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Letter From the Editor 18 July 2002
Enterprises that measure, monitor and manage performance in a piecemeal fashion via a myriad of disparate business applications will more often than not fail to meet their strategic goals. In today's economy, the need to address business challenges, including the transformation into an agile enterprise able to meet global business requirements, will compel many enterprises to abandon their "siloed" approaches of the past for the more-strategic and holistic corporate performance management (CPM) approach. However, this shift in methodology won't happen overnight. What Is CPM? An umbrella term describing the methodologies, metrics, processes and systems used to monitor and manage an enterprise's business performance, CPM has existed for many years in the form of isolated components. However, no single vendor or CPM practitioner ever put together all the pieces for true CPM. And, even when enterprises assembled business applications into packages that approached total CPM, what they had really amassed were the pieces of a CPM solution or an enterprise resource planning (ERP) system - which only delivers to the needs of transactional users. For example, many enterprises have historically been forced to produce information from the general ledger, providing both a fiscal-only perspective and a massive volume of data in the general ledger that was often unnecessary. On the other hand, complete CPM systems can deliver critical data not only to transactional users, but also to operational users for budget planning and to strategic users for formulating enterprise goals. CPM can link the disparate points of an enterprise (from top to bottom) internally, as well as its partners (for collaborative commerce). This enables each business unit to align its functions with and contribute to the enterprise's strategic corporate objectives. The Strategic Deployment of Business Intelligence (BI) Applications Many enterprises have turned to BI vendors for a CPM solution. The infrastructure and reporting and analysis tools these vendors provide have done a good job of opening up business information to all types of users; however, they have been largely unable to support CPM processes, such as budgeting, forecasting and strategic planning. These needs have been served by specialist BI application vendors, which have focused on key process areas. At this point, none of the BI application vendors has been able to break out of specific niche areas to provide complete CPM. Enterprises need to understand which BI applications are key in successfully leveraging CPM and how to blend applications for a fuller CPM solution (see Corporate Performance Management: BI Collides With ERP ). Early Adopters Few enterprises are implementing BI applications in a strategic manner to support CPM. However, some of the early adopters are already beginning to see some benefits or to anticipate major benefits in the near future (see Corporate Performance Management Benefits Early Adopters). Despite the different approaches employed in the three CPM initiatives we studied, there were common benefits: Vendor Selection Early adopters tend to be the exception, rather than the rule. The immaturity and confusion of the CPM applications market makes vendor selection challenging. ERP, enterprise BI suite and BI platform vendors are competing for a piece of this potentially lucrative market. Although the vendors will come from many areas, ERP vendors are likely to gain a significant presence in this market because of their domain expertise (see CPM Will Benefit ERP Vendors' BI Strategy). Enterprises must identify the vendor types that are the best complements to their current ERP and business application environments, as well as their BI infrastructures (see Choosing a Vendor for Corporate Performance Management). CPM Methodologies and Processes CPM requires a combination of methodologies, because no single CPM method system can span the complete enterprise management control cycle. Many of the methodologies involved, such as activity-based costing (ABC), have existed for decades. Others, such as the BSC, are already popular. To implement CPM, enterprises need ways to integrate several of these methodologies, instead of deploying each in isolation (see A Starter's Guide to CPM Methodologies). In doing so, they'll be able to counter the weaker aspects, and leverage the strengths, of each method. Enterprises also need an understanding of the processes (for example, strategy formulation, scenario analysis, and planning and budgeting) that drive CPM and how they work together. This will help to build a cross-functional vision for CPM and avoid disparate, disconnected initiatives in functional silos. Enterprises that implement BI applications to support this process perspective will be more successful in their CPM initiatives than those that stress stand-alone BI applications or performance management methodologies separate from processes and BI applications (see The Processes That Drive CPM). As always, feedback is welcome. Lee Geishecker Editor in Chief ERP II, HR, Supply Chain and Manufacturing spotlight.feedback@gartner.com Brian Zrimsek Editor in Chief ERP II, HR, Supply Chain and Manufacturing spotlight.feedback@gartner.com |
