What is EPM? Enterprise Performance Management & and Connected Planning
EPM, in its full form, stands for Enterprise Performance Management. EPM encompasses the processes of planning, measuring and optimizing business results for enterprise organizations.
In 2019, the enterprise said goodbye to Enterprise Performance Management (EPM) as we know it, and it now takes hold of a new best-of-breed approach to enterprise planning and performance management. It no longer matters which Enterprise Resource Planning (ERP) platform you are on, or which spreadsheet-based EPM or Corporate Performance Management (CPM) suite you are struggling to pull together.
Today’s modern enterprise planning platform needs to be cloud-based with advanced yet user-friendly modeling that can support an array of cross-functional and complex business use cases. The move to achieve this criterion aligns with Connected Planning—a next-gen approach to enterprise planning.
What is Enterprise Performance Management?
Enterprise Performance Management (EPM) is defined as a process supported through planning, reporting, and business intelligence software that enables an organization to connect its strategy with planning and execution. The modern EPM approach came to fruition in the mid-90s and incorporated past, present, and forward-looking information—in addition to business drivers—for a more comprehensive method of financial and operational planning. Some of the key components of EPM systems include planning, budgeting, and forecasting capabilities and the ability to monitor performance measures (KPIs), provide analysis, and manage reporting.
Enterprise Performance Management processes also encompasses the financial close, consolidate, and report process to improve insights. Ultimately, these suites of solutions are to support the business by linking the strategic plan with the annual budget and the periodic forecast using both bottom-up and a top-down methodology.
EPM software is designed to integrate with ERP systems to provide a management layer on top of the transactional ERP modules. EPM systems can support practices that align finance with operations for integrated business planning and establish the foundation for aspirational, enterprise-wide Connected Planning.
Successful use of EPM software in the finance function allows financial planning and analysis (FP&A) teams to anticipate performance gaps and drill down into root causes, collaborate strategically with the business, and execute timely and reliable planning, analysis, and reporting.
Counting down the top three Enterprise Performance Management technology trends
- Deployment models remain a challenge. When rolling out an entirely new EPM solution with different deployment models (cloud vs. on-premises) at a global operation, it can mean replacing some large legacy systems and processes. This effort is no small feat and can result in one to three-year on-prem implementation times (or longer). Fortunately, solutions such as Anaplan can be implemented in a fraction of the time it typically takes to get an on-premises solution up and running due to the agility of the platform and the natural language syntax putting modeling in the hands of the business.
- All innovation is not created equal. In addition to the move toward cloud solutions, EPM innovation is evolving along four vectors: user-experience simplicity, social collaboration, advanced analytics, and integration with other business applications. However, these four are often not equal in importance, and many Anaplan customers indicate a preference for the following order:
- Integration. Robust and straightforward data and metadata integration are critical.
- Experience simplicity. Users have experienced many technology rollouts, and adoption increases when technology aids their work and drives efficiencies.
- Advanced analytics. In today’s fast-paced world, organizational leaders need insight and flexibility in their planning platform to evaluate scenarios and best courses of action quickly.
- Social collaboration. When planning doesn’t include the right people at the right time, decision making is delayed and misinformed.
- Flexible EPM modeling is “The King.” As SaaS solutions have become prevalent in EPM, widely acknowledged differentiators provide competitive advantages, such as the robustness and flexibility of modeling, reduction in IT dependence, and management reporting capabilities.
The transition from EPM to CPM
The acronyms have changed, but the concepts remain the same as corporate performance management (CPM) supersedes EPM. Here is Gartner’s Definition of CPM from December 2001†:
“‘Corporate performance management’ is an umbrella term that describes the methodologies, metrics, processes, and systems used to monitor and manage the business performance of an enterprise.”
EPM, a suite of methodologies that ranges from strategy maps, planning, activity-based cost, and financial reporting has morphed into CPM as the favored term, and vendors that support the practice of CPM strive to bring all of its methodologies into a single platform. This shift has resulted in many improvements to the CPM space, such as:
- Users have access to all of the CPM methodologies they need in a single workspace.
- Users can quickly customize and deploy applications for finance, sales, operations, and human resources. Now the traditionally finance-centric CPM can extend out into all areas of the business, and it is easier for finance teams to provide support for decision-makers across the enterprise.
- With a central repository to reconcile and synchronize various sources of data, users leverage a single source of truth for all their CPM needs, something that was far from easy in the past.
- Moving past installing on-premises software by loading CDs on your servers, software-as-a-service platforms accelerated deployments and precluded propping up and maintaining four or five different kinds of software on company hardware.
From their “Back to Basics” research†, Gartner noted how they “…originated the concept of corporate performance management in 2001. At that time, CPM was envisaged as a holistic approach to managing the performance of an organization at the corporate level. CPM brought individual applications for financial reporting together with budgeting, management reporting, and strategy management into an integrated suite that complemented business intelligence investments and was ERP solution-agnostic.”
From the same research, Gartner advised clients to “Pursue a more targeted approach to selecting FP&A and FC solutions. Don’t start with a ‘suite is best’ mindset. Work with your finance team and focus on its requirements in these areas. Look for areas of differentiation and innovation where you can deliver rapid incremental business benefits by leveraging cloud solutions.”
Relaxing the “suite is best” strategy
By relaxing the suite ideal, your organization is free to choose which solution is optimal for each purpose or use case. The cloud has been the great enabler of this best-of-breed approach. The need to spin spreadsheets to fill gaps between platforms is fading as this “postmodern” FP&A approach leverages cloud-born apps as the equalizer for finance.
