How Much Have Oracle and SAP ERP Mislead on Speeding the Month End Closing Process?

Executive Summary

• Oracle and SAP have both sold their ERP systems based on a much faster month-end closing process.
• We analyze how accurate these vendors have been on this topic.

Introduction

For whatever reason, both SAP and Oracle promised far faster a month-end closing process to their ERP customers. These claims have not born themselves out on SAP or Oracle ERP cloud projects.

Our References for This Article

If you want to see our references for this article and other related Brightwork articles, see this link.

Notice of Lack of Financial Bias: We have no financial ties to SAP or any other entity mentioned in this article.

• This is published by a research entity, not some lowbrow entity that is part of the SAP ecosystem. 
• Second, no one paid for this article to be written, and it is not pretending to inform you while being rigged to sell you software or consulting services. Unlike nearly every other article you will find from Google on this topic, it has had no input from any company's marketing or sales department. As you are reading this article, consider how rare this is. The vast majority of information on the Internet on SAP is provided by SAP, which is filled with false claims and sleazy consulting companies and SAP consultants who will tell any lie for personal benefit. Furthermore, SAP pays off all IT analysts -- who have the same concern for accuracy as SAP. Not one of these entities will disclose their pro-SAP financial bias to their readers. 

Hiring Forbes to Publish Claims by Oracle’s Marketing Department

As we cover in the article Can You Trust IDC and Their Now China Based Owners?, one can pay Forbes to run any article one wishes. For example, like the following article.

Notice that the author is Margret Harrist — who is listed as a Brand Contributor.” What does that mean? Let’s find out, because it is important and also not good?  

A Message from Oracle Content Strategy…..Definitely Not Marketing?

Margaret works in marketing for Oracle. There is no difference between reading this article on the Oracle website or reading it at Forbes as a form of disguised advertisement called a “paid placement.”

The title..

“Director of Content Strategy and Implementation,”

..is designed to give Margaret a different title than one that includes marketing. This is because marketing has ruined its credibility. This is the same way that vendor salespeople are called “account managers.” Similarly, any title with the term “sales” immediately discredits the individual in terms of the accuracy of the information they provide.

• However, the fact is Margaret works in marketing for Oracle. And as such, any information she provides will be highly suspect and contains 100% financial bias. Secondly, as Margaret works in marketing, she will have no first-hand experience with anything she writes about and will have only a hazy understanding of technology. (if my experience interacting with marketing resources in many vendors holds for Margaret).
• Therefore, not only is the fact that the article was written straight out of Oracle’s marketing department cloaked by readers by Forbes, but Margaret is posing as a person who is not out of Oracle’s marketing department.

Let us review what Margaret has to say about the end of period close in Oracle.

Oracle is making progress toward its goal of an automated close of its monthly financial books—and in March, with the finance team working from home because of COVID-19, the company shortened that close by 20%.

“We had been planning to reduce the close time frame, but to be able to accomplish that while working remotely is incredible,” says Maria Smith, Oracle senior vice president and assistant corporate controller. “It was business as usual for us on the cloud.”

There you go. This is Oracle saying that by using its own software, it shortened the close — and by extension, this is a reasonable assumption for customers of Oracle’s software also to expect. And they did it while working remotely.

Pushing The Automation Story

Notice the term “automation.” This has been a long term marketing angle pitched by Oracle that does not have any evidence to support it. But executives love this term because it translates into “firing people.” However, Oracle skirts around this issue by stating that “no one will be fired. They will just use their extra time to do more value-added work.” In this way, Oracle has its cake and eats it too.

Notice the following quotation.

Ultimately, a fully automated close would result in real-time financial accounts, and financial data could be reported at any time.

The idea of a fully automated close is a pipe dream — as much of the close is revenue recognition, which requires human determination as to what revenue is to be recognized (based upon the probability of it being actualized) and which should not.

Single Day Closing on the Horizon?

See this quote.

The path to that fully automated close goal is being paved by one of Oracle’s subsidiaries, which itself has more than 20 subsidiaries located in all major regions. That company closed its books in a single day for the first time in March—also while working from home—and is serving as Oracle’s “pilot test case” for moving finance systems to the cloud before rolling out the various ERP modules and business processes to the entire organization.

Here Oracle holds out the potential of closing in a single day. This gives the impression that Oracle is “pushing the envelope” on closing functionality.

