• Strategy
  • CFO.com | US

Pep Boys Does Budgeting for Less

The automotive servicer opts for a software-as-a-service solution to handle the budgeting process for its retail stores.

With many companies, even large ones, still using spreadsheets for budgeting, planning, and financial reporting, the growth potential for vendors of performance-management software is vast. After all, the software promises to handle the same tasks more efficiently than spreadsheets, while allowing greater collaboration among users.

The smaller the vendor, of course, the more room to grow — and the weightier the threats to its long-term viability. In a market dominated by SAP, IBM, and Oracle, one comparatively tiny supplier with large aspirations is Adaptive Planning, a software-as-a-service (SaaS) outfit that has scored $33 million in venture-capital funding but has not yet achieved positive cash flow six years after launching its first product.

That threshold will likely be crossed later this year, says Adaptive Planning CEO Bill Soward, though the company is sacrificing some top-line growth to get there. While its early focus was on gaining market share, now it is choosier in signing up customers, given a business climate where cash is king. “We went from grabbing every dollar we could get to saying, let’s be cash-flow positive as quickly as possible so we’re less reliant on the vagaries of the financial world,” says Soward.

Like SaaS players in other software sectors, Adaptive Planning touts the lower cost of its vendor-hosted solution compared with the more-robust on-premise installations the market leaders are pitching to enterprise-size organizations. Soward says the target customers are companies with up to $500 million in revenue, though there are some larger ones.

One of the larger customers is Pep Boys, a $2 billion publicly held company, which used Adaptive Planning to prepare the budgets for its 580-plus automotive-service stores for its 2009 and 2010 fiscal years. The company previously had its budget information on Excel spreadsheets, which were sent to the store owners for changes, then to area directors for review, then back to headquarters for more changes, and, ultimately, a consolidation.

“It was an administrative nightmare to create all those files, get them out there, follow up on their status, and collect them,” says Phil McAllister, the company’s director of budgeting and internal reporting.

With all users now accessing a single system running on top of a relational database and thus able to view updated information in real time, Pep Boys is saving 600 person-hours of effort per budgeting cycle compared with its former cumbersome procedure, says McAllister.

Pep Boys selected Adaptive Planning because it didn’t need the largest vendors’ more-sophisticated software for purposes of its individual store budgets. Indeed, McAllister notes, it hasn’t even come close to using all of the software’s features. “We didn’t need a Cadillac,” he says.

A shorter implementation time frame was also appealing, since the decision to seek a more-collaborative budgeting process was made too late in 2008 to accommodate a drawn-out installation of an on-premise system. It took about six weeks for Adaptive Planning to create templates incorporating all the store-budget information and get the service up and running, according to McAllister.

Many midmarket and larger companies shy away from SaaS solutions because of concerns over the security of data hosted off-site. McAllister says Pep Boys’s information-technology team signed off on the deal after an extensive review, and no security issues have arisen.

The companies did not divulge what Pep Boys is paying for the Adaptive Planning service, but Soward says the list price is $600 to $800 per user per year. Pep Boys has about 650 users, including the stores, area directors, division vice presidents, and administrators. Another atypically large customer, Japanese equipment renter Aktio, has about 300 branch locations and more than 800 users.

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