By: Clive Longbottom, Head of Research, Quocirca
Published: 2nd March 2010
Copyright Quocirca © 2010
Quocirca has completed the second cycle of research and analysis for Oracle around enterprise performance management (EPM), and the headline results show a massive improvement across the six sub-indices and the overall EPM index. Surely, then, this is good news?
Underneath the headline figures lay various findings that show that while awareness of how EPM can help an organisation has grown, existing technical systems are often ill-suited to meeting the business process requirements of an organisation, while the wish to invest in new systems has shrunk as recessionary budgets remain in force.
Also, the findings show that while respondents understand the need for better processes in each area, there is still a lack of overall belief that these processes need to be linked to gain the maximum benefit from an EPM approach.
The research looked at six different areas; stakeholder environment, market model, business model, business plan, business operations and business results. The stakeholder environment sub-index, which looks at how inputs from and the needs of customers, suppliers, shareholders and legal bodies were dealt with by those involved in the overall EPM financial processes of an organisation. As with the first cycle of the research (carried out in February 2009), this sub-index resulted in the lowest showing overall. Although the majority of respondents felt that they had consistent and repeatable processes in place to engage with stakeholders, far fewer felt that key stakeholders had a true and transparent view of the corporate strategy. Either the process of engagement is flawed, or the messages being passed through the process are poor - either way, this points to a lot of work needed to make the overall process workable.
However, at the other end of the process, the business results sub-index resulted in the highest performance overall. It is therefore tempting to look at the results and think, Hang on - if all the processes leading up to the business results are sub-optimal, why is the business result itself so strong? Good point, but one that is best looked at against a real world vertical example.
In the world of finance, we see that the business results up until 2007 were excellent: it seemed that the house of cards could continue to be built up and up without any issues. Then, sub-prime hit and the cards came tumbling down. Those institutions that were hardest hit suddenly realised that the processes that led up to the final results were flawed: stakeholders were not involved in key decision making, and strategies had not been well communicated. Chasms between various areas within the institutions themselves led to processes being broken as information was not treated transparently or consistently as it traversed from one part of the organisation to another. Internal risks were not evaluated properly, and employees were compensated more on immediate than on long-term results, leading to higher risk taking that was uncontrolled.
In effect, Quocirca believes that the EPM research is still reflecting this. Many organisations are still profitable despite poor internal processes. If they were to look at how best to apply fully cohesive and coherent EPM processes, not only could savings be made across the board, but new opportunities could be opened up through greater flexibility, as could the capacity to play the key what ifs? around new product or service offerings. The good times of the early to mid 2000s allowed many process issues to remain hidden, whereas the past two years have rapidly uncovered major process failings.
It is, as yet, not apparent as to whether the recession is over and that the world will now move back to mid-term growth. Many commentators believe that a second wave of recession will hit many countries. With effective EPM in place, an organisation will be far better placed to survive a second recession - and to do well once out the other side. Although full EPM will involve investment in new technology to underpin the processes, it will be money well spent.
After all, what is the point in saving money and going out of
The Quocirca report on the Oracle EPM index, Enterprise Performance Management: Cycle II, is available for free download here.
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Published by: electronicdawn Ltd.