Projects coming from the CPM ( or EPM) area have become of common use in our everyday lives. Before taking an in-depth look at our approach and vision in relation to this, let us get a better understanding of what CPM is.
What is CPM: definition and approach taken in selecting a software
Although slightly different versions exist, you can consider the acronyms CPM – Corporate Performance Management – and EPM – Enterprise Performance Management – as synonyms without causing misunderstandings. CPM is used to identify “corporate” applications in a company used in supporting Performance Management (PM) processes which are usually run by Finance functions. These are the PM processes which are present:
- Planning, Budgeting & Forecasting
- Reporting & Analytics.
Some analysts tend to classify the software available on the CPM market according to the processes that can be handled, thereby underlining the pros and cons needed for others in making their choices.
The aim of this article is not to give advice on what CPM software to choose but to highlight the two possible polar approaches available in companies, which in a business context, can reach two very different results in terms of costs and usability of the chosen software. To be able to understand this, we have to take a step back and outline the applications used in to the company to give support to the Finance area.
CPM Software: master or slave?
One of the most common perspectives of the systems supporting the finance area of a company is the three-level one shown below, where the CPM part is shown in the intermediate layer between the ERP system levels – where the data is generated – and that of Business Intelligence – where the data is analyzed.
A project in the CPM area can therefore support one or more of the business processes listed above, acquiring data from the ERP layer, aggregating it, modifying it and possibly transferring it to the BI systems if the depth of Reporting and Analytics present in the CPM area is not sufficient enough to cover the informative needs which are present.
It is specifically when choosing a CPM system that the two polar approaches emerge:
- Considering the CPM layer as a slave to the ERP system
- Considering the CPM layer as independent (master).
In other words, in the first situation the CPM layer is seen as an attachment to the ERP layer: the processes which are dealt with even in the ERP area or those not so strategic as to be given specific attention. For this reason the typical CPM business processes are approached in this case under different forms:
- by choosing the software proposed by the same vendor present in the ERP area
- by choosing a software that can be integrated by using certified connections on the ERP layer
- by customizing the ERP layer
In the second case, however, the processes in the CPM area play a different role and the CPM layer itself is created by favouring software that performs better in the management of processes. The theme of integration with respect to the ERP system is certainly pursued without, however, giving strategic importance to the technology used for the purpose.
The winning approach to implement with CPM software
After 20 years of working in this field and giving consultancy I believe that the first approach is not worth the trouble. I say this simply because the business processes that give support to the finance world have certain specifications that need to be treated with care to avoid unsatisfactory results.
The 5 aspects of unsatifactory results:
- the usability of information
- software configuration
- scalabiilty of the solutions
- processing time performance
- configuration maintainability
The CPM layer in recent years has become increasingly strategic in terms of giving support in decision making and often it is considered as an “ERP Management”.
Although ERP systems have evolved in recent years, they were created with the aim of managing transactions – millions of transactions that are generated daily in the company in the various areas of work. On the other hand, the CPM area was created to govern these amounts of data and operate on aggregates of these in order to lose the administrative baggage of the transaction and look for trends that allow us to understand the company’s performance and define future development plans.
In the CPM field, one no longer operates on the movement but on the balance, it is not necessary to know the invoice number but it is important to group by billing customer (or cluster), …
It is necessary to add to this the increasingly dynamic and articulated business contexts that have increased the centrality of the CFO and made this position more and more strategic and that of the processes that find their natural place in the CPM area.
Implementation of a CPM project: what you should aim for and why
Each different necessity needs the right tool to deal with it. With a purely technological approach there is the risk that the users on the CPM side will be penalised and equipped with inadequate tools so that they will be unprepared and misinformed when decisions have to be made. If it is true that decisions must be made on the basis of data that originates in the ERP system, it is equally true that this data must be analyzed and this can only happen on the layers dedicated to the purpose: the CPM for its nature or, possibly, the BI belonging to the CPM area, should draw most of the data of interest.
I believe that all choices have risks; some evident and others hidden. The aim of choosing a software should always be that of minimalizing the TCO of an investment and looking towards maximizing the benefits for the user of the various applications. From this point of view the concept of integration, even if it is not the purpose of the choice, should not be overlooked. As can be seen from what has been written so far, integration is not the vertical one between layers, but the horizontal one within the same layer. The value lies here.