Corporate Performance management (CPM) is a unified, holistic approach to managing performance, and it recognizes the interconnectivity of various parts, processes and plans in an organization's business, and how the impact each part has on each other. Gartner defines CPM as not only the process used to manage corporate performance but also the methodologies that may drive some of the processes, the metrics used to measure performance against strategic and operational performance goals. Organizations are presented with views of the business in terms of performance, by way of sales, operations, and even resource utilisation, hence creating a strong link between the strategy and the execution of that strategy.
CPM combines effective and integrated consolidation, monitoring, abstraction and analysis, and intelligence tools critical to the success of corporate management, something which the ordinary spreadsheet or the primitive pen-and-paper driven approach cannot provide.
CPM delivers a total enterprise view of the organization’s performance which helps in the execution of strategic and tactical goals. CPM helps monitor and analyse performance against goals, producing the understanding necessary to continously recalibrate plans and budget. It is this closed-loop cycle of planning and heads-up visibility of performance that makes it possible to change course on a dime and thereby gain competitive advantage.
Performance management has come a long way since its beginnings. The new mantra of performance management is to go beyond traditional financial metrics (actual versus budget for example) for a broader, more holistic view of all the critical indicators that show how well a company is executing against strategy. That means joining goal-setting (planning and budgeting) with scorecarding (monitoring and measuring) and business intelligence (analysis and reporting on actual business performance). It also means providing information to three levels of information consumer in the organization, those who formulate strategy, those who execute against it, and those who carry out day-to-day transactional activities.
‘Next Big Thing’ or ‘Passing Fad’
Today the sharper focus on corporate governance based on ethical business standards, is one key reason to believe corporate performance management will not be merely a passing fad. Debacles like Enron, Worldcom and Andersen Consulting have changed the way businesses are managed. Boards and management teams have to take greater responsibility and show a level of transparency that was unheard of until now.
Most manufacturing companies already have an enterprise applications transaction engine, which is used to record detailed operational activities of the business such as sales orders, purchase orders, manufacturing plans, capacity, dispatches, receivables, payables, and so on. If the data held in that transaction engine can be harnessed and transformed into relevant, useful and manageable information, then the benefits from the enterprise applications investment can be delivered at last. And there will be a direct link between the way organizations measure and understand the business and the detailed transactions that are needed (and probably need to improve) to make it operate.
Let’s examine the global business landscape to get a better handle on whether CPM is here to stay. Businesses today, be it a small company in Chengdu, or a multinational corporation operating across 80 cities, are faced with pressures to be more competitive, agile and responsive to market changes. They are also under tremendous pressures to maintain high levels of corporate governance. So, on one hand, businesses need to empower their staff to make decisions but they also need to maintain a sound framework for control, accountability and security.
Legal and regulatory mandates, together with challenging economic conditions, demand performance that is consistent, repeatable, and auditable. In order to achieve such performance, organisations need to establish a high level of control over business practices and processes. Connected processes will help enforce control by enabling greater consistency and efficiency and easier monitoring. CPM also facilitates a larger percentage of time devoted to solving business problems instead of managing data.
With decision making occurring more frequently and at every levels of an organization or enterprise, companies are investing in tools that will provide their decision makers direct, accurate, and timely and correct information. These decision making managers will need such information to effectively carry the companies’ objectives and targets. Also, as organizations continue to expand, collaboration in an accurate and fast manner will be more important than ever to help managers of different departments or levels formulate strategies for growth and align their strategies with the operation plans of the company.
From the above discussion, it is safe to conclude that CPM is not just another passing fad. It’s here to stay as companies need technology to effectively facilitate the dispersal and use of accurate, timely information for each decision maker to contribute, to improve performance and be transparent in their actions for the company.
Key Drivers Forcing Companies to Look Towards CPM
There are several key drivers that are forcing companies to look towards CPM as the next big thing. These include:
1) Regulatory Requirements: Investors and stakeholders across the globe are demanding quality and transparency of disclosure of the highest order resulting in regulations such as SABOX in the US and IFRS in Europe. In many cases, these demands is driving an organization’s P/E ratio.Take the Sarbanes-Oxley compliance requirement for instance, this requirement is likely to drive increased adoption of business performance management solutions. Our interactions with customers indicates that a growing number of customers are leveraging their investment in financial reporting software to meet compliance requirements and also keep pace with a dynamic and highly complex business environment.
