The Power of the Cube: Using CPM Software to Analyze Business Problems

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1 issue 4 The Power of the Cube: Using CPM Software to Analyze Business Problems 2 The Power of the Cube: Using CPM Software to Analyze Business Problems 5 Prophix Cubes in Action 9 Gartner Research: Getting More Value from CPM: Strategic Versus Office of Finance CPM 16 Featuring research from About Prophix

2 Thought, not money, is the real business capital. Harvey S. Firestone The Power of the Cube: Using CPM Software to Analyze Business Problems Head office 350 Burnhamthorpe Road W. Suite 1000 Mississauga, Ontario Canada L5B 3J1 Telephone: Toll-free: Prophix UK Grove House Lutyens Close Basingstoke Hampshire RG24 8AG England Telephone: Prophix Europe Orestads Boulevard Kobenhavn Copenhagen Denmark Telephone: [email protected] The Power of the Cube: Using CPM Software to Analyze Business Problems The office of finance faces new challenges For many years now, finance professionals have used spreadsheets for analysis. Spreadsheets sufficed when these needs remained relatively modest, but the needs of finance have changed. Companies have access to more data than ever before As Enterprise Resource Planning (ERP) systems have become more sophisticated, organizations use them to track what happens at a more granular level; companies can place more departments in the General Ledger (G/L) and more accounts in the chart of accounts. Additionally, the business environment has become increasingly complex, requiring analysis of everything from product lines to customer types to inventory levels. Finance is overwhelmed with data. Source: Prophix 2 l The Power of the Cube: Using CPM Software to Analyze Business Problems Prophix South America Av. Marechal Camara 160 sala 1610 Centro Rio de Janeiro RJ Brazil Telephone: [email protected] The Power of the Cube: Using CPM Software to Analyze Business Problems is published by Prophix. Editorial content supplied by Prophix is independent of Gartner analysis. All Gartner research is used with Gartner s permission, and was originally published as part of Gartner s syndicated research service available to all entitled Gartner clients Gartner, Inc. and/or its affiliates. All rights reserved. The use of Gartner research in this publication does not indicate Gartner s endorsement of Prophix s products and/or strategies. Reproduction or distribution of this publication in any form without Gartner s prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner s Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see Guiding Principles on Independence and Objectivity on its website,

3 Financial experts need to forecast more frequently Planning used to happen once a year when organizations prepared their annual budgets. Now, many companies produce monthly rolling forecasts and can perform advanced functions, like inventory planning and sales planning, on a daily and weekly basis. Collaboration has become a fundamental requirement Historically, planning and reporting involved finance and relatively few other departments. Today, planning, analysis, and reporting are more collaborative, involving employees from all parts of the company. Finance has to manage the collection and dissemination of information from and to more users. This requires reliable workflow solutions, guiding the movement of important and/or sensitive data. Manual work causes problems Even while facing these pressures, many organizations still run manual processes that are repetitive, time consuming, and error-prone. Companies need more innovative tools for reporting, budgeting, forecasting, and analysis. Automation equals business benefits Finance now has the option to implement Corporate Performance Management (CPM) software that automates analytical business processes. Historically, CPM has been expensive, with high license and implementation costs, available only to big companies, and regarded as a major investment. Most affordable software has featured limited capabilities, with restrictions to either spreadsheet-based reporting or simple planning. However, the value proposition of CPM software has changed for three main reasons: 1. Software vendors now have low cost business models that involve extensive use of Internet technology for customer acquisition and service delivery. They pass these cost savings on their customers. 2. Market leaders offer integrated and unified solutions that contain all CPM functionality in a single product. This minimizes installation, maintenance, and training costs. 3. In the best cases, finance professionals configure the software, rather than using IT consultants to write expensive customization code. How does CPM software help? Typically, finance employees run reports directly from their ERP or General Ledger (G/L) systems and manually key the results into Microsoft Excel spreadsheets. These reports may include cash flow projections, revenue forecasts and analysis, and estimates of available resources (based on regulatory requirements). CPM software offers a better way, with Online Analytical Processing (OLAP) as its underlying technology. OLAP tools do not store individual transaction records in a two-dimensional, row-by-column format, like a spreadsheet would, but instead use multidimensional database structures, known as cubes, to store collections of consolidated information. Storing both data and formulas, these multidimensional databases allow users to output views of the information on demand. Users can simply twist and turn the cube to find the combination of coordinates that they seek. The Power of the Cube: Using CPM Software to Analyze Business Problems l 3

