Beyond BI: benefiting from corporate performance management solutions; There's a trend towards developing company-wide solutions as businesses learn that integrated, business analysis applications can significantly improve operations. In this environment, CPM is fast becoming an established function.

Corporate performance management (CPM) is one of today's hottest topics, in the software world. Vendors are touting it, corporations are bragging about using it--whole conferences revolve around it. Industry leaders have even built a forum designed to collect best practices for implementing CPM.

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Yet many corporations don't quite understand what CPM is or why businesses need it. This may stem from the fact that the idea sometimes goes by other names, including "business performance management" (BPM) and "enterprise performance management." Whatever words or acronyms are used, CPM is most often discussed in terms of compliance with legislation such as The Sarbanes-Oxley Act, which requires businesses to demonstrate financial transparency, accountability and compliance. While CPM does offer more visibility into the financials of a corporation, it can and should do much more.

As more enterprises turn to CPM to meet their challenges, its value becomes clearer. Their experiences have helped formulate a better definition for CPM and serve to teach other businesses the best methods for deploying a robust CPM solution. That means it's getting easier to understand what CPM can do for an enterprise and how businesses should go about implementing it.

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More Than Business Intelligence

Technology research and advisory firm The Gartner Group defines CPM as "an umbrella term to describe the methodologies, metrics, processes and systems used to monitor and manage the business performance of an enterprise." That describes far more than a tool to manage financial data.

A good CPM system offers users visibility and control, risk mitigation and increased efficiencies in their businesses. But in order to make CPM work properly, businesses must take a holistic view, making CPM a part of every segment of their businesses, from accounting to human resources to customer service.

One way to understand more about CPM is to describe what it isn't. CPM isn't simply business intelligence (BI). It's not a tool implemented into a single department that analyzes data. It's not deployed reactively based on outside events. And it doesn't merely focus on history.

Instead, CPM is the real-world insight delivered across a suite of applications with embedded business processes that essentially sits on top of the reporting foundation that BI creates. It's an enterprise-wide tool that is used to offer reports and analysis and also to integrate that data with planning, budgeting, forecasting and consolidating. And, rather than a tool used to analyze history, CPM is most valuable for its ability to help businesses look to the future and plan appropriate action.

Ultimately, a CPM solution, properly deployed and used, can help users regain control over their business, increase their organizational credibility and remove barriers throughout the enterprise. Broader than current scorecards and executive dashboards products, CPM enables managers to get a handle on their business, understanding and responding to the changes and trends that are taking place, and use this information to collaborate across the enterprise.

With all of its data collected and analyzed, businesses achieve a whole new method for risk mitigation, or, more accurately, risk avoidance. CPM offers actual business performance assessment so that users can better understand where and when their business is at risk, as well as when to avoid potential risk situations. For example, the intelligence from CPM can help an order manager understand the probability of impact to production should a supplier shut down, and allow him/her to factor that scenario and contingency operations into forecasting plans.

The benefits offered by CPM are crucial for many types of businesses in today's increasingly competitive economy. Global competition and the economic uncertainty are all working to squeeze margins for almost any business. As a result, organizations are increasingly looking to make the investments that will help them trim costs in the future. A growing number are finding that CPM is just the tool to help them accomplish that, and Gartner predicts that by 2005, 40 percent of businesses will adopt CPM.

Implementation is a Process

Understanding CPM and what it can do for an enterprise is just the first step. Management must make the initial key decision to recognize that there is a problem as well as accept that changes have to be made about how information is attained and used to solve the problem. Implementing a solution comes next. And while such a far-reaching system may sound daunting, breaking down the process into a few clear steps makes it easy.

One of the first steps must be taking a close look at solutions on the market. With CPM a current "hot term," many BI vendors are essentially re-marketing their products under the CPM banner. Others are updating their BI products to offer a broader solution that is something like CPM.

It's important to keep in mind that CPM is not a technology but a management process. Also, it is more than the creation of actionable business strategies through the application of scorecards. The key to CPM is measurement and deciding what needs to be measured, how it needs to be measured and when.

* Once a business has identified key technology suppliers, it can start the process of deploying CPM by considering a single area of business to start with, which could include financial, internal process, learning/growth and customers. Within internal processes, for example, the business would consider its products, markets, supply chain, processes and services.