Because we integrate data from multiple sources and provide a common view across the enterprise, we enable an integrated financial and performance management process that aligns tactics with strategies. Such a comprehensive solution not only helps meet compliance requirements but also provides the capability to increase efficiency and profitability across the organization.
2) The CIO / CFO Convergence: The convergence between the CIOs and CFOs needs in organizations is yet another key driver . Recent studies have shown that the most forward looking and breakaway CIOs rank Business Intelligence in its broadest sense (that includes CPM) as their number one priority, much as they acknowledge security as a close second.
According to a key research finding from an CIO Insight article published in October last year, IT alignment is important for achieving corporate growth. In the article, the writer, Allan Alter, said, “80 percent of for-profit companies say increasing revenues rather than reducing costs is their primary strategy for improving earnings. That means that the never-ending task of aligning IT with the business is now focused on launching new products, improving speed and service, and supporting mergers and acquisitions.”
Alter’s article was based on the magazine’s survey of more than 1,000 business and IT executives.
3) The Effects of Globalization: The effects of globalization have clearly validated the notion that the world is indeed flat! Companies in Asia are no longer competing with themselves, they are truly competing with world-class organizations in every part of the world. Outsourcing has further flattened the world in a very phenomenal way.
The World Is Flat, written by Pulitzer prize winning author Thomas Friedman is a national best selling book in the US. What Friedman means by "flat" is that sometime in the late 1990s a whole set of technologies and political events converged. This included the fall of the Berlin Wall, the rise of the Internet, the diffusion of the Windows operating system, the creation of a global fiber-optic network, and the creation of interoperable software applications, which made it very easy for people all over the world to work together and that leveled the playing field.
The above 3 phenomena are clearly driving forces behind performance management.
Role of Technology In CPM Solutions
Primarily, CPM aims to provide companies still operating in a disconnected environment to one that is collaborative and transparent. This refers to companies that are spreadsheets and that their need to move toward a strategic integration of technologies, metrics, processes, and methodologies. SDA Asia spoke to some CPM vendors: Cognos & SSA Global, Hyperion, and Oracle to better understand the role of technolology in CPM solutions.
According to David Runacres, Vice President, Asia, of Cognos Pte Ltd, and Jeremy Goddard, Vice President South Asia & Pacific, SSA Global, “the Cognos CPM solution is based on the tried and tested Cognos 8 BI platform. It is a single product that address all aspects of BI from reporting and analysis to scorecarding and dashboarding. Aligned on top of this platform, the Cognos Planning solution (Enterprise Planning) enables high participation, high velocity planning for all aspects of business. The Cognos 8 platform is the first complete SOA architecture, single product BI platform”.
Technology is the key success factor for Hyperion’s solution – Hyperion System 9 (HS9), says Suganthi Shivkumar, Managing Director – ASEAN/India, Hyperion Solutions Asia Pte Ltd. “HS9 is a business performance management (BPM) solution which integrates a modular suite of financial management applications with comprehensive business intelligence (BI) capabilities for business reporting and analysis. HS9 offers a common workspace that brings together applications, tools and business processes in a single unified environment for action.”
Oracle’s CPM products deliver business intelligence, planning and budgeting, consolidation, profitability management, and analysis and reporting capabilities across the enterprise, says Patrick Lim, Senior Solutions Manager, Applications Product Solutions, Oracle Asia Pacific. “Typically, our main CPM components include the Daily Business Intelligence, which offers a set of pre-built operational reporting and analysis applications tools with more than 250 key performance indicators; the Balanced Scorecard, which links strategy to management action by placing the company’s key performance indicators right on managers’ desktops; the Financial Consolidation Hub brings together financial data from disparate sources to create a single, global view of financial information across the entire enterprise; the Profitability Manager provides enterprises with greater insight into the profitability of current operations; and the Enterprise Planning and Budgeting, which offers enterprise planning and budgeting capabilities across departments”.
Emerging Technology Issues In the CPM Space
Corporate performance management is demanding greater integration with other enterprise applications and systems within the organization. The obvious integration is with the enterprise’s resource planning and financial management tools. These require the delivery of data and information within the enterprise in an organized and timely manner to achieve the results.