4 Each business element (e.g., organization, region, department, account) that a company seeks to evaluate constitutes a dimension. Each dimension contains members (e.g., specific departments like HR, marketing, sales, and customer support), that belong in a dimension hierarchy. Dimensions can also feature alternate hierarchies that provide a means to aggregate data from other perspectives and generate reports based on those criteria (e.g., regional tax reports or other management reports). CPM users also benefit from direct connections to their ERP and G/L systems, wherein a company s dimensions and summary data automatically load into their Corporate Performance Management software. CPM technology allows users to easily drill-across into ERP and G/L systems, down to the transactional level, in order to investigate the performance of their business. Companies thrive when they leverage CPM s power CPM software helps businesses by integrating with other software systems and automating all of the major financial processes, including budgeting, forecasting, planning, reporting, and consolidation. This frees up time for value-added activities, included advanced analysis. All of this comes to organizations for manageable costs, with straightforward implementations. Most CPM software is user friendly, so finance experts require minimal technical training if they have experience using desktop software like Microsoft Excel. With the ability for their employees to simply master the tools at their fingertips, the office of finance can achieve remarkable returns on their investment. 4 l The Power of the Cube: Using CPM Software to Analyze Business Problems Source: Prophix

5 Source: Prophix Prophix Cubes in Action We sat down with Neal Khan, Prophix s Director, Professional and Client Services, to find out about some of the more innovative cubes that his company s customers have developed. Thank you for joining us, Neal. You re welcome. This topic is particularly important to me. Over the past 5 years I have witnessed a significant shift in the CPM space. Companies are beginning to recognize ways that they can use the software to generate benefits across their organizations, beyond the office of finance. As I see it, this represents the emergence of true Corporate Performance Management solutions, involving sales and marketing groups, operational departments, IT divisions, and others. This is becoming a real differentiator, as companies can plan better, respond quicker, and act faster all due to coordination between the moving parts of the organization. This integration involves more than just adding people to the annual budget cycle. It means solving business problems that are unique and relevant to each part of the business, and then tying them back to the overall strategy. I have had the pleasure of working with several companies that really embrace this concept, and have developed innovative ways to use the software s capabilities. With that, I d like to present some impressive examples from the past few years. 1 PARTEQ Innovations. This not-for-profit organization, which commercializes inventions resulting from university-generated research, uses Prophix to automate their detailed planning. PARTEQ tracks the following elements: License revenue and distribution expenses Salaries and benefits Neal Khan Fees-for-services Patent expenses and recoveries Other business expenses (consulting, subscriptions, insurance, rent, lab expenses, research) Capital assets Direct statement of cash flows Leveraging a centralized view of these key business drivers, correlated with each other, PARTEQ analyzes their past performance, their current situation, and models future what if scenarios. The Power of the Cube: Using CPM Software to Analyze Business Problems l 5

6 Evaluating inventory, based on numbers of cages in use, types of cages (or isolators ), and the health status of mice and rats Analysis of costs, by cage o Cages in use per strain/per project/per barrier o Cages in use as above + unutilized capacity 6 l The Power of the Cube: Using CPM Software to Analyze Business Problems For example, they can better project revenues from their many license agreements. Pinpointing this data allows PARTEQ to more effectively manage their cash flows and corresponding expenses. According to Paul Vickers, the organization s Vice President, Finance and Administration, CPM software from Prophix turns the office of finance into a value-added department one that continually provides insight to the rest of the organization. 2 A global provider of genetically modified rodents for testing, development, breeding, and distribution. This organization s Oracle ERP integrates fully with Prophix. With a highly-skilled financial analysis group and access to complete information, the company conducts profitability analysis, contrasting, among others, the following factors: Revenue planning, based on site, pharmaceutical or research customers, product (cage rats or mice, different types of isolators for housing the animals, rental space for test specimens, etc.), incubations costs, and transportation costs Personnel planning, tracking employee expenses in multiple countries, factoring in different taxes, benefits, and other considerations in each location The organization plans to further develop their sales and inventory planning processes to integrate with their demand planning. This integration will allow them to anticipate the needs of their customers and contrast this with their capacity to meet those requirements. The company has also built an activity-based costing model to collect and allocate costs at the highly granular level, based on statistical cost drivers. This analysis enables them to determine the cost of each major operational activity and to pinpoint the profitability of products and of specific customer relationships. The company then uses their modeling capabilities to evaluate the impact of different cost and resource allocation strategies. Finally, the organization has improved their managers accountability for financial performance by standardizing and streamlining financial management reporting ultimately reducing their reliance on finance staff for access to business information.

