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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

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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).

 

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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.

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7 Comments

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  1. Ryan,
    It concerns me that there is no mention at all of employee performance management in your model. Surely aligning employee performance is a fundamental part of the story?
    Thomas
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    1. Ryan Leask Post author
      Hi Thomas,

      Great question…
      First of all, I totally agree that Employee/Workforce PM is an important part of the story. The question I guess I have is, how should it fit into the above diagram?

      In the first diagram, I see Employee PM as application-specific content for these products (i.e. employee alignment, goal-setting, and measurement through SAP Strategy Management, compensation and staffing planning in SAP Business Planning, and so on).

      However, the question is a bit harder to apply to the second diagram. Obviously this diagram is just conceptual to begin with, and Employee PM relates to all departments in an organization, but you could easily argue there could be some sort of “shared services” structure under the “expense” area, including HR (for Employee PM), IT, etc.

      You sparked some discussions on this topic in our group, so I would be interested in how you think it should be incorporated into the model?

      Regards,
      Ryan

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      1. Ryan,
        Give me a call please and lets take this offline. i have some ideas, but the comments box on the blog isn’t really the spot to do it.

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  2. Alistair Shaw
    Ryan,

    Excellent blog.  I couldn’t agree with you more that there is an ongoing and profound conflict between the corporate and departmental requirements when it comes to deploying a CPM system.  However, I would say that this conflict continues below the departmental level, down to individual business teams within departments and maybe as far as individuals within teams.

    All business teams have local CPM needs that are specific so in many ways the structure is ‘fractal’ as much as hierarchical. However deep into an organization you look there is always a need to establish goals, plan, monitor, forecast, report and analyze.  The difference at deeper levels seems to be not so much the nature of the process (although this tends to get progressively less coherent) so much as the move from structured to unstructured content and the move from periodic to event-driven timelines.

    Yet it is at these lowest levels that decisions are made that most directly affect the outcome of the organization.  So it is increasingly important to capture within the CPM system the territory that has traditionally been ceded to e-mail and personal productivity tools, but to do so in a way that is, as much as possible, still under the control of the local business teams.  This is the vision of pervasive CPM that we all share.

    I have been working on resolving aspects of these CPM conflicts at the departmental and team levels in an approach I call Team Performance Management.  If you are interested in discussing further then please contact me at alistair.shaw@cooptimum.net.

    Best regards

    Alistair Shaw
    Founder and Managing Member
    coOptimum Management Framework Technologies LLC
    +1 203 563 9066

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  3. Bob McGlynn
    Ryan,
    Very good blog. For the business user, the benefit of a consolidated, enterprise system is better access to information and more of a stress on collaboration. The success of any company depends not on excellence in a single function, it depends on quality at every level and how those functions work in concert.
    Individual systems allow narrow, self-centered focus and encourage silos to develop. Connecting departmental strategies and tactics to larger organizational goals help people understand that success depends on working together toward common goals.
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  4. Lokesh Nandula
    Hi Ryan….whatz the future for SAP SEM consultants? We have just started working on IP and now confused whether our career is at stake. Whatz the plan on SEM product development. Will IP and BCS will continue?

    regards,

    Lokesh Nandula

    (0) 

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