Using CPM, companies are able to closely monitor and manage their business processes and metrics. They will be able to manage technology issues such as timeliness, speed and accuracy of the information that managers will rely on to deliver their calculated, informed and intelligent decision.
The ability to establish or improve control depends first upon achieving a better understanding of the business through unified, consistent data. CPM relies upon a unified data model to provide the basis for a 360-degree view of the organization. The unified data model allows the organisation to establish a single repository of information where users can quickly access consistent information related to both financial and management reporting, easily move between reporting the past and projecting the future, and drill to detailed information.
CPM applications are integrated with the single repository of information and are delivered with a set of tools that allow users to configure them to their specific business requirements. Analysis takes less time, requires fewer resources, and is more accurate so that managers can make good decisions that lead to increased revenue and reduced costs.
CPM lets users create an environment where business is done collaboratively, data is current and consistent, and communication is widespread—a virtual conference room that connects all stakeholders and allows you to manage with facts in hand. In this collaborative environment, strategy is linked in a well-timed manner to planning, which in turn is aligned with execution, management, and measurement, enabling cross-functional sharing of timely information. This enhanced form of communication allows everyone to work as one team using consistent information.
For many companies, CPM is used to address the issue of too much information such as too much information from individual applications, focused on individual departments, without a broader, corporate-wide context. So, business intelligence can be used for departmental and operational needs, CPM must span division, departments, functional areas, and geographic areas of companies and help to address the issues relating to high volumes of disconnected information.
As software is increasingly used for financial purposes, security is a major issue, says Suganthi of Hyperion. “Security is important not only because our customers require it, but also because a lot of external regulatory requirements require any kind of system that is used to build up the applications which has information needs to be very secure. There are regulations such as HIPAA in the US that require us to provide that level of security”.
Implementation Considerations
Organizations need to be clear on what they hope to achieve from CPM and the business value that the solution can bring to the table for them. If organizations embark on a CPM process design clueless of the project objectives, performance measures or do not map a proper workflow of how data can be effectively obtained to deliver timely business intelligence, they will face a lot of challenge in getting the project going.
For any company, CPM is about creating a plan for the enterprise, communicating that plan to everyone in the company, and then providing the operational reporting and strategic reporting on an ongoing basis so that people can see how they're doing compared to the plan. It is also about giving managers the ability, if things go wrong, to take corrective actions and to update the plan when it needs to be. The fundamental considerations are:
* Is there a need for a set of pre-built operational reporting and analysis applications tools that has built-in key performance indicators such as margin percentage, total head count, average salary per employee, and etc;
* Have a scorecard system that provides a way to define and graphically illustrate key performance metrics; or Be able to gain deep insights across the organisations?
* Is there an enterprise planning and budgeting capabilities across departments? How would the solution help organisations match their strategic plans to their operational systems?
* Can the solution provide give you a common view by leveraging integrated applications?
* Can you quickly spot trends and exceptions in your business?
* Do you spend more time preparing, consolidating, and reporting on the data, or on analyzing performance based on what the data has highlighted?
* Is everyone on your management team working from the same information?
* What do you think are the main factors impacting current product and/or customer profitability?
Implementing a major enterprise application such as CPM can be hard work. As a result, the whole issue of management reporting and performance measurement is often neglected. It is a convenient and seemingly discrete activity to be delayed if the overall project starts to take longer or cost more than planned. Organisational buy-in to CPM is important.
The thinking is simple – if we don’t have good reporting and performance measurement, how can senior management answer business questions like – are we making money, are we meeting our customer promises, how effective is our manufacturing? And similarly, how will we answer project questions like – how well are our new process operating, where should we be focusing our efforts in refresher training, are there areas where further redesign is needed?
The significance of performance measurement becomes even more evident because all companies strive to be both excellent and agile. Agility is characterized by the proactive selection of business goals and the definition of objectives and the timely reaction to changes in resources. Excellence can best be defined as the efficient and effective deployment of available resources across the organization to deliver the set objectives. It is the ability to define and measure performance efficiency that forms the link between strategic intent and operational execution.
How to Choose Your CPM Vendor
In choosing the CPM solutions provider for your enterprise, a few things to consider are:
* How can CPM help my business transform and improve on corporate performance?
