A critical look at Gartner’s Magic Quadrants for FP&A and FC

In recent months, the ‘Magic Quadrant for Cloud Financial Planning and Analysis Solutions‘ (FP&A) as well as the ‘Magic Quadrant for Cloud Financial Close Solutions‘ (FC) were published. For each field a companion ‘Critical Capabilities’ paper was published as well. How relevant are these papers for your situation? And do they add value for your software selections?

The difference between the Magic Quadrants and Critical Capabilities

In the Magic Quadrants (MQ), Gartner ranks the suppliers in 4 quadrants based on 2 axes: ‘execution’ and ‘vision’. The software vendors pursue the Leader-quadrant; they do everything they can to convince Gartner of their vision and their success. And after the Magic Quadrants are announced, they publish rousing press releases with selective quotes from the reports, related to their status or progress within the MQ.

The Critical Capabilities papers focus more on product functionalities for organizations of different sizes, as well as specifically for organizations in Europe.

Practice versus the Magic Quadrants

As an independent player, we are involved in dozens of tool selections per year. Looking at our experiences, a number of elements from the Magic Quadrants differ from our findings during tool selections. What are the differences, and what are they caused by?

The 5 most notable conclusions:

1. Different requirements in the Dutch market

On one hand the differences arise from the Dutch market and associated specific requirements such as the Equity Pick-Up. On the other hand, the presence of U.S. or local suppliers and implementation knowledge plays a role. The rapid developments in this market have an impact as well. After all, the Gartner MQ has been out for 8-9 months at publication, and often relies on customer experiences that do not always reflect the latest version.

We also see that some vendors convince Gartner they provide a certain functionality (check-in-the-box), whilst we know that this functionality is not mature enough for implementation, and on top of that is hardly further developed.

2. Growing interest in a platform-thinking

A few years ago, the Netherlands was primarily focusing on consolidation. Nowadays we are seeing a growing interest in a broader view of Performance Management: inclusion of financial (driver based) planning, tax provisioning, narrative reporting, integrated reporting, XBRL, (sub)ledger account reconciliation, etc.

The result is an increasing interest in an integrated approach to financial processes and reporting, with possible advantages for platform vendors such as Board, CCH Tagetik or OneStream. However even with an integral approach a ‘best-of-breed’ planning solution next to a consolidation solution could very well be the best choice. Integration between these processes should then be an important point to validate!

3. Integration of S&OP with FP&A

Similar to this is the growing focus on integration of S&OP (Sales & Operational Planning) with FP&A. At Finext, we increasingly see this in our selection processes. However, it is not taken into account by Gartner, as these processes are evaluated individually in separate Magic Quadrants.

4. Maturity of the financial process

The consolidation process is usually very mature: the data collection and reporting processes are relatively stable, and changes often limit themselves to ‘some new accounts or reports’. Major process changes such as the change of a functional to a divisional or matrix organization rarely take place. New standards such as IFRS 15/16, which have a major impact on valuations, also have relatively few consequences for a solid consolidation application.

On the other hand, the planning processes of many organizations are often less mature. Significant parts of these processes, such as the interaction between departments and the associated workflows, change every few years – especially within fast-growing organizations. Flexibility in planning tools to move with these changes can therefore be a more important aspect in comparison with consolidation tools.

5. Decentralized maintenance

Not every organization needs it, but the need for decentral maintenance can have a huge impact on the selection – whether it is needed for a series of planning models that need to be maintained by different departments, or for consolidation & reporting specs that vary by division and need to be maintained locally. The extent to which this is supported varies greatly.

On the other hand, it is underestimated to what extent the ideal situation ‘maintenance by the business user’ is feasible – of course also reinforced by the optimistic stories of the tool vendors. Gartner seems to have little regard for this. In the FP&A Critical Capabilities report, the picture for ‘product or service scores’ in this respect differs strongly from our observations in the Dutch market.

The ‘best solution’ varies per organization

The conclusion? Gartner does offer insight into the use of Performance Management solutions in organizations worldwide. However, it mainly gives you a picture of other types of organizations in other countries. Also, the software vendors have more influence than you would expect or like. As a result, the Magic Quadrants offer too little guidance for the Dutch market. After all, a tool selection leads to a substantial investment in effort and money. It would be a shame to base this choice on information that is not necessarily relevant to your situation.

A well-founded tool selection for your organization?

We are happy to share our experiences with you, and jointly select the best tool for your organization. With more than 150 Performance Management consultants, Finext has extensive in-house product- and implementation knowledge of more than 12 of the relevant solutions in the PM market. As an independent player we are not limited to a few software partners, so that we can really base our advice on your specific situation.