Oracle Pitches Some Fake Stats

Here is what Oracle says it sees from its Cloud ERP.

Among the benefits that Oracle is seeing since starting implementation of its Cloud ERP: About 92% of global bank transactions are now automatically reconciled; global intercompany balances across hundreds of legal entities are reconciled in 90 minutes; expense allocations have been reduced by 98%; accounting for open purchase order accruals globally is now complete in just three hours; and so far, the company has reduced its manual accounting by 35% with multi-ledger, multi-currency journals.

Curiously, reports from the field are that Oracle ERP Cloud has provided no improvement at the end of the period close for the companies that implemented the software. Furthermore, Oracle has a reputation of being very discombobulated internally, without the ability to leverage its technology anywhere close to what it recommends to its customers.

All Businesses within a Company are Ported to Oracle ERP Cloud

See that the following quotation contains an important assumption.

A necessary foundation for getting to an automated close is integrated systems that are always in sync and are based on a singleset of data, which eliminates duplication and the need for manually-intensive reconciliation, Smith says.

This is the core assumption of vendors, so not only Oracle, that their software controls everything within the company. Once you work within implementing companies, it looks much different. This division is not on the system, nor is it another one. There is no “single view” of information, as there is no single system controlling things. It is far more accurate to think of various systems having partial coverage of parts of the company.

The problem with Oracle’s assumption is that many companies with Oracle will often have segments of their company or other subsidiaries on a different system than Oracle ERP Cloud. Like SAP, Oracle likes to perpetuate a reality where the company has migrated entirely to a single ERP system. This also ignores the reality of mergers and acquisitions.

“When you have one set of data, you don’t have to spend time on reconciliations because everything ties out immediately,” she says. “I know companies that have to reconcile every subsection of their activity to their general ledger.

Even if all of a company’s subsidiaries and related companies are in Oracle ERP Cloud, it does not lead to immediate reconciliation. This is because reconciliation cannot be automated in a system. It requires judgment. It also requires a debate, as not all decision-makers on reconciliation will necessarily view the future likelihood of booked revenues becoming real.

For example, one of the biggest cost areas for companies is people. The integration of Oracle Cloud HCM and Oracle Cloud ERP means that when Oracle acquires a company and the employee data is moved into the HCM system, it is immediately integrated with the ERP system—the salary and benefits, cost centers, the line of business of each employee, purchase orders, travel expenses—all of it flows in automatically.

Integration Perfection That Only Comes from Using 100% Oracle Applications?

And yet, even when this occurs, there are issues with discrepancies between the people coming in from the different companies. Secondly, what Oracle describes here is not unique. Any HR system that is already integrated into the ERP system will behave the same way as described above.

“Knowing what your headcount is globally in a company our size, and never having to try and reconcile it between accounting and what’s in HR is a huge time saving,” Smith says. ”An integrated HCM and ERP cloud results in data accuracy, control, and speed.

Again, any company that just has integrated finance or ERP and HR system will observe the same thing.

She equates the close to a relay race: When the data and systems are integrated, it is like the baton is transferred immediately. If the systems do not talk to each other and are not integrated, then the “runners” have to stop, reconcile, and research before handing over the baton for each area—accounts payable, fixed assets, revenue, expenses, and more.

Oracle appears to be beating a dead horse that systems must be integrated to speak to each other. Yes, this is true.

Another important factor: Oracle moved to a single global chart of accounts, which provides consistency across the company and greatly simplifies reporting.

I am unaware of a vendor that does not provide this.

Once one reviews Oracle’s closing functionality, it looks entirely generic — as is partially demonstrated in this video. In both the case of SAP and Oracle, I can find no evidence that newer versions of the software have improved the ability to increase the speed of the monthly close process. 

Conclusion

We covered exaggerations on the part of SAP at the end of the period close in the article Does HANA Have a Simplified Data Model and Faster Reconciliation? We found the exaggerations and false information in SAP’s claims to be even worse than in this article.

1. The end of period close has been an area of enormous exaggeration by both SAP and Oracle.
2. Both vendors attempt to present an idealized view where the close is a function of the software when, in reality, there are both software and non-software limitations to speeding the end of the period close.

We rate Oracle’s accuracy in this article a 2 out of 10.