Since financials touch every part of a business -- from production to human resources -- conflicting or inaccurate financial reports can spell disaster for the many moving parts of a company.
Corporate performance management software collects operational data from a company's various systems and helps to manage its financial information. Having financials located in one centralized system that users both inside and outside of the finance department can access can help align disparate business units and lead to more accurate planning and forecasting.
In this guide, learn about the basics of CPM software, its purported benefits and its adoption history. Get tips on how to deploy a new CPM suite and how to choose a vendor. Finally, read about forthcoming trends that are shaping the latest products.
Table of contents:
Corporate performance management software defined
Corporate performance management (CPM) software facilitates the processes of financial budgeting, planning, forecasting and reporting, and can help chief financial officers (CFOs) and other executives evaluate business performance based on metrics called key performance indicators (KPIs). Commonly tracked KPIs include expenses, ROI (return on investment) and revenue.
CPM software falls under the umbrella of business intelligence (BI), and often works alongside a company's other BI initiatives. While CPM focuses most heavily on financials, the reach of many systems has broadened to encompass enterprise-wide functions, including sales and operations.
The term is used interchangeably with enterprise performance management and business performance management.
How CPM software can improve business processes
Many companies continue to use Microsoft Excel for the bulk of their financial processes, but as a business grows, discordant spreadsheets can become harder to manage. The high likelihood of manual errors resulting from consolidating spreadsheets can lead to conflicting data, which in turn makes it more difficult for finance managers to produce accurate budgets and forecasts.
Because CPM software acts as a single repository for all financial information, analysts say the potential for incorrect data is lessened. The software can be extended to pull data from systems other divisions of the company use, providing finance managers with accurate, real-time data.
One of the most important functions of corporate performance management software is the ability to conduct "what-if" planning scenarios. CPM software can also highlight areas where the organization is weak so business leaders can identify and remedy problems.
Adoption trends in corporate performance management software
Far from being a new technology, corporate performance management software has been on the market for more than 10 years. Historically, companies have been slow to adopt CPM software, many opting instead to remain with Excel for financial management. Analysts have speculated that this hesitation is due to CFO resistance to spending and change.
Today, while adoption has risen, CPM software is underutilized according to industry analysts. While many CFOs now use CPM software for forecasting, budgeting and reporting, strategic functions like KPIs and balanced scorecards are often collecting cobwebs. A more positive development is the fact that corporate performance management systems are steadily gaining users from business units other than finance.
Deploying CPM software
CFOs tend to be conservative spenders, which is why it's necessary to make a strong business case for CPM software. One expert recommends pitching the idea of implementing a corporate performance management suite this way: What's more costly in the long run -- adopting new CPM software, or making decisions based on incorrect data?
Once a company's executives decide to invest in CPM software, it's important to be aware of potential snags that could disrupt deployment, including employee resistance and ambiguous metrics. Companies can avoid such pitfalls by taking advantage of CPM software's compatibility with Excel to help wean employees off spreadsheets, and agreeing on standardized data terminology on a granular level.
Recruiting senior management to lend support to the process, choosing actionable KPIs and providing consistent user training are additional keys to success, according to experts.
While IT can provide valuable assistance in managing CPM software, experts agree that a C-level executive needs to oversee the implementation as well. It's also critical for the CFO or another finance manager to be involved so they can explain financial terms and business processes to IT professionals who may be unfamiliar with the jargon.
Prominent CPM software vendors
The CPM market is mature, and there are many well-established products for buyers to choose from. So how can decision makers ensure that they select the right one for their business? Experts recommend defining the key metrics that a company would like to track through CPM software before launching the vetting process. It's also a good idea to look for a product that has the ability to scale to the size of the company.
While mega-vendors IBM, Oracle and SAP have long reigned supreme in CPM, industry analysts say that smaller vendors like Tagetik and Exact-Longview are bringing new innovation to the field and have the potential to upset the market. Software as a Service (SaaS) vendors such as Host Analytics and Adaptive Planning are also increasing in popularity as CFOs gain confidence in the cloud.
Key trends and new functionality
With tablet and smartphone use on the rise, many CFOs want to work from their mobile devices. Emerging mobile capabilities of CPM software allow finance managers to create budgets and forecasts on the go, vendors claim. SAP has notably made strides to build out its platform's mobile capabilities, adding mobile apps for profit and loss analysis, capital project planning and insight into expenses.
CPM software is yet another area where users have a choice between Software as a Service (SaaS) products and on-premises systems. While some companies have enjoyed the benefits of using cloud-based CPM -- increased collaboration, faster and more frequent upgrades and "on-demand" access -- others have had less rosy experiences, contending with system crashes and unresponsive support teams.
Many CPM vendors are also adding new functionality by extending their suites to address the "last mile of finance" -- features that further refine the close-management process, focusing specifically on external disclosure and reporting.