* The business should then consider the type of user within that area of the company by evaluating three categories. The user could do strategic planning by evaluating goals and objectives, developing performance indicators and analyzing and adjusting plans.

The user also might do operational planning--develop plans and budgets according to goals and objectives and develop performance indicators. Then the user would analyze and adjust plans.

The final user might be transactional, monitoring execution and evaluating against the plan. Along with the other users, this one also needs tools to analyze and adjust plans.

* The next step for a new CPM customer would be to identify the topic. The strategic planning user under the internal processes group will be concerned with efficiency and time to market. The operational planner will be focused on inventory, manufacturing and delivery. The transactional user will be responsible for commitments, backlog and out-of-stock data.

Once those areas of interest have been identified, the new customer can begin deploying tools that will help those users do their jobs. For example, the strategic planner will use applications for financial analysis and scorecards. The operational planner will need an advanced planning and scheduling tool that includes demand planning, while the transactional planner will use an information dashboard and applications to help manage the supply chain.

* Once that process is complete, the new CPM customer can start over with other areas of the business, such as financial or customer services. Ultimately, all of the applications used to run the business should be tied together so that managers may access data collected from other areas of the organization that could very well affect their operations.

Using CPM in the 'Real World'

California Eastern Laboratories (CEL) recently followed the steps described above to deploy a CPM solution and has met with great success. CEL, the North American sales and marketing partner for products made by NEC Compound Semiconductor Devices, wanted to make sure it was ready for future growth. "Our objective was to meet our existing needs and support key business requirements for the future," says CEL Chief Information Officer Kalki Radhakrishnan.

CEL hired a consulting firm to help evaluate its systems and compiled a list of requirements that focused on three areas of the business: human resources, supply chain planning and accounting. With the help of the consulting firm, CEL identified big picture goals, which included: positioning the company to meet changing business conditions with a scalable solution, to better serve global customers, create an integrated supply chain and consolidate the applications into a single, integrated package.

CEL implemented the software applications it chose in phases, starting with human resources and benefits management and moving onto financial, order management, advanced supply chain planning, purchasing and business intelligence tools. The whole process took about eight months.

The company was able to consolidate its applications into a single integrated package. Instead of gathering data from separate warehouse management, accounting, supply chain planning and human resources systems, CEL can turn to a single source for information.

Now, CEL's distribution system is closely linked to its planning system. Its 13 sales offices, multiple distribution channels and distribution center are tightly interconnected. By connecting planning, execution and business intelligence, it has global visibility into demand and supply across its supply chain.

"We run the planning engine each day, which establishes what we can or cannot supply and what is required to support the plan," Radhakrishnan says.

Integration between CEL's order management, supply chain planning and order processing lets the company provide accurate order information, which increases customer satisfaction. With a single system in place, managers in all areas of the company have stronger support for decision-making and faster access to accurate, consolidated data.

But CEL isn't done yet. It will be implementing automated procurement and expense solutions for employees. "Introducing self-service functionality will be the point at which we really realize the benefits of the infrastructure we have laid out," Radhakrishnan explains.

CEL's experience exemplifies the route that many enterprises are taking when pursuing a CPM solution. The company began by closely examining its business and identifying where it could collect better data. It then targeted specific organizations within the business and started deploying useful applications, using a phased approach, by starting with one organization until each was complete. Finally, CEL chose applications that could all be linked together and learned how to combine data from each business unit so that users can access integrated information.

More and more companies are finding what CPM can do for an organization. Their successes are clearing up the confusion in the CPM market that has been fueled mainly by the different definitions of what exactly constitutes a CPM solution.

Companies like CEL that share their experiences are making it easier for others to follow. There are a range of CPM solutions that include essentially re-purposed BI applications to full-blown, company-wide solutions. Armed with more information, enterprises can now make decisions about which solution best fits their needs.

In addition, companies that are interested in CPM now know that implementing a solution need not be daunting. The process can be broken down into several basic steps that make it much easier than it may initially appear.

It's clear that a very strong trend toward using CPM solutions is underway. Businesses are learning that integrated, widespread business analysis applications can significantly improve the way they operate. CPM is on the way to becoming an established function inside most enterprises.

Steven Miranda is Vice President of Development at Redwood City, Calif.-based Oracle Corp. (www.oracle.com). He can be reached at [e-mail].