Improving operational performance has a direct effect on the financial performance of any business. The vital link of operational data generated from service, sales, support and production workflows to the machinery and production team levels are now possible thanks to enterprise performance management software (EPM). But what is EPM software? How is it different from corporate performance management (CPM), financial planning management (FPM) or business planning management (BPM)? Is it different at all? Where is EPM going in the near future? This article will answer these questions and many more.
What Is Enterprise Performance Management Software?
So, what is EPM? Also known as corporate performance management software (CPM), financial performance management software (FPM) or business performance management software (BPM), EPM is designed to help enterprises tie their strategies directly to the execution of their business plans. It specializes in combining business intelligence (BI) with financial management and forecasting to assist in the management of an organization’s revenue from a data-backed position.
Often confused with business intelligence, EPM focuses much more on the financial planning and forecasting side. It may perform some of the same functions — especially analytics, reporting and forecast modeling — but doesn’t provide the same decision services or guidance as business intelligence.
- 75% of enterprises are seeking ways to improve the accuracy and strategic impact of financial planning and analysis data, combining them with operational data from multiple divisions or business units to meet and exceed their growth goals, according to Gartner.
- The worldwide revenue of EPM solutions was $2.6 billion dollars in 2019, and is predicted to reach over $3 billion by 2022 according to a Statista study.
- The market is estimated to be worth $11.7 billion by 2023, a huge jump from 2017’s market worth of $6.17 billion.
- By 2020, one in four enterprises will be able to report financial planning and performance management metrics by business units, providing visibility from all sales channels and business units in real time, according to a recent study by Gartner.
The Rise of Cloud-Based EPM
The fastest changing areas of EPM include the rapid adoption of cloud-based platforms by organizations that had often rejected them in the past. The majority of EPM adopters today have a series of homegrown, third-party, highly customized on-premise systems that are now requiring intensive levels of investment just to stay current. Infrastructure costs and the time-consuming process of upgrading on-premise legacy and third-party systems are draining many IT budgets.
The consensus among analyst firms, including International Data Corporation (IDC), Forrester, Gartner and others, is that cloud EPM will overtake on-premise systems in the next five years or less.
The following seven factors are what’s driving more enterprises to adopt cloud EPM:
Real-time availability of operational and financial data that isn’t available using existing legacy, on-premise systems.
The potential for greater real-time data queries in an operational and financial context reduces the time it takes to make decisions. Real-time data availability and contextual intelligence are a couple of the many benefits of having cloud-based EPM software integrated back to legacy on-premise accounting, finance, transaction and pricing systems. Oftentimes, Enterprise Resource Planning (ERP) systems are the system of record that enterprise performance management systems rely on to gain greater data availability and contextual intelligence. Real-time integration enables greater speed and scale of EPM reporting and predictive analytics, leading to more effective decisions over the long-run.
Usability and customization of the customer experience of legacy Enterprise Performance Management systems lag behind what’s possible with cloud EPM applications today.
Making any enterprise succeed begins with how well its user interface can be customized. Usability and customer experience will make or break any complex enterprise application, and with the depth of modeling, scorecard and dashboard options, each screen of an EPM application helps it gain traction in an organization. Modeling, reporting, planning and advanced analytics are all core features of any EPM application or suite. It’s the agility and flexibility of changing the user interface, improving usability by modifying workflows and creating a more consistent customer experience that makes EPM suites and applications excel in any enterprise.
On-premise Enterprise Performance Management systems constrain enterprises from attaining higher levels of collaboration and compliance.
Designed for business models that may have been discontinued years or decades ago, on-premise EPM tools aren’t designed to enable cross-functional collaboration in companies. The most valuable EPM suites and apps have built-in support for collaboration, supporting annotations, notifications and social collaboration that resemble popular social networks like Facebook and Twitter.
Avoiding the high costs of maintaining legacy on-premise Enterprise Performance Management systems that are delivering just a fraction of the data needed for current business models.
From annual maintenance contracts that cost as much as 25% of the on-premise EPM system’s purchase cost to maintaining application modules to get the data needed to run a business, legacy systems are expensive to maintain. Add to this the fact that many legacy EPM tools aren’t designed to deliver the information needed to fuel today’s business models, and the agility and flexibility of cloud EPMs become clear.
