For more than 40 years spreadsheets have been the most widely used data management and data analysis software tools. But in the era of Big Data, Cloud Based Collaboration and Ubiquitous Connectivity this tool from the 80’s is not just ill suited to modern data management, it’s a clear and present danger to your business survival. Let’s look at all the ways in which spreadsheets can kill your business.
Spreadsheets are Error-Prone
In a comparison of 9 studies that audited operational spreadsheets, Ray Panko, Professor of IT Management at the Shidler College of Business found spreadsheet error rates averaged 83%. Five of the nine studies found error rates exceeding 90% with 3 audits finding an error rate of 100%. Those findings should not be surprising. Why?
The time devoted to Quality Assurance in software development averages between 30-50% of the total development hours. In software development, there are highly developed and proven testing methodologies managed by dedicated QA professionals for testing. Imagine the number of errors in software if this was not the case. Are 30-50% of the hours that go into spreadsheet development devoted to Quality Assurance? Is the QA of spreadsheets managed by QA professionals?
Now you know why it’s not unusual to find that 90% of spreadsheets have errors and those errors can be costly:
- TransAlta, a Canadian power generator, lost $24 million due to a cut-and-paste error in a spreadsheet.
- Fannie Mae discovered a $1.136 billion error in total shareholder equity due to an error in a spreadsheet used in the implementation of a new accounting standard.
- Fidelity. The Fidelity Magellan fund was forced to cancel a $4.32/share year-end dividend distribution because a missing minus sign in a spreadsheet turned a $1.3 billion loss into a $1.3 billion gain.
- MI5. The British intelligence agency bugged more than one thousand of the wrong phone numbers because of a formatting error on a spreadsheet.
- Barclays Capital. During the Lehman Brothers bankruptcy Barclay unintentionally purchased 179 contracts it did not want because of a spreadsheet error.
No Version Control
Version control is critically important in managing electronic documents of any kind that undergo revision and extension over time. Especially if multiple people have the authority to make changes. Version control protects the source of electronic documents and applications from catastrophe, unintended consequences, and the accumulated degradation of human errors both big and small.
Software developers use cloud-based version control platforms like GitHub to manage version control. Most spreadsheet users are unfamiliar with the concept and how to employ it for spreadsheets. It just isn’t an ingrained part of the culture and expected practice in spreadsheet creation and management as it is in software development. It is not uncommon to see multiple versions of the same spreadsheet in use by different employees in a company.
Malware infects 30% of the computers in the USA. A plague of macro viruses infected masses of users of Word and Excel in the late 90s. Despite the efforts of Microsoft to deal with macro viruses since then, there has been a resurgence of such attacks from hacking groups like Evil Corp. Most of these attacks exploit users that are not security experts and are unfamiliar with the potential dangers and hackers’ methods. That group includes a lot of spreadsheet users.
Aside from the risk posed by hackers, unintended security breaches and damage done by inexperienced employees may be a greater risk to your spreadsheets. Preventing employees from screwing up a spreadsheet while trying to enter data often results in additional steps and time-consuming work to get data entered into a spreadsheet. The data may have to be passed to someone with permission to edit the sheet, creating bottlenecks and extra steps.
There is also the risk of someone just copying the whole spreadsheet and walking off with all your critical data and business processes. If your business is subject to compliance regulations your spreadsheets could very well be non-compliant in some respect, from the spreadsheet itself, to where it is stored or how it's secured.
From an enterprise standpoint, spreadsheets are a security nightmare. Hackers know that and try to exploit the weak security common in spreadsheets.
No Single Source of Truth
Businesses often use multiple spreadsheets that contain a lot of redundant data to track a business process or project. Each department may have its own spreadsheet for its part of the process that contains much of the same data as the spreadsheets of other departments. There may also be multiple versions of the same spreadsheet floating around the company on employees’ laptops. All of these redundant data entries are time consuming and provide multiple opportunities for error. They also make tracking data more difficult if not impossible.
The fact that there is not a single source of truth that all employees can access easily whenever needed is a critical problem with spreadsheets.
An Obstacle to Growth
Spreadsheets don’t scale well to match the rapidly changing needs and increasing complexities of a growing business. Spreadsheets are slow. As they grow more complex, increase in size and are distributed among more employees it becomes increasingly difficult to locate and verify the data you need. Errors multiply exponentially and become more difficult to identify and cure. If the spreadsheets are spread across multiple departments and team members in multiple versions the problem quickly becomes impossible to manage.
A rapidly scaling business puts more pressure on the spreadsheets it is dependent on and this multiplies the impact of all the problems previously outlined. Decisions that need to be made in real time in a rapidly changing business environment are dependent on verified data being available instantly, where and when it's needed. That is not possible with spreadsheets.
An Impediment to Transparency and Collaboration
These are key values for the modern enterprise and spreadsheets are an impediment to both. Trading excel sheets through email or giving the entire team access to a cloud based sheet in Google or Outlook runs the constant risk of sheets being broken by less experienced users or data being entered into the wrong version or incorrectly. The overhead involved in maintaining data integrity makes real collaboration time consuming, costly and in many cases impractical.
Transparency requires all team members to have real time access to the data they need. It also requires that the data you have access to is verified and up to date. The way spreadsheets operate make that more difficult and the bigger your organization grows the worse the problem gets. According to a survey of 2,000 employees in the U.S. and U.K:
- Over four in five employees said that they want management to share more info with them about business performance.
- A quarter of us have, or know someone who has, left an organization because they felt left in the dark about the performance and direction of a company
- Over half of employees said that there was a significant positive impact on their productivity when bosses openly shared information.
A Really, Really Bad User Experience
What may have looked like the future in 1979 doesn’t come close to meeting a minimum acceptable standard for User eXperience today. By today's standards, spreadsheets are a lousy way to visualize data and an error prone and overly complicated way to enter data. Users today expect an easy, fast and frictionless experience. Tasks should be easily and rapidly accomplished with a UI that is intuitive and does not require any learning curve.
It used to be that users had a lower bar for business software but that is no longer the case. Users have been conditioned by the software they use everyday to expect instant gratification and an effortless experience. They expect the same from any software they use. Spreadsheets could not be farther from meeting those expectations. They are a throwback to the stone age of computing. The web did not yet exist and the first iPhone was still decades away when spreadsheets were considered the state of the art. A great UX is critical to employee productivity, client conversion and retention and data integrity. One more metric that spreadsheets can not come close to meeting.
The 21st Century Solution
You may have taken note in the previous paragraphs that modern application software development suffers from none of the deficiencies of spreadsheets. Quality Assurance, Version Control, Security, Data verification and availability are all taken care of with mission critical proven methods. Great User Experiences, Cloud Based Collaboration, availability on mobile and web devices and permissions that allow users to see just what they need to see and make data input a snap are also part of the expected in application development. In addition you can have a platform that's scalable and ready for functionality like IoT and Machine Learning.
Sounds great, but isn't it expensive? Not with today’s technology. You might be surprised at how reasonable the cost can be to move from spreadsheets to a cloud based platform customized to your unique business needs. To get a free, no-obligation strategic analysis of your spreadsheet business process - fill out this easy questionnaire. Once you fill out the quiz you will receive a link to your custom analysis within 48 hours.