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What makes introduction of a consolidation system successful?

Oct. 2 2019 by Markus Noçon, Senior Partner - 4C GROUP AG

Performance Management Consolidation & Closing

Many groups are forced to replace their solution for group reporting due to providers no longer supporting old solutions. But also the optimisation of the closing processes has many of our customers starting projects for system replacement.

How do you know which new system is the optimal one?

Definition of project targets

The success of a project, such as introduction of a new consolidation system, is usually determined by measuring target achievement. This requires precisely defined targets before the project commences. To prevent misunderstandings, "introduction of a new system" is not a target in itself. Usually, the performance capacity of the processes is to be improved.

Ensuring stability and future capacity of the system is a frequent target if systems are already outdated. In addition to the targets aligned with benefits, projects usually have time and budget frameworks set. Since they can be measured more easily than the collection of expected benefits, such a framework allows for an easier evaluation of a project as "successful" in the short term. I will leave the relevance of measuring benefits for project success up to you.

Criteria for system selection

The criteria for system selection initially depend on your starting point, your framework conditions and your targets. Nevertheless, some typical criteria can be named. 

Functional criteria

First of all, there are the functional criteria that many would think of first. Interestingly, the leading systems barely differ in these. All solutions from leading international providers have become good at consolidation. You can work out your most complex situations here and throw them to the providers to solve in a proof-of-concept presentation. I have supported this very eagerly in the past and tormented many vendors with it. However, this exercise rarely brought about any decisive insights. It is better to have a good look at functions such as multi-level validations, support for complex workflows, and flexibility in supporting alternative structures and simulations using scenarios. That is where you will find significant differences between the leading systems. The decision on how relevant these differences will be for your decision must be your own.

Another important functional area is reporting. All providers now offer high-performance solutions in this field, though they may use different paths. Look at them and assess whether the approaches match your existing landscape.

In addition to consolidating, the group has other, related processes based on similar structures and figures. These are management reporting and planning in any case. The former is based on the figures from external accounting, and the latter can be found in the adjacent column in your financial reports. Therefore, the market leaders offer platforms for all processes of Performance Management (for more details on the subject, see my article "Which consolidation system is best for me?"). 

Because of this, Group Accounting should choose the system together with Group Controlling at all times.

You don't like to hear that, since you wouldn't be solely in control of the decision then? I understand that very well! However, integration always increases complexity. The payoff will come later, and your CFO will surely agree with me.

This has two results: First, you and your colleagues will start system selection together now. Second, your criteria list will expand by the requirements from planning and further requirements from reporting. There is some good news, however: the project does not have to be done at the same time and in combination. 

Usability: user-friendly interfaces improve acceptance

In addition to the hard functional criteria, each system selection also assesses the interface and its "usability". Strictly speaking, this is not a functional criterion. Subjectively, however, the "look-and-feel" is considered one anyway. You will also find clear differences between systems where evaluation is mostly a matter of taste. You wouldn't want to drive even the most advanced car either if it was ugly. After all, you need to get in it every day. However, I advise you not to let appearances alone guide your decision.

Non-functional criteria

We have gone through the essential functional criteria now; however, most system decisions in recent years cannot be tied to such criteria at all. This is because, as mentioned above, all the big systems are now able to consolidate properly. There are also some essential differences in the non-functional criteria that I don't want to keep from you. 

The total costs are decisive, rather than the license fee

As the first criterion, you may be thinking of the software's price. That's right! But let us talk about the total cost of ownership. The software price will let you distinguish roughly between the big platform providers and the local specialist.

You will already know which category fits your corporation best. The price differences between providers in that category will usually level out if you know how to properly purchase software. We can gladly discuss how to best buy software for you in a consultation session.

You can find greater differences based on the effort you need to plan for the implementation. The rule of thumb is that the more flexible and the more powerful the solution is, the more elaborate your requirements for implementation will be. Reliable providers can, by the way, also be recognized because they provide you with this calculation honestly. They do not have to sell through the price alone. "Buying cheap means buying twice" is a generally applicable rule in project business. If you believe in the unrealistic promises of some sellers, you will overdraw your project budget by twice the amount later, and you will probably hear from your CFO about it.

