Enterprise Performance Management (EPM): Why It's The Next Big Thing...
John Hagerty - CEO - AMR Research
The Issue:
After years of effort and billions of dollars spent on Enterprise Resource Planning (ERP), Customer Relationship (CRM), and Supply Chain (SCM), corporations finally have the data and components of the infrastructure in place to dynamically manage enterprise performance.
Senior managers at enterprises worldwide have always had a vision of an all-encompassing business information system that manages day-to-day business processes while providing the analytic insight necessary to make timely, informed, proactive business decisions. Many implemented ERP applications to achieve that goal, but these applications had little, if any, decision support capability. As their functional footprint expanded to accommodate supply chain and customer management needs, users had more data than ever. Yet, they could not manage company performance any better.
That vision of a single, unified environment is still intact and finally in sight. Yet, there is still more work to be done. Data must be distilled to the performance indicators that truly matter to each business, presented through scorecards or dashboards to all levels of management, and then acted upon. For managers, this means getting the best information to evaluate the health of the corporation and make the right decisions to guide it through these turbulent times.
The $10,000 question
Whenever I speak to a company charting its course to Enterprise Performance (EPM), I ask, "Is it worth $10K per seat for each of your managers to be fully engaged with the key metrics that you've determined drive optimal performance?" No one disagrees. In fact, many suggest it is worth a lot more to them to have everyone aligned to the same performance goals. So, decision makers are clearly on board with empowering managers with the information they need to do their jobs, like EPM.
Now, let's do some math. Fortune 1000 North American-based companies employ more than 29 million workers. Roughly one in ten is a manager, making 2.9 million managers. If companies think EPM is worth, conservatively, $10K per manager, that's $29B. Factoring in the rest of the world and companies beyond the Fortune 1000, and adding in a healthy dose of conservatism, I estimate that EPM is worth at least $50B today.
EPM is a journey, not just a final destination
Is there an EPM spending spree just waiting to bust loose? Not $50B worth. EPM is evolutionary, building on the foundation of technology and applications a firm has already implemented. It includes Business Intelligence (BI) products, reporting tools, planning and budgeting applications, analytic applications, incentive management systems, portals, and scorecards, along with data warehouse technology, data models, and integration software. If you scan your technology inventory, you'll surely find some EPM components already in use, and active performance measurement programs underway in pockets of your business.
Obviously, some of that EPM money has already been spent. But, much of it has been for discrete databases and/or business processes that rely on large chunks of data being shuttled back and forth between applications; it's not optimal, but it's pragmatic for solving pressing business or business performance issues. Many users already understand that it's virtually impossible to separate analytics and reporting from budgeting and planning or incentive management from the Key Performance Indicators (KPIs) on which they're based. Products that architecturally and/or conceptually reinforce this separation are becoming harder for strategists to rationalize.
EPM frameworks are being planned and put in place, a piece at a time. Users have a wide array of options available to them, from analytics and BI sources to enterprise application vendors and systems integrators, all offering their unique perspectives on how to frame EPM in each firm. Knowing what's most important for the business must guide any decisions you make.
Ever since the first Information Systems (MIS) department was created, corporations have been striving to provide better information to managers. So why is now the time for EPM? Several important technology trends are coming together to support EPM on the scale necessary to sift through terabytes of data to make decisions:
Advances in storage technology has made it possible to collect enormous amounts of data. Advances in servers help process this data with sophisticated algorithms that can interpret the data in near real time. Internet-based software tools make it possible to access data anywhere in the world without having to solve complex integration issues. Many corporations now have an application infrastructure that captures all of the data supporting and created by key business processes. Further out, look for wireless technology to push EPM indicators and alerts to cell phones and hand-held devices. Before corporations can take advantage of any of these advances in technology, they must first embark on the EPM journey. Proceed with your eyes (and mind) wide open. Poll your own managers and gauge their priorities. Use that information to decide what hot spots you tackle first. Match that against what you hear from technology and application providers to uncover those products and services that fit best. Because of the vast number of EPM market participants, you'll find many options, some of which may challenge long-held beliefs.
Leverage, leverage, leverage. Make sure to take advantage of all the work you've already done and paid for. At the same time, don't be dogmatic and automatically give the nod to an incumbent vendor if its products and plans don't match up well to your requirements.
EPM is not just a financial management exercise. Although money is the common language throughout the enterprise, supply chain, customer management, and production-based performance management are fundamental parts of the EPM model and must not be neglected.
