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ENTERPRISE PERFORMANCE MANAGEMENT:
THE NEXT GENERATION ENTERPRISE PLANNING

Sometime in the distant future, enterprise performance management (EPM) will be able to turn a globe-spanning organization into a trained athlete, fully aware of its surroundings, muscles working in perfect harmony, responding instantly to the smallest change. Today, EPM performs more mundane tasks: helping corporations escape the tyranny of the spreadsheet and speed up transaction processing, supporting budgeting and forecasting, and even providing input to strategic planning. But it is a long way from achieving its true potential.

Another challenge is complying with the increasing and time-consuming number of financial reporting requirements, such as Sarbanes-Oxley. Then, there is the confusion created by vendors, whose claims and terminology aren't always as informative as they could be.

The Path Toward Clarity Fortunately, while EPM itself may be complex, the direction in which it is developing is relatively simple and clear. Each successive step in functionality delivers more value and at the same time moves across boundaries to engage more of the organization. Rudimentary EPM functions automate processes that already existed and may only impact an individual or small group. More advanced functions provide capabilities that did not previously exist and can impact large groups or the entire organization.

At one end of the spectrum we have spreadsheet management, an essentially clerical function that streamlines an existing function and has very localized impact. At the other end of the spectrum we find actionable planning, predictive planning, and value-based planning. These are largely non-financial processes in which the system is learning to think like an experienced executive. Unlike an executive, however, sophisticated systems have the added advantage of full-time access to more data than any individual could possibly assimilate and the ability to monitor and react to that information all day, every day, year in and year out.

Beyond Finance EPM is, by definition, an enterprise-wide activity. And while it is tempting to think of planning in financial terms, largely out of habit and because currency is easy to measure, enterprise planning must cross the threshold from financial to operational planning.

Arguably, enterprise planning can, but need not be, applied entirely within the finance department. Beyond financial planning they could begin to incorporate operational planning as well, but beyond strategic planning they must extend beyond finance and into operational areas. This is where the next generation of EPM begins.

• Integrated business planning collects data and feedback from, and sets measurable goals for, areas like sales, production, and marketing. This is a fundamental change in the organizational reach of the centralized planning process. It breaks down the silo-based structure of traditional planning and requires that the system be accessible to the widest range of users, particularly in non-financial areas.
• Actionable planning is event-based and addresses contingencies. It institutionalizes the well-known truth that plans change the minute they meet reality, turning the planning process from one of snapshots into motion pictures. It incorporates process flows and threshold management and turns the plan from a static tool to a dynamic one.
• Predictive planning goes beyond the rapid response of actionable planning to actual projection of what is likely to happen based on experience and accumulated data. Of course this becomes practical only when large amounts of information are being collected and analyzed. In essence, it turns the plan from a passive recipient of and conduit for information to an active generator of information.
• Value based planning incorporates unstructured data of all sorts. It breaks through the barriers imposed by the categorization of anticipated information and opens the process to unanticipated change. In a world prone to "this changes everything" events, that can be critical. Traditional plans faced for example with an occurrence like 9/11 freeze like the proverbial deer in headlights. Value based planning can incorporate and respond to even such cataclysmic events.

Getting There from Here The development of EPM will be an evolutionary process. Tomorrow's advanced features will build on today's more basic ones. Developers who suddenly realize that their system needs new functionality will find that they have little to build on in providing those capabilities. In some cases marketers will take over where the developers leave off. For example, the term "driver based planning" can easily be applied to the inclusion of static drivers without providing a foundation for the future delivery of actionable planning capability. When the drivers change, there will be no practical way to trace them back and update the plan. A perfectly good function is reduced to a buzz-word.

A buyer's first line of defense is a few simple questions asked over and over:

• What does that mean?
• How does it work?
• Where is it headed?

The second is to anticipate future needs, not just in finance but out into operational areas. Can the system address governance, compliance and enterprise risk, and the like? Is it scalable, both in size and functionality?

Finally, you need to find out whether the functionality you want can be delivered, not just in the lab but in your organization's real world. Does it require a complete change-out of existing systems or can it be deployed incrementally, working with existing systems as it grows? It's not necessarily an easy process, but then, being eaten by alligators is no fun either.

Source: Beth Beld, Business Objects

Beth Beld recently joined Business Objects as Vice President, EPM Strategy. Beth is responsible for all Enterprise Performance Management market development and portfolio strategy for Business Objects. Her background includes over 15 years experience in various senior leadership roles at PeopleSoft, Cognos, and Hyperion, as well as other large, global organizations. Her past roles include leading the business performance management as well as product management and strategy functions for the application business unit at Hyperion, and leading the performance management market development function for Cognos. She has also been actively involved in M&A and other corporate development work. Beth began her career as a CPA and Financial Analyst responsible for global consolidated financial results, analysis and reporting at both NCR and Corning. Ms. Beld has a degree in International Finance and an advanced degree in Accounting from Purdue University and London School of Economics, and is a CPA.

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