Eighty-one percent of businesses use Microsoft Excel spreadsheets during their day-to-day operations. Honestly, this isn’t surprising. Spreadsheets are a low-cost, high-value solution for nearly every data-centric business operation. In energy, spreadsheets are used for everything from compensation and monetization to ﬁnancials and full-scale tracking of commodities. In fact, we’ve (in the past) run entire gathering systems on spreadsheets, so we understand the complexity, ﬂexibility, and usability of spreadsheets. To put it simply, they’re awesome.
But spreadsheets also have issues. Recently, I covered some of the value and limitations of spreadsheets in a webinar entitled “Moving from Spreadsheets to a Gas System.” I strongly urge you to check it out, but I also want to do a deeper dive into some key points I covered in the webinar. Namely, I want to look at the limitations of spreadsheets in terms of these large transactional gas systems and how using Excel-based “systems” introduces risk into businesses as they fall into the ever-so-tempting trap of spreadsheet complexity and reliance.
Understanding the Spreadsheet “Problem”
Before we begin dissecting the spreadsheet “problem,” we want to make something clear: spreadsheets are incredibly valuable. I use them every day. This post isn’t meant to attack spreadsheets or disregard their value in the modern energy company. In fact, we built our energy transaction management system (ETMS) to work well with spreadsheets, and there are certainly areas across your energy company where spreadsheets are critical, impactful, and ultimately a must-have.
However, they’re not ideal for some situations. Mission-critical energy transactions and pipeline management that have a material impact on your ﬁnancials are just a couple of those situations. In the webinar, I touched on ten critical weaknesses of spreadsheets that I want to expand on:
- User controls: Spreadsheets can only be used by one person at a time, even with manual version controls set in place. This can create awkward, review-heavy workﬂows that force users to backtrack and ﬁgure out exactly what the last person changed before adding in new data. As you can imagine, the more complex and lengthier the spreadsheet becomes, the more strenuous managing this gets. To compensate, many gas companies try to create ad-hoc, untitled “spreadsheet experts,” but when that person leaves, it can throw a wrench in your entire transactional system. There are some limited alternatives offered by folks like Google, but even those fall short for change control in a business environment.
- Complexity: I like to say that no good spreadsheet starts out complicated. But almost every valuable spreadsheet ends up complicated — especially in energy. These long, formula-intensive sheets are hard to navigate and incredibly dense in formulas, lookups and data. Once you reach this point, you’re in trouble. A single data entry error on a formula or incorrect cell becomes a headache-inducing effort to trace the issue leading to the wrong number or dollars. Or worse, an incorrectly changed formula leads to a number from your spreadsheet impacting your company’s ﬁnancials.
- Entity management: Need to add a new location or business to your lengthy, business-impacting spreadsheet? Get ready to spend a signiﬁcant amount of time navigating, adding, and verifying those new rows or columns to make sure you have not disturbed another calculation. Again, this is a problem of scale. As your spreadsheet’s complexity grows, so does the difﬁculty of managing or modifying that spreadsheet. That may sound counterintuitive. Obviously, long-running spreadsheets may feel easier to manage since you’re so used to navigating them. But density and complexity make the management of the spreadsheet (especially when it comes to errors) more like a chore. And I’m not even going to talk about what happens when you have to deal with a black swan event: things get uncomfortable— fast.
- Variability: When we look at SaaS applications and traditional data systems, things are pretty standardized. Spreadsheets are deﬁnitely not standardized. Almost every company has a very unique- looking spreadsheet to manage their gas. This can make it challenging to onboard new employees or contractors. Bringing outside auditors up to speed on a spreadsheet can be challenging as well. But complex spreadsheets also give you a pretty serious labor fail-point. If your “spreadsheet expert” (of which there is only one and only one in this case) leaves, pain will follow shortly.
- Auditing: When you combine variability with complexity, you get a not-so-delicious, barely-auditable soup of formulas. Lately, we’re seeing a number of issues pop up around spreadsheets and auditing. We could dive into the speciﬁcs of SOX Section 404 and “critical” spreadsheets, but let’s just say this: imagine how difﬁcult it would be to accurately audit your spreadsheet when it’s a one-of-a-kind piece of artwork of formulas, lookups and data. Energy auditors are trained in basic Excel, but auditors are becoming increasingly persistent about clear and easily-digestible transactional management. Auditors are focused on change control, data validation, business controls, and user access. All of these are very difﬁcult to manage using a spreadsheet.
- Data security: Spreadsheets are single systems of records. Outside of custom-baked applications and intricate, integration-heavy stacks, most spreadsheets aren’t automatically backed up and are ripe for deletion and corruption errors. Across all industries, losing a few records costs around $18,120 to $35,730. But spreadsheets in the energy sector that are used for complex transactions are not mere records. One accidental deletion can cost you a signiﬁcant amount of capital.
- Cybersecurity: This is, by far, the weakest point of spreadsheets. The only real data security built into spreadsheets is cell locking, which does very little to protect data or against changes. Spreadsheets are burdensome to merge, difﬁcult to use when de-duplicating data, have no real built-in versioning controls, are challenging to scale, and are ripe for security incidents. Many businesses are under the impression that Microsoft’s back-end “global scale” security has them covered. But the fail-point for spreadsheets has always been direct access. 34 percent of data breaches involve internal actors. Not being able to track which user changed data or formulas is a very tangible risk.