7 3 Constar International. Constar is a global supplier of sustainable plastic containers for food and beverage companies. In early 2012, the company sought a solution that would allow them to integrate with their ERP and consolidate their reporting. Over time, they have built their Prophix solution to track the following considerations on a daily basis: Sales (variance) reporting Costs of the materials that compose their plastics o Which they evaluate to track and manage their profit margins In the near future, Constar s finance experts plan to build operational Key Performance Indicator (KPI) reporting to track labor productivity, machine downtime, and output per machine. o With a large number of customers, they contrast projected (forecasted) sales with actual sales Inventory reporting o The company holds inventory at multiple manufacturing plants. With a consolidated view of their data, Constar understands how much stock they have on hand in various locations, and how this can enable them to meet their orders The Power of the Cube: Using CPM Software to Analyze Business Problems l 7

8 4 Regional Management Corp. Regional Management Corp. is a specialty consumer finance company that provides a broad array of loan products to customers who have limited access to consumer credit from banks, thrifts, credit card companies, and other traditional lenders. The organization found that their general ledger struggled to write reports, so they implemented Prophix, and eventually came to build these specialty cubes: A new store model, which allows them to report on the first year performance of their locations, relative to each other. Understanding how all of their 264 locations perform (or have performed) in their early stages i.e., with basic budgeting, cash flow planning, etc. enables Regional Management Corp. to decide if, how, and where they will open new locations. A revenue planning model that helps the company to analyze their sales (by product, by seasonality, and by geographical location), identify trends, and decide which products to offer. A long term planning model, which Regional Management Corp. uses to plan 5 years into the future through a bottomup method. The organization reaches their findings by evaluating a combination of geography and break-even analysis for their locations to inform their plans for store openings over time, as well as how much money to borrow and lend based on anticipated revenue. This data also informs the rates that they obtain from their lenders and offer to their customers. 8 l The Power of the Cube: Using CPM Software to Analyze Business Problems

9 Getting More Value from CPM: Strategic Versus Office-of-Finance CPM Research from Gartner RAS Core Research Note G , John Van Decker, Chris Iervolino, 08 February 2013 Corporate performance management deployments are typically of two types: strategic and office of finance. While most CPM implementations take advantage of office-of-finance CPM capability initially, the CPM strategist can make significant improvements by taking advantage of strategic CPM. Impacts An office-of-finance approach to corporate performance management (CPM) will provide greater effectiveness for finance if extended deeper into the financial close process through added support in such areas as account reconciliation, financial analytics and tax provisioning, financial analytics, planning, and forecasting. A strategic CPM approach that is separate from an officeof-finance approach can benefit the entire organization by managing enterprise business plans for corporate goals and objectives, and facilitating the understanding of the true drivers of profitability. Taking advantage of these two different, yet related types of CPM deployments can extend the value of your current CPM implementation and have a more transformational effect on the entire organization by increasing the alignment of business planning with enterprise goals and objectives. Recommendations Understand where you are on the Gartner CPM Maturity Model to help determine your next steps. If you are currently at Level 2: Opportunistic, you have probably already gone down the route of an office-of-finance approach. You may continue to deploy more office-offinance-specific applications, such as close/reconciliation management, disclosure management and tax provisioning. If you have enabled some strategic CPM capabilities, look at expanding those efforts beyond strategic planning in strategy management and profitability modeling and optimization (PM&O). If you want to drive to Levels 3 and 4, consider implementing both office-of-finance and strategic CPM applications. Strategic Planning Assumption By 2017, less than 35% of CPM implementations will support both strategic and office-of-finance capabilities. Users can increase their return on CPM investments by up to 40% by supporting strategic CPM and not just the office-of-finance needs. Analysis Implementations of CPM are typically of two varieties: officeof-finance CPM and strategic CPM. Gartner estimates that 85% of CPM implementations are of the office-of-finance variety, 25% utilize both office of finance and strategic CPM, and 15% use strategic by itself. From the 2013 Magic Quadrant user satisfaction survey, we see that: The use of CPM modules continues to be more focused on office-of-finance applications. More organizations are implementing additional functions that provide efficiency in the finance organization, such as close management and disclosure. About 75% still have not taken a more strategic approach to CPM. According to the recent client survey used for the upcoming 2013 CPM Magic Quadrant, 76% of respondents use CPM for budgeting, while 23% use it for strategy management. Not much progress has been made since the prediction we made in 2008 (see Measuring and Managing Corporate Performance: The State of the Art ). Not much progress has been made in the past five years since we wrote Measuring and Managing Corporate Performance: The State of the Art. This research showed that CPM projects typically focused on budgeting, planning and forecasting, or financial consolidation and reporting. Finance drove most of the projects, but the results clearly showed that finance-led The Power of the Cube: Using CPM Software to Analyze Business Problems l 9