Infrastructure costs ranging from operating system updates to server upgrades also increase the costs of maintaining on-premise Enterprise Performance Management systems, without an assurance of higher quality.
The many supporting costs of keeping an on-premise EPM software system up and running are making cloud EPM systems a logical, financial alternative. Keeping operating systems current and optionally configured with the best possible hardware burns valuable IT staff time. On-premise legacy enterprise performance management solution burdened with all these costs and constrained by the limited value of data they produce are making cloud EPM tools a good decision for many enterprises today.
Mobile devices and the advanced Enterprise Performance Management apps they support now dominate many industries that legacy on-premise EPM apps were never designed to support.
HTML5, responsive design, Angular JS and many other programming innovations all started making a major impact in enterprises within the last decade. In many legacy on-premise EPM software systems, there aren’t any Application Programming Interfaces (APIs) or comparable integration technologies to connect them with mobile platforms. Studies from International Data Corporation and others have shown that the faster a business grows, the more likely it is to have distributed operations spanning broad geographic regions. That’s because fast-growing companies are chasing intelligence and insight, not necessarily staying concentrated in a given area. Cloud EPM suites and apps are designed to be the catalyst that helps organizations grow quickly, breaking free of geographic constraints and creating a fast-growing, location-agnostic business.
Enterprises want to measure how effective their customer-driven strategies are at increasing product and customer profitability and growth.
Legacy on-premise EPM systems aren’t designed to provide customer-centric analytics, metrics and KPIs to the business unit level. Cloud-based EPM applications and suites are. The initial early adopters of Cloud EPM apps were in accounting and finance departments. Today, cloud EPM adoption is scaling across enterprises, encompassing sales, marketing, manufacturing, operations and human resources.
What’s Driving the Enterprise Performance Management Roadmap
The future roadmap for EPM applications and suites is being defined today by an emerging base of features, functional improvements and cloud-based innovations. Leading companies in this arena are creating and launching today, integrating with a widening array of diverse data sets.
This allows advanced modeling applications, techniques and technologies to be used to gain greater insights in driving the market forward. Cloud-based EPM platforms enable greater integration across diverse databases and platforms, overcoming the constrictive nature of data silos.
One of the most significant trends in cloud EPM in the next year and beyond will be integrating diverse data sets with modeling technologies to enable greater analytical accuracy and customer insight. The following graphic illustrates the key success factors from a data, modeling and insight perspective that’ll define the cloud EPM market next year:
This next year will be a pivotal year for enterprise performance management systems and the strategies they enable. ore organizations will replace their legacy on-premise EPM software with cloud-based EPM applications and suites. More enterprises will move away from spending so much on infrastructure costs, instead investing in new, more agile and customizable cloud-based EPM solutions.
Based on conversations with CIOs regarding their plans for replacing on-premise EPM tools with cloud-based apps, the conversion rate will be between 15 and 22%. This falls in line with the consensus estimate from leading analyst firms of cloud EPM, eventually overtaking legacy on-premise systems.
The Future of EPM
The next 12 months will see EPM apps and suites accelerate the development of new features that will be collaboratively shared across enterprises, including the following:
A greater depth of metrics and key performance indicators (KPIs) that can be customized to specific use cases across the enterprise.
Look for greater depth of feature definition and ease of customization for workflows that support advanced sales, marketing, manufacturing, operations, pricing and service. There’s going to be more agility, flexibility and freedom in defining metrics and KPIs across enterprises than ever before. Combining cloud platforms with the ability to scale metrics and KPIs for specific use cases will have an exponentially positive effect on adoption, too. Look for cloud EPM to have a breakout year as a result of these factors coming together.
More effective data structures and reporting algorithms for tackling the financial impact of customer-focused campaigns, initiatives and programs.
The majority of companies grapple with just how effective their marketing, selling, pricing and service strategies are in driving gross contribution margin and profitability improvements. In the next year, many of the cloud-based EPM providers will offer enhanced analytics and reporting features that will enable greater accuracy and precision when it comes to tracking the profitability contributions of key initiatives.