You can also relax the notion of the software stack as the integration between ERP and EPM/CPM components are, for the most part, equal. Moving away from a central suite frees the business units from reliance on corporate finance to generate their analysis and reports. Anaplan meets the needs of both corporate finance and the business units; bringing both together on a common platform yields Connected Planning.
Joining the Connected Planning choir
Organizations have long acknowledged a need for a more adaptive financial planning process. A Harvard Business Review survey revealed that 75 percent of organizations need to plan more frequently, and 85 percent responded that they need to plan faster. Despite this, of those survey participants, only five percent believe their organization is effective at ongoing course corrections.
So, what gives—what is holding finance back?
Some of the specific pain points that a Connected Planning approach can help resolve for an organization include:
- Lack of planning accuracy and outcome predictability. Plans are often not agile enough to adapt to changing business conditions and support unexpected scenario modeling needs. With better analytic insights and modeling techniques provided through technology, organizations can drive more valuable performance outcomes.
- Stale business information. Batch interfaces and a lengthy close-the-books process can result in delayed reporting and analysis. With Connected Planning technology, real-time data merges with planning for up-to-date, faster, and reliable business insights.
- Intermittent collaboration. With e-mail and spreadsheets, collaboration is a challenge and a hindrance to developing plans and forecasts. With accessible technology and appropriate workflows, stakeholders connect with not only one another but the information they need to achieve short- and long-term business objectives.
- Lack of strategic focus. With more traditional tools, organizations could fall short on achieving long-term strategic goals. This is because planning and performance measures customarily focused on controlling costs—rather than aligning with strategic growth imperatives.
- Lack of insight into revenue and operations. Numerical reports and presentations can provide murky insight into trends and performance indicators, in addition to difficulty in correlating financial, sales, and operational results. Connected Planning technology eliminates this kind of data density by providing clear business insights.
Five key notes of a Connected Planning solution
Technological advancements in multidimensional databases, Web-based visualization, and cloud technology have become top-of-mind for today’s finance leaders. How do you know if your organization is leveraging these features effectively?
Here are five distinct signs reflecting what organizations have implemented for a successful Connected Planning management approach:
- It’s integrated. All areas of the business execute against plans. There is a wide variety of use cases across the enterprise, with opportunities to connect workforce planning, sales compensation, marketing campaigns, project planning, IT costs, and more. Adopting a true Connected Planning platform brings about this benefit.
- It’s continuous. Financial plans are living and breathing things that can be refreshed with real-time information. With technology moving to the cloud, we now have better data integration tools. What was historically executed as a batch process is now continuous.
- It’s collaborative. Real-time information is shared across the enterprise. Access to shared technology and data can help eliminate spreadsheet errors and inefficiencies. Moving collaboration within a planning platform also allows users to refine their assumptions and act on outcomes more quickly.
- It’s predictive. Your team isn’t doing all of the hard work anymore. Traditionally, people performed all of the work manually; today’s planning and forecasting processes are enhanced with real-time insights and predictive analytics. Progressive technology can do more of the work with its predictive algorithms and simulations, giving teams more time to focus on value-added work.
- It’s strategic. Executive stakeholders can focus on growth opportunities. For many organizations, there is extreme pressure to deliver results that may be at direct odds with what is needed to improve the customer experience. With EPM, CPM, and Connected Planning technology, bottom-up initiatives connect with top-down strategies to ensure business alignment.
Connected Planning brings plans together
Connecting data, people, and plans is imperative to conducting your enterprise with symphonic precision and artistry. Connected Planning is a practice ideally managed enterprise-wide on a common platform, supports agile methods, and enables the digital transformation that the big consulting firms are pitching to your CFO.
If you are looking to be a “post-modern CFO,” financial analyst, or FP&A maestro, here are a few reasons to consider implementing Connected Planning with Anaplan:
- Anaplan is a platform that provides the power of a single code base to advance enterprise planning across finance, sales, supply chain, and other use cases and functional areas.
- Anaplan brings sales and revenue forecasting to demand planning.
- Anaplan is strategic. Legal/financial consolidation solutions support the close process and external reporting requirements. Meeting these requirements checks a box but does not provide forward-looking value. Anaplan is your management system for driving insightful decisions to align strategy with action and to drive enterprise value.
- Anaplan provides a robust cloud-deployed platform that can flex, evolve, and provide future-ready technology on a multi-tenant architecture that is both in-memory and multidimensional.
- Anaplan allows you to plan to the rhythm of your business with flexible modeling capabilities that free you from the Pied Piper of application-based software.
With Anaplan as your instrument for Connected Planning, you put your whole organization on the same sheet of music by integrating finance with operations—moving from analog processes to digital optimization.
As Gartner says in its previously cited “Back to Basics” research, “C-level executives have shifted their focus to digital business transformation, so the original principles of corporate performance management have become less relevant. Application leaders who are modernizing finance applications need to adapt the finance system strategy to accommodate this shift.”
Gartner goes on with their refrain, “Pursue a more targeted approach to selecting financial planning and analysis (FP&A) and financial close (FC) solutions. Leverage cloud FP&A solutions to enable flexibility and agility.”
Connected Planning provides a means to leverage past ERP, EPM, and CPM initiatives with a modern, cloud-born solution that orchestrates the entire enterprise on a common platform for all of your planning needs.
(†) Gartner: “Back to Basics: The Refocusing of Corporate Performance Management”—Published: 31 October 2017; John E. Van Decker, Nigel Rayner, Christopher Iervolino