10 figure 1. Impacts and Top Recommendations for Getting More Value From CPM Impacts An office-of-finance CPM approach can result in greater effectiveness for finance if extended deeper into the financial close process. A strategic CPM approach that is separate from an office-of-finance approach can benefit the entire organization by managing enterprise business plans for corporate goals and objectives, and facilitating understanding the true drivers of profitability. Taking advantage of these two different, yet related types of CPM deployments can extend the value of your current CPM implementation and have a more transformational effect on the entire organization. Top Recommendations Understand where you are on the Gartner CPM Maturity Model to help determine your next steps. If you are currently at Level 2: Opportunistic, you may continue to deploy more office-of-finance-specific applications to expand efficiencies. If you have enabled some strategic CPM capabilities, look at expanding those efforts beyond strategic planning in strategy management and PM&O. If you want to drive to maturity Levels 3 and 4, consider implementing both office-offinance and strategic CPM applications. Establish a firm foundation at your current level of CPM maturity before attempting to reach the next. Source: Gartner (February 2013) 10 l The Power of the Cube: Using CPM Software to Analyze Business Problems projects exhibited lower levels of maturity and benefits delivery. Only a small number of projects were transformational in nature and covered all aspects of CPM. To recognize this continuing focus of most CPM implementations on a narrower, financeoriented focus, we have categorized them into two types: officeof-finance CPM and strategic CPM. There is not necessarily a distinct division of applications and purposes, because there is an overlap of capabilities between office-of-finance and strategic CPM that serves the important purpose of focusing this discussion on illustrating the current/historical trends in the CPM market. Office-of-finance CPM is usually sponsored by strengthening financial processes (run), and strategic CPM is sponsored by drive growth/transformation (grow/transform). In responding to this lack of strategic CPM implementation, CPM suite vendors have driven a wedge between strategic and office-of-finance CPM, because since 2008/2009, they have added more office-of-finance applications to extend software sales in more tactical finance areas. We have seen extensive office-of-finance capabilities being built into CPM suites by vendors such as Oracle and SAP, including disclosure management, close/reconciliation management and taxes, while these CPM vendors have focused less on strategic CPM. Strategic CPM has not been as major a contributor to revenue as these office-of-finance applications have been, and they have followed the sales opportunities. By doing so, they caused a split between strategic CPM and office-of-finance CPM with a more distinct office-of-finance offering. Impacts and Recommendations An office-of-finance approach to CPM will provide greater effectiveness for finance if extended deeper into the financial close process through added support in such areas as account reconciliation, financial analytics and tax provisioning, financial analytics, planning, and forecasting CPM initiatives are typically conducted through a progression of projects that begin with particular pain points, such as Excelonly budgeting or financial consolidation systems. Most CPM solutions are underutilized due to various issues, including limited original scope without additional phases, skill gaps, unawareness of additional functionality that is in the vendors suites and a limited understanding of the full value these

