This is the second in a series of blogs discussing the requirements of a successful Enterprise Performance Management implementation. The first blog in this series stressed the importance of Executive Involvement. This installment explains why the office of the CFO, not IT, should lead the implementation. The discussion emphasizes the Finance function, but it applies to EPM implementations focused on Sales, Marketing, or Operations.


A Historical Perspective: IT-Finance Collaboration in ERP

At organizations around the world, Finance and IT have collaborated in the implementation of Enterprise Resource Planning (ERP) systems. ERP projects are led and run by IT, with Finance describing the requirements and providing support – a reasonable approach considering that ERP applications, like most transactional systems, reside in the domain of IT.

EPM implementations are different. Success in EPM is far more likely when Finance leads the project. To understand why, let’s begin with a working definition for the software applications commonly used for Enterprise Performance Management:

“The technology that enables improvement of the business processes of planning, budgeting, forecasting, reporting and analytics”


Role Reversal: Finance-IT Collaboration in EPM

The operative words in the definition above are: business processes. ERPs optimize the technology that process transactions; EPM is about improving business processes – usually financial processes. Technology is necessary in EPM, but it is only the enabler. While technical process improvement naturally resides with IT, financial process improvement is the responsibility of the office of the CFO. It is Finance that requires the data. It is Finance that specifies how that data should be transformed into information, through tables, charts, and graphs – all formatted to their specifications. It is Finance that understands the business rules that turn data into KPIs revealing the reasons for achieving or missing cost objectives or helping to chart a course to improved profitability. And it is Finance that is deeply familiar with the planning and budgeting process.

The Great Divide

There is a gap that exists between the systems that generate and store the company’s data (ERP, GL, CRM, HR) and the applications that consume and model that data in the form of reports, graphs, and input templates (often Excel). This gap can be viewed from two directions. IT looks across that gap from the side of data generation and storage. Finance views the gap from the opposing vantage point.

Both departments recognize the problem and want to bridge the gap. And when introduced to EPM, both departments generally propose it as the solution. But the different perspectives into the divide produce drastically different approaches to solution design.

Bridging the Gap between Data Generation and Data Presentation

IT will design the bridge as a “multi-dimensional extension” of the data systems under its control. Keep the data, just change the data storage mode from transactional to analytical. This viewpoint puts the emphasis on data storage and optimal retrieval time – important considerations, but an overemphasis on this aspect of design can inhibit usability by Finance. End Users require a design that reflects the way they think about their business.

I was once on a large EPM implementation led by the IT Director of Applications. In typical IT design philosophy, he wanted to build a “EPM data warehouse”: cram as much data into the EPM application as possible, anticipating any future information request. While the prospect of triumphantly producing, four years in the future, a wanted but obscure piece of information seems enticing, the forced complexity on the everyday user of the application obliterates any advantage of a data warehouse approach. Fortunately for the End User, the business department eventually re-engineered the design.

Finance will design the bridge as an extension of the planning, reporting, and business modelling it is currently performing in Excel. This approach leads to the development of a business model that reflects the way the End User thinks about her business. Querying the database becomes intuitive. A query is no longer a technical exercise of writing SQL code for a “left outer join”; it becomes a simple click of the mouse. While a small percentage of the data might not be included in a given model, the application will be simple and easy to understand; it will immediately satisfy 99% of the information requests. Moreover, the remaining 1% can be accessed by “drilling through” from the EPM application into the source system.

In summary, an IT led implementation will place an emphasis on the data, resulting in a masterpiece of data storage; a Finance led implementation will prioritize the End User resulting in an application that is simple, intuitive, and enthusiastically employed. The choice seems obvious.

Please be sure to read the first post in the Successful EPM Projects series, which discusses the importance of executive involvement:

Author: Stephen Nelson