Implementation not only needs a budget, but also consultants who support you in introduction. Availability of sufficient consultancy capacities and experience on the market for the individual solutions should be included in your system selection as a criterion. 

Future-proofness in selecting the provider

Another non-functional criterion is assessment of the system provider. Will the provider still be on the market eight years from now? Will it continue to develop your product? My crystal ball is no better than yours, but there are some indications to partially improve safety. How large is the provider? Is it a candidate for a merger? How important is the solution for the provider? If it's a smaller provider, what will happen if the owner and leading mind retires to settle in Ticino and enjoy the wine there year-round a few years from now? Since when has the solution been on the market, and when is the provider going to develop its successor?

In addition to the functions that every experienced sales employee will be able to present to you convincingly, take a look under the hood. For systems, that means that you should look at how the parameters in the system are set. Once you have successfully completed the project, you need to be able to maintain your own system and develop it further. You will need to adjust structures (e.g. jobs and companies) and develop rules. If this needs programming, you either require further training as a system developer, need to let your IT perform system maintenance, or pick a different system from the beginning. I recommend the third option here. Buy a system that you or your specialist department can develop further without help. That will always keep you one step ahead with new requirements from the IASB or your board. This is much more important to you than the question of how to operate the system. Whether you trust in the cloud or run the system on-premise through your IT department can remain their decision.

Review based on the established criteria

How do you review systems based on all of these criteria? If you have the providers freely present their systems, you will purchase from the provider with the best pre-sales consultant. You weren't looking to find the best sales employee, though, but the best system! I recommend that you define your criteria precisely and completely in writing, disclose them to the provider and then have the solution presented to you live. Check each criterion as you go.

The popular request for information (RfI), in contrast, can be mostly dispensed with. Every provider will tell you that it meets every single requirement. You can save yourself, and them, the effort. Better ask me whom to put onto the shortlist and invest your energy into reviewing the essential criteria on the live system. One thing will hardly be a surprise for you: CCH Tagetik is one of them!

If you aren't fully convinced, chase the vendor out from behind the wheel and test-drive yourself. This is called proof of concept. Define specific showcases of your own and set them up together with your pre-selected provider(s). That will cost you some money but will save a multiple of that amount in the project later.

A detailed overview of the typical criteria named above can be found in our checklist. 

Factors for success

Selection of the right system is perceived as the essential lever for project success by most people in charge. I can tell you with complete conviction born from more than 40 such projects that this is incorrect! True: a suitable system is an essential prerequisite for project success. But then why do so many projects not reach their targets with state-of-the-art systems?

There are many factors for the success of a system introduction. A complete treatment would go beyond the present scope and bore you.

This is my top-five hit list:

  1. The project must be properly set up and managed in terms of craftsmanship.T This means that targets must be defined, activities planned in detail, expenses properly estimated, resources realistically planned, and an experienced project manager installed. All of this costs money and effort, but will pay off multiple times during the project.
  2. Do not underestimate your project. Allocate enough resources for it in terms of budget, time and internal capacities. If you want to climb a mountain, you should be prepared well. You will get sweaty and you do not want to freeze to death in a blizzard. Do not overestimate your condition (plan for enough resources) and do not over-estimate your abilities for difficult climbs (purchase experts).
  3. Experts: Hire an experienced implementation partner to supplement your internal resources. He should already have successfully competed multiple such projects, have mastered the software and be able to provide you with experts who are at least on equal footing with you in professional respect. You may want to choose the implementation partner with the same care as the solution. A good implementation partner will make even the second-best solution a success.
  4. You have picked the right system, made a plan, allocated a sufficient budget and brought the right experts on board. Can implementation start right away? No, unfortunately it cannot. First, you need to draw up a business concept and write it down in detail. You need to make sure that the right things are implemented and can be tested against your requirements. It will also force you to think everything through completely.
  5. The technical concept is to be derived from this business design. A good technical concept makes sure that the structures in the system can be expanded for your future requirements as well. Popular examples include statement of changes, mapping of dimensions for detailed outlines, and mapping of the cost-of-sales method.

What do you think? Leave a comment for us here or contact me in person!

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