11 solutions can provide. Financial consolidation, and close and budgeting solutions are relatively well-known; however, greater effectiveness within the office of finance can be attained by extending CPM support into CPM processes. Since our research in 2008, office-of-finance capabilities have made their way into the CPM suite. This was initially spurred by best-of-breed vendors that brought extensible Business Reporting Language (XBRL) reporting, disclosure management and close/reconciliation. While there is still a very strong market for these financial governance vendors, such as WebFilings, Trintech and BlackLine (see Q&A: Current Issues in Financial Governance ), we are seeing CPM suite vendors bring these capabilities into their suites, such as Longview, SAP, IBM and Oracle. With these capabilities being integrated in the CPM suite, organizations can now take advantage of integration with financial consolidation and reporting processes. These office-of-finance processes and the solutions that support them can be identified as follows: Financial consolidation and close management These create the audited, enterprise-level view of financial information, enabling organizations to reconcile, consolidate, summarize and aggregate financial data based on different accounting standards and government regulations, and provide financial and management consolidations at local, regional or business unit subconsolidations. These applications require complex transaction-processing rules to automate intercompany transaction management (elimination and matching), as well as complex currency translation and revaluation capabilities. They also maintain a detailed audit trail of all transactions processed to arrive at the consolidated financial results. This includes close control process management, reconciliation management, intercompany activity management, journal entry control, financial control testing and tax provisioning. Financial and management reporting and disclosure This reporting capability formats structured financial/ regulatory and management reporting statements. These applications support specific generally accepted accounting principles (GAAP) presentation rules, such as U.S. GAAP or International Financial Reporting Standards (IFRS), to enable the preparation of statutory financial statements with appropriate commentary and supplementary notes. Increasingly, financial-reporting solutions incorporate process controls for reporting and disclosure, such as templates, collaboration between the company and the financial statement publisher, business rules, workflow, and audit trails to better meet regulatory, compliance and governance programs. In addition, these tools support financial-reporting technologies, such as XBRL, because regulators increasingly require the submission of financial statements in XBRL format. Budgeting In CPM, the budgeting process sets shortterm targets for revenue, expenditures and cash generation, and usually has a one-year horizon. It typically uses financial classifications found in the general ledger to classify financial goals and targets. The budget (and the budgeting process) is usually wholly owned and controlled by the CFO and the finance function, and needs to link with underlying finance systems. The budgeting process acts as more of a fixed control mechanism than plans and forecasts, and is less strategic. Financial planning and forecasting In CPM, the financial planning and forecasting processes consist of a financial-modeling engine with an integrated profit-andloss, balance sheet and cash flow forecasting capability. This is the key feature that distinguishes CPM from other analytic applications that also create plans and forecasts (such as sales and operations planning, or marketing campaign planning applications). These capabilities support the creation, review and approval of financially focused plans and forecasts, as well as their associated workflow. Longer-term financial plans are used by executives to evaluate the effects of alternative strategies, such as merger and acquisition activity. They typically represent a high-level perspective of revenue, expenses, balance sheet items and cash flows. Forecasting typically differs from budgeting and planning in that, once a budget is created, many organizations tend to strictly adhere to it, regardless of changes to the business environment. The goal of forecasting is to dynamically create more accurate predictions of future outcomes based on experience, and to predict alternative outcomes if business conditions change. Note: Planning and forecasting efforts that support this could be considered strategic. Costing Accounting departments frequently require additional tools to perform a cost breakdown analysis for product/service, customer and units, which is a key component of cost accounting. In the CPM suite, this base The Power of the Cube: Using CPM Software to Analyze Business Problems l 11

