Enterprises should understand the evolving financial governance solutions market and how they can leverage these tools. The new offering by Oracle provides current and future Oracle customers with solutions that integrate into their ERP and corporate performance management (CPM) systems to automate the financial close and financial statement production, including eXtensible Business Reporting Language (XBRL) assignment/management.

• Oracle unveiled the first end-to-end close management solution and financial statement production solution from a megavendor. The solution is integrated with Oracle's ERP and CPM solutions, but can also be used as a stand-alone application outside Oracle's ERP (e.g., E-Business Suite, PeopleSoft and JD Edwards) and Oracle Hyperion systems.
• Oracle Hyperion Financial Close Management helps to automate the financial close process and manages the activities that occur during the "last mile of finance."
• Oracle Hyperion Disclosure Management helps to automate the financial statement production processes, addressing the needs for external regulatory reporting to various agencies across the globe.
• These are new solutions that do not have a significant base of referenceable customers, so Oracle will need to work quickly on providing this base to achieve market penetration.

• Organizations should consider these solutions to automate the close and disclosure processes, as they address many last-mile-of-finance management requirements.
• Non-Oracle ERP and Hyperion customers should evaluate the solutions as they evaluate financial governance suites for their potential fit with the financial management environment. Still, we believe that primary marketing efforts will be toward the Hyperion and Oracle ERP customer base.
• Since reconciliation management is a major part of the financial close (we believe 30% to 40%), customers should push Oracle to include this functionality in future releases of the product. Oracle has plans to include this functionality in later releases in 2010.

Oracle introduced the first megavendor offering for critical financial governance market capabilities, including close management (Oracle Hyperion Financial Close Management) and financial statement production (Oracle Hyperion Disclosure Management). These solutions address the timeliness and confidence in internal and external financial reporting. Until recently, organizations had to look to specialist vendors (e.g., Clarity, Trintech and BlackLine Systems) to automate the last mile of finance, including solutions to manage the close and financial reporting process. These new offerings by Oracle signal that the megavendors have taken notice and are beginning to capitalize on an important but untapped market for financial management solutions, potentially spurring other ERP and CPM vendors to extend their suites to provide similar capabilities.

Oracle has not yet provided customer references for this product, so prospects need to ensure that they speak with customers that participated in Oracle's beta programs before buying the solution. Also, the Financial Close Management solution does not yet address reconciliation management requirements as the specialist products do in their financial governance suites, which may represent 30% to 40% of financial close activities.

On 7 April 2010, Oracle announced new applications available to streamline the financial close and financial reporting process, including collaboration and XBRL tagging to automate the coordination of results and tax reporting with publishers and regulatory agencies. Oracle Hyperion Disclosure Management provides internal collaboration around financial statement production, along with XBRL assignments for external financial reporting, such as U.S. Securities and Exchange Commission (SEC) reporting in the U.S. and in-line (XRBL) iXBRL requirements in the U.K. Oracle Hyperion Financial Close Management provides a means to improve the coordination of financial close activities, an often cumbersome process to coordinate across large enterprises.

We classify the Oracle Hyperion Financial Close Management solution as a financial governance solution, and there is a relatively small market for financial close management solutions already. The introduction of the financial close solution by Oracle is also very timely. Financial close management is an important component of a financial governance solution. Combined with financial statement production (used for disclosure management), it is becoming one of the most-sought-after applications in the financial governance market, as we have discerned from Gartner client inquiries; we see this in 50% of financial-governance-related inquiries. Oracle's financial close solution is a process management tool that ensures that all the activities needed to execute a close are done as prescribed and presents a compelling argument for adoption by many organizations, as they include:

• Processes to assist organizations in streamlining the financial close process through centralized task management so that manually maintained checklists related to period-end close are replaced with action-oriented dashboards that deliver visibility and predictable execution.
• End-to-end monitoring and management of all financial close cycle tasks related to ledger and subledger close, data loading and mapping, financial consolidation, creation and filing of statutory reports, tax/treasury activities, and more.
• Best-practice processes to automate complex close cycle events while improving visibility/predictability in the financial close through closing reporting, leading to continuous improvement to the close process.
• Full reconciliation management is not presently available in the system; however, organizations can monitor some of the reconciliation tasks as part of the close financial process in the solution.

The Oracle Hyperion Disclosure Management solution is a financial statement production solution also representing a very small market today. The solution addresses the major components of a financial statement generation solution, including the following capabilities to:

• Manage the completeness and accuracy of external and statutory financial reports, and their transformation into specifically stylized statutory filings using XBRL through workflow and adherence to established financial reporting requirements.
• Manage the assignment of XBRL and the ability to reuse established reporting formats (that have embedded XBRL tags) from prior reporting periods.
• Leverage an XBRL taxonomy tool to provide enterprise XBRL mapping at the document level, or using source metadata, taxonomy viewing and extension, and instance document validation, generation and viewing.
• Leverage Microsoft Office for the creation and management of financial reports and documents that will be distributed to financial statement publishers and regulatory agencies.
• Ability to support multiple country regulatory reporting, including the SEC (U.S. generally accepted accounting principles [GAAP]) and European and Asian exchanges (in International Financial Reporting Standards [IFRS]), as well as the ability to support regional tax submissions that require XBRL, such as iXBRL in the U.K.

