Enterprise Performance Management (EPM)

What is Enterprise Performance Management?

Enterprise Performance Management (EPM) is the process of monitoring an enterprise's performance, with the goal of improving business performance. It involves budgeting, planning, forecasting; modeling the value creation of a company; consolidating results; performance analysis using key performance indicators (KPIs) such as sales, overhead, and operating costs as well as Return on Investment (ROI); and analyzing how changes in one area affect other areas.

Enterprise Performance Management (EPM) integrates ideas from Performance Management with Business Intelligence, to make actual performance information available in real-time to the relevant stakeholders. EPM uses a separate data management level to ‘harvest’ data from the operational processes and supplies it to Business Intelligence applications, such as planning, dashboards, scorecards, reporting, and analysis.

Enterprise Performance Management (EPM) Process

As with most traditional software, enterprise performance management systems were initially installed on-premises. Today, more and more EPM software systems run in the cloud. A cloud platform provides a range of benefits, including larger data storage capacities, stronger security, and easier integration with complementary applications such as financial consolidation, financial close, planning, tax reporting, profitability and cost, account reconciliation, and other applications. Here’s how the EPM process typically works:

• Access data across all business units. Leverage the agility of the cloud to access financial and operational data from business units across the organization, including IT, marketing, HR, operations, and sales. Data can be sourced from e-commerce systems, front- and back-office applications, data warehouses, and external data sources. Make more confident decisions and respond to disruptions faster with complete, accurate data.
• Create a strategic plan. Use EPM data analytics to build forecast models and ad hoc simulations across multiple dimensions. Make data-driven decisions that maximize profitability, and performance, and drive alignment with your strategic plan.
• Budget. Work collaboratively across lines of business to crowdsource plans and build flexible budgets. Leverage automated workflows for a clean and efficient process.
• Track and report. Use real-time data to assess performance across the enterprise and determine if adjustments are required. Prepare reports that align with corporate and regulatory guidance.
• Assess and analyze. Review performance and profitability against the strategic plan. Identify new areas of opportunity, resolve areas of underperformance, and use the intelligence to inform the next cycle of strategic planning.

History of EPM

• From paper to spreadsheets: The concept of EPM has been around for decades. Before computers, EPM processes and solutions were managed manually via meetings, phone calls, and discussions. In the 1970s, the first EPM software applications became available and accounting solutions began collecting budgeting and financial information for reporting purposes. Spreadsheets were introduced in the 1980s with software such as Lotus1-2-3 and VisiCalc. Spreadsheets allowed finance teams to automate budget and report creation and replace manual worksheets. The availability of email in the 1990s allowed people to share spreadsheets, which led to better collaboration and collection of budgeting and reporting data. Around the same time, the first EPM software packages began to automate the financial consolidation and reporting process. These products included: IMRS Micro Control (which later became Hyperion software), Hyperion Enterprise for financial consolidation and reporting, and Hyperion Pillar for planning processes.
• From on-premises to the cloud (Today): Over the past couple of decades, EPM software platforms evolved from Windows-based client/server systems to internet-enabled, web browser-based applications. Today, there’s an increasing demand for cloud-based EPM software, also known as software as a service (SaaS). When EPM software is “in the cloud” it simply means that the application is housed on a network of remote servers, instead of at a company’s location. The cloud offers a more affordable alternative for EPM that lowers both operational expenses (OpEx) and capital expenses (CapEx) because it eliminates the need for companies to purchase software and hardware or hire additional IT staff. With no costly infrastructure to support, resources can be invested in growth opportunities, while employees can focus on more value-added tasks instead of managing IT.
• Analysis to action (Next-generation EPM): Historically, EPM systems have focused on transitioning finance from spreadsheets to more robust solutions that let teams spend less time on low-value tasks such as data manipulation and reconciliations and more time on high-value tasks like the analysis. But even after making the move from spreadsheets, there’s still too much time between analysis and action. Enter the next generation of EPM, which has new capabilities that incorporate emerging technologies, such as artificial intelligence and machine learning. These technologies are powerful decision-making tools because they close the gap between analysis and action. They help improve the quality of decisions made by finance managers and executives by detecting hidden patterns and insights in historic data. The impact on decision-making is widespread, from tactical (which vendor to pay first) to operational (budget reallocations) to strategic (mergers and acquisitions). Beyond decision-making, these technologies can automate routine tasks to eliminate manual labor and reduce the likelihood of errors. There are many tasks in the financial close and reconciliation process that fall into this category. This type of automation will free up valuable time for finance professionals to engage with operations and spend more time providing the forward-looking guidance that management needs to capitalize on the next opportunity.

Enterprise Performance Management Technology Trends

1. 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.
2. 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 the 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.
3. 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.

See Also

• Business Process Management (BPM)
• Enterprise Resource Planning (ERP)