12 12 l The Power of the Cube: Using CPM Software to Analyze Business Problems costing functionality can be found in PM&O applications (which take the capability even further by providing modeling and planning based on expense and revenue). PM&O includes activity-based costing (ABC) applications that determine and allocate costs at a highly granular level to, for example, determine the cost of each task (activity) that an agent may perform across all channels in a customer service contact center. This information can be applied to various cost objects, including products, customers and customer segments. Recommendations: Understand where you are on the Gartner CPM Maturity Model (see Assess CPM Maturity to Rate Your Performance Management ) to help determine your next steps. If you are currently at Level 2: Opportunistic, you may continue to deploy more office-of-finance-specific applications to expand efficiencies. If you are using a budgeting solution for data collection, consider using the capabilities within the solution for planning and forecasting. If you are using a financial consolidation application for financial reporting, consider extending the solution to management reporting. Consider more applications within the financial close area, augmenting your implementation of financial consolidation with financial governance applications, such as close management, reconciliation management, disclosure management and tax provisioning. Expand costing capabilities with a formal PM&O solution to better understand and make business decisions on the costs to provide products/services, as well as the cost to deliver these to a specific client. A strategic CPM approach that is separate from an office-of-finance approach can benefit the entire organization by managing enterprise business plans for corporate goals and objectives, and facilitating the understanding of the true drivers of profitability While strategic CPM capabilities are less of a CPM sales lead today, we are beginning to see a resurgence of interest in them, particularly where they are part of a larger performance management initiative at the enterprise level. Companies are seeking to leverage more predictive capabilities that are being enabled in the business intelligence (BI) platform into CPM. We have been touting the value of strategic CPM since 2008, and unfortunately, many still do not take advantage of these important capabilities within the suite, although some do. This should be a higher priority today, because firms are championing business analytics projects today, although many have not taken advantage of the capabilities in their CPM suites. Many organizations do not leverage CPM strategically to benefit the entire organization; however, these solutions are increasingly being used to help link corporate and operational plans, to provide wider access to financial analytics, and to help develop strategies that deliver to the expectations of shareholders, investors and funding bodies. This strategic approach to CPM facilitates a broader approach to organizationwide performance management. As a result of the wedge in the market that we have described in the earlier part of this research, we have reorganized the pillars of the CPM to reflect these changes in the market, particularly in the area of strategy management. Expanding a strategic CPM approach can entail leveraging additional CPM systems in the following areas: Strategy management These solutions provide a packaged approach to support strategic planning, modeling and monitoring to improve corporate performance, accelerate management decision making and facilitate collaboration. They re usually tied to strategy maps or methodologies, such as the balanced scorecard. Strategy management comprises:

13 Strategic planning The creation of higher-level business plans to evaluate the impact of different strategic alternatives. It also includes long-term financial planning, which creates a high-level perspective of revenue, expenses, balance-sheet items and cash flows to show the financial impact of different strategic alternatives. Initiative/goal management Includes projectmanagement-like tools to enable responsible managers to execute specific tasks related to a strategy. Recommendations: If you have enabled a scorecarding application, consider taking advantage of more strategy management capabilities, including initiative/goal management, strategy management and the linkage of key performance indicators with key risk indictors. Consider implementing a strategic planning application, which can be used to tie together operational and financial planning. This may also require implementing a strategic finance application. Scorecards and strategy maps Used to record strategies, objectives and tasks; monitor performance; identify, explain and maintain the relationship of key performance indicators (KPIs); and enable related communication and collaboration capabilities. Dashboards Aggregate and intuitively display metrics and KPIs, enabling them to be examined at a glance or analyzed interactively using embedded filters and drill-down/-across capabilities before further exploration via additional BI tools. Strategic PM&O PM&O includes ABC functionality, but also can be used to help determine product and customer profitability. PM&O applications take this approach one stage further and provide modeling capabilities to enable users to model the impact on the profitability of different cost and resource allocation strategies. This approach can help model optimal product and service offerings in packaging, bundling and pricing, as well as optimize channel strategies. Increasingly, profitability-modeling applications are focusing on profit-optimization capabilities that enable executives to plan the impact of different strategies on profitability from different perspectives, such as customer or product. These solutions may also be able to model business processes and provide other advanced features, such as constraint-based, bidirectional and predictive modeling. Since 2008, more predictive capabilities have entered these products, along with improved reporting and a focus on integrating PM&O with planning capabilities. Consider PM&O beyond costing, letting the application help determine product/service and customer profitability. Taking advantage of these two different, yet related types of CPM deployments can extend the value of your current CPM implementation and have a more transformational effect on the entire organization by increasing the alignment of business planning with enterprise goals and objectives There is no consistent, distinct division between office-offinance CPM and strategic CPM. Areas of overlap suggest opportunities to take a more comprehensive approach to CPM that can have a more transformational impact on the organization. For example, many of the CPM solutions on the market have a combined budget, planning and forecasting capability, and like planning, many firms have not effectively implemented what is available for forecasting. Having improved forecasting capability that is consistent across budget and actual data can constitute strategic CPM, particularly if the company is using the CPM solution across the enterprise to link financial and operational planning. Similarly, newer predictive capabilities that the vendor may offer as part of its BI and performance management offerings, or embed within its CPM solution, can be leveraged to strategic advantage. The Power of the Cube: Using CPM Software to Analyze Business Problems l 13

