It has long been the case that companies capable of responding to the increase in speed, volume, and quality of information while making swift transformation decisions come out on top. Promoting a digital transformation (DX) as a key corporate strategy to achieve this has become the norm.
The promotion of DX is often undertaken in the following order: organize what the challenges are, measure their impact, assign an order of priority, and consider how to take action. In the organizing of challenges, you will always come across phrases such as budgeting, forecasting, performance monitoring, data analysis, and visualization.
Organizations often consider deploying EPM tools as a means of undertaking DX with regard to these key phrases (especially budgeting, forecasting, and performance monitoring). However, organizations will often pass on implementing DX because they lack an understanding of the benefits of EPM tools and struggle to visualize how to get the best out of them, leading to a cautious deployment approach.
The aim of this Insight is to enhance your understanding of digital EPM tools not just as a means to reduce workload, but as enablers of flexible adaptation to business transformation and support for management decision-making. In doing so, I hope it will help readers better grasp how to use these tools.
The Best Direction for Advancement in Efforts to Maximize Enterprise Performance Management (EPM) in Finance
- Financial Accounting and Business Management
- Data-Driven Management
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Kyoji Yoshida
Senior Expert
What are EPM tools?
EPM tools are business management tools to support budgeting, forecasting, performance monitoring that includes KPIs, and variance analysis. EPM tools are mainly provided via the cloud or particularly as a SaaS-type application. EPM tools have been released by all kinds of vendors, with the target domains and concepts different for each offering.
Some products specialize in particular domains such as accounting, HR, or supply chain operations, while others specialize in company-wide business plan integration or real-time operations. As the approach to licensing fees varies, you need to choose an appropriate EPM tool to suit your goals.
ABeam Consulting facilitates the deployment of globally renowned EPM tools such as Anaplan, Tagetik, Oracle, and SAP.
Concerns over the cost performance of EPM deployment
In terms of the benefits of deploying EPM tools, an obvious one is enjoying greater efficiency by reducing the workload of existing operations.
However, in finance, budgeting is generally done a maximum of twice a year and forecasting is done about once a month. As a result, many organizations give up on deploying EPM tools because they cannot establish a plan where the deployment costs and licensing fee can be recovered from the benefits obtained from workload reductions.
Users who expect the deployment of EPM tools to reduce the workload often tend to be users in the corporate planning or finance departments who oversee budgeting efforts, rather than users in business departments that formulate plans. This is a factor why it is difficult to calculate the cost performance of EPM tools with workload reductions alone.
It is also common for the cost performance produced after deployment to be less than expected, with many organizations wondering how they can raise the cost performance.
In the case of switching from planning done using spreadsheets such as those of Excel to EPM tool-based planning, while it is understood that workload reductions are not the only benefit of EPM tools, it is important to recognize the following key benefits.
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| Deployment benefit perspectives | Detailed benefits |
|---|---|
| Data reliability | Eliminates the risk of unreliable data being used in management reports, business decisions, and external disclosures |
| Information security | Eliminates the risk of information leakage caused by poor viewing, copying, and printing restrictions |
| Governance | Eliminates the risk of relying on figures with no approval or revision history used in management reports, business decisions, and external disclosures |
| Data asset formation | Ensures the accumulation of carefully formulated data over time to be put to use in future planning, performance monitoring, and trend analysis |
I hope this reminds you that EPM tools not only reduce the workload of operations but that they also positively impact business by increasing the speed of operations with quicker reports, and that they also reduce operational risks by eliminating the dependence on individual staff (see Figure 1).
Changing one’s thinking regarding planning and management systems
Other than cost performance, hesitation to deploy EPM tools typically stems from the idea that a systemized approach lacks flexibility and speed in adapting to business, operation, and organizational changes. The fear is that EPM tools will ultimately lead to a substantial increase in operational costs or that they will become obsolete.
Before the terms “low-coding” and “non-coding” became popular, traditional planning and management systems required database and data processing function redesign, development, and testing, as well as data migration when adding or changing functions and management items in response to business changes or operational process changes. These modifications would take a long time and be expensive too. It was essential that the person in charge of the systems department understood this and decided whether or not to take action. This led to the widespread notion that ‘changes are troublesome’ when it comes to EPM tools. There have been many cases where organizations have undertaken a business transformation but the systems have been unable to keep up, with tools becoming a burden on the business transformation.
However, recent SaaS-type EPM tools are advancing in a way that does not conform to the pattern I just mentioned.
They now offer high changeability to enable flexible adaptation to business and organizational transformations. They also assist in achieving the functionality required by each company through customization and parameters. Furthermore, some vendors offer best-practice operational processes and functions to support this as part of their applications.
