.
IBM Cognos provides critical performance information
when needed. At the core of IBM Cognos TM1 is a powerful
in-memory, multidimensional engine that enables lightening
fast what-if calculations. IBM Cognos TM1 is the only multidimensional FPM product that can model what-if scenarios in
real time. In fact, IBM Cognos TM1 was named the best in performance for data load/calculation times and fastest query
times in a recent independent OLAP survey. Also because
Turbo Integrator imports data efficiently, user can assess corporate performance in minutes, not hours or days.
IBM Cognos TM1 comes with a built-in tool for building or
updating dimensions and for loading data. This tool, (Turbo
Integrator), can be used to pull data from many sources, including relational databases used by all modern ERP systems,
Excel spreadsheets, and text files. It can also be used to automate processes such as adding years to a time dimension and
zeroing out portions of the database. This efficient ETL tool
allows for significant reduction in cycle time in the administration of a TM1 application. Large volumes of metadata and
data can be loaded and calculated within minutes.
Relevance and credibility: Spreadsheet-based approaches
to financial performance management are so flawed and cumbersome that line-of-business managers regard the entire process as irrelevant and untrustworthy. In-the trenches staff
have learned by hard experience that “the numbers” are likely
wrong, out-of-date, and out-of-touch with reality.
Finally, IBM Cognos TM1 has a very strong feature set. The
feature set includes a robust Excel add-in called Perspectives,
which can be utilized for development of an application, input
to the database, and reporting. Security is also strong, with the
ability to secure each individual cube, dimension, or process,
including cell-level security. TM1 Web has slice & dice, nesting, "sandboxing" and graphing. IBM Cognos TM1 offers a
robust, centrally-managed, real-time, planning, forecast, reporting and analysis tool.
IBM Cognos TM1 helps promote both relevance and credibility. Since users across the company are always working
with the most current data set, results are more believable and
better as it reflects daily reality. Credibility is also enhanced by
advanced TM1 security functions—more secure data is more
reliable data. Individual access can be controlled based on the
role each person plays in the FPM process. For example, a plan
manager can easily administer and monitor all tasks and functions in a forecast cycle. Also a built-in audit trail— along with
IBM Cognos TM1’s managed workflow— further establishes
data credibility and facilitates statutory compliance.
TM1’s advantages over IBM Cognos Enterprise Planning:
IJOART
IBM Cognos TM1 at first glance has features quite similar to
it. It uses a multicube architecture and it supports complex,
cross-cube calculations. TM1 applications typically involve
fewer cubes and also have a cleaner design as compared to
IBM Cognos Enterprise Planning. TM1’s calculations can be
cross-dimensional whereas Cognos Enterprise Planning’s calculations are confined to a single dimension within the cube.
The primary differentiating feature of IBM Cognos TM1 can
be found in its efficient calculation engine and its method for
storing data. Most, if not all, other OLAP applications store
data on disk. When users enter data into other planning applications, a read/write from the hard disk is required. These
applications require a calculation of the database to reflect
changes in items that have calculations associated with them.
In contrast, IBM Cognos TM1 calculations and data storage
happens in RAM, so data that is entered is immediately calculated and retrieved. As a result, data is available real-time,
providing reports that can be generated at any time, while
reflecting the current state of the database.
The second differentiating feature of IBM Cognos TM1 is
scalability. IBM Cognos TM1 cubes have the ability to hold
many dimensions, and these dimensions have the ability to
hold many elements. It is common to have customer lists, organizational units or product lists containing tens of thouCopyright © 2012 SciResPub.
5 FUTURE SCOPE
Business Intelligence is used to understand the capabilities
available in the firm; the state of the art, trends, and future
directions in the markets, the technologies, and the regulatory
environment in which the firm competes; and the actions of
competitors and the implications of these actions. IBM Cognos
TM1 is an upcoming analysis tool that provides Business Intelligence. It provides faster data refreshes provides more current information. It provides more BI functionality for a wider
group. It helps the performance managers with the entire decision making process and thereby eases and fastens the procedure. The entire project planning is reduced from 45 days to
almost 10 days. It provides faster data refreshes provides
more current information. There is seamless integration with
SAP and Microsoft investments. It provides more BI functionality for a wider group. It also supports multi-dimensional
analysis. It has familiar Excel & Web interfaces. Predetermined
model requirements for scenarios are not required for building
an application. There is an unlimited flexibility for end user
scenario building. The future roadmap for IBM Cognos planning and reporting tools includes harnessing the power of
TM1 with the intuitive user interface of contributor.
The TM1 calculation engine is replacing analyst as the
modeling tool. So, while these products will be supported going into the future, new development is going into further enhancing TM1.
6 CONCLUSION
Clearly, a spreadsheet-based approach to Financial planning and performance management is inadequate to meet the
challenges facing a growing midsize business. IBM Cognos
TM1 supports key planning, budgeting, forecasting, consoli-
International Journal of Advancements in Research & Technology, Volume 2, Issue 5, M ay-2013
ISSN 2278-7763
dation, reporting, analytics and data management processes in
one integrated solution. Immediate feedback enhances decision-support at all levels of businesses, so that one can spend
more time on what he/she does best—running and growing
businessesIBM Cognos TM1 integrates business planning, performance measurement and operational data to enable companies to optimize business effectiveness and customer interaction regardless of geography or structure.
REFERENCES
[1] “A Real-World Financial Performance Management Solution for Midsize Organizations”, IBM
Corporation, February 2008.
[2] “Transforming spreadsheets: planning, budgeting
and forecasting for midsize companies”, IBM Corporation, Canada, August 2010.
[3] DevelopersGuide,http://publib.boulder.ibm.com/infocent
er/cogic/v1r0m0/index.jsp
[4] “Migrating to TM1”, QueBIT Consulting 2010.
IJOART
Copyright © 2012 SciResPub.
495