Major improvements to customer retention, pricing, profitability and customer lifetime value analytics.
One of the most significant shifts occurring in enterprise performance management today is the higher level of emphasis and intensity placed on customer-driven metrics and outcomes. Look for all EPM vendors this year to prioritize this market requirement and translate the many customer requests each has for them into actionable analytics and features in future products.
Collaborative workflows will become commonplace, starting with cost and revenue management, with greater emphasis on predictive and prescriptive planning.
The majority of organizations relying on EPM applications and suites are asking for greater support for collaboration workflows that include predictive and prescriptive planning. More companies using legacy on-premise EPM software will adopt cloud-based apps and suites to gain the greater benefits of collaboration and improved prescriptive and predictive analytics. The need for collaboration will be the inflection point that completely changes the enterprise performance management market in the next year and beyond.
Selecting the Best Enterprise Performance Management Solution For Your Needs
There are six major areas to consider when evaluating any enterprise performance management system. They apply to both on-premise and cloud-based systems, with the focus on cloud extensibility and support being important for planning future implementation strategies.
Cloud-based EPM applications and suites are the future of this market, and the following list of criteria explains why:
1. A solid EPM product platform that’s modular enough to scale and reliable enough to manage complex modeling and forecasting is a must-have in the next year. Legacy EPM software often lacks a modular architecture that allows them to scale and flex in response to their customers’ changing needs. As cloud platforms and applications proliferate, there’s going to be more focus on modular architectures that are integrated using APIs and give customers the freedom they need to define the type of system they want
2. Currently offering an HCM application or suite in the cloud, or have plans to offer one in the next year. The EPM market is moving quickly to cloud-based deployments for the many factors mentioned in this post. Be sure to check and see what the single-tenant and multitenant cloud deployment strategies are, and what the specific costs are for each configuration. Also, check to see if the vendor has any way of benchmarking cloud performance given the databases and data sets that will be used daily in the EPM apps.
3. Have a clear strategy for working with public cloud providers, including Amazon Web Services, Google Cloud Platform or Microsoft Azure. Public cloud platforms provide greater security, speed and scale of application performance on a global level. Check to make sure that any EPM vendors under consideration have a public cloud strategy in place, and are actively testing their applications on it.
4. Have proven the ability to serve enterprise accounts that require mobility support. Going forward this will become even more prevalent, as EPM use cases and strategies quickly permeate partner and reseller channels. EPM on mobile devices drastically reduces the time it takes to decide, by providing the data anytime, anywhere.
5. Proven depth of usability and customization, as referenced with active customers in industries of interest. Each industry’s requirements are significantly different, so having a good idea of how customizations are performing is a great way to evaluate any EPM system. If at all possible, it’s a great idea to see a demo of their system running in production and speak with those who use the EPM software on a daily basis.
6. Proven mobile app support in enterprises that span multiple geographies. Supporting enterprises that operate in global regions is a daunting challenge for any EPM app or suite provider. It’s challenging to publish unique, highly-customized dashboards and scorecards that reflect real-time updates across all senior management teams’ devices on a 24/7 basis. Finding EPM providers that are cloud-based and excel in this aspect of their product and delivery strategy can turn service into a viable differentiator for any business very quickly. Consider asking for customer references to companies relying on mobile-based EPM apps to get work done on mobile devices globally.
This type of business performance management is entering a new era, where long-standing challenges of linking day-to-day operations data with strategic performance is a reality. Cloud platforms are enabling EPM software industry frontrunners, including host analytics, to be adopted quickly, in addition to helping define corporate performance management.
Enterprise performance management is going through an evolutionary change today, with cloud platforms and the many benefits they provide being the catalysts for growth. Support for mobile devices that make dashboards and scorecards available 24/7 from literally anywhere there’s Internet access; support for greater customization; and more focused strategies on database and data integration are changing this market. Cloud-based EPM tools will eventually replace their on-premise counterparts, and this year will be pivotal in the overall transition.
What do you see happening in the EPM field? Leave us a comment with your thoughts!