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A Love Supreme

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OK, you clearly have a special relationship with your XLS files. But is it time to retire those old spreadsheets?

In a recent conversation, I casually referred to the plethora of Excel sheets in use across supply chain organizations and how our “beloved XLS still reigns supreme.” Judging by the lively response I received, people tend to agree with that statement.

To me the supremacy of Excel is second nature. Twenty years in building supply chain application software has taught me this reality. I have seen it all: multibillion-dollar high-tech manufacturers planning the entire business, admired athletic apparel brands tracking production and WIP across all Asian factories, top-10 CPG supply chain professionals synchronizing inventory buildup with marketing campaigns, the world’s biggest retailers collecting sustainability data on their suppliers’ suppliers — all of it exclusively in Excel spreadsheets! If you are a connoisseur of supply chain, you know this. 

The crucial question I find most fascinating is this: Do we see that changing? Might Excel’s reign be coming to an end? To answer it, let’s first explore the reasons for this remarkable success story.

Lots to Love

First, familiarity: We all know and use it. It’s one of the foundational building blocks of the digital fabric of work. Second, ubiquity: What’s true for me is true for you. So anything I can build in Excel can be shared and quickly understood by others. Spreadsheets are thus particularly popular “at the edge of the enterprise” as a means of communication and coordination among companies, buyers and suppliers, forecasts and inventory, you name it.

Third, flexibility: From the simplest approved vendor list to that incredibly complex macro- and VLOOKUP-laden planning “system,” spreadsheets seem to do it all and provide an astounding utility and flexibility to do just about anything. Fourth, economy: It’s essentially free. The incremental cost of building a solution is perceived to be zero.

Fifth, freedom: There is something terribly alluring about being free to innovate without depending on others. No need to ask for money, no dependence on IT to do “requirements gathering.” Just start building! Sixth, speed: No waiting for capital or IT support translates into fast time to solution. Supply chains need agility to cope with changing needs. Spreadsheets deliver.

Those are compelling advantages. So, is the spreadsheet’s dominance really on the decline? My answer is a resounding “it depends.” It depends on the type and purpose of its use.

A Lot of Downside

Undeniably, Excel and its brethren will continue to prosper as a utility tool, a rapid prototyping engine and augmentation mechanism into outlier requirements. But there are downsides that leave it open for attack. First, on-prem technology: The spreadsheet is fundamentally a single-user, on-premise model. Multiple users start stepping on each other when trying to work in parallel. Business problems with many concurrent users become challenging. A company called 2Web Technologies, later acquired by Google and renamed Google Sheets, re-invented the spreadsheet as a cloud-based, multi-user system. While it has substantially resolved this limitation, it has also severely limited the capabilities (equally true for Microsoft’s own cloud version) and the desktop Excel app is still the gold standard for large and complex spreadsheets.

Second, scalability: Over the years the amount of data and complexity Excel can handle has grown drastically. But still, for many large supply chain applications it is woefully inadequate. Third, user experience: It is, at the end of the day, just a spreadsheet. So the user interface capabilities are limited as is the ability to leverage advanced computing concepts.

Fourth, unwieldiness: When systems become complex enough, a proper software management approach is in order. Separating logic from data. Version control. Automated regression testing. Spreadsheets make those very hard and often are error-prone and break easily once they reach a certain scale.

Fifth, custom by nature: Like in the very beginning of mainframe computing when every application was custom-coded for a given customer, Excel-based applications are always built by the customer for the customer. There are no economies of scale, no amortization of the R&D effort across a larger customer base, no cross-pollination of innovation from the needs and ideas of many companies.          

A Fundamental Shift

So, where does this leave us? In an interesting and exciting place. On one hand, the spreadsheet has secured its place in the pantheon of business computing and won’t be falling out of favor anytime soon. But at the same time, an increasingly large field of Excel-based “business applications” is being replaced by dedicated cloud business applications that overcome Excel’s limitations and offer substantially better solutions and drive higher business value.

That’s happening largely because of the fundamental shift cloud computing is delivering. SaaS apps are far more economical to build than on-premise software and can be sold efficiently to a global market. So you can now build a successful company around solving much more specific and narrow problems.

And cloud drastically speeds up innovation, allowing developers to be responsive to the fast-changing needs of supply chain — always on the latest version and with new releases every few weeks instead of 18 months and having to stomach expensive and risky upgrades. Those days are over. And modern multi-tenant cloud architectures with APIs to enable flexible integration into the overall IT landscape are ideally suited to solve those large, complex, intra- and multi-enterprise supply chain problems Excel could never really crack.

This is a trend I see every day. In my second career in venture capital — with a particular interest in mission-critical business application startups across supply chain and related sectors — I see many startup pitches that boil down to replacing manual and Excel spreadsheet-based processes with much-faster and more-effective cloud business applications.

And that isn’t just a start-up fad. Just think of Anaplan, the $8 billion company that went public in 2018. They are “driving a new age of connected planning,” which is code for replacing myriad financial, budgetary and other types of planning spreadsheets that have long been the backbone of financial modeling and planning. There you have it: Replacing spreadsheets can be a multibillion-dollar business. And that’s just in financial planning. Supply chain spreadsheets of the world — rejoice and get ready for retirement.

Andy Stinnes is venture partner at Cloud Apps Capital Partners, a venture capital firm leading investments in early stage cloud business application companies.

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