14 We reiterate what we said in 2008 Although finance is key to success in CPM, it is clear that, if finance leads the project, then the focus will be more on the needs of the finance function, rather than on a broader approach to managing corporate performance. This will limit the ability of the organization to achieve higher levels of CPM maturity. Office-of-finance functionality will be championed by the finance organization, and if finance is in the lead, then office-of-finance functionality will more likely be the focus of the CPM implementation. If a broader enterprise approach is pursued, strategic CPM will more likely be the focus. It is incumbent upon the IT organization to help companies achieve a more consistent approach to CPM, championing the benefits of a duel office-of-finance and strategic finance offering. Recommendations: Pursue a combined office-of-finance and strategic CPM strategy that takes advantage of the two pillars of CPM. Understand that these may have different executive sponsors within the organization, and the IT organization should ensure that both of these branches, when pursued, are done so within the same suite, where possible. Augment CPM capabilities with best-of-breed applications, where appropriate. Expand an office-of-finance-focused costing solution, such as an activity-based costing/management tool to compare costs to products and then customers. In this way, the CPM solution would become strategic, in that it can be 14 l The Power of the Cube: Using CPM Software to Analyze Business Problems

15 used to provide insight into how to steer customers to more profitable products, or provide market-basket modeling to optimize a firm s interaction with a customer. If this can then be integrated into the corporate planning solution, then this strategic CPM solution would transform the way an organization goes to market and positions itself to customers. If integrated into a CPM suite s planning capability, then this PM&O capability can result in a more-strategic planning process. Leverage your CPM solution for a combined enterprise planning, budgeting and forecasting initiative. Take advantage of the data you collected in your officeof-finance initiative, as well as the platform you have implemented for CPM, as a baseline to pursue strategic CPM opportunities listed in the prior impact section. Most vendors in the CPM market have taken an approach to address most, if not all, of these capabilities in the CPM suite. Lately, many have turned to increasing their depth and coverage of the office-of-finance CPM set of requirements by providing increased depth in the financial close, reconciliations, financial analytics and, for some, tax provisioning areas. They have also understood that the CPM market has turned a bit more inward lately, toward its origins: the office of finance. We believe that this temporary shift back to finance will increase the opportunity for more efficiency in finance; however, efforts to bring performance management into operational areas that are coinciding with this movement will lead to a resurgence of strategic CPM in the next three to five years. The Power of the Cube: Using CPM Software to Analyze Business Problems l 15

16 About Prophix Recognized by leading analysts, Prophix develops Corporate Performance Management (CPM) software that automates important financial and operational processes, making companies more profitable and reducing their risks. Thousands of business leaders in nearly one hundred countries use Prophix to gain valuable insights into the performance of their organizations. Prophix and its partners deliver superior value by combining high-end functionality with low cost-of-ownership and fast implementations. With powerful and adaptable solutions built on the Microsoft SQL Server stack, Prophix streamlines budgeting, planning, reporting, consolidation, and more. Head office 350 Burnhamthorpe Road W. Suite 1000 Mississauga, Ontario Canada L5B 3J1 Telephone: Toll-free: Prophix Europe Orestads Boulevard Kobenhavn Copenhagen Denmark Telephone: [email protected] 16 l The Power of the Cube: Using CPM Software to Analyze Business Problems Prophix UK Grove House Lutyens Close Basingstoke Hampshire RG24 8AG England Telephone: [email protected] Prophix South America Av. Marechal Camara 160 sala 1610 Centro Rio de Janeiro RJ Brazil Telephone: [email protected]