If you’re an enterprise contemplating changing your backend transaction system or enterprise resource planning (ERP) platform to something built for modern businesses, ask yourself this question: What are you really after? Are you looking to streamline transactions? To simplify your GL structure? To consolidate account categories and reduce the number of products you track and measure?
Aren’t you really just looking for better information to run your business? Maybe basic building blocks to support strategic or just day-to-day decision making like “Who are my most profitable customers?” and “What happens if the price of one of our key inputs like natural gas goes up?” are completely missing or take weeks to create? Let me guess, the blame ultimately rolls down hill until you hit the transactional system(s) right?
Before you begin the long and expensive journey of an enterprise replacement, think about enterprise performance management (EPM) before ERP. Here are four reasons why.
Technology should follow strategy.In the past, most implementations of ERP and analytics platforms followed a strict, inflexible hierarchy: transaction systems before analytics systems. On its face, this approach might seem logical, especially since legacy analytics systems were built from the data up, and not from the user down. But businesses are not architected from the transaction up. Businesses start with strategies to drive shareholder value, create the objectives to achieve that value and put in place the metrics to measure those objectives. So why wouldn’t you start by ensuring you have the right system to measure and impact performance before deciding where transactional gaps exist?
Users first, data second. Data is crucial. But the ways in which we gather, analyze and use data has become even more important. Legacy EPM systems were designed for use primarily by a small group of analysts and data entry specialists in the finance department. Unfortunately, this divorced front-line managers from planning and analysis, and in turn it added multiple steps (and lots of time) to the process of acquiring the performance data needed to develop plans, forecasts and analyses. What was missing from this picture?
The best solutions today not only are user-friendly, but they’re available on mobile tablets so managers and decision-makers throughout the company can immediately understand how the business is performing and quickly calculate the implications – financial and otherwise – of hiring three new sales representatives or reorganizing the warehouse crew’s work week from six days to five. Taking three years to change out a transactional system won’t enable the data-driven decision-making you’re looking for every team member to embody.
Adaptation is the norm. Since 2000, 52 percent of the companies in the Fortune 500 have either gone bankrupt, been acquired, ceased to exist, or dropped out of the Fortune 500. Odds are your current transactional system was put in place when your business was very different than it is today, for reasons that might not make sense now (Y2K anyone?). And odds are your business will continue to change – organic growth, new lines of business, reorganizations, acquisitions, IPOs – any or all of these impact the way your company operates. A well-designed, modern EPM system gives you the ability to add or replace data sources as your business changes without extensive coding. Change is the new norm but the good news is, so is flexibility.
EPM can speed up ERP time-to-value. Designing back-end architectures by thinking first how ERP will serve EPM (and not the other way around) builds enormous flexibility into your planning and forecasting capabilities. But a flexible EPM system can also accelerate an ERP implementation and minimize risk. A well-designed EPM-then-ERP implementation will allow you access to capabilities that previously required weeks of customization, if they were possible at all. Among them, the ability to:
- Easily create “what-if” scenarios to understand the implications of changing account structures.
- Quickly “prove out” Chart of Accounts modifications with rapid prototyping and mapping.
- Harmonize financial reports by tying EPM data to known systems like an existing G/L, then validate the new G/L system, and finally load old and new G/L information simultaneously to validate the conversion.
- Create a single financial analytics platform that allows for a seamless, sane transition from old G/L systems to new ones.
This is what flexible EPM + Analytics looks like. And what will it get you? Alignment of strategy to technology, democratization of planning and analytics, lower operating costs, faster ERP implementations thanks to fewer reworks, and the ability to see where you can improve your ERP implementation while it’s happening, not long after the fact when it’s too time-consuming or expensive to fix it.
Consider EPM and analytics solutions before you replace your ERP platform, and chances are you’ll be happier with all three.