Where did it come from? From corporations themselves. In 2001, research firm Gartner Inc. recognized it as a trend in the way companies were applying business- intelligence systems as part of programs for continual performance improvement.
Is this the same thing as “Enterprise Performance Management”? Yes. Different vendors and research firms have latched onto slightly different labels for the same thing. Analyst Lee Geishecker claims the honor of coining “CPM” as Gartner’s official three-letter acronym; software maker Hyperion Solutions calls it “Business Performance Management.”
This sounds like a scorecard system. The two are closely related. Management scorecard systems, often tied to methodologies like the Balanced Scorecard or Six Sigma, are used by managers at every level of a business to see how well operations are performing against financial, quality, customer service and other goals. Like scorecarding, CPM shouldn’t restrict you to a single type of analysis. Instead, you ought to be able to mix and match popular measures and methodologies, such as Activity-Based Costing or Economic Value Add or Balanced Scorecard.
How is this better? Scorecard reporting systems often only loosely connect to the systems and processes used to generate budgets and targets. As a result, the metrics targeted in a plan may not match the ones used to judge whether the plan was successful. CPM is supposed to change that by ensuring that the metrics from an initial plan flow smoothly into systems for monitoring progress and for analyzing the results. Some businesses are using this sort of technology to move away from annual plans to ones that they can continually revise based on the latest data.
Who makes CPM software? Business-intelligence-software vendors, such as Hyperion Solutions, Cognos and SAS Institute, have begun bundling their products into CPM suites. Hyperion’s advantage is its experience in financial analysis. Cognos, more of a general analytics tools vendor, recently strengthened its position with the acquisition of Adaytum, a maker of planning and budgeting software.
If you’ve already made a comprehensive commitment to an enterprise resource planning (ERP) vendor, however, then it may make sense to look at that vendor’s CPM product. SAP and PeopleSoft have strong CPM offerings, for example-they are able to build on the integrated budgeting software of their ERP products as well as on their data warehouse and data-analysis products.
What are the problems?Look out for these issues, says Gartner:
- Data agnosticism:Being able to accept data from any source is key, because few companies have all their performance information coming from one system. If you need to extract data from a variety of unrelated systems, then a product from a business-intelligence vendor or a CPM specialist may be a good choice.
- Integration:That is, a CPM suite’s integration with itself. Just because the pieces are bundled doesn’t mean they work together. For example, Cognos is just starting to integrate the software it acquired from Adaytum.
- Bonus features: A comprehensive solution will provide the collaboration and workflow features necessary for managers to take such actions as submitting a revised plan for approval.
CPM should be able to be deployed and maintained largely by its users, with minimal support from information systems specialists.
