Don’t bother setting up an xP&A function unless you’re already doing integrated, cloud-based financial planning and analysis (FP&A), a Gartner report says.

Extended planning and analysis, or xP&A, is touted as the next planning innovation because it does something executives have long wanted — the integration of financial planning with operational planning so when decisions are made, there are fewer surprises on how the enterprise is impacted. 

“xP&A can offer decision makers a holistic view of their planning processes, results and progress toward fulfilling a strategy and meeting an organization’s goals,” the report says.

But as a tool, xP&A is still in its infancy, so early adopters need to adjust their expectations accordingly. 

“While xP&A is compelling and attractive, at the current stage of market maturity other approaches and technologies may deliver better results,” the report says.

These other approaches include integrated financial planning (IFP), a robust finance-first planning process that also integrates data from other function areas, like sales and human resources. xP&A differs from this and other robust approaches, like integrated business planning (IBP), in its platform.

The xP&A platform is built from the outset, both in its architecture and its ability to handle large data volumes, to incorporate all enterprise functions, including sales and operations planning, human resources, IT and marketing.

But it’s this all-encompassing approach that represents its weakness, at least for right now. Although it integrates all the function areas, the capabilities are more shallow than the more mature, and more specialized, best-in-class approaches. But you can expect this weakness to improve as more organizations adopt xP&A. 

“The xP&A market is likely to become more competitive as the cumulative technological impact of integrated financial management applications supporting companywide planning processes become increasingly evident,” the report says. 

Limited penetration

Although finance leaders recognize the advantage of integrated planning, fewer than 5% of implementations that bring together financial with operational planning are actually successful, Gartner estimates. 

It won’t always be this tough; Gartner expects vendors in the xP&A space, as competition heats up — including from non-financial planning vendors who enter the space — to do a better job including more specialized planning functionalities that will increase platform robustness. 

“Some vendors have already introduced, or plan to introduce, support for sales and operations planning (S&OP) to help continuously align supply chain and financial plans,” the report says. “In the HCM [human capital management] area, new investments may be considered to support both strategic as well as operational workforce planning.”

Against this background, Gartner expects 30% of FP&A implementations to support operational and finance processes through 2024. Half of these will require a substantial xP&A roadmap from whatever vendor the finance team works with.

Implementation roadmap

Despite the challenges, for organizations that are prepared from both a technology and a culture standpoint to undertake an implementation, it can make sense to take a leap into xP&A. These organizations’ reward could be an improved capability “to exploit new digital business models and navigate current and future economic uncertainties,” the report says.  

To get there, the report says, finance leaders should first determine your organization’s readiness to implement the new approach by taking a hard look at your planning processes and maturity levels. “A mature, well governed FP&A process that currently incorporates IFP will be a prerequisite for successful xP&A,” Gartner says.

If you feel your organization is ready, conduct a cost-benefit analysis that focuses attention on touchpoints between operational and financial processes.  

Then take a deeper look at your cultural readiness. Adoption of a technology like xP&A, which changes how other function areas do their planning, can be disruptive, so the transition requires deliberate change management.  

“Technology by itself often cannot overcome cultural barriers to planning collaboration,” the report says. “Build consensus and ascertain if the organization has the fortitude to embrace a finance approach to enterprise planning.”

If you’re comfortable you can clear the cultural hurdle, assemble a business case and strategic roadmap for executive approval. 

If you get the approval, evaluate vendor offerings and associated costs. And start looking at elements like data governance.

The report looks at 15 vendors in the space: Workday, CCH TageTik, Vena, Unit4, Solver, SAP, Planful, Oracle, OneStream, insightsoftware, IBM, Jedox, CALUMO, Board and Anaplan. There are others, but it chose them as representative of the different approaches being taken today. 

“xP&A platforms and architecture [are expected] to continue to evolve, creating new enterprise performance management opportunities where none previously existed,” the report says.