The history of “P”
Did you ever wonder why most ERP systems do not fully support, what the name indicates? For those who don`t know, or already forgot – the P in ERP stands for “planning” – however very little customers still do (Financial) Planning inside their ERP system – no matter if they use SAP or any other vendor. To understand the reasons, we need to go a back bit in business software history.
Years ago the ERP system was the central (and often only) business application of companies, addressing all requirements at that point of time – from resource management, financial journals to planning. Over time usage and data size of ERP systems have increased, customers started to have parallel ERP systems and vendors realized that reporting has to be done in a special consolidated environment. One the one hand, because of the limited analytical capabilities of ERP systems, on the other hand because of limited computing power that was unable to calculate the full amount of increased data volume– the starting point of the huge success for data warehouses, like SAP BW.
At that time, customers also started to move Planning out of ERP – for mainly 3 reasons: Data-Harmonization, Performance-Considerations and Flexibility. The data-Harmonization was essential for larger customers, as some planning scenarios where based on data from different ERP system at the same time; Performance was critical for industries with complex data model (like financial industries) or large data volume (like retail). Flexibility was important growing companies, who had the need to plan on different dimensions, than their traditional ERP systems offered. That time – the P walked into BW – the birth of BW-IP.
The power of business
Implementation of large, powerful and deeply integrated corporate wide Planning & Reporting applications was a key success factor for our customers. Detailed planning and the possibility to exactly understand plan vs actual differences enabled them to continuously improve their business efficiency and be more profitable. But establishing these solutions took time and special skilled people that were able to model planning and reporting scenarios, build and monitor data extraction from ERP and customize intelligent planning logic. A generation change in individuals working in finance-functions and the Increasing speed of a changing economy lead to situations, that some planning processes got decoupled from the general company platform and moved into specific planning applications, that could be fully controlled and owned by the business users, with as little support from IT professionals as possible. Especially financial planning which is characterized with less complex data models (mainly driven by the chart of account) was moved into the hands of finance & controlling departments – in the best case directly together with group reporting to run legal & management consolidation of enterprises. SAP supported these customers with a numbers of Enterprise Performance Management Solutions, from which SAP BuisnessObjects Planning and Consolidations have shown to be the most successful.
Let`s get digital
While most of companies run still very successful with the above described planning landscape a even fast changing economy requires changes in the finance business processes for more and more customers. The combination of more electronically connected businesses with a significant easier trade over country-borders and continents has led to the requirement for finance get faster insights. Capital and liquidity is playing a more important role – in a global business a economic crash of a certain industry or country, can have a faster and bigger impact to companies than before. We have seem examples with Greece or the US real-estate market – that 10 years before would have been less critical to a lot of companies outside that markets. Just being able to plan a quarterly budget is not sufficient anymore to compete, as reaction time is too long. The role of finance has also changed – before, often seen as very conservative and backwards looking department more and more CFO`s play a very important role, being the strategic advisor for companies executives. This directly results in new requirements for the software they work with – they need to real-time access to all data, not just the financial pieces. With very volatile commodity- and raw-material markets, it just not enough to know just the liquidity situation – you need to be able to see and control the full set of companies assets. A monthly rolling forecast, planning each month 18 month ahead is not the exception anymore. Being able to answer ad-hoc requests to simulate a certain business decision is good – but it is better to give advises on what other options might be better. For all that, companies need to have an integrated view with direct access to all data and add external data where needed, combine it with statistical algorithm to find patterns or drivers and help to “predict” more and more automated results. We see that in customers who have stopped long established processes to collect a verbal sales forecast, because they realized that the automated forecast based on CRM data was more accurate. With S/4 HANA SAP has developed the right enterprise platform for exactly these needs – with the HANA technology being a key enabler to support that, as it is the first database that also includes the relevant business logic to support the new processes in real-time on big data volumes. With business logic I means especially aspects like our planning engine or predictive capabilities being directly available on top of transactional data, eliminating the need to extract that data into any other solution. Thus – it was only logical that SAP BPC becomes a natural part of S/4 HANA, to run planning and consolidation directly inside the new “ERP” system – similar like in the very early days, but with all the benefits and functions that in the meantime have been developed – resulting in possibilities to re-think existing (planning)-processes, that have been designed to fit to technology-barriers of the past.