* How can CPM be used to actively monitor performance and achievement against corporate goals?
* How easy to use is your CPM solution and what are the self-service options available to empower my employees to be more effective in their roles?
* How can CPM improve organisational agility and better manage business exceptions as they happen?
* Does your CPM come with pre-built integrations to major ERP applications and pre-built content to support faster and more effective solution deployment?
* Will the company’s solution fit your nature of operations? One thing to note, CPM involves process management as well as cultural shifts within the organisation;
* Does the solution has open systems support or architecture? This is a critical consideration as almost every organisation has different applications or systems from different vendors running on a variety of platform;
* Does it offer quick-to-value features? For SMEs, a scalable solution will be what they would prefer.
* Will the solution support a gradual aggregation of additional packages in case the need for CPM widens?
Some of the more direct questions to pose to a potential CPM vendor include:
* How proven is your solution? Length of time the vendor has been in business, his focus on performance management, his product roadmaps, analysts ratings, market leadership, referenceability are all important inputs into this. As the saying goes, the proof is in the pudding.
* What makes your solution different from the rest in the market place? Trend setter vendors, vendors providing cutting edge technology, platform openness, scalability , are all important factors here.
* What is the user interface and user experience with yours that is so outstanding? How will I truly achieve user empowerment with your solutions? Apart from technical features like single sign on and MDM, for example, that truly unifies solutions in CPM, it is important that the vendor provides FULL BPM with a single user experience so as the organization adopts planning and scorecarding and consolidation and dashboards and so forth, the training of end users is a non- issue.
* How viable is the vendor’s organization and what are its development/growth plans? Indicators like analysts’ reports, stock prices over the last few years, history of product releases, acquired technology and so forth provide great inputs in this respect.
* How does the market validate your solution? Factors like market leadership, sustained leadership, key members in management team who are known in the industry circles.
CPM for SME’s and Vice-versa
SMEs are typically not the first movers in implementing technology. Also, they may not be ready to implement enterprise-grade CPM technologies due to lack of resources to support this initiative and/or their business processes and structures within the enterprise may not be as sophisticated and do not justify that level of investment. Take budgeting for instance, many SMEs are contented with using just spreadsheets because the operational dimensions that they deal with may not be complex.
However, as SMEs begin to grow and expand their operations, they should consider CPM solutions to help enhance their enterprise planning, forecasting, budgeting and reporting capabilities, as well as leverage CPM to put in place best practices that comply with regulatory reporting requirements. And they can do this in cost effective ways by deploying CPM solution that comes with prebuilt integration and content so that they need not invest in building the solution from scratch and they can also structure deployment in a modular fashion so that their initial investment is more manageable.
Another view is that SMEs look for similar considerations as enterprises. They want world-class solutions based on industry best-practices and strong governance framework. So SMEs, will want these in their solutions, and will assess value from a basket involving solution pricing, service and support, cultural fit and scalability.
SMEs may lack data confidence as they may have non-integrated systems and processes, or they could be dealing with “multiple versions of the truth” with disparate data in their environment. In such scenarios, CPM will offer SMEs greater business insight and help them achieve world-class performance.
Current and Emerging Market Trends for CPM in Asia
Business planning today is the lifeblood of competitive success for every company or enterprise. With the booming industry in Asia, particularly in India, Vietnam, Laos, Cambodia, Singapore, not to mention China, Taiwan and South Korea, the region offers lots of opportunities for CPM implementation. Growing Asian businesses are looking for the ability to understand, predict, communicate, and act immediately on their plans and forecasts, is a very important issue to Asian businesses today. Financial and non-financial values now need to be integrated into a strategy and operational plan and then communicated across borders.
Over the next several years, the need for faster and more accurate decision-making, agile planning, and business-process transparency will lead more and more companies to adopt enterprise performance management techniques as a way to align actual output with business plans, and overall employee activity with corporate strategy. Strategic intent becomes operational reality only when data from continuing, enterprise-wide process measurements is successfully transformed into valuable information that can be used to improve a company’s bottom line. The key drivers for growth include:
* Increased need for insight: Global competitive pressures, mergers and acquisitions are putting constant pressures on restructuring and finding additional sources of profitability.
