Vanguard System Reviewed in New Book, The Flaw of Averages

Vanguard's Enterprise Focus Cited as Unique among Risk-based Modeling Software

Cary, NC – June 29, 2009 – In his new book, The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty, Sam L. Savage, a consulting professor at Stanford University, discusses the benefits of using Vanguard Software Corporation's risk-based modeling solution called Vanguard System^™. Through interviews with Vanguard Software executives and customers, Savage explores the impact of Vanguard System's approach to risk analysis in the corporate world today.

Savage describes how Vanguard System uses Monte Carlo simulation, a sophisticated business modeling technique, to provide a cure for what he calls the "flaw of averages" – defined as the use of simple averages to represent uncertainty. In contrast to the "flaw of averages", Monte Carlo simulation automatically calculates risk by analyzing thousands if not millions of real-world scenarios according to their likelihoods. Brian Lewis, Vanguard Software's Vice President for Professional Services, points out to Savage that companies are now realizing how backward-looking analysis of historical data is insufficient to drive company strategy; and, that these companies are turning to Monte Carlo simulation to plan ahead.

Although spreadsheet applications that use Monte Carlo simulation exist, The Flaw of Averages notes that these applications have many critical shortcomings including readability and scalability. However, as Savage identifies, Vanguard's modeling and simulation platform overcomes these common spreadsheet limitations because it is designed for enterprise modeling and simulation. Vanguard's collaborative enterprise solution offers an innovative approach by which different groups create model components that reflect their areas of expertise and later link these components to form higher-level business models.

To further explore Vanguard's approach and the benefits of its collaborative modeling and simulation, Savage interviews Vanguard customer Michael Kubica, President of Applied Quantitative Sciences. Kubica uses Vanguard System to combine simulations performed by many different departments within a Fortune 100 manufacturer of medical devices. He then uses these simulations to demonstrate key interrelationships between the demands for existing and new products. By using Vanguard System to raise awareness of these key interrelationships, Kubica has helped this company avoid unnecessary expenditures and shortfalls.

Vanguard Software CEO, Rob Suggs, expands upon the benefits of Vanguard's enterprise modeling and simulation, offering that Vanguard also distinguishes itself by using "stochastic libraries" to integrate simulations with other enterprise software systems. Suggs explains that there is a demand for integrating real-time information into business models and that the Monte Carlo simulations generated with Vanguard System address this demand.

To demonstrate the benefits of Vanguard System mentioned by Lewis and Suggs, another Vanguard customer, Jim Scanlan, Professor of Engineering at the University of Southampton, provides Savage with an example of how Vanguard System is currently being applied in industries such as aerospace. According to Scanlan, there are growing contractual requirements on suppliers for long-term performance and cost guarantees. Scanlan describes how risk-based business modeling is being integrated into mechanical design considerations at major companies such as Rolls-Royce's gas turbine business. To accomplish this, Scanlan and his industry counterparts use Vanguard System to enable collaboration between multidisciplinary teams in these large companies. Experts in areas as disparate as logistics and law combine their independent Vanguard System models into Monte Carlo simulations that forecast performance for the entire enterprise.

Vanguard System's ability to perform Monte Carlo simulations on millions of real-world scenarios is helping forward-looking Vanguard customers to drive company strategy. From enterprise modeling and simulation solutions that expose key interrelationships and avoid unnecessary expenditures to business model simulations that provide real-time information for forecasting enterprise-wide performance, Vanguard's solutions are squarly focused on curing the flaw of averages.

Vanguard Software offers Monte Carlo simulation features in the following products: Strategic Forecasting Suite^™, Business Analytics Suite^™, and Vanguard System. Vanguard System also supports enterprise collaboration, forecasting and decision optimization, dynamic Web-based reports, and more.

The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty, by Sam L. Savage is available at Amazon.com.

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About Vanguard Software

Vanguard Software is a privately held corporation founded in 1995 to develop business Decision Support software. Customers in over 60 countries and in every major industry use Vanguard’s software for forecasting, resource optimization, Web-based expert systems, and financial modeling. For more information about Vanguard, visit http://www.vanguardsw.com/.