Enterprise performance management (EPM) systems are made up of the tools and technologies that companies use to manage the cycle of collecting, monitoring and reporting on the key elements of their business functions. This allows organizations to accentuate a positive trend and optimize the benefit to the business. Additionally, organizations can take corrective action on trends that are showing less favorable results. The activities generally covered with this type of platform are:
The functions of closing and consolidating the books
The exercise, management and strategies related to planning, budgeting and forecasting across the entire enterprise
Defining and analyzing key indicators
Tracking specific approaches to profitability and the cost drivers that affect profitability
Prioritizing and optimizing strategic programs driving long-term growth
These functions span the breadth of an organization and require many foundational elements and definitions in any business to be governed enterprisewide. The functions can then seamlessly interact
during normal business cycles, creating meaningful and actionable information. Since these types of applications need to be closely tied to the business users, they are traditionally run on-site, and owned and operated by the business
. This has created an environment where two things have occurred:
Organizations purchase and implement in discrete business areas, allowing them to own and operate these systems for their specific needs. This creates a less-than-optimal environment for managing across the entire enterprise because managing the linkages is not addressed in this approach, i.e., the applications don’t speak to one another. This creates isolated silos that can hurt the business.
Organizations purchase and implement an enterprise-wide platform that can address all of these essential business functions. These systems have become so sophisticated that they are increasingly run by IT departments to maintain the linkages across the organization, i.e., the applications do speak to one another. This platform approach has become so sophisticated that it now eliminates the ability for them to be run by the business.
The great promise of EPM applications has always been business-user ownership. The connected and sophisticated nature of EPM applications, or an EPM platform, has made business user ownership difficult — the cloud now brings the opportunity for EPM applications to make good on this promise. In order to take advantage of this opportunity, organizations now need to take a step back and rethink how to own these specific systems and link them across the entire business cycle. The rise of cloud applications has started us down the path to solving these issues.
How can the cloud solve the problem?
Providers and pundits are now starting to espouse many different approaches and philosophies regarding how using the cloud will make the business world a better place. Big promises being made include:
Major reduction in costs.
Implementations will be faster and easier.
Security will not be an issue.
These are all possible benefits of using the cloud. However, when we specifically focus on the uses of EPM systems, the driving element that organizations need to consider is irrevocably linking the business cycle to the business users — in a platform that is user-owned and operated. The cloud offloads all the IT infrastructure, thereby putting the power of the system directly in the hands of the users. But before taking the step to move to the cloud, there are a few things organizations should consider.
1. Foundational elements and business definitions are key.
Though there is a technological aspect that needs to be addressed, creating the foundational elements is business functionality. The foundational elements driven by the users are:
Defining the measurement metrics
Specifying the proper business drivers
Creating the hierarchies that the business will use to link together the elements of the business cycle
Understanding the key variance and predictive reporting needs
When considering the move to the cloud, the foundational elements above must be addressed by any solution. The EPM applications and linkages will be set by these governing structure(s) and definitions
. These structures span beyond the EPM platform and also need to extend and include transactional systems, Enterprise Resource Planning (ERP), creating Business Harmony at an Enterprise scale. The EPM platform does not need to be the first to go to the cloud, but the ability to integrate with the cloud for seamless interaction
across the business cycle functions is critical.
2. Managing the strategies regarding planning, budgeting and forecasting across the entire enterprise.
3. Closing and consolidating the books.
Moving the planning function is the easiest first step for an organization migrating its EPM system to the cloud. As more organizations move to what can be defined as a rolling forecast or continual forecasting process, cumbersome traditional systems have made it difficult for users to operate at the speed required for efficient business management. The cloud offers a host of providers that will put the ownership of the system in the users’ hands. The result is the offloading of dependence upon IT infrastructure. Businesses will want to ensure that they can integrate the foundational elements discussed in the previous section with this piece of the system, as well as link the operational plans, budgets and forecasts with the development of long-term strategy.
4. Defining and analyzing key indicators.
The nature of the information required to close and consolidate the books is one of the things that keeps organizations from moving this function to the cloud. Security is key to taking this step. Providers are aware of the security issues and have taken steps to ensure that the confidentiality of closing information is protected. All organizations need to be comfortable with the security provided, ensuring that the move to the cloud meets or exceeds the regulatory or business tolerances for exposure. Once that is accomplished, and all closing and consolidation functionality is available, it is time to move the closing function to the cloud. This will keep the traditional close and consolidation functions in the users’ hands. The final key to move to the cloud will be integration with the system’s foundational elements mentioned earlier. This is important as organizations prepare to track key indicators and overall variances, which results in organizations becoming more predictive in their analysis.
5. Tracking specific approaches to profitability and the cost drivers that influence profitability.
Dashboards, ad hoc analysis and general variance reporting have been lending themselves to a cloud approach for some time, and now are one of the most mature areas of cloud EPM. The key is attaching them to the foundational elements mentioned above, specifically the metrics, drivers and hierarchies. Taking the approach of tying all the analytics together through the foundational elements that have been put in place paves the way for a more predictive analysis approach driving across the entire organization.
6. Prioritizing and optimizing strategic programs to drive long-term growth.
For any business, the bulk of the profitability analysis work is related to defining the cost drivers and pools irrespective of any cloud needs or approaches. Organizations that have already completed the cost definitions face the challenge of integrating that information across a broader EPM footprint. Integrating this information provides analytic capabilities on the profitability information. The key to actionable profitability analytics is selecting the tool that provides users the ability to own changes to and management of the costing methodologies, while connecting with the EPM platform via the defined foundational elements.
This element of the business cycle offers many different options to get to the cloud. A number of organizations address this institutionally, with very little reliance on technology. The cloud allows organizations to be more collaborative with strategy maps and collaborating with larger user constituencies for greater understanding and alignment with growth initiatives. The link to foundational elements is less critical here, but the outcomes may drive updates to the metrics, drivers or hierarchies. A tool that allows users to own, operate and update the defining metrics, drivers and hierarchies will fulfill their needs and tightly integrate all the business functions across the enterprise.
The great promise of EPM systems has always been putting the power in the hands of business users. These systems have grown in their overall ability to manage the business cycle; that growth has made them much more sophisticated, requiring greater support and driving ownership further from the hands of the business. While the assurance of the cloud relates to cost savings and speed of implementation, when it comes to EPM systems, the focus should be on giving organizations the power to link all business cycle functions and allow them to optimize trends they are seeing in their businesses. The best way to optimize the business cycle is to move the ownership of the applications as close as possible to the business user — which the cloud will offer over time.
Providers are heading toward a single integrated EPM cloud system, but no one is quite there yet. To achieve this, there will need to be a hybrid approach in the near term while finding the silver lining in the cloud. The silver lining is there and it is time to start planning to move your EPM system to the cloud. This, in turn, will get it back in the hands of the users. Moving to the cloud will allow users to leverage the insight gained from the growth of EPM systems and lay down the proper foundational elements. Is your organization ready to do the work of defining the business functions and the foundational linkages maximizing your cloud deployment around your business needs?
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