* Transparency: After millions of dollars have been spent on ERP systems, IT organisations are under pressure to unlock the information trapped in those systems.
* The ability to report with confidence: Today’s regulatory institutions and business climate are very unforgiving towards any kind of expectation variances or financial discrepancies that may be construed as malfeasance or misconduct. This forces companies to put a lot of rigor in their planning and reporting processes.
* Consistency and certainty: The ability to create one version of the truth.
* The need for foresight in addition to insight: There is a need for organizations to get better operational visibility into state of their plans, demand, revenue and expense forecasts to better deploy resources and capitalise on opportunities.
Changes in the Asian CPM Market in the Last Two Years
While Asian companies are generally slower than their American and European counterparts in the adoption of CPM, there is an increasing interest and take-up in this particular solution area as more and more companies are recognising the value of CPM in extending the capabilities of their current ERP applications and providing enabling tools to help them become demand-driven and stay competitive.
The Asian business landscape has seen a number of changes. Corporate governance has taken centrestage in a number of Asian markets with high-profile cases in the media scene. CEOs no longer can claim they are unaware of questionable tactics by their employees, for instance. The onus is now with businesses to take responsibility, ensure a level of transparency and work with accurate, timely information across their enterprises.
Organisations are looking towards solutions for business continuity and consistency as well as collaboration and standardisation. These are definitely the opportunities that could start with a requirement as simple as query and reporting and escalate to much more sophisticated analysis and application requirements to constitute a holistic CPM approach.
All these mean that more and more, we’re seeing interest in CPM solutions to help Asian businesses align their strategies and plans, and be able to measure their corporate performance with clear metrics.
Strategy for the Asian Markets
Asian companies are ready to embrace the CPM mantra. Cognos has opened it’s first Indian office on March 28th in Mumbai. Besides positioning it as a centre for software innovation for many of Cognos’ customers, India is also being viewed as a strong domestic market for Business Intelligence tools and software. “We are now seeing a growing trend of interest in more sophisticated CPM solutions, like Cognos in the market. Our investments in the market are evidence of our commitment to moving ahead aggressively in the Indian marketplace. Naturally we need to balance our investments across the Asian region that is experience dramatic growth across the board”, according to David Runacres of Cognos.
Hyperion has about 30 clients in India. Plans are also afoot to establish a permanent establishment in India beginning with 2 offices in India very shortly. “This is certainly because we believe the Indian market is ready, post ERP, to embrace solutions that will take them to the next level.”, says Suganthi of Hyperion.
The challenge in India is that businesses are growing at a rapid pace and competition among local businesses is keen. Hence it is imperative for CPM vendors to keep up with the pace of growth with innovative products that will meet their needs and improve their time to market. “Oracle strategy has been to deliver solutions that will help manage information for businesses. Our product development centres around 5 key themes: high performance, high reliability, deliver performance and reliability at very low cost of ownership, incorporate security into our products, and deliver integration solutions. Even in India, we are seeing good opportunities and we’re continuing to grow through our partners and our solutions into major cities across India.”, according to Patrick Lim of Oracle.
Regardless of size, vertical, complexity – all companies are positioned in a very competitive and flat world today. Organisations can no longer be content with measuring themselves against their internal comparative data. In order to stay relevant in today’s dynamic business environment and to meet and even exceed stakeholder expectations, they must be able to benchmark themselves against the best of the best in their industries. CPM, although not a silver bullet, is definitely a solution that will enable them to leapfrog and stay ahead.
With Inputs from
Suganthi Shivkumar: As Managing Director- ASEAN/India for Hyperion Solutions Asia Pte Ltd, Suganthi manages a team of sales, channels, services, marketing and education professionals in the region.
Patrick Lim: A Certified Public Accountant (CPA) with over 10 years in the IT industry, Patrick Lim is the Senior Solutions Manager for Corporate Performance Management (CPM) in Oracle Asia Pacific.
David Runacres: is the Vice President of Cognos’ Asia Operations, based in Singapore. David is responsible for driving Cognos' field operations and performance for both North and South Asia (excluding Australia, New Zealand and Japan).
Jeremy Goddard is the Vice President South Asia & Pacific, SSA Global. Jeremy leads the business for SSA Global for India, ASEAN and the Pacific, with direct responsibility for sales, pre-sales and marketing for the organisation.
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