The Issue:
After years of effort and billions of dollars spent on Enterprise Resource Planning (ERP), Customer Relationship (CRM), and Supply Chain (SCM), corporations finally have the data and components of the infrastructure in place to dynamically manage enterprise performance.
Senior managers at enterprises worldwide have always had a vision of an all-encompassing business information system that manages day-to-day business processes while providing the analytic insight necessary to make timely, informed, proactive business decisions. Many implemented ERP applications to achieve that goal, but these applications had little, if any, decision support capability. As their functional footprint expanded to accommodate supply chain and customer management needs, users had more data than ever. Yet, they could not manage company performance any better.
That vision of a single, unified environment is still intact and finally in sight. Yet, there is still more work to be done. Data must be distilled to the performance indicators that truly matter to each business, presented through scorecards or dashboards to all levels of management, and then acted upon. For managers, this means getting the best information to evaluate the health of the corporation and make the right decisions to guide it through these turbulent times.
The $10,000 question
Whenever I speak to a company charting its course to Enterprise Performance (EPM), I ask, "Is it worth $10K per seat for each of your managers to be fully engaged with the key metrics that you've determined drive optimal performance?" No one disagrees. In fact, many suggest it is worth a lot more to them to have everyone aligned to the same performance goals. So, decision makers are clearly on board with empowering managers with the information they need to do their jobs, like EPM.
Now, let's do some math. Fortune 1000 North American-based companies employ more than 29 million workers. Roughly one in ten is a manager, making 2.9 million managers. If companies think EPM is worth, conservatively, $10K per manager, that's $29B. Factoring in the rest of the world and companies beyond the Fortune 1000, and adding in a healthy dose of conservatism, I estimate that EPM is worth at least $50B today.
EPM is a journey, not just a final destination
Is there an EPM spending spree just waiting to bust loose? Not $50B worth. EPM is evolutionary, building on the foundation of technology and applications a firm has already implemented. It includes Business Intelligence (BI) products, reporting tools, planning and budgeting applications, analytic applications, incentive management systems, portals, and scorecards, along with data warehouse technology, data models, and integration software. If you scan your technology inventory, you'll surely find some EPM components already in use, and active performance measurement programs underway in pockets of your business.
Obviously, some of that EPM money has already been spent. But, much of it has been for discrete databases and/or business processes that rely on large chunks of data being shuttled back and forth between applications; it's not optimal, but it's pragmatic for solving pressing business or business performance issues. Many users already understand that it's virtually impossible to separate analytics and reporting from budgeting and planning or incentive management from the Key Performance Indicators (KPIs) on which they're based. Products that architecturally and/or conceptually reinforce this separation are becoming harder for strategists to rationalize.
EPM frameworks are being planned and put in place, a piece at a time. Users have a wide array of options available to them, from analytics and BI sources to enterprise application vendors and systems integrators, all offering their unique perspectives on how to frame EPM in each firm. Knowing what's most important for the business must guide any decisions you make.
Ever since the first Information Systems (MIS) department was created, corporations have been striving to provide better information to managers. So why is now the time for EPM? Several important technology trends are coming together to support EPM on the scale necessary to sift through terabytes of data to make decisions:
Advances in storage technology has made it possible to collect enormous amounts of data. Advances in servers help process this data with sophisticated algorithms that can interpret the data in near real time. Internet-based software tools make it possible to access data anywhere in the world without having to solve complex integration issues. Many corporations now have an application infrastructure that captures all of the data supporting and created by key business processes. Further out, look for wireless technology to push EPM indicators and alerts to cell phones and hand-held devices. Before corporations can take advantage of any of these advances in technology, they must first embark on the EPM journey. Proceed with your eyes (and mind) wide open. Poll your own managers and gauge their priorities. Use that information to decide what hot spots you tackle first. Match that against what you hear from technology and application providers to uncover those products and services that fit best. Because of the vast number of EPM market participants, you'll find many options, some of which may challenge long-held beliefs.
Leverage, leverage, leverage. Make sure to take advantage of all the work you've already done and paid for. At the same time, don't be dogmatic and automatically give the nod to an incumbent vendor if its products and plans don't match up well to your requirements.
EPM is not just a financial management exercise. Although money is the common language throughout the enterprise, supply chain, customer management, and production-based performance management are fundamental parts of the EPM model and must not be neglected.
posted by Ian Gotts at 12:35 PM
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