If accommodating a work transformation with these systems, functionality changes shall be made within a scope that guarantees operations under customization and parameter settings. As changes are often dealt with without coding, the time it takes to make the changes is short, which reduces the cost due to simpler modifications.
I hope you see that EPM tools that were once a burden on business transformations or were a system that was difficult to change are, in fact, now easy to change, becoming a system that can flexibly adapt to work transformations (see Figure 2).
Goals to be achieved when deploying EPM tools
Can EPM tools provide value and be used fully no matter what the circumstances?
While there is not a single answer to this question, perhaps advanced operations leveraging the characteristics of EPM tools to support management decision-making is a valid solution.
Expanding the usage scope of EPM tools to areas like accounting, HR, sales management, and supply chain helps to gradually reduce the workload of these areas. Meanwhile, another valid approach is to expand the tool to assist budgeting to enjoy the benefits of reducing the workload of users in business departments. This Insight, however, will focus on advancements.
(“Advancements” in this Insight is defined as the ability to routinely perform tasks that are currently difficult or impossible at a low workload and high frequency.)
To achieve lofty business goals, one method could be to forecast future external factors and formulate an approach aligned with organizational restructuring. To make this approach successful, it is vital to feed insights from various simulations into planning efforts and be capable of cycling from implementation to variance analysis at a high frequency.
For simulations, not only must you ensure the information is consistent, but you must also compare many cases using the most recent performance data and the latest forecast information.
The fluctuation of many elements, such as exchange rates, interest rates, internal labor costs, outsourcing costs, sales costs, depreciation from investments, and inorganic strategies, makes it extremely difficult to carry out simulations without EPM tools.
In today’s business structure, in which complex elements are intertwined, carrying out real-time simulations to update these fluctuating elements and check their impact on profit/loss is impossible without EPM tools (see Figure 3).
Understanding how to achieve this advancement paints a picture of how to use EPM tools as a platform to facilitate business transformation and management decision-making.
EPM tools will change from “a system that can flexibly adapt to work transformations” mentioned earlier into “something that supports business transformations” (see Figure 4).
As the best direction for advancement is different for each company, we need to consider this topic carefully.
The means to make an EPM infrastructure that supports work transformation does not require a major leap in advancement. We recommend a strategy in which you establish a solid vision for advancement, starting with quick wins by improving immediate operations, to gradually making their application more advanced.
We should consider the goals and benefits of deploying EPM tools to be not only improving immediate operations and reducing their workload, but also the impact these tools have on management through the various aforementioned advancements.
Utilizing EPM tools + data analytics platforms
EPM tools are a platform to produce planning information. They support plan formulation and simulations, and can be used to monitor performance using budgets or forecast information.
In data-driven management, a vast amount of detailed data is accumulated on a data analytics platform. This data includes wide-ranging datasets and real-time performance information. By visualizing this data in real-time, organizations can objectively understand and analyze their own resources, which enables them to make data-backed decisions. Combining highly accurate/reliable forecast information and simulation outcomes with data-driven management that places an emphasis on performance information makes it possible to expand the scope of management decision-making.
Also, when formulating simulations, the outcomes of analyzing past trends obtained from a data analytics platform enable the creation of more realistic scenarios.
Performance information is produced by implementation platforms, but for it to be used as valuable data, it must be combined with data for analysis. This performance information needs to be fed into a customized grand design, which integrates implementation platforms, data analytics platforms, and planning platforms (see Figure 5).
EPM tools focus on forecasting the future, while data analytics platforms look at the past and the present. By clearly dividing these roles and ensuring collaboration and data integration between them, it is possible to generate greater benefits than if they were operated independently.
Recently, insight-generating technologies have also advanced, with the use of AI in planning platforms and data analytics platforms. Platforms continue to become better at providing support for more effective management decision-making.
In conclusion
The recent advancement of SaaS EPM tools is rapid, with the incorporation of AI technology also progressing. We hope this Insight prompts you to rethink your idea of EPM tools, which you might perceive as a burden on business transformations or not providing cost performance.
When promoting DX, it is important not only to address challenges and optimize DX specifically for your organization, but to break these efforts down into a grand design that includes enterprise architecture. At ABeam Consulting, we are increasingly leading DX projects that integrate planning platforms, data analytics platforms, and implementation platforms. If you are not sure how to go about undertaking such a project, reach out to us.
ABeam Consulting is a team of consultants specializing in planning and performance management, offering expertise from a wide range of industries such as finance, manufacturing, real estate, consumer goods, trading companies, and organizations in the public sector. We help our clients visualize how they can advance their business and then bring this vision to life by providing end-to-end support services, from planning work transformations to deploying and maintaining systems.
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