Executive stakeholders want an analytics strategy that is cost effective, platform centric, and offers strong user uptake. But they often struggle to distinguish between products and terminologies that can sound the same when coming from sales or marketing people.
My team and I see this confusion in the market on a regular basis. We are in the business of implementing cloud-based corporate performance management applications for financial consolidation, management and regulatory reporting, and budgeting and planning for clients who struggle with overgrown Excel spreadsheets and a desire to work autonomously from IT. The confusion among clients costs them time and money.
We have witnessed highly professional organizations struggle to define an effective information architecture to meet the growing demands of KPI management and self-service business intelligence. Often, the underlying reason is a poor understanding of how today’s technologies support a variety of business processes. Sometimes companies spend millions of dollars on platforms trying to solve problems that could be met with line-of-business specific applications that are cloud based and fit for purpose at a fraction of the cost.
When discussing analytics, our clients often ask about three technologies. While all three should coexist in any corporate information architecture, it is crucial to recognize their differences. To better understand them, let us use the definitions proposed by the Gartner IT consultancy:
- Corporate Performance Management. 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 and planning.
- Business Intelligence. BI is 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. Commonly used functionalities include data discovery, data visualization, and big data.
- Enterprise Resource Planning. 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.
CPM, BI, and ERP – In Real Life
Software can be twisted to do almost anything – but why go through the pain if you don’t have to? Trying to support fundamentally different business processes through a single solution is a recipe for heartache.
Software vendors love to present their solutions as one size fits all. But whenever you come across such a bold promise, remember that customizing your specific workloads onto an all-purpose platform often becomes more expensive in the end. I will illustrate this through some real-life examples.
BI is not CPM
A worldwide mining client of ours tried to use BI technology to support CPM functionalities for financial consolidation. However, the BI tool could not cope with the currency conversion of equity at historical cost. Consequently, the consolidated equity and especially the currency translation reserve always had to be recalculated in Excel by each of their worldwide operations. Furthermore, the BI tool did not feature process management functionalities. Its database would always reflect the latest batch of data – effectively presenting the corporate centre with a moving target. As reported periods could not be properly closed, corporate reports would generally present constantly changing comparative data as commodity prices fluctuated.
ERP is not CPM
A Calgary-based oil and gas company used ERP technology to also support CPM functionalities for data collection and validation. Some of its overseas subsidiaries used a different brand of ERP than the D365 platform that was used by head office. As a result, data collection was a nightmare for these overseas subsidiaries. The monthly reporting had to be delivered in the format of a journal entry to fit into the corporate ERP. Mapping the local chart of accounts to the corporate chart of accounts as well as translating the local functional currency to the corporate functional currency was done in Excel. The result was a cluttered process that was neither transparent nor reliable. It took the overseas subsidiaries substantial effort to deliver the monthly reporting to corporate headquarters. Any non-financial reporting, such as number of headcounts, had to be provided outside the corporate ERP and typically lived in Excel.
CPM is not BI
A Canadian power generation company with offices in Canada and the U.S. used CPM technology to also support BI functionalities for highly granular breakdowns of income and cost per plant. Each plant represented a profit centre 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 that were not configured into the data warehouse. Because of this, the power generator faced dramatic performance issues when trying to run complex transactions via their self-service BI platform, and any last-minute changes were a nightmare to process if the workflows were not configured correctly.
These three examples highlight the importance of addressing the corporation’s business processes with the right technology – CPM, BI, or ERP. BDO develops applications on all three platforms, and we typically know the nuances of choosing a software like Adaptive Insights or Prophix vs. trying to build a solution in SQL/Power BI, or utilizing the reporting capabilities of Dynamics 365. If positioned and utilized wisely, CPM, BI, and ERP leverage each other to drive your analytics culture. They do not cannibalize each other but feed off each other, providing the end user a much richer data set. A recent SAP client of ours recently reduced their overall forecasting process by 1600% and has now embarked on a BI roadmap to meet additional reporting needs across the organization.
If this blog post has piqued your interest, feel free to reach out to me directly. Our next topic will be “Advanced Analytics – The Cloud Will Not Improve Your Reporting Unless You Do This First.”