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By Michael Coveney, Analytics Thought Leader and Author
Background
There are many software products that claim to support CPM, but often they only support some aspects, for example, financial planning and reporting. One of the issues is that the term CPM is synonymous with budgeting, forecasting and management reporting which by itself cannot provide a complete solution.
Similarly, some vendors have multiple products covering different parts of CPM. For example, many have a scorecard application that they deem suitable for strategy management; a separate solution for collecting budgets and forecasts; and yet another for reporting and analysis. In the context of this framework, these multiple solutions can only work if they are truly integrated and can be made to operate as a single system. Without this level of integration system maintenance becomes an unbearable nightmare that cannot suitably adapt to the dynamics of the economic environment.
It is worth pointing out that CPM from a vendor’s point of view is a mature market and most have similar capabilities. For organisations looking for discreet planning, budgeting, forecasting and reporting solutions, there is a wide range of choices with vendors offering good solutions. But for organisations wanting to implement a complete CPM solution, it is easy to be misled on what product suites can and can't do.
This evaluation section of the framework outlines the key areas to be investigated so that those evaluating solutions can accurately assess whether the products selected will meet their planned and future needs of CPM.
One area not covered in this evaluation is a detailed assessment of the technology that underpins a CPM solution, whether that is SQL, OLAP, ROLAP, or In-memory BI. One of the reasons is that having a common technology platform or a system built on a leading ‘open’ database is no guarantee that the vendor has an integrated solution or that it will perform. Solutions should be assessed on their ability to solve a business problem over a period of time. The choice of technology should be up to the vendor to provide the best application they can for the price being offered and that, from a customer point of view, gives the best return on its investment.
The evaluation areas here are primarily concerned with a product's capability to meet the CPM framework discussed in this article.
At the heart of every CPM system is a data model that stores information relating to:
Each type of data is different and contains both structured (e.g. numbers) and unstructured (e.g. text) information that is held at different levels of granularity and for different time periods. Some data will be required on a monthly basis, while other – for example forecasts involving contracts – are better handled by assigning a date. This means that if the date changes, then the system should know how to roll this up into the appropriate reporting time period. For organisations that deal in seasons, for example retail, the ability to define time as a span between specific dates is important, while results would still need to be accumulated on traditional monthly basis. All these requirements means that a single multi-dimensional model cannot (without serious compromises) meet the different needs of CPM, and yet this data still needs to be bought together if performance is to be planned and managed.
Things to look for:
Much of the data within a CPM model will be organised as hierarchical structures e.g. organisation; strategy, product families. Many members will be common across different CPM data sets and so any change in definition should automatically be applied to related sets.
Hierarchies change with time, but in order to preserve historic reports, original structures need to be retained. For assessing potential changes, the CPM system should allow alternative structures that can be used to report the impact of change, should that change be adopted.
Finally, hierarchies are not the only way to select and analyse data. The ability to use attributes where members are selected and grouped according to a range of ‘tags’ assigned to them is an important capability. For example:
Things to look for:
Functionality can be split into two areas – that which is common to all areas of CPM and that which is specific to a particular CPM process. With the latter, a capability to support a specific process may well be useful in other processes. Reporting capabilities are covered in section 5.5. Here are the things to look for in a CPM solution:
Common functionality:
Strategic planning specific functionality:
Tactical planning specific functionality:
Financial planning specific functionality:
Forecasting specific functionality:
Risk Management specific functionality:
Reporting occurs throughout all CPM processes, while the Management reporting process brings together a range of information that determines whether the plan is on track and what decisions can be taken to improve performance. Audit report capabilities are covered in section 5.7.
Things to look for:
Alerting capabilities
Workflow relates to the way users are directed through the different tasks involved in a process. There are two types of process:
Structured processes can be dealt with through menus but it does requires users to know where to look and to choose the right option. This can make it hard in creating an efficient process as there is no way to prioritise options for specific users.
Unstructured processes cannot be realistically handled by menus and will require dynamic workflow capabilities to trigger activities as and when they arise. As these activities are completed they themselves will trigger other activities to be carried out. For example, a sales forecast that is 10% outside of a limit, may trigger a request for more information and confirmation of the levels expected. When this is approved it could trigger re-planning by the factory, or an action by marketing to increase advertising spend. These will then have a knock-on effect onto other departments.
Both types of process should be supported if CPM is to become a continuous, efficient process aimed at managing corporate performance.
Things to look for:
The ability to audit any plan or result is a key requirement of any corporate system if the numbers shown are to be trusted. This includes collecting comments on what the numbers actually mean as well as how they were gathered and transformed.
Things to look for:
This area of the evaluation considers all the costs involved from initial purchase, through implementation and to the resulting systems’ on-going cost. It also looks at the expertise required to setup and maintain the system, and what else an organisation may have to purchase in order to realise their vision for a complete CPM solution.
Things to look for:
This looks at the vendor’s commitment to CPM and the maturity of the product. Maturity can be both a blessing and a curse – Mature products can offer a large reference base but also may be coming to the end of their life, which then may require an upgrade or redevelopment cost.
Things to look for:
So far the software evaluation has focused on capabilities that can be viewed in isolation to each other. However, to support CPM these capabilities must be delivered in a seamless way so that the solution operates as single application. The only way this can be properly evaluated is by performing a number of scenarios that cross different processes. This is the purpose of the demonstration workshop.
It is unlikely this can be accomplished without some planning from the vendor and so the scenarios to be evaluated should be communicated in advance and covered in detail during an interactive workshop. The aim is to gauge the levels of integration that exist and the effort required to maintain them.
Strategic Planning scenarios
Tactical Planning scenarios
Financial Planning scenarios
Forecasting scenarios
Management reporting scenarios
o Comparison with strategic plan (i.e. updates the strategy map)
o Comparison with tactical plan
o Comparison with budget / forecast
The aim of this framework has been to clarify the purpose of a CPM system; ways in which it can be implemented; how it relates to supporting BI/Reporting applications; and how to evaluate CPM software solutions.
It outlines an ideal implementation although it is unlikely that a company will ever implement it in this way. However, it provides a goal for an IT systems strategy that will genuinely help managers and executives manage performance.
By adopting such a framework, organisations will realise a number of high-level benefits it provides, including:
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