- Continuity: The more valuable a spreadsheet is to your business the higher the risk if it fails in some manner. Spreadsheets don’t come with the same backups, data replication and recovery times as a SaaS transaction system. Spreadsheets are often just one more ﬁle in the forest of directory trees on some network drive. Seldom does your IT organization even realize the critical nature of a spreadsheet in your business operations. I don’t want to think of the number of times over my career a spreadsheet has been corrupted, forcing me to use a week-old backup that took days to restore.
- Scalability: How do you scale users, reporting, and functionality on a spreadsheet? Here’s an easy answer: you don’t. Well, technically, you might. But not without signiﬁcant time investments and a bottle of Tylenol.
- Cost: Based on the 81% statistic above, chances are, most of you have MS Ofﬁce. So, from a cost perspective, spreadsheets are “essentially” free. But that’s not completely accurate. There’s a very real human cost to managing and maintaining spreadsheets. Not only is there a labor cost associated with creating the spreadsheets, but data entry errors, versioning issues, and maintenance hog time, resources, and energy. To be clear, spreadsheets aren’t free. They just have more intangible costs that can be tricky to calculate.
Why Are We Still Using Spreadsheets?
McKinsey estimates that digital transformation will cut energy operating expenses by up to 25 percent and produce 20 to 40 percent gains in safety, reliability, and regulatory compliance. When we look at the current energy ecosystem — where price volatility, complex pipelines and grids, and delivery models are increasing in nature and complexity — it can and should be hard to justify a spreadsheet-driven business. So why do so many of us stick with them?
Well… because it’s hard to move off of them, right? Not only do we have to deal with change management and beat that ever-present resistance to change, but we have to unravel these complicated and dense spreadsheets that we’ve been using for years. For the same reasons that spreadsheets are risky, they’re hard to migrate away from. You aren’t sure if you have enough people, resources, or energy to make the change, and you may ﬂoat around the idea of an alternative during your budgeting cycle only to focus on more “critical” business objectives. I think of it like cleaning out the garage…not something I want to do but clearly something I need to do.
Luckily, moving off of spreadsheets isn’t as difﬁcult as it seems. No, it won’t happen in a day. And yes, it will require some effort on your end. But the results are certainly worth the effort. In other words, the same reason you may be resistant to moving off of spreadsheets is probably the reason you need to make the transition in the ﬁrst place.
Finding an Alternative to Spreadsheets: What to Look For
To paraphrase what one of my old bosses used to say, “Bring me solutions, not problems.” So, what does an alternative to spreadsheets look like, especially in the energy transaction space? I would recommend that any system investment meets the following 6 key considerations.
- Business and regulatory requirements: Any alternative system needs to cover at least 80% of your business requirements and 100% of the compliance requirements (mostly talking to interstate pipeline and storage operators here on the compliance topic). Obviously, ﬁnding any one system that covers 100% of business requirements is unlikely, but we don’t recommend setting the bar too high in this area either. Otherwise, you may ﬁnd yourself investing in an expensive total cost of ownership (TCO) challenging system. Again, you can supplement any gaps with spreadsheets or other solutions to achieve that last 10- 15% coverage.
- Spreadsheet integration: Don’t invest in any systems that don’t integrate with spreadsheets. That may sound counterintuitive to the entire point of this post, but remember, spreadsheets aren’t bad. In fact, they’re necessary. They just need to be used correctly. The best thing about spreadsheets is that they’re gap-ﬁllers. Any business requirements that your system can’t meet can be supplemented by spreadsheets. And since you’re only handling a small chunk of requirements on those spreadsheets, it prevents them from getting messy or overcomplicated, keeping the risk minimal.
- Speed of implementation: People are surprised when we tell them how quickly Trellis is to implement. I think there’s this air of uncertainty about implementing transaction management systems in the energy space. Since energy transactions are, by nature, complicated beasts, many of us feel we must implement a system that has to be equally complicated. That is not the case. Smaller companies can launch Trellis in 1 to 2 months. You want something that’s relatively quick to implement (this depends on the size of your business, of course).
- ROI: In any well-run business, you have to justify the spend. For spreadsheet replacement, this is tricky. Remember, many of spreadsheets’ costs are intangible. Most of the costs of spreadsheets are in resources used to create, maintain, and update over time. Examine how often the spreadsheet has to be modiﬁed for business changes and the amount of effort this takes. While cost is important, don’t forget to focus on the risk mitigation, security and data backup/business continuity aspects.
- Scalability: I always look at scalability from two perspectives. You need a system that’s scalable enough to meet any future requirements as your business grows. But you also need a system that has external scalability. Choose a system that has a vendor with a culture for advancement, both on the business functionality side and the technology side. Don’t mess around with tech that is not regularly updated to meet the rapidly-evolving energy landscape.
- IT and auditor requirements: More and more spreadsheets are showing up on auditors’ exception lists. They are wise to the issues large, complicated spreadsheets represent to an organization. Any system investment has to be audit-ready and meet all of your existing IT and compliance requirements. This one is simple.
How Trellis Can Help You
When we developed Trellis, one of our considerations was ease-of-use via an intuitive application. Part of that was creating easy interactions with spreadsheets. We wanted to not only create an end-to-end energy transaction management system that was hyper-secure, compliance-driven, and incredibly ﬂexible, scalable, and powerful, but we also wanted to ensure that transitioning from legacy spreadsheets was as pain-free as possible.
At Trellis, we can help you move away from spreadsheets without forcing you to abandon the beneﬁts you get from them. Trellis was designed to work with spreadsheets and other vertical systems, and our solution can help you cut costs while realizing the tangible value of digital transformation. Contact us to learn more about Trellis or to talk about how you can move off of spreadsheets faster than you probably think.