These new offerings by Oracle represent the first step that a megavendor has taken to provide end-to-end close management functionality and financial statement production/disclosure management solutions, rather than rely on partners'/third-party tools. Until this offering, organizations had to rely solely on specialist vendors to provide stand-alone solutions for these functions. Although workflow capabilities are available from SAP in its ERP (Closing Cockpit) and CPM solutions, Oracle is the first large ERP vendor offering a solution for comprehensive close management, including ERP and post-ERP financial management processes, for what we have termed the "last mile of finance". Both Oracle and SAP have long provided XBRL capability with their partnerships with UBmatrix; however, Oracle's financial statement production solution provides not only XBRL tagging capability, but also document management with XBRL alongside it to automate filings with external agencies (e.g., Hoover filings, U.K. iXBRL) and to manage the handoff to a firm's financial statement publisher. Note: Oracle will continue to provide its prior XBRL tagging capability with UBmatrix for those customers that are just looking for tagging and not financial statement production.

These Oracle financial governance solutions can be connected to any general ledger system or CPM system with the appropriate integration. While these solutions should be able to be used outside the Oracle ERP or CPM base, we have not spoken with references that have done this, nor have we seen Oracle position these solutions outside its base of customers from a sales and marketing perspective. If you are in this situation, you'll want to clearly understand from Oracle how it has handled these projects, and should speak with customer references that have done this. We believe Oracle will have success primarily when selling these solutions to Oracle Hyperion Financial Management customers, as there are natural integration points between financial closing/reporting and financial consolidations, and that the typical customer profile of Hyperion Financial Management (e.g., large public enterprises needing to coordinate many closing activities) will be similar to those organizations looking for this functionality.

Oracle's financial statement production solution introduction is very timely, as many Oracle Hyperion Financial Management (financial consolidation solution) customers are in the market for a solution to manage disclosures, particularly with XBRL being an increasing concern. XBRL filing is gathering momentum worldwide, with many mandatory requirements now in place. This will increase during the next few years, and many Oracle customers have XBRL requirements today. As companies move from the requirement to tag at the block level (i.e., financial-statement-line level) to the detail level, where every financial figure needs to be tagged, the XBRL tagging requirement will grow significantly (for example, from 300 to 3,000 tags). This will overtax the publishers, which will have to raise their rates. In subsequent years, errors due to poor XBRL assignment will result in the need for restatements. This will drive interest in Oracle's solution, as well as those from specialist vendors, during the next three years.

We have speculated in prior research that many governance, risk and compliance (GRC) solutions focused on the office of finance and CPM will converge over time. This is now the third CPM vendor that has close management functionality (along with Clarity Systems and Tagetik) and the second CPM vendor to offer financial statement production capabilities as well as XBRL (along with Clarity Systems). We believe financial close functionality will be included in leading CPM solutions within five to seven years. Firms have been adopting CPM-based consolidation solutions, but penetration for close management tools is still relatively shallow, because most firms have been hesitant to buy solutions in an emerging market from third-party vendors. We expect many Oracle Hyperion customers to purchase this solution to complement their consolidations solution.

Reconciliation management was not addressed in this release of Financial Close Management; however, Oracle plans to deliver account reconciliation capabilities in multiple phases, starting with a first phase this calendar year. Account reconciliation is a key control step in the close process of all companies, and most have hundreds of reconciliations (including general ledger, subledger, operational systems and bank accounts) that need to be executed for each close. Excel is the most commonly used tool, because data often comes from a number of disparate sources. There is an emerging applications market for reconciliation management solutions that can leverage Excel, as well as improve management of the reconciliation process. Oracle customers may be able to manage many of the reconciliation process steps in Financial Close Management; however, it is not a complete reconciliation management solution as defined in the market, and third-party tools should continue to be considered until Oracle provides a road map for reconciliation management.

As mentioned, we see many Oracle Hyperion Financial Management customers being interested in these solutions. The close management solution should provide an important opportunity for customers and prospects to streamline the close. We see this solution primarily aimed at Oracle customers, both Hyperion and ERP customers. We believe that it could be used in non-Oracle organizations, but Oracle would need to significantly ramp up its efforts to sell this as a solution beyond the Oracle base of customers and to show that non-Oracle referenceable customers have used this solution outside the base.

For financial statement production solutions, firms are only beginning to understand the need to manage XBRL internally for regulatory submissions. Prior to the last few months, firms had little option besides managing this in spreadsheets, using a taxonomy solution (e.g., UBmatrix, Rivot Software and Fujitsu), outsourcing to a publisher or purchasing a comprehensive solution for financial statement production (e.g., from Clarity Systems or Trintech). Recently, however, many of the tagging/taxonomy vendors have extended solutions with XBRL tagging capability with Microsoft Office so that a firm would be able to manage the tags within a Word or Excel document, which had been a major stumbling block for companies, particularly as they moved to detail tagging. While these new tools are not as extensive as financial statement production solutions and are primarily desktop solutions, many firms that have less-complex requirements will find that they suffice, from an XBRL tagging perspective.

Still, for the typical Oracle Hyperion Financial Management customer, this is probably not the case, and firms that need to coordinate financial reporting among a distributed universe of locations and staff may find the Disclosure Management offering compelling, as it integrates already into Hyperion Financial Management and enables those customers to not search for specialty vendors for this functionality.

Many specialist vendors have developed partnerships with financial statement publishers like RR Donnelley in order to increase the use of its financial statement production solution, as many organizations have been considering buying publishing tools that these firms have been reselling. This will need to be a focus of Oracle in the near-term, as many vendors are having success selling third-party products.

Oracle has established a partnership with Deloitte, with which Oracle coauthored a white paper on disclosure management, and this was part of the product launch activities. Oracle will also need to establish more partnerships with other leading consultancies that are helping clients with their responses to XBRL, financial reporting approaches and future IFRS requirements, as many of these firms also advise clients as to what solutions they should use for financial governance functions, such as financial statement generation and close management.