Two recent articles in The Wall Street Journal reignited the debate between spreadsheet defenders and foes. Excel is perennially derided by software marketers selling replacement solutions, yet its usage continues to proliferate. So we need to ask, why are spreadsheets used so often within critical business processes? More often than not, the smart business decision is to keep those spreadsheets in place.
Ignore the CFO! 3 Reasons to Keep Your Spreadsheets
Two recent articles in The Wall Street Journal (Stop Using Excel, Finance Chiefs Tell Staffs , Finance Pros Say You’ll Have to Pry Excel Out of Their Cold, Dead Hands) reignited the debate between spreadsheet defenders and foes as evidenced by hundreds of posts in various social media channels. Excel is perennially derided by software marketers with replacement solutions (e.g., “Spreadmarts are bad!”), yet its usage continues to proliferate. If it’s so risky, so error-ridden and/or inefficient, why is it used so often within critical business processes where the stakes are high? There is no single, one size fits all answer. But more often than not, the smart business decision is probably to keep those spreadsheets and/or spreadsheet-based models in place. Here’s why:
- One could argue that spreadsheet usage is one of the purest manifestations of capitalism and the principles of efficient markets. If a spreadsheet adds value, it is used. If not, it’s quickly discarded. The benefits and costs accrue directly to the person/group that built and maintain it. Accordingly, people only build what they need and they make sure it works and continuously adds value. This is what end-user controlled computing (EUC) is all about, enabling agility and innovation to create significant competitive advantage. This Darwinian dynamic of spreadsheet usage is unmatched by any IT managed application. As one example, industry statistics estimate that 60% to 80% of the centrally administered business intelligence platforms are not used. Even if those estimates are off by half, how can that dismal adoption rate be rationally used to justify replacing Excel? Given its low cost and universal accessibility, the ROI on Excel repeatedly delivers the maximum bang for your buck.
- It is impossible - repeat, impossible - for centrally-administered IT applications to keep pace with the data demands of an agile, modern business. That is not offered as a cheap shot at IT, it is a stark reality. With each passing day, new data sources become available and older sources lose their relevance. Indeed, certain transactional processes and other standardized reporting are more efficiently done by IT-managed applications. But typically, that’s not where the transformational business value is derived. Using the latest data, analyzing that data within the context of new sources or the latest proprietary model, is where valuable insights come from.
The best insights come at the intersection of various data domains and they happen in real time. Data warehousing projects that last months (if not years) don’t come even remotely close to the speed required. To have the agility and flexibility to analyze data at the intersection of disparate domains, or to rapidly apply innovative mathematical methods, you need Excel. Not that doing everything in Excel is healthy. But there is a happy medium that you need to mutually agree within your firm.
- Regardless of technology, in the end, human error reigns. And it’s fair to say that end-user controlled applications (spreadsheets being the #1 file type) are more prone to error. In addition, spreadsheet-based applications that are used in critical business processes typically have few (if any) controls and this translates into higher information risk than an IT-managed application. But the solution is not to throw away the spreadsheet (or other EUC). Why incur the expense of new application development and testing to replace something that is proven to reliably work?
It makes no business sense to impede creativity or take away the flexibility that is vital to high performance. Fortunately, there is a middle ground. The solution is twofold: (1) enable error-free spreadsheets, and (2) to assess the risk and put better controls on your EUCs. Bring them to acceptable levels of risk consistent with, or at least closer to, the inherent risks of IT-managed applications. There are software tools available to help with both of these solutions.
So in closing, should you really defy your CFO? Probably not. That might be a career limiting move on par with being responsible for a material spreadsheet error! But when these conversations happen within your company, don’t choose sides and digress into the stereotypical “good vs. evil” emotional battle. A business need or opportunity exists… find the most effective way to address it while incurring acceptable risk. EUCs that underpin a critical business process yet don’t have effective controls represent an unnecessary, and hence unacceptable risk. But stay focused, don’t succumb to an emotional impulse to throw the baby out with the bath water. Address the core issue – the lack of effective tools to detect spreadsheet errors and lack of effective controls for end-user controlled files. Good IT governance principles are important regardless of whether it is IT-managed or an end-user controlled application. Progressive IT organizations understand that. They should play a constructive role in helping get effective controls in place for your critical spreadsheets. If they don’t, then perhaps that’s a better conversation for you to have with your CFO.
For more information on spreadsheet & EUC risks and how to reduce them, read our white paper, Taming the Spreadsheet Menace.