Today’s technologies should jointly manage a variety of business processes

 

 

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CASPER VAN LEEUWEN

We are in the business of implementing value-added CPM applications for financial consolidation, management & regulatory reporting, and budgeting & planning. During my consulting career I witnessed many corporations having trouble defining an effective information architecture. Often, the underlying reason is a poor understanding of how today’s technologies support a variety of business processes. In this article I highlight the fundamental differences between Corporate Performance Management (CPM), Business Intelligence (BI) and Enterprise Resource Planning (ERP). These three technologies should coexist in any corporate information architecture.

First, let’s define these three technologies. According to Gartner, CPM is an umbrella term that describes the methodologies, metrics, processes and systems used to monitor and manage the business performance of an enterprise. The most commonly used functionalities include financial consolidation, reporting and disclosure, and budgeting & planning. Gartner defines BI as an umbrella term that includes the applications, infrastructure and tools, and best practices that enable access to and analysis of information to improve and optimize decisions and performance. Here, commonly used functionalities include data discovery, data visualization, and big data. ERP applications automate and support a range of administrative and operational business processes across multiple industries, including line of business, customer-facing, administrative and the asset management aspects of an enterprise.

 

There is no such thing as a magic box

 

The Gartner definitions of CPM, BI and ERP already outline the distinct differences between these three technologies. It is therefore quite peculiar that some corporations try to support fundamentally different business processes through a single solution, but, and this should also be pointed out – software vendors all too often love to present their solutions as a one size fits all. Whenever you come across such a bold statement, just do remember that there is no such thing as a magic box. I will illustrate this through some real life examples.

BI is not CPM

A worldwide logistics company used BI technology to also support CPM functionalities concerning financial consolidation. However, the BI tool could not cope with the currency conversion of equity at historic cost. As a consequence, the consolidated equity and especially the currency translation reserve always had to be recalculated in Excel. Furthermore, the BI tool did not feature process management functionalities. Its database would always reflect the latest batch of data – effectively presenting the corporate center with a moving target. As reported periods could not be properly closed, corporate reports would generally present constantly changing comparative data.

ERP is not CPM

A worldwide media company used ERP technology to also support CPM functionalities concerning data collection and data validation. Some of its overseas subsidiaries used a different brand of ERP compared to the corporate center. Data collection was a nightmare for these overseas subsidiaries. The monthly reporting had to be delivered in the format of a journal entry in order to fit into the corporate ERP. Mapping the local chart of accounts to the corporate chart of accounts as well as translating the own functional currency to the corporate functional currency was done in Excel. The end result was a cluttered process that was both not transparent and very error prone. It would take the overseas subsidiaries substantial effort to deliver the monthly reporting to the corporate center. Any non-financial reporting such as number of headcounts had to be provided outside the corporate ERP.

CPM is not BI

A worldwide production company used CPM technology to also support BI functionalities concerning highly granular breakdowns of income and cost per plant. Each plant represented a profit center at one or multiple legal entities. Even though there was no need to consolidate any of this plant-related data, the data was subject to currency translation and intercompany elimination rules. As a consequence, the corporation faced dramatic performance of the CPM technology and any last minute change would be a nightmare to process.

 

CPM, BI and ERP leverage each other

 

These three examples highlight the importance of addressing the corporation’s business processes each with the right technology. If positioned and utilized wisely, CPM, BI and ERP leverage each other. They do not cannibalize. We have seen corporations slicing literally days off of their monthly close by just reallocating their business processes to the right technology. We invite you to review your corporate information architecture and would love to hear your experiences.

 


 satriun-casper-van-leeuwen

Casper van Leeuwen is an Executive Partner at Satriun Group, a Corporate Performance Management consultancy with offices in Amsterdam, Geneva, Paris, Munich, Zurich and Bucharest. Clients include family owned businesses, stock listed corporations, as well as private equity portfolio companies..

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