Sooner or later, everyone faces the same conflict when deploying Corporate Performance Management (CPM) applications: how to balance corporate needs vs. departmental requirements. In most organizations, every department wants their own individually customized solution (especially for budgeting), yet this design inherently leads to multiple versions of the truth, challenges in combining the figures at a corporate level, and TCO problems (especially when systems from multiple vendors are used).
So today, we see organizations generally fit into one of three categories:
- They are stuck in spreadsheet hell, with no sophisticated CPM systems in place (or only deployed to a limited user base). All the problems of security, compliance, user error, reconciliation, audit, maintenance, and all the other well known spreadsheet issues are being dealt with.
- Each department has implemented their own CPM solution, but the IT department is driving to standardize on one vendor. Each individual department is generally happy with their solution, but it causes headaches for finance/corporate to reconcile all the different formats and the IT department is left supporting a high TCO environment.
- Corporate Finance has rolled out an enterprise-wide CPM system that requires departments to conform to a standard solution. Each individual department loses the flexibility needed to fulfill their unique requirements, and are therefore generally unhappy and resort to keeping spreadsheets. Corporate Finance and IT are generally happy though, as it provides a consistent solution that can be easily and cost effectively maintain.
So how can this situation be resolved in a way that meets the detailed needs of the individual business, satisfies the corporate requirements for visibility and consistency, and keeps the TCO low? We are generally seeing the market answer this question on its own today: vendor standardization.
Vendor standardization is happening at a rapid pace nowadays, so what has changed triggering this to happen today? Perhaps the single biggest factor is the vendor consolidation taking place in the CPM market, forcing organizations to look at what systems/vendors they are now dealing with. Typically in the past, each department has pursued the “best of breed” solution that best met their requirements, while IT departments pursued solutions that integrate to the corporate environment. Companies like SAP, whose product sets are well integrated with one another, are now in a possession of what were previously called “best of breed” applications (namely, OutlookSoft for SAP Business Planning and Consolidations, and Pilot for SAP Strategy Management, as well as the reseller agreement with Acorn Systems for SAP Business Profitability Management). What is therefore occurring is the replacement of isolated departmental solutions, with offerings from a single vendor, like SAP, who is now able to tout both best of breed and tightly integrated solutions.
It is important to clarify here, what exactly “tightly integrated” means, as integration needs to take place on two fronts. The first is a technical integration (see Diagram 1), where the CPM solution needs to interact seamlessly with a customers’:
ERP systems, where the core financials and transactions are held
Data Warehousing and BI tools, used for reporting and analysis
GRC (Governance, Risk and Compliance) suite, ensuring compliance and built-in risk sensitivity
The second aspect is business process integration. It’s not enough for just Corporate Finance to have a performance management solution. Every department in an organization should have their own solution, which meets their individual requirements, yet also seamlessly rolls up into a corporate view. For example, if the Marketing department decides to run an additional campaign to improve sales on a specific product line, they will update their own performance management solution to reflect the increase in expected sales volume. In an integrated world, the Purchasing department (who also have their own individual performance management solution) would now see that they now have a shortfall to expected sales. Now imagine this happening corporate wide across all departments, with the data seamlessly rolling-up into a corporate view, and the systems all being supported cost-effectively by IT (see Diagram 2).
Of course, such tight integration takes time, but SAP has great expertise in this area, and that is certainly what we are working towards at a rapid pace. Of course, this concept is not limited to just planning/budgeting/forecasting, but to entire portfolio in the CPM Suite, however, for a more detailed, product-based look on this topic with a planning-specific focus, please take a look at Prakash Darji’s blog titled SAP Business Planning & Consolidations (Outlooksoft) vs BI Integrated Planning.